Half Measures Won’t Cure Health Insurance

October 23, 2024

The Only Way to Fix US Health Care
Review of: We’ve Got You Covered: Rebooting American Health Care (Einav & Finkelstein)
New York Review of Books
Oct 16, 2024 online, Nov 7 print issue
By Adam Gaffney, David U. Himmelstein, and Steffie Woolhandler

“We take it back,” Liran Einav and Amy Finkelstein, two of America’s most prominent health economists, declare in a new book, We’ve Got You Covered, their blueprint for reforming our health care system. After years of preaching “the gospel” that “patients must pay something for their care,” they’ve now abandoned the message. Instead they propose tax-funded “basic” health coverage—without copayments, deductibles, or other forms of “cost-sharing”— for all Americans. … 

Most workers in the US once enjoyed first-dollar coverage for much of their care: in 1982, for instance, only 30 percent of private plans had a deductible for hospital stays. Today 90 percent of private sector workers with job-based individual coverage face a deductible that averages $1,735 a year. Some states have even sought waivers to increase out-of- pocket payments for impoverished Medicaid recipients. …

Yet reams of evidence confirmed what our patients (and physician colleagues) regard as common sense: copays and deductibles cause people to skip needed care and hence suffer poorer health, and even mortal consequences. …

And while copayments and deductibles discouraged care seeking, they didn’t constrain health care spending, which rose from $1,000 per person in 1980—equivalent to spending in other wealthy nations—to $13,493 in 2022, more than double the OECD average. … 

As “skin in the game” lost its cachet, the big insurers pivoted to other profit-maximizing strategies. For instance, many now focus on privatizing Medicare and Medicaid. Some employ doctors directly and use penalties and bonuses to motivate them to minimize expensive care. Those shifts—along with an ever-growing body of data on medical harms—have perhaps changed the intellectual climate for economists to one more tolerant of jettisoning cost sharing. 

However, if Einav and Finkelstein  … have finally gotten some important things right, they continue to miss the mark on others: they embrace a two-tiered medical system and ignore … the corporate takeover of health care. These are related issues. Treating medical care as a market commodity like microchips or microwaves supports the dual falsehoods that copays benefit society and that market-driven corporatization breeds efficiency and quality. …

Einav and Finkelstein now rightly conclude that more patches won’t work; we have to start from scratch. “Basic coverage,” they write, “must be provided automatically, and financed by the taxpayer.” But their support for tax-funded universal coverage comes with a caveat: to be affordable, the public coverage “should be very basic”—worse than current coverage— with “longer wait times, less patient choice.” It should leave “patients and their physicians not at liberty to get any medical care they both want, as they are currently under Medicare.”

The very concept of “basic coverage” rests on economic and medical fallacies; there is no workable definition of the “basic” or “minimalist” care. Einav and Finkelstein propose that would simultaneously slash spending and provide medically adequate care. There is useless care, to be clear, like ineffective drugs or unneeded surgeries. …

In the realm of effective care, there is no circumscribable “basic” category that can be safely carved out of coverage. …. “Minimalist coverage,” in practice, means greater disability and shorter lives.

Recognizing that the affluent wouldn’t abide “basic coverage,” Einav and Finkelstein would allow “top-up,” or supplemental, coverage in a higher tier. Of course, imposing long lines on working-and middle-class Americans while letting the rich jump the queue isn’t just inequitable; it’s medically hazardous…. But a simpler, more efficient, healthier, and fairer alternative has long been available: universal single-tier coverage.

… Scientific practice and supply planning can more safely and effectively constrain overuse than copays and two-tiered medicine.

Einav and Finkelstein leave the door open for MA-type plans to serve as the chassis for their universal coverage system (they describe basic coverage “offered by private firms” as one potential reform structure) … Medicare for All can’t accommodate patients’ varying “tastes for medical care.” …

The United Kingdom NHS experiment underscores two lessons most economists haven’t learned. A rationally planned, publicly financed and owned health care system can provide free and comprehensive care without causing runaway costs. But diluting the system with top-up coverage and market incentives undermines its political, economic, and medical foundations.

Another system of US health care— without medical debt, insurance hassles, red tape, corporate predation, copays, punishing deductibles, and paltry care—is possible, not to mention that support for it is hugely popular. Achieving such a system will require a new economics of care, one that moves past outdated economic orthodoxies, divorces medicine from commerce, and provides care on the basis of needs, not means.

 

Comment by: Jim Kahn

This eloquent essay interprets the arc of post-WWII health insurance in the US (largely private, highly dysfunctional) and UK (universal public basis, but private sector-contaminated and hobbled). It’s a fine primer and resource, laying out a cogent argument that the Einav-Finkelstein proposal is an inadequate half-solution.

HJM has written previously about this book, here & here, raising similar concerns about the proposed tiered system. The new essay places these critiques into a highly instructive historic context.

When will US health economists learn *all* the right lessons? Not just to abandon the misguided idea of “skin in the game”, but also to replace profit-driven market strategies with justice-driven and efficient universal public coverage? Single payer.