In a week when President Biden announced that Medicare would take the first steps to lower the price of expensive medications, we talk with an advocate of a far more radical overhaul of the US’s flawed health care system.
In this week’s WhoWhatWhy podcast, MIT economics professor Amy Finkelstein makes a case for replacing our overpriced and underachieving medical insurance regime with a radically new model — a universal, tax-neutral, automatic-coverage health care system.
Finkelstein, a former MacArthur “genius grant” recipient, argues that the current US system for delivering health insurance is not just inefficient and unfair but fundamentally broken.
Her new book, We’ve Got You Covered, serves as a manifesto for the radical change she believes must replace the existing patchwork of programs, which leaves so many people uninsured and unable to get the care they need.
Drawing on insights from American history and comparative analyses of health care systems around the world, she concludes that our current, piecemeal approach to health care reform is destined to fail.
In its place, she calls for, and gives details of, a uniquely sculpted basic coverage system, with individual options for additional coverage. This new model, she says, challenges conventional wisdom across the political spectrum, and would not only provide essential medical care to all, regardless of resources, but would also not require raising taxes.
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(As a service to our readers, we provide transcripts with our podcasts. We try to ensure that these transcripts do not include errors. However, due to a constraint of resources, we are not always able to proofread them as closely as we would like and hope that you will excuse any errors that slipped through.)
Jeff Schechtman: Welcome to the WhoWhatWhy podcast. I’m your host, Jeff Schechtman. In the United States, 30 million individuals lack formal health insurance, with countless others living under the perpetual threat of losing their coverage. Even those insured often grapple with the risk of enormous medical bills for their “covered care.” It’s evident that the American health insurance system urgently needs some kind of reform. Our guest today, Professor Amy Finkelstein, is an economics professor at MIT. She contends that the existing health care reform proposals, which focus on expanding a successful element of the current system or making incremental additions, are missing the larger point.
She believes that we need to pose the question: What should the US health insurance policy aim to achieve? In her new book, We’ve Got You Covered, she proposes a fresh blueprint for a health care system constructed from the ground up. Drawing on insights from American history and a comparative analysis of global health care systems, she concludes that our current approach to health care reform is destined to fail. The only viable solution, she asserts, is to construct a new coherent system from the ground up.
It’s a challenge to conventional wisdom from the right and the left and even from many of those in the field of economics. Amy’s plan is innovative, evidence-based, and holds immense promise. And we’re going to talk to her about it today. Amy Finkelstein is a MacArthur Genius recipient and a professor of economics at MIT. Her new book is We’ve Got You Covered: Rebooting the American Health Care System. Amy Finkelstein, thanks for joining us here on the WhoWhatWhy podcast.
Amy Finkelstein: Thanks so much for having me.
Jeff: A delight to have you here. How did we get to the present system? How did we get to a system that literally no one is happy with at this point?
Amy: It’s a great question. We talk about it at length in the book. I think the simple answer is we got here because we never had a plan to get anywhere else. Our health insurance system was never deliberately planned, sketched out, and constructed. It’s been put together piecemeal, patch by patch as various issues have arisen, or various constituencies have made their issues politically salient. We’ve responded with a quick fix or a patch to cover some particular group of people or some particular disease in some circumstance as things became politically salient. And so the result, obviously, through enormous efforts of well-intentioned people, has been a haphazard patchwork of programs that leave enormous gaps in the seams and are destined to punch below their weight.
Because whenever you have multiple pathways to getting coverage, you’re going to have people who don’t find their path. One of the most sobering things we realized in writing this book, we didn’t go into it with the idea that of course we needed to tear it down and start over. Incremental reform is always easier, and so we had hoped we’d come up with a few last Band Aids or patches to fix the remaining issues. But one of the really sobering facts is that of the people who are currently uninsured, six in 10 of them are actually eligible for either free or heavily, heavily discounted health insurance coverage.
