Don:

I had referenced an angry paper I had once written for the US Chamber of Commerce. Unsure of whether I had sent it to you for distribution, I send it to you now.

I had agreed to appear on one of their panels, but when I saw that our topic was “Why are there so many uninsured, and what does it mean to us, the insured?” I balked. I told them I won’t blow a day to participate in such a panel but I would write them a statement, if they promised to distribute it. They did, I wrote it, and they distributed it. It was written in some haste, as you can tell, but I did want to register a few points with that crowd.

Best,

Uwe

Note: This paper provides a clear explanation for the perpetuation of the deficiencies of our current health insurance system. Because it is inappropriate to send a 180 KB attachment in a mass mailing, it is not included with this message. If you would like to receive this paper (as a Microsoft Word attachment) please respond to this message, and we will send it to you.

Don McCanne

Uwe Reinhardt, Ph.D. responds to Ellen Shaffer, Ph.D.:

(Dr. Shaffer’s previous comments are marked ES, and Dr. Reinhardt’s inserted comments are marked UR.)

UR: Ellen:

I appreciate your comment on our ongoing debate and shall offer some rejoinders in the body of your text. Before doing so, however, I would like to address an issue of methodology.

You write off my and Norm Ornstein’s comments as “cynical” and “unanalytical.” Although I would not characterize Norm Ornstein’s commentary thus, I am prepared to plead vaguely guilty as far as my commentary is concerned, because I had not intended it to be a scholarly, tightly reasoned, analytically rigorous piece. It was a rather quickly written comment, injected into something akin to a chat room–a rather loose statement of a hypothesis which is this: The structure of our government alone, and the power of the elite that uses that structure to its advantage, cannot fully explain the half century of failure to move the US towards universal coverage–let alone toward a single-payer system. The myopia and apathy of the electorate also played a part. Furthermore, unless that electorate can be awakened and mobilized politically, mere appeals to the ruling elite, and finger-pointing in that elite’s direction, are unlikely to bring us closer to your goals.

Now, having said that much, and in view of your professional judgment of my and Norm’s comments, I deem it fair to look to your commentary for an example of “analytical” thinking. Presumably, you would not contribute an “unanalytical” piece to this debate. Therefore I am asking you, quite sincerely in fact, to identify for me just where your commentary is analytical, in the sense that it could be a role model for an economist like me. I do know very well what is and what is not a rigorous analysis within neoclassical economics. I am curious to know what political scientists mean by “analysis,” and I would like you to use your commentary to show me the way.

I shall proceed with my rejoinders, paragraph by paragraph.

ES: Here is why Uwe Reinhardt’s comments, and Norm Ornstein’s, are cynical, unanalytical, demoralizing and wrong:

Whatever nods they may offer to the actual structural political obstacles to achieving universal health care in the U.S., the ultimate villain is the stupid American populace (teenagers, plebes, what have you -surely not the well educated, who read this list).

UR: Is this what you mean by “analysis”, Ellen?

By the way, I would not call the plebs the “ultimate villain.” In fact, I am not sure what “ultimate” means in this context any more than I know which blade in a scissors “ultimately” cuts the paper. My point was merely that the electorate does have more power than it chooses to exercise and that its failure to exercise that power is an integral part of the failure so far of the movement for universal health insurance coverage.

Furthermore, I do believe that the general public suffers from a degree of myopia. In many opinion surveys that I have seen, a large majority of respondents (usually over 80%) declare themselves satisfied with their health care and even with their health insurance. I wonder how many Americans actually worry about being uninsured, while they are employed and well insured. One of President Clinton’s stronger selling points for his plan was that insurance card he waved, “insurance coverage that you cannot lose.” Why did that powerful message not get better political traction with the electorate in 1994? Why did Americans vote as they did in 1994? Did the preferences of the electorate have nothing to do with Newt’s ascendancy?

Let me hasten to concede that I share the economist’s deep suspicion of opinion polls of any kind, even those that might support one of my hypotheses. I am more impressed by actual votes and plebiscites.

ES: And the econometrician’s solution to engaging these dunderheads is: make them pay more! Then they’ll pay attention and we can really get somewhere. Economic shock therapy for the ailing of America. Great news for insurance companies, hospitals, doctors and employers. Defined contribution plans will finally make Americans real consumers, with direct control over their health care choices. Then they can really call up that doctor and tell her to conform to national standards of quality, balancing over- and under-service. Yes indeed. (Or maybe the theory is that once they have realized the futility of becoming individual consumers, Norm Ornstein will lead us in calling for rescinding the tax rebate, and funding federal enforcement of national quality guidelines, as well as universal coverage.)

