Rebooting American Health Care, with Amy Finkelstein

Episode Summary

How can public policy improve upon and fix the mess of U.S. health care? In a new book, health economists Amy Finkelstein (MIT) and Liran Einav (Stanford) argue that's the wrong question. Instead, they suggest we ask: What is it that U.S. health policy should try to accomplish? Finkelstein, also a MacArthur Genius grantee, joins Bethany and Luigi to discuss health care as a social commitment and to make the case for free, automatic, and universal coverage for a basic set of medical services. She argues why the current patchwork system of incremental reforms isn't the answer, why insurance is not the lever to reduce racial disparities in health inequality, and why we must “tear down the system and build from the ground up.” Finkelstein and Einav's new book, "We've Got You Covered: Rebooting American Health Care," is out now.

Episode Notes

How can public policy improve upon and fix the mess of U.S. health care? In a new book, health economists Amy Finkelstein (MIT) and Liran Einav (Stanford) argue that's the wrong question. Instead, they suggest we ask: What is it that U.S. health policy should try to accomplish?

Finkelstein, also a MacArthur Genius grantee, joins Bethany and Luigi to discuss health care as a social commitment and to make the case for free, automatic, and universal coverage for a basic set of medical services. She argues why the current patchwork system of incremental reforms isn't the answer, why insurance is not the lever to reduce racial disparities in health inequality, and why we must “tear down the system and build from the ground up.

”Finkelstein and Einav's new book, "We've Got You Covered: Rebooting American Health Care," is out now.

Show Notes: On ProMarket, read:

  1. Lowering the Barriers to Entry for Economics Research in Healthcare, by Filippo Lancieri
  2. Rethinking How To Achieve Universal Health Care Coverage in the U.S., by Katherine Baicker, Amitabh Chandra, and Mark Shepard
  3. More Than 20 Years of Consolidation Have Led to a Dysfunctional Health Care Market, by Martin Gaynor
  4. The Secret Driver of U.S. Health Care Costs: Politicians Wanting to Get Reelected, by Asher Schechter

Episode Transcription

Amy Finkelstein: Given this commitment to provide essential medical care, the most sensible way to do it is to recognize that and fund it up front through the tax system, rather than through the back door once people become sufficiently ill that we feel morally compelled to jump in and do something.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: Few people would argue that in the United States, the healthcare system is an area that works well. Costs have spiraled even as Americans have gotten less healthy. There is a picture that shows how life expectancy has increased as a function of the increase in the expenditure per person in healthcare in all the developed countries. When you see this picture, you see that every country is on a common trajectory except the United States. The United States spends much more and has outcomes that are much less good. And the reason why I like this picture is because there are other differences across countries, of course.

In Portugal and Italy, we eat olive oil and not butter, and olive oil is better than butter, but the fact that this is within countries over time, it’s not the quality of what you eat. For every dollar increase in healthcare expenditures, we buy fewer extra years of life than in any other developed country.

Bethany: I just have to refute something that you said. Olive oil is not better than butter because there is nothing in the world that is better than butter, especially if you add salt. OK, wait. I know that wasn’t your point, but I’m glad you agree with me that—

Luigi: And you are from Minnesota.

Bethany: Well, yeah. Part of the problem, as economists Liran Einav and Amy Finkelstein, who are at Stanford and MIT, respectively, point out in their new book, We’ve Got You Covered: Rebooting American Healthcare, is that there is no system. They write that although healthcare in America consumes nearly one-fifth of GDP, it punches below its weight. In other words, it’s an economist’s nightmare.

I often think that the hardest issues to solve are those where ideology gets mixed up with practicality because people’s preexisting beliefs prevent us from seeing solutions. And of course, we automatically dismiss a lot of solutions because they don’t line up with what we believe. On top of that, when morals and money get tangled up, a mess results, and healthcare sits right at the epicenter of all of that.

Just think about the political battles over what was disparagingly named Hillarycare and then the Affordable Care Act. The questions are deep. Does everyone deserve access to healthcare? Does and should access to healthcare serve as an equalizer in an otherwise unequal society?

Luigi: Einav and Finkelstein have a solution. They do believe that everyone should have access to basic healthcare. Maybe it’s a moral right, maybe it’s a practical issue. They start from the point that if you look carefully at the history of the United States, when push comes to shove, and somebody’s life is at risk, we end up paying to save him or her. So, basic healthcare, de facto, is something that we are trying to offer to everybody, but they don’t believe that healthcare can or should be used as a great equalizer. To get to where they think we need to go, they argue that we first need to tear down what exists because the ongoing patching of the system, the efforts to fill holes, doesn’t work.

