Are we in a health care crisis?
some sense we've always been in a health care crisis and we always
will be in a health care crisis. The nature of health care, because
it's always changing and it's getting better all the time, means
that we can never completely resolve the problems that we're facing
today and that we never have resolved them in the past. We have
a real conflict between how much money we're willing to spend on
health care and how much we want for that money, and that's a perpetual
Who is at risk in this?
people who are most at risk today are those who have no health insurance
at all. They're at risk of not getting regular care when they need
it. They're at risk of not catching real problems before they get
serious enough to not be treatable. They're at risk of not getting
the best treatment when they actually do get sick. And they're at
tremendous financial risk. They could lose everything that they've
saved in their lives because of some even fairly minor health problem.
happened to the doctor-patient relationship?
always had a set of multi-level relationships in health care between
the doctor and the patient, but then once insurance came into the
picture there was also this third level. The doctor and the patient
made some arrangement about what appropriate treatment was and then
the insurance company, they came in from the outside and paid for
it. But in the new contracts, in managed care contracts, the insurance
company has more of a say in what is covered by that contract and
what is not covered. So they can say, "You can't go to Dr. X. That's
not in your contract." And the employer has some negotiation with
the insurance company to arrive at that. It isn't entirely clear
how that affects the doctor-patient relationship. It need not, but
it does affect the payment relationship to the doctor and the patient.
And that leaves both of them at a different kind of risk than they
used to face.
about problems regarding individual versus group insurance.
actually no period in American history when we've had an individually
based health insurance system, which I think is striking. The reason
for that is that people vary tremendously in their anticipatable
health care risks. So some people know that they're going to be
sicker than others do at a moment in time. And that means that the
people who know that they will be sicker are going to want insurance
a lot more than the people who know that they're going to be healthy.
And that creates a problem that economists refer to as adverse selection.
It means that the sickest buy the insurance and the healthy people
stay out, and that drives premiums up very high. Now in order to
try and avoid that problem, insurance companies try and target premiums
to reflect people's expected health risk. So if they know that you're
going to be sick, they charge you a high premium. And the reason
that they do that is really the converse, which is that way, if
they know you're going to be healthy, they can charge you a low
premium which will allow you to continue buying insurance. Otherwise,
they'll charge a high premium to everybody and the healthy people
will just drop out of the market. So they try and use that information
to charge premiums to people that reflect their risk. That's a lot
like the car insurance market, where if you've had a lot of accidents
you'll pay a lot higher car insurance premiums than if you've had
very few accidents. The difference, though, is the range in health
insurance is so huge. I mean how much damage can you do to your
car? It's pretty limited, but your health -- the amount of money
that could be spent on your health is almost infinite. So the differences
between the healthy and the high risk people are very, very large
in this market, and that really leads to a lot of sorting. In order
to avoid that sorting, what we do is try and sell insurance to groups
that exists for reasons other than buying insurance. That is, if
you get a bunch of people together for some reason that has nothing
to do with insurance at all, it's a fair bet that some of them will
be very sick, but a lot of them will be really healthy. And the
people buying insurance won't just be the sick ones. So this is
a way of basically compelling the healthy people to share with the
sick in buying insurance together.
the employer the best place to be forming
the group at all?
is increasingly the case that employers may not be a stable source
of coverage for lots of people, because they may not naturally form
these groups. People may be moving in and out of employment or moving
from employer to employer. The problem is, I think, from a policy
perspective that there's nothing else. If you look around and say,
"Where else in the market are we forming groups for reasons other
than buying insurance," I think you'd have a very hard identifying
such places. So we're in a situation where we don't have alternative
group besides employment, even though, increasingly, employment
may not be the way to go. I think that's a real policy quandary
it ever be possible to go back to fee-for-service?
it's almost impossible. It's really hard to imagine going back to
that system. In any system of health insurance what you need to
do is come up some way to ration care. We don't like to use that
term, but you have to limit how much care people will get, otherwise,
they will just -- people who are sick particularly will just use
enormous amounts of care that they can't afford to buy for themselves.
So we need a system to make people make trade-offs about how much
care they buy. In the old system the way we did those trade-offs
is by making people pay out of pocket for a large share of their
health expenses. The standard contract used to be 20 percent out-of-pocket
with a big deductible up front. That was the standard old fee-for-service
contract, although many of us forget. Unfortunately, health care
costs have gone up so much that in order to make that contract limit
people's expenditures enough, you'd have to make them pay an awful
lot of out of pocket, or you'd have to stick them with a very high
premium. And what we observe is, when people are faced with the
choice of a contract with a very high out-of-pocket medical savings
account type contract, which is really an old style fee-for-service
contract, they never choose it. They always prefer managed care.