UR: Is this what you would call rigorous “analysis”, Ellen? Can this serve as a role model for economists who might venture into political analysis?

I should mention to you that econometricians are, basically, positive analysts who usually do not engage in normative economics. You must be thinking of normative economists, such as Mark Pauly or Stuart Butler and many others who tend to think along those lines.

Personally, I have never argued that more cost sharing will make the individual patient a smarter “consumer” of health care. On the contrary, I have written that I do not subscribe at all to that hypothesis. Many economists on the right of the political spectrum, of course, do make that a working hypothesis. They seem to have much sway in the political arena..

On the other hand, it would not surprise me to see greater interest in a single-payer system among the American people if the full fiscal brunt of a defined contribution scheme rained down on them. As you probably know, the percentage of the American health bill that was paid out of pocket actually fell during the 1990s. Using the CMS data, which you can download off the web, I find that total private out-of-pocket spending as a percentage of total national spending on personal health care was 24.1% in 1988, 22.6% in 1990, 17.6% in 1995 and 17.7% in 2000. That is averaged over all Americans, including the uninsured. If one took only insured Americans, the fraction spent out of pocket would be even lower. My point is that, by and large, insured Americans really are not yet hurting, fiscally. The only problem they have is hassle over the interpretation of the myriad of fine-print clauses in their increasingly customized insurance contracts, but that is another issue. The hypothesis that much heavier cost sharing under a defined contribution plan could, conceivably, kindle greater interest in a single-payer system with comprehensive coverage is not, in my view, totally off the wall.

ES: Well, yes, power does flow in many directions between the ruling/corporate elite and the rest of us, and sometimes our side wins. (Medicare. Medicaid. Happened at a time when many of us were inspired and united by the civil rights movement, not demoralized by invective.)

UR: Just a question: were you, Ellen, personally part of the movement that brought us Medicare and Medicaid? I ask, because I believe that an important factor at the time was that America was then run by a generation that had suffered the Great Depression together and had gone through W.W.II together–a generation that understood that luck is just luck and not (as many of my students seem to think, deserved), and a generation that had experienced first hand that government can be benevolent and get things done. Government organized the Allied victory. I wonder whether that generation of Americans did not emerge from its travails with a greater sense of social solidarity (and greater faith in government) than is typical of the younger generations–a lingering racism at that time notwithstanding.

ES: Specific analysis of particular political events needs to inform us, and determine when we are mistakenly blaming the victim, and when instead we can rightly blame a stratum of society for intentional and heartless pursuit of self-interest.

UR: Do you consider this statement rigorous analysis, Ellen? I sense a distinct prejudgment here.

ES: People are regularly abused and treated unfairly by those with more power, whether raped and slaughtered, unfairly fired, or given a bad grade; some fight back, many don’t, usually successful organizing and intelligent leadership helps.

UR: Is this analysis or a polemic?

ES: The prevailing rules and institutions societies develop over time (very long periods of time) to safeguard justice also play a role.

UR: Precisely what do you mean here?

ES: Without dwelling on some lapses in bonhomie among certain Europeans during the 20th century …

UR: I’m glad you don’t, Ellen, but it really does not have any bearing on the issue of universal health insurance coverage. On the other hand, it is a nice personal dig in this debate, I’ll grant you that. Touché!

ES: … it is important to recognize that in the case of the failure of universal coverage in the U.S., the problem lies not primarily in failures in the national character of the American population, however amusingly this elitist view of our people is served up.

UR: Is this a statement of fact, your opinion, or analysis, as you understand that term?

ES: If Uwe wishes to make the case that this is really the central problem, he might present some evidence that links cause and effect, or at least a logical line of argument beyond observations about spoiled stockbrokers in the Hamptons.

UR: I don’t know what will pass muster, Ellen. I cite the sorry American voting record by income class to shore up my point; but apparently that does not count. I cite the fact that in a clear-cut plebiscite on the single-payer system, in a generally progressive state, the majority of those citizens who did bother to vote voted against the single payer system. I make the logical inference that failure on the part of the poor to vote more heavily in presidential or Congressional elections (cause) has as one of its consequences (effect) that the poor will be disregarded in the political process, especially when candidates (such as Bill Bradley) who do take up the cause of the disenfranchised lose at the ballot box for want of political support. In my view, this is a legitimate hypothesis about cause and effect.

ES: (If the American people really were that stupid I’m not sure that yelling at them to get off their duffs would be very effective.)

UR: Yelling at them when they are basically comfortable probably won’t work. Yelling at them when they are in great discomfort might work.