Bethany: They also argue that because you can lose your access just when you need it most, this is an issue that applies to all of us in America who are under age 65, and age 65 is, of course, when Medicare kicks in, and they don’t necessarily think Medicare is perfect, either, but one of the really interesting points in their book is that the lack of health insurance is a different and separate issue than health-insurance instability. And that often, even for people who have healthcare insurance, it is exactly the opposite of what insurance should be. Instead of creating security, it creates insecurity. But more on all of these issues directly from Amy Finkelstein, who joins us to discuss her new book.

We’re going to start with a nice, simple question. At the start of the book, you talk about how you preferred to tackle narrower questions in healthcare, those with hardcore empirical answers, and this book obviously is not narrow. What made you decide to tackle it, and what got you out of your academic comfort zone?

Amy Finkelstein: Liran Einav, my coauthor, and I have worked together for about two decades, always focused on narrow, technical pieces of the broader picture that we felt that we could tackle. And of course, though, people always ask, “How should we fix the US healthcare system? What do you think of Medicare for All? What would you do?” And I gave what I think was the honest answer, which is, “I don’t know.”

But when my father-in-law asked me that in, I guess it was summer 2019 during the Democratic primaries, and I gave him that standard answer, he said, “Come on, Amy, you must be the world’s expert on US healthcare policy.”

Now, that I’m not sure of. He’s generous to a fault—something that I might add, I don’t think his son has inherited—but he said, “Come on. Are you really telling me that you have nothing to say to me about, if you were in charge, what would be a better way to set up the US healthcare system?”

And Liran’s even more likely to stick to what we can do, not to what we’d like to do, than I am. And I expected him to say, “Well, sure, we’d also like to invent cold fusion, but we don’t have any ideas for that, so let’s stick to what we can do.” And instead, he was like, “No, he’s totally right. He’s onto something.”

And so, we started talking, honestly, mostly to satisfy ourselves and hopefully my father-in-law. And then there was a moment when we realized, “Aha, it’s actually startlingly simple.” And once we realized that, we were excited to not just tell my father-in-law but to hopefully tell the American public.

We started by saying, what is the goal that it seems that US health policy has been trying to accomplish? And there are many things you could be trying to do. We could be trying to improve population health or address the many problems in healthcare markets that don’t function the way the sort of cartoon Adam Smith invisible hand of markets suggests that markets should.

What we discovered, when we looked basically to our history, as a practical matter, the US has been committed since the very dawn of the Republic to trying to make sure that everyone has access to essential medical care regardless of resources.

Now, you may say: “Really? It doesn’t look like that. We’re the only high-income country without universal health insurance, et cetera.” And that’s all true. But as we spend a fair amount of time documenting and hopefully successfully arguing in the book, that represents our failure to make good on what is clearly our social commitment, not its absence. And everyone sort of focuses in policy on the uninsured, the headline number that 30 million Americans lack health insurance.

And that’s a very real problem, but it’s a startling fact that, although something like one in 10 Americans under 65 are uninsured at a moment in time, one in four Americans under 65 will spend some period of time without insurance over a two-year period. In other words, insurance, whose very purpose is to provide some measure of security and protection in an insecure and uncertain world, is itself highly insecure and uncertain. There’s a lot of churn in health-insurance coverage. And we were shocked to discover that the Affordable Care Act, which had made a huge dent, halving the share of the population uninsured at any given moment, had essentially not moved the needle at all on the risk of losing health-insurance coverage.

And there’s a reason for that. Of the people who are currently uninsured, the estimates are that about six in 10 actually are eligible for either free or heavily, heavily discounted health insurance. So, just making people eligible for care is not enough. That doesn’t mean they get coverage, and that’s because they don’t know what program they’re eligible for, or assembling all the documentation to verify their eligibility is a barrier. Or as happens a lot, they get on a program, and then they either cease to be eligible because they get slightly older or slightly richer, or they lose their job.

Or, if they’re eligible for one of these many programs that cover you with a specific disease, perversely, if you get better, if your breast cancer is cured and you go into remission, you lose your health insurance coverage because it was a program for low-income women with breast cancer. Or they stay eligible, but the program has to check if you still meet the income and the age and the disease requirements. And if you don’t remember to refile and show that you’re still eligible, you’ll lose coverage even if you are eligible.

