The AANS Neurosurgeon asked Cushing orator Uwe Reinhardt, the James Madison Professor of Political Economy at Princeton University, for his insight into healthcare reform. The interview on May 4, during the 2009 AANS Annual Meeting, delves into his ideas on bias, physician payment systems, universal healthcare implementation, the insurance industry and more. The following is an edited transcript.
AANS Neurosurgeon: The headline in the issue of Business Week in our hotel rooms is What Good Are Economists Anyway? Last January you asked a related question—can economists be trusted?—in the New York Times Economix blog, and you gave an example of an economist’s “flexibility,” which you called siffing (structuring information felicitously). How would you say you “sif” with respect to discussion of healthcare topics?
Reinhardt: Well, that’s an interesting question. First of all there was one article that went ahead—an economist’s mea culpa to say that we don’t see things that we should see. But on the other question, I always tell my students that the arrogant idea that we can be objective scientists and not have our life experience enter—particularly in social science; maybe if you’re a physicist, I could see where that’s true—is crazy. I once said in an article that I should reveal my bias, which is that I am a strong advocate for universal coverage. And I doubt that I can exclude it from what I’m about to tell you; somehow there will be a coloration. Some people called me, and they asked why I said that. I wanted to say it to warn people that I cannot be totally objective about things. It will come out in adjectives, it will come in just the way I structure a sentence.
That’s one level—that our beliefs really dictate what we see. So the first thing is, we are not unbiased. In addition, of course, there are some economists who will essentially become slaves to interest groups and power.
When the Clintons wanted to have health reform, they essentially wanted an employer mandate. To a properly trained economist, that’s just a payroll tax. And then the question is, what is the effect of this payroll tax on employment and on the wages people get. Economists known to be Democrats came out and said there won’t be much of an employment effect. But they didn’t say that wages would go way down. The Republicans came out with an article that said that there would be a huge employment effect, and they didn’t say much about the wages. It broke down, not randomly, which is what you would hope would happen, it broke down by party. So, I believe we economists are by and large intensely political, deep down. Why else would it be that whenever the Congress changes hands, the Congressional Budget Office gets a different director? You never see a Republican House appoint an economist who is a Democrat to head that, or vice versa. It’s been on both sides, and it’s unfortunate.
AANS Neurosurgeon: In a 2003 article in Health Affairs, you said that the U.S. was unlikely ever to move toward a system that could warrant the “universal coverage” label. In the current economic and political climate, do you think universal coverage is possible?
Reinhardt: It’s not a done deal. First of all, there was an article by Victor Fuchs, who’s a dean of health economics, who said we won’t have universal coverage unless World War III breaks out or we have a truly deep depression or we have a major pandemic. So, we are skidding toward a depression.
And then look at demand and supply. There will be a strong demand for health insurance coverage. Very strong. And I think the insurance industry will be so desperate because they’re losing half their base. They’re losing now thousands of people who are unemployed. The insurance industry is willing this time to play and to take considerable regulation, as long as there isn’t a public plan. I think if there isn’t a public health plan, Obama will extract a huge pound of flesh from them in the form of regulation. But ultimately it will work in their favor because they have trillions going through their book of business and they have a little spoon and take 5 percent.
AANS Neurosurgeon: Let’s say that would happen, that we don’t have a national plan but we have insurance that’s highly regulated. How would that reduce cost enough?
Reinhardt: I think by itself that wouldn’t reduce cost at all because for the first few years it’s business as usual. I think to really have cost control, you ultimately have to address those Wennberg variations and figure out why that is. How can you explain that the cost of the Medicare beneficiary in the last two years of life in northern New Jersey hospitals is three times what it is in the south? That’s not malpractice—it’s the same damn state—so thereâs something else going on. We do need to really understand this volume business a little bit better. What part of it really passes the cost-effectiveness test and what doesn’t. And ultimately I believe that you will have an all-payer system.
You could go at that in stages. They are now talking about bundling. An organization that actually is trying to do it—Prometheus Payment Inc.—if you read their literature you say, my God is that complicated! Because what you need is teams of doctors and hospitals and pharmacists agreeing to specialize around one type of illness and quote one price for it and then be re-upped the money somehow. The political dimensions of that are horrendous. So I don’t think that will happen, but you could say every hospital must price itself on the DRG, which really is just their relative value scale. But a hospital can set its own conversion factor. Actually, I proposed that for doctors. It was considered a flaky idea, but I said hey, we have the RBRVS, it’s a relative-value scale, why doesn’t every doctor set their own conversion factor. That way doctors can set their own fees, but it has to be the same fee schedule so that you can use electronic billing.