Very tiny fractions of the population choose those big deductible
possibility is to offer an old fee-for-service contract and people
still do, but it usually comes with a very high premium. When people
are faced with the choice of a very high premium and absolute free
choice or a much lower premium and managed care, they all flock
to managed care. So when you are actually asked to make that choice
and face the true cost of it, people don't want that fee-for-service
did we get to this point in terms of insurance?
you look at the history of employer-sponsored insurance in this
country, what you see is that over time, employers and insurers
are always trying to come up with ways to make this coverage more
affordable. Remember that health care costs in this country, until
very recently, were growing at an astronomical rate over a very
long period of time. And nobody liked that. So everyone was trying
to come up with ways to save some money. We used to have second
surgical opinion programs, utilization review, which we think of
as a new thing, actually started in the '50s and '60s. People have
been trying to come up ways of controlling the cost of these programs.
Now, what happened is, in the '80s especially, health care costs
really skyrocketed. They went up very quickly and employers began
to ask employees to pay a larger and larger share of the premiums
of their health plans. That made people very dissatisfied. Employers
were dissatisfied because they were paying higher and higher premiums.
Employees were dissatisfied because they had to pay a larger and
larger share, and it really caused a search for cheaper alternatives.
One of those alternatives was managed care contracts with many more
restrictions on them. And what happened is that as employers began
to introduce these contracts into their mix, employees began to
it be better to toss out
our system and start over?
it out and starting over again is an attractive idea. The Clinton
Health Care Reform of 1993-'94 is a classic example of what happens
when you take that idea and really think it through. And the problem
is that there isn't a solution out there. There's not a single system
in the entire world anywhere that does what we need to do perfectly.
And so when we think about redesigning the system, you have to understand
that we're not going to come up with a perfect system even if we
spend the rest of our lives doing it. Now some of the things that
are wrong with our system I think that we can fix. And one of them
is, we need to get everybody insured. And I think everyone who thinks
about health care policy will agree that getting everybody into
some kind of insurance is an absolutely key element to making this
work. For one thing, it will make sure that the healthy people don't
stay out and it will keep the premiums down for the rest of us.
It will also mean that everyone has insurance when something goes
wrong that they don't expect, and that's really critical.
about having a single payer solution?
are a lot of health care systems out there, and I think one of the
things that strikes me is that no two systems in the world are the
same. If there were one perfect system, we'd see everybody doing
it except us. But we don't see that. Germany doesn't have a single
payer system. They have a lot of competing health insurance plans
called sickness funds. England has a very different system than
Canada. France has a different system than Canada, England, or Germany.
So there isn't one perfect model out there. I think that's the first
thing that we should be clearly aware of. The second thing you should
be aware of is that every one of those countries reforms their health
care system every three years, and if their systems were perfect,
they wouldn't have to do that. There are always going to be compromises
and weighing one thing against another and we're always going to
have to do that whichever way we go. Now Canada has a single payer
system, which is very attractive in many ways. It really reduces
administrative costs, but right now they've gone through a period
of extreme cut-backs in their health care system. When you look
at consumer satisfaction in Canada, it's as low as consumer satisfaction
in the United States, which is extraordinary, given how high it
was in Canada ten years ago. It does cost a lot of money to buy
people health care. How are you going to do that within a context
of the government budget? How are you going to deal with the fact
that some people would really like to spend a lot more money on
health care than the government does while others are too poor to
spend any more? So every one of these systems faces problems and
they're all sort of variants of the same problem that we face.
are the impediments to reform in the system?
are a lot of impediments to reforming the system. One of them I
think is that Americans have very different sort of schizophrenic
views about what health care is all about. On the one hand, I think
we think everyone ought to have a right to health care. It ought
to be the same for everybody. And it's very striking to me that
when you ask Americans, "Do you think everyone should have access
to the same health care a millionaire gets," people answer almost
uniformly, "Yes, everyone should be entitled to the same health
care." But, on the other hand, if you ask people, you know, "Do
you think people should be able to buy more expensive plans if they
want them? Do you think the government should restrict how much
money high income people spend on health care in order to keep everybody
in the same plan," they're uniformly against that, too. So there's
a tendency to both think of health care as something that's really
special, that everyone should be entitled to same thing and to think
of health care as just like everything else that we deal with where
rich people should be able to buy more and poor people are stuck
with less. When we get these ideas together and we try and make
policy, we're really torn between this notion that we have to restrict
how much money we all spend on health care, that we have to make
sure that everything is perfectly egalitarian.
it's really hard to steer a course between those two very different
sort of polarized ideas, about which way to go. And politics falls
out that way, too. You know, some people say, "If we go with a national
health care system, it's government run and that's a terrible thing.