And yet they don’t have it because they’re unaware of which program they’re eligible for or haven’t been able to get all the documentation and paperwork together to enroll in the program, or perhaps worst of all, they have enrolled, but didn’t realize that whenever there’s a program with specific eligibility rules, you have to continually reaffirm that you meet those requirements. And so a year passed, and they didn’t file the paperwork to show that they still have the disease that got them covered or were still young enough or poor enough to qualify for that program, so they lost their coverage.
Jeff: You mentioned the evolution of this in terms of the patchwork nature of it, the political constituencies that had to be dealt with along the way. Why has there never seemingly been more pushback or more creativity from the medical establishment itself?
Amy: I’m not sure that this is, in all fairness, a problem that we should be looking to the medical establishment to solve. It’s a policy problem that we need to solve through our political process and our policy. In other words, the term “health insurance” is something of a misnomer. It’s not a medical product. It doesn’t ensure our health. It doesn’t provide the fountain of youth; I would that it did [Jeff laughs]. Health insurance is an economic product, a financial product that’s designed to protect us economically. When we are unfortunate enough to experience poor health, at least we won’t have to forego essential medical care or forego paying our rent or our utility bills in order to afford that medical care.
It’s fundamentally an economic product, and it’s been failing in that design because it’s not protecting us economically against the costs of essential medical care. The people who don’t have insurance, the people who have insurance but risk losing that coverage when they lose their job or get older or get a little richer or get healthier or get sicker, even the people who are able to maintain their coverage but can still, as you said at the outset, face catastrophic expenses that they have to pay for their supposedly covered care. We need to fix it as a policy matter. I don’t think it’s fair to blame the medical profession or at least solely blame them for the predicament.
Jeff: Yet it’s been different than other kinds of insurance. We have auto insurance systems that with their problems and their glitches more or less work, homeowners’ insurance, business insurance, et cetera, et cetera. None of them have faced the kind of problems as economic components, the kind of problems that we have seen with respect to health care. There is something inherent in this that somehow seems different.
Amy: I totally agree. In fact, in another life from something of an insurance geek, and I’ve studied a lot of other nonhealth insurance products as well. I completely agree with you. I think there’s two key things that are different. The first and probably the most important is that if you have a car, and it breaks down, and you’re not insured, no one is going to offer you some quick fix, some mechanical care for free, or give you a run-down but serviceable alternative car. You’re on your own. Fundamentally, we, and I think most other societies, are not willing to accept that for health care.
So, then we may say you need to buy health insurance, but if you don’t, and you end up sufficiently ill, we step in, and I mean, not just as charitable individuals, but our public policy, as we discuss in the book, creates a series of programs to either require hospitals to provide essential care, and that’s not just talking about the emergency room, or to fund clinics to provide care or programs that will cover you under particular circumstances, as I said, particular diseases, particular ages, particular types of people because we’re not willing to stand idly by when someone needs essential medical care and can’t afford it. We are willing, if your car breaks down or your roof caves in to not step in, if you don’t have insurance. And I’m not saying that one is right and one is wrong.
Our key point in the book is not to argue whether we should be less generous or less altruistic when people are sick or more altruistic when people’s cars break down but to realize that this is the fundamental reality of how we have always operated as a society. We actually go back to colonial times to talk about examples of this. Therefore, it’s essential that if we recognize that this is in fact how we’re going to behave, we might as well fund and design that coverage upfront rather than just in the back-end try to provide patches. I think the second thing, which is, I think, important to realize is that I think health or medical care is unique in being one of the few risks we face as individuals where the size of the financial risk we face is unrelated to our income.
You talked about auto insurance or homeowner’s insurance or even life insurance. What you’re trying to insure is going to increase with your income because you’re going to have a fancier car or a more expensive home or a job, in the case of life insurance, that pays more. But medical expenses, if anything, they’re higher for the poor because health is worse for the poor. The cost of treating care is really not a function of your income. And so you can really have unaffordable medical expenses in a way that you can’t really have an unaffordable car repair. You may choose not to pay it or not have the money at the moment, but fundamentally, you’ve bought a car based on how much you can afford, and therefore, you can buy insurance to insure it. Whereas with medical expenses, they can easily be many, many full-hold your income. And so that’s part of the reason I think we feel compelled to step in and do something.