This sad history, which we document in some detail in the book, just makes it very clear that more patches will never be the answer, that the history of the last 70 years of plug the leaks, grease the wheels, patch this, deal with this problem as it arises, has made it very clear that whenever you try to create a system through a series of patches, there will always be gaps in the seams. And so, it turns out there is a really simple solution, which is what we describe in the book: automatic, basic, universal coverage for everyone, with the option to buy more if you can afford it and want to.

And that is a simple solution that it turns out every other high-income country has done, and sometimes the simple solutions turn out to be the right ones. It was both exciting but also a little humbling to realize that all the nonexperts who would come up to me and say, “What’s wrong with our system? Why can’t we have health-insurance coverage like everyone else?” They were right.

Luigi: One thing that surprised me a bit in the book is how little bashing of the American healthcare industry in general there is. We live in a country in which we spend almost twice as much as a fraction of GDP in healthcare, and we get outcomes that are pathetic. With all due respect for people in Turkey, life expectancy in Turkey now is longer than in the United States. It seems to me that there are some really, really major failures in healthcare. Extending the system without fixing those problems might not be a great solution because do we want to have, what, half of our GDP spent on healthcare?

Amy Finkelstein: This, I think, is a place where we depart from how many people—including, it seems, yourself—and certainly how policymakers have attacked the US healthcare problem. There are quite clearly two problems, and we view them as distinct and separable. One is the coverage problem, which is what our book is about, how to get the very valuable and important economic security that health insurance can provide and how to make sure that everyone has that and they’re not at risk of losing it or of having it in spirit, but not in reality because they’re still at risk of large medical debt.

The other problem—the $4 trillion elephant in the room, as it were—is the one that you’re talking about, which is the problem of healthcare delivery, that we spend more as a share of the economy than any other high-income country on healthcare. We spend basically twice as much as the average other high-income country, and we don’t have much to show for it in terms of good outcomes. That’s an important problem, but it’s separable. How do we shrink that large spending level without sacrificing outcomes? That’s a problem that we do not know the answer to yet. And I’m pretty confident that it’s not just that I don’t know the answer and you may not know the answer, but no one really knows. And anyone who’s trying to say otherwise is trying to sell you something.

We talk a bit in the book about why the simple solutions like, “Oh, we pay doctors or pharmaceutical companies too much, or just get rid of all that unnecessary, useless care or high administrative costs,” those sound much easier than they are. So, it is a very hard problem. It’s one that I hope to spend the rest of my career working on. We’ve started that already. If we or anyone else ever comes up with a really good answer, I’ll be thrilled to write another book about it, but until then, I don’t think we need to hold the very real coverage problems captive to the problem of how to actually improve healthcare delivery.

And more to the point, you mentioned, “Oh my goodness, is healthcare going to become half of the economy?” I don’t know. But I do know that as we talk about in the book, we can achieve universal coverage under our proposal without increasing taxes on the taxpayers. Yes, it’s true that healthcare in the US is twice . . . we spend twice as much as any other country, but only half of that is publicly financed. Whereas in every other high-income country, essentially all of healthcare is publicly financed. And so, another way of putting it is, our tax dollars are already paying half of our healthcare spending for the amount that it costs to get universal coverage in other countries, so we could do it here as well.

Luigi: I really like your insight that basically, we already pay for most of the healthcare, but we leave the last mile scrambling. And as a result of that, we impose an enormous cost on everybody because the last mile is not filled in, but it wouldn’t cost that much to do it.

However, I am still not completely convinced of the separation between coverage and healthcare delivery because when you are making the argument, “Oh, we simply pay as much as everybody else, we just pay in the wrong ways,” you are basically making a delivery point that if we change the delivery system in America with the same amount of expenses, we could cover everybody and more, probably. But if we don’t change the delivery system, to what extent will this increase the costs? Is it like just 20 percent more, as you said, or is it much more?

Amy Finkelstein: What we were saying is not that we would get universal basic coverage without increasing taxes. We’re saying we could. Whether we do or not is a political choice. And to answer that, let me be clear, because I certainly agree with you that in order to get universal basic coverage without increasing taxpayer taxes, we would have to impose a lot of constraints on what is covered in basic coverage relative to what, say, the currently privately insured or currently the elderly on Medicare get. And that’s why we expect that about two-thirds of the population, so people currently having private insurance or the elderly on Medicare, would probably buy our supplemental coverage.

