Uwe Reinhardt comments on LeBow and Sullivan
Uwe Reinhardt, Ph.D., James Madison Professor of Political Economy, Princeton University, comments on the responses of Kip Sullivan and Bob LeBow, and then discusses managed care and the single payer approach to reform:
Because your scream at my one-liner was so primeval, Kip, let me respond to it and, in the process, to other commentaries that were submitted. Let me begin with some remarks on the American people as I have come to know them. Thereafter I'll say a few words on the role of managed care and the peoples' reaction to it. Finally, I shall offer my views on single payer systems. It will be useful for me to think through some of those issues.
THE AMERICAN PEOPLE
Both you, Kip, and also Bob LeBow portray the American people as more or less hapless subjects of a crony-corporatist "democracy" in which a corporate aristocracy uses its paid political agents to arrange the economy so as to suit the aristocracy's tastes. Unlike similar setups in Asia, however, the American aristocracy is not benign. In Singapore, Taiwan and Japan, for example, such corporate aristocracies at least have installed universal, reasonably egalitarian health insurance systems and first-rate egalitarian systems of education. By contrast, America's corporate aristocracy has left the lower classes to languish on both fronts--perhaps even to make them a more docile servile class.
A skeptic, like me, would wonder what makes the subjugated American plebs celebrate this nasty setup with such enthusiasm every July 4th. The answer might be that the aristocracy has kept the plebs mesmerized with some kind of opium--like religion, Lenin's "opium of the people." In this case, the opium is the myth that anyone in America has an equal chance of becoming rich or the President of the United States, which may be the reason why even the poor favor the abolition of the inheritance tax. Another helpful myth may be that we have the best health system, education system, railroad, cellular phone system, _______ (fill in any noun) in the world, which the average American firmly seems to believe. No matter how miserable an American may be, he or she thanks God for being in America. Powerful stuff, that, and very useful to the conduct of a society with as wide an income distribution as ours. Perhaps that is all it takes to subjugate a people.
Now, is that your vision of American "democracy", Kip and Bob? This vision, of course, leaves the subjugated plebs totally off the hook in matters of health policy or any other public policy. It excuses them from informing themselves on matters of public policy, from participating in a conversation on it, and even from voting at all. The excuse is that any exercise of these powers would come to naught in any event.
I am not prepared to go quite that far. To be sure, there is something like a corporate aristocracy in America, and it is growing stronger and more entrenched by the day, as corporate chieftains have learned how to fleece their shareholders legally and to amass vast fortunes in the process. It is also true, as Bob points out, that American health policy has been run much more in the interest of the supply side than in the interest of patients. Leaving millions of American elderly citizens without coverage for prescription drugs is but one manifestation of this bias.
But I believe the American citizen would have more say and and could exercise more power in our democracy--even in health policy--if that citizen could ever bring him- or herself to mature beyond the stage of blissful adolescence. It may be outrageous for an immigrant to these shores to say it, but having lived consciously in two other societies, I am impressed with how juvenile the so-called average American citizen is on most matters of public affairs. To me, the typical American comes across as a permanently exuberant, lovable, sometimes charming and often vexatious adolescent who knows much about personal entitlements and very little about personal responsibility or civic duties. He or she is the rugged individualist who builds a house in the flood plains, only to whine why FEMA takes so long in coming to the rescue when the flood appears. It is also the investment banker in the Hamptons cursing the intrusive government, all the while basking in the comfort of federal flood insurance. As I said, those of us who came from abroad find this basically charming, somewhat amusing and often very frustrating. If America is the corporate aristocracy that you seem to have in mind, it is so mainly because the average American citizen simply refuses to grow up. Over half of them do not even vote or know the names of their state's senators. By European standards, they are pathetic citizens, to use that term loosely.
HEALTH INSURANCE PRIOR TO 'MANAGED CARE"
No foreigner, for example, could understand that any sane nation would run as uncontrolled and open-ended a social contract with its health system as the US did during the 1960s-1980s. Essentially, like the card-carrying teenagers that they are, the typical working American expected to be given by his or her employer an open-ended health-care credit card that could be used anywhere, for any conceivable purpose vaguely related to health care, in any amount, and whose balance the "parents", the employer, was to pay off from time to time, without any question asked.