Jeff: And to that extent, is it possible to talk about a policy and a system of health insurance that doesn’t address the fundamental costs of medical care, the way they have escalated, and the way they’re out of proportion to similar costs in most of the world?
Amy: Yes. So one thing you mentioned that at various points in the book may commit some economic heresy. And one of them is that we think it’s very important to separate the kinds of coverage and basic economic security and financial protection policy of health insurance coverage from the also very important issues that you raise about the very, very high cost of medical care in the United States, or to put it differently, why we can’t, with all the money we spend, get better health outcomes or spend less for the health outcomes we currently get. These are both very important problems. They tend to be conflated in most policy proposals.
If you think back to Obamacare, the idea was we were going to both expand coverage and “bend the cost curve,” reduce health care spending, but they’re actually fundamentally separable. And while as we talk about in the book, it turns out the solution on the coverage front is startlingly obvious. The question of how to improve health care delivery, how to reduce the very, very high costs of health care spending without harming patient outcomes is actually a problem which we don’t have a solution for currently.
And by we, I don’t just mean myself and my benighted co-author; I mean the entire policy, medical, academic profession. And anyone who’s telling you otherwise is trying to sell you something. And so we don’t think we should hold the problems of coverage captive or hostage to having to also solve the problems of delivery, especially when as we explained, it is possible to get to the type of universal automatic basic coverage that we think we need without actually raising taxes. And then for people who want more than the basic, more than the essential, they can pay for that out of their private income, if they’re able to and want to.
Jeff: Talk about this notion. Expand on that a little bit that you define in the book that you just referred to, and how it is similar or dissimilar from some other systems around the world, particularly the French system, which in some ways seems similar.
Amy: That’s a great question. The truth is the way we approach this problem, perhaps not surprisingly given our training as economists, was from first principles. What is the goal that health policy is trying but failing to achieve? And that’s clearly to try to provide essential medical care to individuals regardless of resources. As we discussed, that’s very clear from our history of policy patches. And once we realize that that’s what we’re trying to achieve, what is the way to achieve that universal automatic basic coverage with the ability to supplement?
That being said, having done this first principles or clean slate, blue sky, what have you exercise, we were both gratified and somewhat humbled to step back and realize that at a broad stroke level, what we’ve proposed is what every other high-income country does: a automatic universal basic system and the ability for people who want and can afford additional coverage to supplement. So, at some broad level, one of the reasons we think this is doable is because this isn’t some complicated mechanism that two crazy academics dreamed up in their blackboard and concocted in their laboratories. It’s actually what we see happening around the world.
That being said, our particular proposal is not something that you can find lock, stock, and barrel in any given country. There are elements of it in each. So you mentioned the French system. The French, like every other high-income country, do have automatic universal basic coverage, and they allow people to supplement. One key difference I’d say between our proposal and the French is that the French basic coverage has unusually high cost-sharing — the amount that patients have to pay when they go to the doctor, even for care that’s covered by the basic system. And this is an idea that has been embraced by economists for generations.
The idea that patients need some skin in the game in a financial sense, if you would, so that they think twice before asking for an MRI for their headache or getting every test under the sun. And this is something we have written about ourselves and lectured generations of students on. And in the book, we say quite clearly we take it back. Not because we were wrong about the facts. In fact, the evidence is incontrovertible. We’ve done some of this work and other people have as well, that if patients don’t face any costs for their medical care, they will spend more and drive up health care spending. Those facts are correct. The implications that we as a profession drew from them are incorrect.
And I think that you can see this in many countries, and I think the French example that you brought up is one clear place you can see it. So, as I said, the French have high cost-sharing in their universal basic coverage, and yet they then have a patchwork of programs — sound familiar? — to try to help people cover that cost-sharing cost. So, for sufficiently low-income people, the government pays their cost-sharing. The government also subsidizes the employers to provide supplemental coverage to their employees. And the end result with all these different patches programs for the poor, the old, the employed, again — sound familiar? — is that 95% of people in France actually don’t face the cost-sharing requirements that were built into the system to try and reduce costs.