The universal basic coverage would be quite basic both in what it covers, so essential medical care, not, for example, plastic surgery or that sort of thing. It would also have longer wait times than what most people with private insurance or Medicare are used to, and it would have more so-called gatekeeping, or the euphemism for it is care coordination, in which the doctor can’t just order any test they want that the patient wants. It has to be considered medically warranted.

All of that would keep the spending in the basic plan down to, we estimate, about that 9 percent of GDP that other countries are spending on their healthcare. We expect that for the uninsured, that would be clearly better than what they currently have. For people on Medicaid, it would be about the same, so they probably wouldn’t buy the supplement. For people with private insurance and Medicare, it would be worse on those dimensions that I just mentioned. So, in that sense, we expect many of them would buy supplemental coverage, but it would be actually much better in two very important respects.

If you currently have private insurance, and you chose in our system to stick with the universal basic coverage, that’s automatically provided. As I said, you’d notice a lot of downsides, but you would have two clear benefits. First, no risk of gargantuan, out-of-pocket medical expenditures for supposedly covered essential care. Not only is medical debt in the United States enormous, but three-fifths of that debt is incurred by people who have health insurance at the time they incur the medical debt. That’s because of the very high cost-sharing or deductibles. And second, you’d have no risk of losing your coverage.

I guess, Luigi, another way to answer your question is, I think the reason the math works out is because the basic system is going to be a lot more basic, but it will deliver on essential care. And then, the people who are currently buying private coverage will continue to buy it. No longer financed by the taxpayer, they’ll pay for it themselves and they’ll get additional amenities.

And that’s how a large number of other countries do it. Australia, Singapore, Israel, they provide the essential medical care through the public system, and then they encourage, in some cases, people who want . . . In Singapore, they refer to it as, you can have an air-conditioned hospital room rather than a “naturally ventilated” one, which is quite a euphemism if you’ve ever been to Singapore’s hot and humid climate.

But those are amenities. Those aren’t part of our social commitment, but that’s where a lot of dollars come in.

Bethany: Another point you make in the book—and tell me if I’m stating this correctly—that I thought was really interesting and perhaps counterintuitive, is that health insurance should address the problem of health insurance. It should not necessarily address the problem of other inequalities in society. I think it’s a clarifying way to think about it and one that isn’t immediately obvious to most people because we tend to wrap this whole thing in many layers of complexity.

Amy Finkelstein: Right. The minute anyone starts talking about healthcare, there’s always a huge concern about the shocking inequalities that exist in the United States, that people at the top of the income distribution have much higher life expectancy than people at the bottom of the income distribution. There are also very disturbing disparities in health by race, even among people with the same income. These are very real and important concerns.

One thing that the research of the last several decades has made extremely clear is that, as counterintuitive as it may sound, if you are rightly concerned about the health inequalities and inequities that exist in US society, the lever you want to be pushing on is not health insurance. It’s not that health insurance doesn’t matter for your health at all. In fact, we talk in the book about rigorous evidence from randomized control trials that I’ve done, that other people have done, that do show that, yes, if you cover the low-income uninsured with health insurance, their health will improve.

But if you look at the shocking disparities in health across the income distribution, differences in health insurance or even access to medical care just quantitatively explain essentially none of that gap. And perhaps . . . There’s many, many studies that have made this point in various ways. To me, the single sort of most compelling—you can hold it, or I can hold it in my mind, at least—piece of evidence from this comes from work that Petra Persson, Maria Polyakova, and Yiqun Chen did recently, in which they show that in Sweden, a country with not only universal health insurance but a cradle-to-the-grave social safety net, the differences in health outcomes between rich and poor are as large between the top and the bottom of the income distribution as they are in the US.

And, by the way, the income distribution itself is much more compressed in Sweden, so at some level, for a given difference in income, the health disparities are even greater in Sweden. And so, that just tells you it’s not to first order about health insurance, which everyone has, or the increased access to medical care that health insurance brings.

The other way to think about it, the other side of that coin is, you might be saying, OK, fine, that’s an interesting study and that gives me pause for thought, but come on, obviously, medical care is important for health. Just look at the massive improvements in medicine we’ve seen over the last half-century and the wonderful increase in life, quality of life, and life expectancy that those have brought. Open heart surgery, dialysis for end-stage renal disease, what have you. And that goes back to the point I made earlier, that we have in the US a commitment to provide essential medical care when people need it regardless of resources.

And so, it’s not that medical care doesn’t matter, it’s that most people get most of the medical care they need that’s actually essential for health, regardless of their resources or insurance coverage.