Much has been written about this period, and I won't repeat it here. Jack Wennberg brought to our attention the inexplicable geographic practice and cost variations that this contract begot, and the questions it raised concerning the quality of American health care (just look at his last edition of the Dartmouth Atlas, devoted entirely to quality). Bob Brook, Mark Chassin et al. showed us how much unnecessary care and human suffering that contract begot us. Exuberant teenagers who won't read much beyond papers like the New York Daily News, Americans remained blissfully ignorant on the fiscal and physical burden this contract visited on them. The single-payer Medicare program, in particular, was shown to be rife with what now has come to be called "misuse, overuse and underuse." (I'll fax you some stuff if you doubt me.) Kip says that this "overuse" was dwarfed by "underuse." That may be so if one includes the uninsured. But within the body of insured, "underuse" would have occurred only if neither patient nor doctor had thought of additional ways to spend the insurance collective's money.
Sadly, American medicine turned a deaf ear to the entreaties of policy analysts to address these issues. The only policy response from that quarter was the demand for more money, although from 1965 to about 1992, America increased its annual allocation to health by 4.5% in real dollars and per capita, year after year, as GDP per capita grew at about 1.7% per year. Expecting no help at all from the providers of health care, private employers turned to what was pitched to them by academics (notably Enthoven) as a perfect hybrid between pure government plans and unbridled private insurance: managed competition with managed care.
By its very nature, this construct sought to shift market power to the demand side of the health sector towards two ends: extracting price discounts from providers and imposing on them guidelines ostensibly designed to eliminate that vast and sometimes dangerous excess utilization. Managed care plans would never tell doctors what they could and could not do with their patients. They merely would tell them what they would and would not pay for. It is a subtle but important distinction. Even so, to hear "No" on any account, or whatever reason, in this context was more than either patient or provider was willing to countenance. Rationing of any sort was deemed un-American, and yet judicious rationing, as David Eddy has written so eloquently, is the core of a fair and efficient health system. Every single-payer system practices it, either overtly or implicitly.
THE MANAGED CARE BACKLASH
I agree with Kip that, during much of the 1990s, the managed-care industry made most of its profits from price discounts and, to some extent, from attracting favorable risks. There was little effective managing of care for two reasons.
First, the knowledge and tools to manage care were lacking. We know this because even the presumably benign, not-for-profit, physician-driven academic health centers who took capitation did not know how to manage care, for want of the basic know-how and the technology to implement it. No one managed care--not the insurers, not capitated providers, nor patients and their individual physicians. If you have any doubt about it, read what Jack Wennberg writes and shows in the latest Dartmouth Atlas of health care: The Quality of Medical Care in the United States: A Report on the Medicare Program. The Medicare program is, of course, the U.S. single-payer system par excellence.
Second, of course, the American teenage-consumer was unwilling ever to hear "NO!" under any circumstance, even if the "No" was intended to avoid paying for dubious or useless care. An American teenage-consumer is entitled even to unnecessary care, as long as he or she wants it. That is the operative credo.
But managed care did achieve something in the 1990s. As late as October 1993, the CBO had projected health spending of $1.673 trillion for the year 2000, 19.7% of GDP. Actual spending for 2000 was only about $1.3 trillion, less than 14% of GDP. Most of those savings came from price discounts. Some came from reducing hospital length of stay. Only a minute fraction could have come from the denial of recommended care that panels of clinical experts would have judged essential. I believe Joe Newhouse et al. had a paper to that effect in Inquiry a few years back.
Now, who got the $370 billion savings in 2000 relative to the CBO baseline forecast of $1.673 trillion? Physicians think it flowed to corporate executives and shareholders. I defy you to find a single economist who would agree to that interpretation. It is almost certain that, in the tight labor markets of the 1990s, the bulk of those savings flowed through to workers in the form of larger take-home pay. Alas, workers, do not know that. No one has ever told them that they actually pay for the "employer paid" portion of their premium through commensurately lower take-home pay. That is why American teenage-consumers really don't care about cost containment, as long as they are not made to pay EXPLICITLY for it. The wag who said that in ignorance there lies bliss had it right, at last as far as employer-provided health insurance goes.
In a recent, very thorough and highly sophisticated survey of the literature, Harold Luft and his colleagues explored whether, on balance, managed care had hurt or improved the quality of care in America. They found no evidence either way. On balance, quality seem not to have been much affected by managed care, one way or the other. On the other hand, one can find isolated studies making either case.