So, the fundamental problem, and the reason we’re against any cost-sharing and the basic coverage for essential care is that if we’re committed to providing essential care to people regardless of resources, there will always be people who can’t afford the $20 copay to go to the doctor or the $5 prescription drug copay. And so, what we’ve seen in country after country is a series of patches designed to exempt the vast majority of the population from the cost-sharing. So we might as well just skip this tortured existence and just get rid of the cost-sharing altogether in the basic system.
Jeff: In that sense, Medicare is a model that is not dissimilar from what you’re talking about.
Amy: So, in one important respect, Medicare is similar to what we’re talking about: the fact that it’s the only form of health insurance in the United States that once you’re on it, you don’t risk losing it because you’re eligible or at least the main Medicare program, when you’re 65 and over. People never get younger, unfortunately, so they’ll be on it for their whole life. But in at least two very important respects, it is very different from what we envision. First of all, Medicare is exactly like the French system in having very, very high consumer cost-sharing. In particular, for doctor visits, patients have to pay 20% of the cost of their doctor visits, and that’s unlimited. There’s no cap on it.
So, if you are unfortunate to have very, very high doctor costs, for example, you have cancer and you’re seeing an oncologist, you can have unlimited tens of thousands of dollars of medical expenses that you have to pay. That is not what insurance is supposed to be doing. It’s supposed to be protecting you economically. So we very much disagree with these high and unlimited cost-sharing in Medicare. Now, on the flip side, I’m not going to just stand up here and say everything’s going to be better and rainbows and roses under our plan. [Jeff laughs]
One of the reasons Medicare has very low administrative costs, which is often touted, “We should have single-payer Medicare for all. Look how low their administrative costs are.” Their costs are extremely low. That’s because they don’t do any administering. They just pay for everything: Anything the doctor orders and the patient wants gets covered. Our basic system would have a lot more, for lack of a better word, patient gatekeeping, or I think the euphemism is “care management” in which you can’t get any care you want whenever you want. There may be longer wait times for nonurgent care, less amenities. For example, in many of the basic systems in say, Singapore or Australia, you have many more people to a room in a hospital, 10 to a room.
And if you buy the supplemental coverage, that gets you your private room. Again, because that’s not essential medical care. It’s nice to have, we’d all like it, but it’s not essential. So, in some sense, although it’s probably not a slogan any politician would want to use, you can think of our universal automatic basic coverage as closer to Medicaid for all but with the important addition that you can then supplement it, if you want additional coverage. Whereas people who currently have Medicaid, not only risk losing it because it’s not universal, and they always have to qualify, but if they want a little bit more than what they’re getting for free, they have to go out and buy the whole package all over again in the private sector. And we wouldn’t have that.
Jeff: And this is what we see many times with managed care systems and HMOs within Medicare. A system like Kaiser, for example, or so many others, where within the managed care structure under Medicare, it’s not dissimilar from what you’re talking about.
Amy: And actually, it’s interesting you bring that up because I think many of the people who say they want Medicare for all don’t realize first of all that as we’ve just discussed, Medicare, the Medicare for some that we currently have, is quite a highly inadequate insurance product. But also that with the current Medicare system, about half of people covered by it have actually opted out of it, taken a voucher, as you will, of what the government is a bad word in liberal circles, but it is what it is. They can take the money that the government would have spent on their public insurance through Medicare and use it to get a private health insurance plan through Medicare Advantage. So we already have that ability to supplement in the Medicare system.
As I said, we just need a different basic product than what the current Medicare program is. We need it both much more comprehensive on the financial protection dimension so no co-insurance or deductibles, but we also need it much more basic on the basic dimension, not anything you might ever dream of but only essential medical care. With some restrictions on choice of doctor or length of time, you may have to wait for nonurgent procedures or the amenities of nice waiting rooms, avocado toast in the hospital, [Jeff laughs] et cetera. I joke, but actually that’s what the supplemental coverage in Australia or Singapore, that’s what a lot of it pays for. And our view is that’s perfectly fine. People who want and can afford that can get that. Our commitment is to provide essential medical care for everyone, not a high-end luxury experience.