A startling fact to me . . . It was actually a fact that I had produced, but I hadn’t sort of realized what it meant until we started working on this book. We have results from the Oregon Health Insurance Experiment, a randomized trial of covering the low-income uninsured with Medicaid, that showed increased health insurance, healthcare use. Covering people with health insurance increased healthcare use, as many other studies had documented.

But what I didn’t realize until I went back and thought about it is that you can flip that around and look at how much healthcare increased. And what you find is that the uninsured are using about four-fifths as much medical care as they would get if they were insured, and they’re only paying about 20 cents on the dollar for that care. The rest is being paid through a series of patchwork public programs designed to pay hospitals or physicians to provide some care to the uninsured when they really need it.

So, that’s not to say that it’s fine to be uninsured. That same Oregon Health Insurance Experiment documents quite clearly the very real benefits to getting insurance, but the point is that the uninsured are not literally uninsured in the sense of not getting any care that they don’t pay for. And that’s part of why, in the end, solving the health-insurance problem is not going to make much of a dent in health inequality. We need to address what people now call the social determinants of health: drinking, smoking, diet, exercise, also the air we breathe, the neighborhood we live in, et cetera.

Bethany: Let me ask a devil’s advocate question. If, as you argue, providing insurance isn’t going to address health inequality, and it may or may not shrink overall spending because that in itself is a separate issue as well, why should we do this? Why bother? Why not just continue to muddle through with the system we’ve got?

Amy Finkelstein: Why muddle through? The easy answer is, seriously? Come on, name me one person who thinks we have a good system. I think that the more serious and thoughtful answer is to say if you buy our argument—or hopefully, after reading our book, you will—that we have always had this commitment that we have tried to fulfill to provide essential medical care to everyone regardless of resources, why not just do it more effectively and efficiently by formalizing it upfront?

And I want to note that this is an argument that has been made both historically and in modern times by people across the political spectrum. It may sound superficially like a liberal argument. Universal coverage, that sounds like something from out of a progressive camp. But Republicans and Libertarians, including both politicians and intellectuals, have made this argument that, given this commitment to provide essential medical care, the most sensible way to do it is to recognize that and fund it up front through the tax system, rather than through the back door once people become sufficiently ill that we feel morally compelled to jump in and do something,

Luigi: Your proposal makes me feel very good because it’s actually quite similar to what we already have in Italy. However, I learned from looking at my relatives that, really, the devil is in the details because if you present that you get basic coverage without the amenities of a single room or sort of a Michelin-starred restaurant meal, that’s easy to say. It’s much more complicated when it comes to serious diseases and cures. Some diseases can be cured at a very high cost. And then the question is, does the basic coverage cover that cost? And up to what point does it cover that cost? When are we resurrecting the so-called death panels? Because at some level, one of the reasons why Medicare in the United States costs a fortune is because there are no guidelines for what is excessive treatment.

Amy Finkelstein: Yeah, I agree completely. And that’s Chapter 11, which we call “Trust the Process,” which my coauthor tells me is a basketball analogy, and I’ll just have to take his word on that. But yes, so we deal with this exact issue. What is in basic coverage? And let me start with the simplest version of the good news, which is, as you said, I’ve seen this play out in Italy. We see it play out in every high-income country because they have to engage in exactly this issue. They all have some form of universal basic coverage, and they have a budget—unlike the United States, I might add.

One of the many things that’s bizarre about the US healthcare system is that when we talk about the healthcare budget or the Medicare budget, we don’t mean the budget in the way that when I give my kids their allowance and I tell them they have a budget, that’s all they have to spend. It’s a budget only in the sense of that’s how much we did spend or Medicare is predicted to spend. There’s no constraint. We usually think of budget constraints. No.

Something that’s simultaneously totally banal and actually very radical about our proposal, is we say, like every other high-income country, universal basic coverage has to have a budget that’s binding. And then we have to make decisions about what we will pay for. And, as we talk about in Chapter 11, that is something that every other country engages in, and so, we have a template for how this is done.

I’ll tell you how it’s not done. It’s not done the way economists might wish it were done, which is purely on the basis of so-called cost-effectiveness analysis. Let’s take every new medical treatment, let’s figure out how much it costs, let’s figure out what the benefits are, and let’s rank them and start with the ones that have the highest benefit for the cost.

We actually talk about in the book, and this is amazing, but in England there was a health economist, Alan Maynard, who was so committed to getting the National Health Service to try to use only cost-effectiveness analysis in deciding what to cover, that he actually went on a game show called “The Life and Death Game Show” in which real people facing medical choices were put on the show.