I think the providers' and media's mindless assault on managed care has been unfortunate. Much of that assault has proceeded from sheer ignorance. In a recent survey undertaken by the Employer Benefit Research Institute, for example, it was found that 81% of those surveyed really had no clear idea what managed care was, 61% of respondents actually enrolled in managed care plans thought they were not enrolled in managed care, and even over half of the respondents who were members of an HMO did not think that they were in managed care. Shocking if one thought of these respondents as informed, mature adults; less so if one thinks of them as perpetual teenagers.
The insurance industry has now morphed back into mere bill payers, coupled with attempts to be a conduit of structured information to patients. But, unable and, in fact, no longer willing to manage care, insurers let premiums rise again in the very high double digits, and employers are eating these premiums, knowing that ultimately they will come of the fiscal hide of their unwitting, teenage employees. Insurance carriers never made much if any money from managing care. They made and make their money from taking x% of the money that flows through their accounts and from the float.
Is this, then, a victory for American patients and consumers? You may think so. I think not. The price will be borne by increasing numbers of uninsured in the years ahead and by ravaged paychecks of the insured. Hence my "Mazel tov!"
THE SINGLE PAYER APPROACH
There can be no question that much of the glory of America's avant-garde health system and many of the problems Americans suffer at its hand reside in the nation's insistence on operating a pluralistic health-insurance system with enormous choice, some of it real, much of it fake.
The glory, of course, is the endless, uncontrolled amount of money the system has shoveled into health care, begetting the luxurious techno-palaces we call hospitals and clinics, capable of giving the insured instant gratification. The downside is that the system is enormously expensive in terms of administrative costs, that it segments people by their health status and leaves so many out altogether, and that it is a bedrock of endless litigation over the terms of the myriad of fine-print insurance contracts that change every year.
A single payer system proceeds on the basis of one uniform benefit package, carefully thought out and well understood. There is little need to litigate, patient by patient, over what is or is not covered in the sundry clauses of customized benefit packages. To be sure, it is a one-size-fits-all approach. People who never contemplate having children are forced to pay for the health care of couples with children. Not a big deal, would say the civic minded Canadian, Asian and European. Outrageous say America's selfish teenage consumers. Probably only in this country is there an actual movement that openly despises children, hates paying taxes for their schooling and health care, and contemptuously calls parents "breeders." (Lisa Belkin wrote about them in The New York Times Magazine).
As James Robinson wrote (in curiously glowing terms) in Health Affairs about a year ago, the American insurance system now moves to mass customization. Wellpoint is the pioneer in this; Aetna now tries to ape it. Such a system , with literally hundreds of thousands of distinct, customized insurance contracts only poorly understood by the allegedly "savvy" American consumer--really, the consumer-teenager-- will provide a field day for tort lawyers for years to come. This litigation is not and has not really been about managed care per se. It is simply over the interpretation of the zillions of distinct little fine-print clauses in the zillion of customized insurance contracts issued on an annual basis. For selfish reasons, Americans demand these contracts. Let them enjoy them, say I.
But this system of customized, risk-segmented insurance contracts was not crammed down the throat of America's plebs. The plebs eagerly WANTED it. I recall sitting in on board meetings of insurers during the mid 1990s, at which consultants presented results from consumer surveys on what consumers wanted from their insurers. The range of products Wellpoint now offers was what America's savvy consumer wanted during the mid 1990s. And Wellpoint responded to these consumers' demand properly, doing well in the process. There was no aristocratic conspiracy here to cram down the throat of unsuspecting plebs products the latter would not like. This was a response to the plebs' own, ill-informed and myopic yearnings, for a simple reason: it spared the healthy individual from the obligation of being one's poor and sick brethren's' keeper. The overwhelming percentage of Americans are healthy at any enrollment time. These healthy ones overwhelmingly favor insurance policies that excuses them from the Judeo Christian thing to share the burden of health care. When they do get sick, of course, they whine and lament the absence of government from their lives. They may then yearn for a single-payer system or some other government program, like the folks who build houses in the flood plains. But as long as they are healthy they don't like government or single payer systems. Then they play rugged little American individualist marching under the motto "God bless me, and the hell with you.".