Jeff: You then get into the question of and the criticism that sometimes comes with a two-tiered system.
Amy: Yes. So, there’s two versions of that criticism. One is a general dislike of inequality that’s magnified in the case of health because health is seen as different, occupying a more special place in our moral firmament than simply inequality and, say, housing or computers. That’s the first concern people raise. And there we have an entire section of the book devoted to explaining that as I mentioned, the term “health insurance” is a bit of a misnomer. It doesn’t actually insure our health. It’s an economic or financial product. And while health insurance can improve health for people who are admirably concerned about the shocking and disturbing disparities that exist in health outcomes in the United States between rich and poor, between white and black Americans, the right lever to push on is actually not health insurance policy or even access to medical care.
There’s an enormous body of work that’s demonstrated compellingly that what is behind most of these health disparities is not medical care, per se, but what’s often referred to as the social determinants of health: the air we breathe, the food we eat, the cigarettes we do or do not smoke, the gun violence that is or isn’t in our neighborhood. And I think that the clearest evidence on that comes from looking at some of the Scandinavian countries, like Sweden and Norway, that not only have universal health insurance coverage but have cradle-to-the-grave social safety nets that we don’t have. And yet the health disparities between rich and poor in those countries are as large as they are in the United States.
And so, it’s a really sobering way of bringing home that for those who admirably want to reduce health disparities, the right policy levers to focus on are not about health insurance or even medical care but are about some of these other environmental, nutritional, smoking, exercise, et cetera aspects of life for which public policy can play a huge role through taxes on cigarettes, regulation of pollution. There’s a huge scope for public policy there, but it’s not health insurance policy. So that’s my first answer, I think. And that’s the easier answer. I think the other reason that, as you said, people may object to a two-tier system, and we grapple with this a lot, is a concern that by allowing people to supplement, that will erode the adequacy of the basic system.
And there’s a political reason for that: that as more and more people choose to go outside the basic system, the political support for providing adequate funding in the basic system may erode. And there’s also just a practical or economic reason, which is there’s a limited number of doctors at any one point. And so, there’s a concern that the best of them will go into the supplemental system, leaving inadequate supply of what highly qualified doctors in the basic system. These are very real concerns. We give examples of several Latin American countries where this has not worked well. And the basic system is really just unacceptable in terms of quality. It’s not actually fulfilling its obligation to ensure access to essential medical care for everyone.
And we give examples of many other systems where Singapore, Australia, others where they’ve managed to sustain both. And the way they do it, and it may not fit on a bumper sticker, and it’s certainly not a sexy slogan, but it’s basically by paying attention and when there are problems, fixing them. So, we give the example of Israel that started with universal coverage in 1995, I believe. And they have a system of basic and supplemental. This is provided by a number of private insurers, actually, from whom you can buy either the basic or the basic and the supplement. And Israel also had a lot of immigrants coming in at that period and other factors that put a lot of pressure on the system.
And people noticed by the early 2010s that the basic system wasn’t working that well anymore, that wait times were longer than was deemed acceptable, that more and more people were going to the supplemental system as a way to get essential care. And they had a series of reform. Some of them were very prosaic. They increased funding for the basic system, that one surefire way to bring down wait times. They also put a bunch of financial incentives and regulation in place to encourage physicians to practice in both systems. The UK has done something similar as well. This is a real concern, but if you’re vigilant, there are ways to make sure that the adequacy of the basic system is maintained while also allowing people to supplement.
Jeff: You just touched on it a moment ago when you were talking about Israel, and what’s been happening in England is that because we have a finite number of doctors, you get more and more of them that are choosing to work outside of something like a basic system. And we see it here with the rise of more and more concierge medicine.
Amy: Again, as with many things in our society, there will be people who have greater resources will access additional or in some ways more preferable care. Concierge medicine is a good example of that. Our concern is not with the high end. It’s about ensuring the adequacy of the basic system. And once we’re fulfilling our social contract, our commitment that these policy patches have all been designed to solve, of making sure that people all have access to essential medical care without risking massive medical debt or economic ruin, then we are not concerned if some people want to buy higher-end services. In the same way that we have, hopefully, a publicly funded law and order system of police protection to make sure that we maintain an adequate level of safety and security. And some people, though, may prefer to put home alarm systems in place, and that’s fine. That’s not our concern. Our concern is with the floor, not the ceiling.