ES: Uwe has already well described the failures of our systems of financing and organizing politics and politicians. Will imposing further financial hardship, e.g. through defined contribution plans, truly mobilize the populace to overcome these obstacles?

UR: As noted, it might.

ES: What is the evidence that this would be the best or even one effective stimulus to political activity in the case of health care?

UR: As I mentioned above, the evidence may be lacking because the bulk of Americans have been reasonably well insured and the bulk of them declare themselves satisfied with their coverage in Humphrey Taylor’s and others’ surveys. But is it surely acceptable, even in political science, to entertain the hypothesis that greater financial hardship associated with brittle and shallow insurance might kindle among the electorate a greater interest in comprehensive, permanent health insurance. Are hypotheses off limits in political science?

ES: (If it were, we should be seeing armies of the uninsured waving their hospital bills in the faces of policymakers, rather than retreating into defeat, homelessness and bankruptcy.)

UR: Perhaps you will explain to us, Ellen, why they just retreat–why it is so hard to mobilize their voting power? A little analysis here might help.

ES: What is even the analytical connection? Is there precedence for this in the US or elsewhere?

UR: You ask me: is there precedence in the US for cases where widespread among the electorate perceived hardship led to remedial political action? Maybe someone else can answer it better than I can. But I believe Social Security is such a case, as is Medicare and Medicaid. There was plenty of suffering there among the people, and fiscal duress among providers, and things did begin to click politically.

ES: Truly, Americans have a proclivity towards individualism. Additionally, many of us do not vote, (As Jim Hightower has noted, if God intended us to vote she would have given us candidates.)

UR: Is this, then, an analytical statement, Ellen? There is no difference at all between Al Gore and George W. Bush that might bestir a citizen to vote? Bill Bradley was not a candidate?

ES: How does this factor balance against the immense financial and political power of the private insurance industry, with its attendant ability to command publicity and the fealty of politicians? No other nation has had to face and overcome this force.

UR: Other nations do have these forces, too. But, as Ted Marmor points out, and I fully agree, these powers do not hold nearly the sway in parliamentary systems as they do in our system.

ES: This is not a reason to give up; it has to be done. It is a difference between the US and other countries that we must acknowledge and address. Further, health care is a difficult stand-alone organizing issue in industrialized countries, absent other national crises: most people are healthy, poor people have other pressing priorities, sick people are sick; both problems and solutions are complex, and the industry has far greater access to the media than do reformers.

What is the actual position of the American people on universal health care, through single payer or any other means? Uwe tells us the vote against single payer in California was definitive; in this case the electorate was swayed by a last-minute, well-financed campaign by the insurance industry alleging huge resulting cost increases.

UR: Are you simply asserting this, or is that a fact? And if you were right, does it not underscore a point I made about the fickle American voter with a short attention span who is easily swayed, one way or the other? Why is it that the proponents of the single-payer system could not apprise California voters of the empirical record all around us, which shows that single payer systems generally cost less per capita and as a percentage of the GDP than does our system? Why were these facts disregarded by the California electorate?

ES: This was a false allegation, this kind of tactic is not unexpected, and activists need to be able to confront this kind of thing.

UR: Yes, indeed. Why haven’t you?

ES: But it is far from the last word. Kip and others point out alternative results through polls, the Maine legislature, the Jefferson Jury, and countless local ballot initiatives.

UR: Like Massachusetts recent ballot initiative? Did the single-payer movement prevail? I thought it had not.

ES: The answer is murky, and often depends on the point the presenter is trying to make.

UR: I sincerely do wish you and yours luck, Ellen, but I won’t hold my breath. In the meantime, I support ugly ducklings, such as the Families USA–HIAA two-pronged approach the reduce the number of uninsured. Ideological purity is not my shtick. I’d just like to see the number of uninsured reduced by as much as is politically feasible, by whatever means.

ES: I like to ask people whether they would prefer the current for-profit, market-driven, inequitable system of health care that leaves 45 million people without coverage; or a fair, publicly financed, publicly delivered and equitable system of universal coverage that would provide high quality health care to all. Usually gets a pretty good response.

UR: Talk some time to pollsters, Ellen. I recommend Humphrey Taylor of Lou Harris, or Bill McInturf, the Republican pollster–both as straight as they come. Pollsters will tell you that the response you get from respondents in surveys depends significantly on the way you ask your question. Look at how you phrase your question. Are you at all surprised to receive the answers that you get? A pollster engaged by the HIAA or AAHP, surveying the very same people, but phrasing the question differently, could most likely extract the conclusion that the respondents would not like a “government run, single-payer, one-size fits all etc etc” system and prefer our “free-enterprise system that stresses innovation etc etc.” In short, Ellen, I hardly consider what you offer here hard data or even analysis. Do you?