The decisions were not binding, and the audience had to vote on whether they should pay for lifesaving kidney dialysis for one person, or the NHS should pay for hip surgery to relieve osteoarthritis for 40 people. Now, the NHS was not going with these decisions, but the point was the health economist was trying to explain the notion of cost-effectiveness. Cost-effectiveness, it turns out, is how every country starts but does not end its process of deciding which of these critical diseases to cover. They start with that, and the technocrats, as it were, the economists and clinicians, rank new treatments by their cost-effectiveness. And then there’s a committee of people that involve stakeholders in the community, physicians, who make decisions.

And these are hard choices. And sometimes, as in Israel, they’ll actually vote to expand the budget to cover new things, and sometimes they’ll make decisions over difficult choices. But just because it’s hard, and, honestly, a little unpalatable to think about, doesn’t mean it can’t be done. And it is, in fact, how every other country does it. And again, remember, people who want something that isn’t covered can, if they have the resources, purchase it outside of the basic system.

Bethany: Your argument makes perfect sense to me theoretically, but one of your complaints about the current system are all the patchwork laws that have been passed in response to public outcry. An effort to do this, an effort to cover that, an effort to get this person who is being left out by the system to make sure they have insurance. We’ve got a history of, let’s call it, a little bit of healthcare entitlement in this country, and we’ve got a plaintiff’s bar that is unlike any other country.

How does the same thing not happen again to your program of basic care, where we end up tacking on this for this special-interest group and tacking on that for that special-interest group? How do you put in place a mechanism that prevents the same exact thing from happening, albeit on top of a basic structure instead of on top of a mess?

Amy Finkelstein: I mean, I think the idea that there’s no politics involved on the margin, whether one new technology or another gets added to basic coverage, in any country’s system would be naive. So, yeah, in the same way, what’s included in housing programs or food stamps, I’m sure is some combination of merit and politics. I’m sure that would be the case here, too.

But again, you’ve said, albeit on top of a basic system, I think that’s a pretty big albeit. That’s like, aside from that, Mrs. Lincoln, how did you enjoy the show, right? So, yes, on the margin there’ll be politics, but we’ll be starting from a much more solid foundation.

Luigi: I think my experience in Italy seems to suggest you’re missing an important element here, which is if part of the delivery of healthcare is private and it’s completely free, there is enormous room for abuses. For example, in Italy, when medicines were completely free, pharmaceutical houses would build boxes that were much larger than needed because nobody was on the controlling side of that. And so, if you needed six antibiotics, they were giving you a box of 12 and charging you for 12. You don’t care, the doctor doesn’t care. The pharmaceutical house makes twice as much money. And so, you don’t see these savings because in equilibrium, these are eliminated.

My fear is that if you completely eliminate any copayment, then you have these rampant abuses everywhere. And the fact that every country with universal healthcare introduced some form of that should tell you something that there is some value to it.

Amy Finkelstein: Well, let me disagree. I said no copays. I didn’t say no restraints. All that gatekeeping or care coordination and care management, as it’s euphemistically called, is designed to precisely deal with that. Now, the particular example you give of pharmaceutical companies packaging drugs in larger packages would require maybe a bit more oversight than the Italian government was up for. But I think the idea is not that there’d be no restraints, it’s just that they would be on the supply side, not on the demand side. And when you say this is why maybe every country is onto something when they’re putting in copays, they’re putting them in in name only. They’re putting them in and then taking them away.

In France, where their universal basic coverage has very, very high coinsurance, and they’ve raised it in part in response to economists’ advice, they’ve also created a large number of other public programs to cover that coinsurance for the low income or to do taxpayer subsidies to employers to provide supplemental coverage. In the end, 95 percent of the French have all that cost sharing covered by a supplemental program. I don’t know the situation in Italy, but at least in the countries we looked at, yes, they’re introducing it, but they’re not sticking to it. Whether it should be there or not, it’s not there in practice.

Bethany: The last question from me, did writing this book and writing a book that was broader than your other work, do you feel like it changed you and changed the way you think? And what does your father-in-law think about the outcome?

Amy Finkelstein: I loved writing the book. It’s hard to go from thinking about the big picture to go back to what we do every day as academics. One thing that became very clear to us in writing this book is questions of delivery are first order and unsolved. And we’d love to write a big-think book about delivery, but we don’t have the answers. So, now we’re back in the weeds, in the nitty-gritty of data and econometrics. And maybe at some point, we or someone else will come up with something.