Jeff: I guess the other question that arises is what constitutes essential care with medicine constantly advancing, with more and more things and tests and procedures coming along that also add cost to the system? The question of what constitutes essential seems to be a potential question.
Amy: It is a great question, and we’ve gotten some, I think, not completely unfair criticism that we don’t spell it out in exorbitant detail. Partly, it would be quite boring, if we were going to [Jeff laughs] list every procedure this covered. But more seriously, part of the reason is exactly what you just said, Jeff, that even if we defined it today, as medical technology improves and as income grows, what we as a society deem as essential will change. 20 years ago, high-speed internet was considered a luxury. Now, it’s increasingly considered essential for education and work. And so what we describe in the book is that what we have to do is not list out exactly what’s in basic care today because even if we did, as you said, we’ll have to reconfront this issue tomorrow.
But we have to set up a process as every other country has for deciding what gets included in basic care. And the most important thing that we need for that process is something that is so obvious and so simple and yet incredibly we don’t have currently in the US, which is we need a budget. There is no health care budget in the US in the sense of a budget constraint of “Here’s how much we have to spend, and now we have to decide how to allocate it.” Instead, the Medicare budget when it’s talked about, we mean how much we have spent through the Medicare program or how much we will spend, not how much we can spend. And it’s only once we have a budget can we then decide what’s in and what’s out.
Now, that budget has to be big enough to cover the care that’s essential in the sense of we’ve designed all these patches to try to provide it. And then, beyond that, we have to make hard choices, and this is what every other country’s done. They have two committees usually, one of technocrats who score things on how cost-effective they are and then one of physicians, politicians, people in the community to decide, “Are we going to cover Viagra? Are we going to cover fertility treatments? Are we going to cover plastic surgery?” These are the gray area things that have to be decided and are decided in every other country.
Jeff: And, finally, can we make the pivot from the current system, the current mess that we have, to something like this? I know we talk about tearing it down, pulling it up from its roots and starting over, not exactly the most practical solution. How do we make that pivot?
Amy: It’s a good question, and we engage with it in the epilogue. There’s a reason we leave it to the epilogue, which is it’s only a question that makes sense to ask once we have gotten some consensus or at least broad agreement on where we want to go. And so we see the main purpose of our book as trying to get clarity and hopefully convince a large number of people of what the solution is. Once we agree on that, we can then talk about how to get there. I think the short answer is we need to leave that to people who are more skilled in politics certainly than we are and to wait for the right policy window or opportunity to come about.
But as we talk about and hopefully, to be totally honest, one of our major motivations in writing the book is to get these ideas out in front of the skilled and hardworking people who work in the policy space. Maybe today, they’re students in policy schools, but tomorrow, they’ll be staffing congressional committees and presidential campaigns. And so we want to get this idea out there so that they can find the right opportunity to make it happen.
But as we talk about in the epilogue, our read of the history of other countries, as well as our own history of near misses with major health insurance reform and almost getting to universal coverage, is that it was not the destiny of every other country to have universal coverage. That in fact, it was highly contentious in many countries, like the UK and Canada, doctors went on strike or threatened to go on strike, the political fighting was enormous and excruciating, nor was it our destiny to remain the only country without universal coverage. So I think, if we can get clarity on where we want to be, then we can start to figure out the right window or way to get there.
Jeff: Amy Finkelstein, the book is We’ve Got You Covered: Rebooting American Health Care. Amy, I thank you so much for spending time with us today.
Amy: Thank you so much for having me on the program.
Jeff: Thank you. And thank you for listening and joining us here on the WhoWhatWhy podcast. I hope you join us next week for another Radio WhoWhatWhy podcast. I’m Jeff Schechtman. If you like this podcast, please feel free to share and help others find it by rating and reviewing it on iTunes. You can also support this podcast and all the work we do, by going to whowhatwhy.org/donate.