ES: Ok, how do we address the myriad obstacles to health care reform in the US, including developing support among our fellow citizens, besides further impoverishing them? Whoever knows this for sure is likely to be rich or assassinated but here are a few points of departure: 1. It may take some time.

UR: Agreed. Half a century down without success. How many more decades to go? Give me a guestimate!

ES: 2. Undermine the credibility and power of the opposition (why the fight over the patients’ bill of rights is a good thing).

UR: As you know, I would debate that, and so would many other detached observers. You are stating your opinion here, which is all right. It is not a statement of fact, and surely not analysis. How far, do you think, would that PBOR movement have gotten without the coffers and the lobby of the AMA, which has its own agenda, and that is surely not enforcement of insurance contracts between insurers and the insured. The AMA, by the way, favors MSAs, not a single-payer system. So you won’t have the AMA on your side in the next round.

ES: 3. Incremental programs like Healthy Families are failing to recruit and retain members; call for states to pay the full premiums, for good.

UR: By all means, call for it. But will the fiscally hard pressed states comply? I’ve seen them make a mush of Medicaid.

ES: 4. Link the fight for a just health care system to other calls for social justice, and thereby ally with political movements with some clout. Opposing “free” trade in health care via GATS and FTAA would be a start.

UR: Has such linkage worked in the past? Honestly, I don’t know.

ES: 5. Point the finger at powerful forces like businesses that prefer to give away their profits to the insurance industry rather than turn the enterprise over to the government as enlightened capitalists do abroad.

UR: Good heavens! You think this will work any better tomorrow than it has in the past? But, ok, point the finger and see the elite blush. Point it at Jack Rowe, M.D. of Aetna, Inc. and see him blush! Point it at Karen Ignani of the AAHP and see her blush. Having unsuccessfully tried to shame members of the elite on many occasions–openly, in my testimony before Congress–I would not expect much from the strategy. No one ever did blush.

ES: 6. Demand some rigor from ourselves and our leaders in analyzing successes and failures, and figuring out which forces are required to and likely to do what in order to advance the issue.

UR: By all means! Agreed!

ES: (Did Bill Bradley’s campaign really fail because he championed a tepid proposal to expand health insurance coverage? Is that what scared the Democrats into the arms of Al Gore? Fascinating!)

UR: I am not sure what you are asking us here. “Tepid”? Bill Bradley offered by far the most generous and far-reaching proposal on the uninsured among the candidates last year. In fact, Al Gore’s health insurance proposal was hardly more generous than Bush’s. A bit of Medicaid and SCHIP expansion, some tax credits to employers, and so on, all on the back of a paltry budget. Anyone who really cared about the uninsured should have favored Bradley.

ES: 7. Get Uwe to write us a polemic from time to time.

UR: OK, Ellen, let’s specialize. I’ll do the polemics, and you do the cool analysis, like the present one.

ES: Apparently some readers found his comments bracing and challenging. It’s a good opportunity to think through why they are misleading, though appealingly presented.

It’s frustrating to have been propounding an intelligent and effective solution like single payer for all these years, and not to be getting very far.

UR: Yes, indeed, As you said, you will need some rigorous analysis to explore why you have failed.

ES: It is worth examining why not, and what we might do differently. I look forward to seeing us all move forward.

UR: I’d like to see it, too. But I don’t expect much.

UR: Let me repeat that I challenge you, Ellen, to explain to me in what way your commentary is more “analytical” and less “polemical” than mine, or than Norm Ornstein’s commentary. I insist upon it, because I am not well pleased by debates in which arguments one does not like are simply written off with adjectives like “cynical” or “unanalytical” or “polemic” and so on. The proper approach is to engage on the substance and I encourage you henceforth to follow that route.

Here is why Uwe Reinhardt’s comments, and Norm Ornstein’s, are cynical, unanalytical, demoralizing and wrong:

Whatever nods they may offer to the actual structural political obstacles to achieving universal health care in the U.S., the ultimate villain is the stupid American populace (teenagers, plebes, what have you – surely not the well educated, who read this list).

And the econometrician’s solution to engaging these dunderheads is: make them pay more! Then they’ll pay attention and we can really get somewhere. Economic shock therapy for the ailing of America. Great news for insurance companies, hospitals, doctors and employers. Defined contribution plans will finally make Americans real consumers, with direct control over their health care choices. Then they can really call up that doctor and tell her to conform to national standards of quality, balancing over- and under-service. Yes indeed. (Or maybe the theory is that once they have realized the futility of becoming individual consumers, Norm Ornstein will lead us in calling for rescinding the tax rebate, and funding federal enforcement of national quality guidelines, as well as universal coverage.)