From time to time Americans have been offered an escape from this expensive and unwieldy cowboy system. One opportunity would have been the Clinton plan. To be sure, the klutzy Clintons, with the even kluztier Ira Magaziner's help, had loaded the plan with so much needless regulatory burden that in the end it was decried even by the Brookings Institution. One can never forgive Clinton for mismanaging this opportunity so. But in the hands of smarter people (on the Hill) the Clinton plan could have been salvaged. It did try to rein in the worst excesses of an uncontrolled, fragmented insurance system. Alas, the savvy American teenage voter slept through this one--if it did not openly vilify an administration who at least had tried to help them. The people, as I recall it, wanted the government off its back, like teenagers who want a regulatory Mommy off their back.
Another occasion was a referendum on a single payer system in California shortly thereafter. Referenda come as close to Athenian democracy as one could have it, Kip. It is more than a debate this or that debater won in front of some particular audience. Those of the California plebs who did bestir themselves to vote at all voted AGAINST the idea (yes, Kip AGAINST!) when they had the opportunity to support it. I find that rather persuasive, Kip. The American teenage-consumer is far from ready to countenance a single payer system.
And there are, let's face it, some downsides to the single-payer approach. Single-payer systems simplify administration, reduce the need for litigation and tend to spread risks over very large, heterogeneous pools. But they also have the tendency to be underfunded relative to what people might want. They are not very hospitable to innovation. And they ration in haphazard ways. This is certainly so in Britain, Japan, Taiwan and even Canada. Germany is moving that way as well. To argue that a seriously ill Canadian would fare better in terms of access to advanced technology than would a similar American in a typical managed care plan would strike me as disingenuous, although Kip might well offer that proposition. The Brits, the Canadians, the Germans and French do pay some price for their more or less single payer system. So, of course, have America's elderly, whose single-payer Medicare program has a benefit package that is a living and cruel joke.
One can debate the pros and cons of single-payer systems versus a more pluralistic system (e.g., one like that envisaged under the Clinton plan) until hell freezes over. Different, smart, honorable people will come out differently on the issue, depending upon the weight they attach to each positive and negative dimension of each approach.
But let me assure you of this, my friends: When the time comes to debate these issues once again, the American plebs ain't going to be with you. They will trust Rush Limbaugh to tell them what to think, if to think about it they wish at all. With the attention span that befits a teenager, it will take nothing in the way of simple propaganda to shove these teenagers one way or the other in a debate on the issue. And the money will shove them against the single-payer approach. And when the time to vote comes, they won't even be there to vote. They'll be fishing or attending football games. They'll be anywhere but with you.
We stand at a cross roads in American health care. We could choose, if we wished, (A) to travel down a more egalitarian, budgeted system with some rationing--perhaps on the back of a single payer system or a regulated insurance system such as Germany's or the Clintons' plan. Alternatively, (B) we could "solve" our health care problem simply by declaring health care Coca Cola, a consumer good, that is to be rationed on the basis of ability to pay. We shall choose (B) in this country, bit by bit, but steadily, in a way that the teenage plebs will hardly notice until it is a fait accompli. Perhaps the income-based system will be chosen for us by the corporate aristocracy that, you seem to think, runs the country. Perhaps. In any event, the teenage plebs will sleep right through it--fishing or whatever, and they will whine only when it is too late for them individually.
CONCLUSION
I come back to where I started with my one liner: the American people have pretty much the health system that they asked for and deserve. They have asked for it, sometimes explicitly, sometimes through sheer apathy, and through a relentless selfishness that seems somewhat unique in the industrialized world. I used to have much sympathy with these folks. I have much less so now.
This attitude of mine is not new, nor a secret. I had written it all down in the 1995 spring edition of Health Affairs, in a commentary entitled: "Turning our Gaze from Bread and Circus Games." In it I quote the Roman poet Juvenal who wrote, in the first century A.D., "Duas tantum res anxius optat, panem et circenses. (Its [the plebs'] anxious longing is confined to but two things--bread and circus games.)" It is widely thought that Juvenal was writing about his Roman contemporaries. He was not. He was writing about the average twentieth-century American and his or her posture on U.S. national health policy. At least, that is what I think. Do you think otherwise?
Best regards,
Uwe
Comment: Dr. Reinhardt's message should be circulated widely. Our great task now is to meet his implicit challenge to prove that Americans really are more decent than their current inaction on health care reform would indicate.