I did give my father-in-law the book to read. He said he liked it. I think he was pleased that I had paid so much attention to his question. I hope he doesn’t lob another hard question at us anytime soon. But beyond that, I don’t want to put words in his mouth. You’d have to ask him what he actually thinks.

Luigi: Thank you very much for the time and for the book.

Bethany: Yes, thank you.

Amy Finkelstein: Thank you guys so much. This was so fun. I’ve never been interviewed by two people. You guys work very well together. It’s terrific. So, thank you very much.

Bethany: Luigi, I do worry, even more so after our conversation with her than I did after reading the book, that by stripping it down as much as she does . . . There’s a great clarity in how she reframes the idea of health insurance. She takes it away from these questions of, is it going to reduce healthcare spending in the US, and how do we possibly achieve this politically? And, no, it’s not going to fix all this inequality we have in health outcomes. But I worry that in stripping it down so much and clarifying it, it loses any appeal whatsoever.

I just always think that there is a trade-off between stripping things down to their absolute, basic, essential . . . There’s a lot of clarity in that, and I appreciate her clarity in that, but they also lose some tonality, for lack of a better way of putting it, or some appeal, in a way. And I think the idea that you can fix this, that you can fix health insurance, and it may not make a damn bit of difference to overall health outcomes, is quite dispiriting.

Luigi: But this is where I think that the book is very helpful because very often when you try to achieve too many things with one objective, you end up achieving nothing or not even getting started. And what she says is, let’s really separate things. At the end of the day, I think that she’s making a very subtle but powerful political argument to say, look, universal coverage is not about the poor, it is about the middle class. In fact, it’s about all of us because all of us can be caught in between jobs without the right insurance at the right time.

And even if you have two days of gap in your health insurance, those can be your two fatal days. And I think it’s very costly. And if that message comes across, this is across political parties, across income levels, across everything, maybe it’s the way in which you can get some universal coverage done.

Bethany: Yes, you’re right. It is an incredibly compelling message. I thought her divide between . . . her way of separating out what it means to be uninsured versus what it means to have healthcare instability was a really, really intelligent one. I have to admit, I hadn’t seen it through the political lens. That way of making something universal may garner a lot more support for it.

And I was actually thinking about that argument about the healthcare-insurance insecurity, in light of our conversation with Matthew Desmond, about the amount of bandwidth that can get chewed up when you’re spending a lot of your time worrying about where your food is coming from or where your rent money is coming from or where your healthcare is going to come from. And that lack of bandwidth in healthcare is something that extends really far up the income spectrum, that worry about what happens if you have an unexpected medical bill and you, as she points out, do end up with insurance that doesn’t provide insurance in some dire cases.

And you could get stuck with—or at least until the No Surprises Act, which has debatably fixed it—a huge ER bill just because the doctor you saw happened to be out of network, and you could still get stuck with a huge bill because you’ve called an ambulance that’s owned by a private-equity company. When you think of how much of Americans’—

Luigi: Just for your love of private equity.

Bethany: Sorry, I couldn’t resist. But when you think about how much of Americans’ bandwidth that chews up, you can argue we could be a lot more productive and creative if we could free up that worry.

Luigi: Yeah, I think that that’s a point she makes very compellingly. And to me, that’s the biggest value out of that book, especially if it succeeds in creating a new political support for that. It’s a very useful first step, but without the second step on how to provide delivery and how to provide delivery more efficiently, I think it is a very hard first step to implement.

I think that the real problem is why the delivery of American healthcare is so inefficient. The reason why we don’t have universal healthcare is because we want to maintain this inefficiency and we want to maintain these rents. And so, it’s a big obstacle to any reform.

Bethany: Well, I have an answer as to why the delivery of American healthcare is so inefficient and it’s—

Luigi: It’s called private equity.

Bethany: Well, in part, yes, but I’ll get to that, only in part. It’s journalistic, not quantitative, but I thought about this a lot because of the book that Joe Nocera and I have coming out, and I’d love to hear what your thoughts on this are, which is that I think it’s so inefficient because we have this really convoluted mix of a private market and a government-pay market, and we pretend at various times that we’re operating in a private market, where private-market incentives should be what should drive a better quality of care or should drive better outcomes. But in reality, the reimbursement system is driven by government decisions that have very little to do with quality of care and with outcomes.

We have this competing, or at least at cross purposes, set of incentives, and we’re not quite sure which one it is because it isn’t either one. It’s a two-headed beast, and two-headed beasts just can’t deliver clear outcomes.