It's going to be Pennsylvania Avenue all the way." Other people
say, "If we don't go with a government system, it's the market and
the market is evil and we're going to have these for-profit investors
on Wall Street making all the money out of the health care system."
is your proposal?
ought to be some limit to the difference between how much really
rich people and really poor people can spend on care. That is, while
I don't think people feel that they ought to spend the same amount,
people do feel that everyone ought to go the same way. That is,
if a new treatment comes along, everyone should have some access
to it. It shouldn't be limited to just the people who can afford
to pay for it. I think we need a system of health care financing
that takes that into account, that allows people to take advantage
of new forms of technology as they come along. And what I've suggested
is that what we might want to do is put a tax on health care that
funds health care. I know that sounds sort of contradictory, but
if you think about the old country doctor in the small town in America
the way we always think of it, how did that country doctor operate?
Well, in those days they were all men, so I can fairly say "he",
he used to go out and visit the big house and take care of the family
of the rich person and charge the rich an arm and a leg for that
care. Then, in exchange for that, he'd use that money basically
to keep himself in business so that when the poor person down the
street came, well, he might have to wait longer in the doctor's
waiting room, but the doctor would treat him, too, and not charge
him very much. So we had a system that essentially redistributed
from health care of the rich to the health care of the poor. And
for a long time we implicitly had this system in our hospitals.
It was called "cost shifting". Hospitals used to charge a lot to
people with private insurance and they'd use that money to pay for
the care for of people who couldn't afford it. That meant the more
people who had private insurance spent, that is, when technology
got good, got better and they spent more and more money on health
care, they was more and more money to pay for health care for the
poor. All boats rose together, even though some boats were bigger
than others. What I'd suggest is that we re-institute that system.
We'd have to do it explicitly now because with managed care and
provider choice and so on, we can't really have the same kind of
inputs and subsidies we used to have. But we could do it explicitly,
we could put a tax on health care spending and use it to fund uncompensated
we go above 15 percent GDP expenditures
on health care?
funny when you look at historical documents, people were complaining
about the share of health care in the GDP when it was five percent.
They said it would be unsustainable if it hit ten percent. And,
you know, we're chugging along very strongly at 15 percent and the
economy doesn't seem to be suffering for it. It doesn't really matter
what share of the GDP we spend on health care. Just like it doesn't
matter how much we spend on movies. We could spend 80 percent of
the GDP on movies and that would just mean we were a wealthy society
and we liked to watch movies and there's nothing ethically, morally,
or economically wrong with that. The GDP is going to be spent somewhere
and if we choose to spend it on health care, that's fine. There's
nothing wrong with that. The issue is how we can finance the health
care that we provide to low income people. It's a distributive issue,
not a size of the pie issue. Doesn't matter how big the pie is.
We can make it as big as we feel, as a nation, we want. What matters
is how we're going the make sure that everyone gets a slice.
about the health care demands of the Baby Boomers that will be coming?
when you get older, health care becomes more valuable to you than
the things that you spend money on when you're young. When you're
young and you have some extra money, you might want to spend it
on a new motorcycle or a new car. When you're older, you might want
to spend it on the new knee. There's nothing fundamentally worse
about spending in on a new knee than on a new motorcycle. Our tastes
for what we want to buy are going to change as we get older, and
as we get older, it's almost certain that we'll want to spend more
money on health. So what does that mean? It means that rather than
a lot of jobs being in the motorcycle-building business, they'll
be in the knee-building business. I don't think that there's anything
fundamentally wrong with that.
there an ethical or moral obligation to make sure people have coverage?
when you think about the moral obligations associated with health
care, it's a very complicated moral question. One issue is: should
people have access to coverage? But what does that mean? For example,
I could provide everyone in this country access to the kind of health
insurance coverage that existed in 1965, all the treatments that
existed in 1965. It would be very cheap. We could offer that instantly.
No one would want it. Think about all the things that have happened
since 1965 that you would have no access to then. So when we say,
is there a moral right to health care, I always want to know what
health care? Is there a moral right to exactly what? Does it mean
that you have a moral right to have your knee replaced if you can't
walk up four flights of stairs, or do you have a moral right to
have your knee replaced if you can't walk up one flight of stairs?
I think it's hard to talk in moral imperatives when you're really
talking about a continuum.
of the things that strikes me when I look at the data is that uninsured
people in this country actually get a phenomenal amount of care.
The average uninsured person in the United States gets as much care
as the average Canadian in dollars. We spend a huge amount of money
on these people. That doesn't mean that we're doing the morally
right thing. How do we think about that? It's not just an amount
of money. It actually has to do with something substantive. And
I think we need to define that before we start tossing around the
idea of moral rights.
we maintain the status quo?
dangerous in health care to say that we can't remain in the status
quo, because if you had looked at this situation 20 years ago, you
would have said, "This is untenable. We can't remain here for another
year," and here we are. So, while I'm an optimist and hope that
everyone will get coverage soon because we'll be so disgusted with
the horrible situation we're in, I think there's nothing to say
that we can't remain in the status quo. Our system is not a rational
system, but is it a system that will fall apart instantly? No. It
will probably continue to be cobbled together in this patchwork
way unless we actually do something about it.