Well, yes, power does flow in many directions between the ruling/corporate elite and the rest of us, and sometimes our side wins. (Medicare. Medicaid. Happened at a time when many of us were inspired and united by the civil rights movement, not demoralized by invective.) Specific analysis of particular political events needs to inform us, and determine when we are mistakenly blaming the victim, and when instead we can rightly blame a stratum of society for intentional and heartless pursuit of self-interest. People are regularly abused and treated unfairly by those with more power, whether raped and slaughtered, unfairly fired, or given a bad grade; some fight back, many don’t, usually successful organizing and intelligent leadership helps. The prevailing rules and institutions societies develop over time (very long periods of time) to safeguard justice also play a role. Without dwelling on some lapses in bonhomie among certain Europeans during the 20th century, it is important to recognize that in the case of the failure of universal coverage in the U.S., the problem lies not primarily in failures in the national character of the American population, however amusingly this elitist view of our people is served up. If Uwe wishes to make the case that this is really the central problem, he might present some evidence that links cause and effect, or at least a logical line of argument beyond observations about spoiled stockbrokers in the Hamptons. (If the American people really were that stupid I’m not sure that yelling at them to get off their duffs would be very effective.)

Uwe has already well described the failures of our systems of financing and organizing politics and politicians. Will imposing further financial hardship, e.g. through defined contribution plans, truly mobilize the populace to overcome these obstacles? What is the evidence that this would be the best or even one effective stimulus to political activity in the case of health care? (If it were, we should be seeing armies of the uninsured waving their hospital bills in the faces of policymakers, rather than retreating into defeat, homelessness and bankruptcy.) What is even the analytical connection? Is there precedence for this in the US or elsewhere?

Truly, Americans have a proclivity towards individualism. Additionally, many of us do not vote, (As Jim Hightower has noted, if God intended us to vote she would have given us candidates.) How does this factor balance against the immense financial and political power of the private insurance industry, with its attendant ability to command publicity and the fealty of politicians? No other nation has had to face and overcome this force. This is not a reason to give up; it has to be done. It is a difference between the US and other countries that we must acknowledge and address. Further, health care is a difficult stand-alone organizing issue in industrialized countries, absent other national crises: most people are healthy, poor people have other pressing priorities, sick people are sick; both problems and solutions are complex, and the industry has far greater access to the media than do reformers.

What is the actual position of the American people on universal health care, through single payer or any other means? Uwe tells us the vote against single payer in California was definitive; in this case the electorate was swayed by a last-minute, well-financed campaign by the insurance industry alleging huge resulting cost increases. This was a false allegation, this kind of tactic is not unexpected, and activists need to be able to confront this kind of thing. But it is far from the last word. Kip and others point out alternative results through polls, the Maine legislature, the Jefferson Jury, and countless local ballot initiatives. The answer is murky, and often depends on the point the presenter is trying to make. I like to ask people whether they would prefer the current for-profit, market-driven, inequitable system of health care that leaves 45 million people without coverage; or a fair, publicly financed, publicly delivered and equitable system of universal coverage that would provide high quality health care to all. Usually gets a pretty good response.

Ok, how do we address the myriad obstacles to health care reform in the US, including developing support among our fellow citizens, besides further impoverishing them? Whoever knows this for sure is likely to be rich or assassinated but here are a few points of departure: 1. It may take some time. 2. Undermine the credibility and power of the opposition (why the fight over the patients’ bill of rights is a good thing). 3. Incremental programs like Healthy Families are failing to recruit and retain members; call for states to pay the full premiums, for good. 4. Link the fight for a just health care system to other calls for social justice, and thereby ally with political movements with some clout. Opposing “free” trade in health care via GATS and FTAA would be a start. 5. Point the finger at powerful forces like businesses that prefer to give away their profits to the insurance industry rather than turn the enterprise over to the government as enlightened capitalists do abroad. 6. Demand some rigor from ourselves and our leaders in analyzing successes and failures, and figuring out which forces are required to and likely to do what in order to advance the issue. (Did Bill Bradley’s campaign really fail because he championed a tepid proposal to expand health insurance coverage? Is that what scared the Democrats into the arms of Al Gore? Fascinating!) 7. Get Uwe to write us a polemic from time to time. Apparently some readers found his comments bracing and challenging. It’s a good opportunity to think through why they are misleading, though appealingly presented.

It’s frustrating to have been propounding an intelligent and effective solution like single payer for all these years, and not to be getting very far. It is worth examining why not, and what we might do differently. I look forward to seeing us all move forward.

Ellen

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.