Luigi: I fundamentally agree. It is true that sometimes a combination is the minimum between the two rather than the maximum between the two. And I think that combining the private sector with the government sector in this funny way certainly did not contribute to reducing the cost.

By the way, one of the things that I did not know and left me completely shocked is the fact that Medicare has no budget.

Bethany: Yeah, I didn’t know that, either.

Luigi: Which, actually—and here I’m going to say something very controversial—really vindicates the reason why we have a vote to increase the government debt because everybody says, “Oh, why do you have to vote again after you have voted for all the bills?” But in fact, you have not voted for all the bills because you don’t know how much Medicare has spent. This is not in the budget, so it is ex post. You have to raise the debt to decide whether I’m going to pay for it or not.

Bethany: I didn’t realize that, either, and had not put it together. But, yes, by the way, back to my point about government and the private profit motive, there is a private-equity angle to this, and one of the things that made me think about it was this private-equity ownership of these ER, emergency-room staffing companies, which resulted in these surprise bills for patients because the doctor they saw would be out of network and the patient wouldn’t realize it. When you go to the ER, you’re usually not thinking, “Is the doctor I see going to be in-network?”

And it was a way of private-equity firms, of these companies, squeezing more money out of the system in a way that had absolutely nothing to do with health outcomes. In fact, it could be deleterious to health outcomes, but it shows how the system works at cross purposes because of these crazy incentives, or these mismatched incentives that are built into it. And from private equity’s perspective, they were doing only what they should do. Their responsibility is to their investors. So, they were trying to maximize the bottom line for their investors.

And so, that’s what I mean by these cross purposes because nobody could argue that what happened with these practices in ER rooms somehow contributed to better healthcare for Americans. The incentives were just completely mismatched and unaligned.

I don’t think she wrote about this in the book. It’s possible I missed it, but she wrote an op-ed in the past that cutting waste isn’t that easy, that this idea that there’s an easy way just to get all the waste out of the American healthcare system doesn’t really exist. It’s this holy grail of healthcare policy to cut waste while preserving critically important treatment, but it’s nowhere near as easy as that sounds because you don’t know what the critically important treatment was until after the fact. And even if you cut what appeared to be useless expenditures, they weren’t useless expenditures for somebody. So, I think that her previous work made her less willing to say there’s an easy way to do this and also reduce costs.

Luigi: I agree that it’s not easy, but to some extent you are the world expert. If you cannot do it, then I give up hope. If the two of us could not figure it out, or a politician or Bernie Sanders could not figure it out, that’s legit because it’s difficult. But if you are one of the world’s healthcare experts and you tell me you don’t know how to do it, then it is kind of much more dramatic.

It’s not impossible. And at the end of the day, I think even in the book she suggests a method, which is put in a budget, because she points out that expenditures in Medicaid, where there is a binding budget, increased less than in Medicare, where there was no budget.

Part of the secret is you need to have a budget constraint. Now, budget constraints are not easy to impose and not politically appealing. That’s my criticism of the book, that it’s more like very clever political marketing rather than a concrete proposal.

Bethany: That’s interesting. I’m not sure I agree with that. I would say it’s more of a starting place than it is a really, fully fleshed-out proposal for how we can actually fix this problem that not only destroys individual lives but threatens to destroy us all. But it is a starting point, so I think I’d give her a little bit more credit perhaps than you do.

Luigi: I think it’s in the eye of the beholder, but I think we agree on one point, I think, and feel free to say no. This is a dramatic problem in the United States. Maybe it’s the most dramatic problem in the United States, and we desperately need a solution sooner rather than later.

The reason why I am maybe more critical than you is because I praise tremendously these experts who write books to try to help, but I was expecting a little bit more. And maybe more is not possible, and it is my wishful thinking that says you could do it, but if the world experts cannot come up with a book about what to do to reduce that cost, where are we?

Bethany: I hear you on that. It’s interesting. I guess I have such a fear and loathing of experts overstepping and pretending to know things that they actually don’t know. I think this phrase “thought leader” is one of the most godawful things that has ever come about, leading other people’s thoughts. Anyway, whatever. Not only in the Orwellian connotations of it, but also the way in which it encourages people to overstep the limits of their actual knowledge. And I like that she’s very clear about what she knows and what she doesn’t know. And maybe it’s frightening that there’s a limitation to expertise, but I’m appreciative of her willingness to acknowledge it.

Luigi: No, I agree. I think it’s very nice that she’s so honest about this, but then it makes me more depressed about the state of not only the US economy, but also the state of the economics profession.