AANS Neurosurgeon: How is President Obama going to rationalize implementing universal healthcare without putting more money in the system? In Canada, Britain and Germany there is rationing of care.
Reinhardt: I said in testimony to Congress that this notion that life is priceless is actually romantic and silly. And this congressman from Georgia was just really angry at me and said, Who gives you the right to tell other people how to value their life. And I said that’s not what I’m talking about at all. What I’m talking about is to what extent can a person who is very sick, terminally ill, demand that the rest of society buy additional life years or weeks for him at an enormous cost. Is there some understanding that, if it’s collectively financed, you canât have it because there is some limit to what you do collectively? These decisions do get made. Canadians will not do a coronary bypass on a 90-year-old person. At some point when you look at the expenditure line and all the other things we need to do, I think there ought to be a dialogue.
AANS Neurosurgeon: President Obama has tied healthcare reform into any kind of economic recovery in the country. Do you believe there’s a chance to reform healthcare as a way of getting economic recovery?
Reinhardt: I showed this morning [in the Cushing oration] that healthcare is the biggest employment machine in the country. In fact if you really think about it, it’s No. 1. Aside from the way that it has one of the highest value sectors in the economy, it creates more jobs than any other sector at all that there is. The other thing that is often not realized is that ill-health is impoverishing. It kicks you out of the workforce, No. 1, and it makes you broke, and with it comes all the social trauma associated with deep poverty. So I think when Obama says we can’t afford to have more middle class Americans slip into poverty on top of the unemployment things—unemployment we can fix—but if they go bankrupt over healthcare then we have even more poor.
AANS Neurosurgeon: In a scenario where we would have universal healthcare coverage, where do you see a procedure-oriented specialty like neurosurgery? The Obama plan emphasizes things like preventive medicine, enhanced primary care—where do proceduralists fit into this?
Reinhardt: I frankly think that they’ll just leave it alone. I don’t think they have a policy on that. There’s no one in the White House who wants a shortage of neurosurgeons.
AANS Neurosurgeon: But we don’t see a lot of new money coming into the system. It’s a reallocation of money from proceduralists to primary care.
Reinhardt: There’s going to be a lot of new money coming in. I always tell people even if we got it down to a 1 percent differential—which will not happen in the next 10 years—it’s still going up. There’s still more for everyone. It’s never going to go down, ever, ever. People are too nervous about it. I don’t think anyone is particularly after neurosurgeons. I showed you that there is 30 percent annual growth in imaging. There’s a real difference in the minds of policymakers between a radiologist—they’re very specialized to be sure—and a neurosurgeon, who is at the other end of the scale. That’s the last specialty I would worry about. If I were a radiologist I might worry.
AANS Neurosurgeon: You recently said that cutting physician pay would have a miniscule effect on national health spending.
Reinhardt: Unless you really devastate the doctors. Think of it. Gross billings add up to probably 21 percent of national health spending. And close to half—at least 40 percent—is practice expense, it’s where malpractice [insurance] is, so for neurosurgeons it’s even more. There’s not much you can do about the practice expense, so you really look at net income, and if you were to cut that 20 percent, which would be a huge hit, that saves you 2 percent of national health spending. So there’s not much mileage in cutting physician pay.
AANS Neurosurgeon: You’ve said that a better way to pay physicians would be benchmarking them on the earnings of the American talent pool.
Reinhardt: No, it’s not a better way. That is how in fact they are benchmarked. Implicitly the awyers and physicians and scientists and the top Wall Street guys—the Ivy League supplies them. Everyone who is a physician is smart enough to work for Goldman, but not everyone who went to Goldman is smart enough to get into medical school. But it’s still the same sort of talent pool that you’re drawing on of highly motivated, type-A, educated people. You cannot pay American physicians the way British physicians are paid and think you’re going to have enough of a really high talent pool. I think there has to be an implicit benchmark to the talent pool and ours is just wider.
AANS Neurosurgeon: On the physician autonomy side, neurosurgeons are very concerned about being able to make the right decisions for their patients using their own expertise and education.
Reinhardt: But you see, the Canadian or the German setup is such that they can. Only in America did a managed care company have a nurse call a doctor and say, What are you doing with this patient. That never happens in those countries or Taiwan. To me it’s another irony that Americans allowed a far deeper intrusion in the ongoing doctor-patient relationship than is common in those countries. Those countries do it statistically after a quarter, and if you see every patient got an MRI, then you question the practice style, but you do not question how the doctor treated Mrs. Jones. That’s only the managed care. They quit this too, because they realized how unproductive it actually was to call up a doctor and have a nurse tell a doctor—who saw the patient and the nurse didn’t—what he did wrong. Obviously that’s a setup for failure.