Editorial Cartoon by David Horsey

Prominent healthcare economist talks about high prices, medical insurance, and rationing

If there were a Straight Talk Express for health economists, Princeton professor Uwe Reinhardt would be the engineer.

Born in Germany and raised in Canada, Professor Reinhardt has personally experienced medical systems in different countries.

Over the past 25 years, he has become a critical voice in the debate about reforming America's healthcare system. He spoke with Dr. Bernadine Healy about today's healthcare costs and efforts to overhaul the system.

Excerpts:

Uwe, you're hard to pigeonhole on health reform

This drives my students nuts. They say, "Are you a Republican or a Democrat?" I say, "Should that matter?" I'm partly libertarian, but I do come out for universal coverage.

Why has President Obama made reform so urgent?

Obama said what the cost of healthcare did to GM it could do to the nation.

This was hyperbolic, of course, but with the GDP down 6 percent in the first quarter and flat economic growth ahead, healthcare can't go marching on as if nothing has happened. It is now 18 percent of the shrinking GDP and projected to be 40 percent by 2050, according to the White House.

If the increase gobbles up SUVs and fast foods, that might not be too bad. But if it displaces money to educate children, that's a real trade-off.

Human capital is what has made America great.

Is it mostly that our healthcare prices are too high?

A bunch of us wrote a paper a few years ago called "It's the Prices, Stupid."

Europe has a lot more physicians and hospitalizations per capita and takes more medicine. But our prices are much, much higher for the same things.

The good side is that high prices have allowed incredible innovation because medical technology and delivery systems have been able to slosh around in money. The bad side is that in 10 years, Americans on the bottom half of the income ladder won't be able to afford healthcare.

One thing that is really puzzling is that for Medicare patients we spend twice the money in Miami and McCallum, Texas, as we do in San Francisco. This geographic variation has been known for about 25 years, but Congress has never appropriated the research budget to figure out what's really going on.

Obviously, if you compare area averages, that's pretty crude science.

You really want to go down to the individual level and see if these patients are different. They might be. But you need very good data on individual patients, even social factors and religion. Now the White House is saying that it is going to slam down on these high cost areas, but you don't really know enough yet.

Why don't individual healthcare consumers bargain for better prices?

My wife, May, called up the Princeton hospital and asked what a normal delivery would cost. She got nowhere. I called about a colonoscopy and got the same runaround. So I asked a guy at New Jersey Blue Cross. He just roared. "Are you serious? We pay 50 prices. We pay every hospital a different price. We pay the same hospital five different prices."

I asked, "Are they public? Can I look them up?" The answer was, "No. That's proprietary."

Imagine if a bunch of people were blindfolded, shoved into Macy's, and told to shop prudently.

For years, I've argued hospitals should post their fees relative to Medicare. I've put it to the White House, the Senate.

People look at me: "Are you serious? Transparency?"

What about reforming health insurance?

The insurance market is chaotic.

We need to have one basic, standard package that is respectable. Hairpieces don't have to be covered, but in connection with cancer, I could see why they should be.

The Dutch had a national debate whether they should socialize the cost of fertility treatments. Making such choices has always made Americans gun-shy.

That does bring up the "R" word. Won't health reform mean rationing hip replacements or end-of-life care?

How much could you really save on end-of-life care? For now, we have more than enough inefficiencies not to have to make those harsh decisions.

My feeling is our kids will be the ones who have to figure this part out. Our generation did civil rights and women's liberation.

Let them do this. They will face millions of baby boomers with zero net worth.

I say to my students, "You will have to take care of them somehow. You cannot put them on an ice floe -- especially with global warming."

Day of Reckoning at Hand for Health Insurers
by Robyn Blumner

President Obama and the Democratically-led Congress are rolling up their sleeves, sharpening pencils and trying to deliver health-care changes that cover many more people, provide a safety net for the rest of us and won't bankrupt our nation the way the current system most assuredly will

Healthcare Reform Estimates Have Democrats on Defensive
by Kent Garber

The inciting spark was the Congressional Budget Office's released of preliminary estimates on the costs of the two main Senate bills. Kennedy's was tagged at $1 trillion. The other, being developed by Finance Committee Chairman Max Baucus, would cost $1.6 trillion.

America's Hospitals Can't Afford Healthcare Cuts
by Rich Umbdenstock

Rich Umbdenstock is president and CEO of the American Hospital Association. We must not lose sight of the fact that we will need good healthcare policy changes -- not just payment cuts -- if we hope to find long-term solutions to the healthcare challenges vexing America: 46 million uninsured, an aging population, an epidemic of obesity and chronic disease and the need for a more coordinated system of care.

Employers to Make Deeper Cuts in 2010 Health Coverage
by Martha Lynn Carver

Look for employers to cut more deeply than ever into health care coverage for their workers in 2010. Companies are getting walloped by higher than expected costs just when they can least afford it.

When Healthcare Reform Hits Grandma
by Bernadine Healy M.D.

Obama has laid the groundwork for a massive overhaul of America's healthcare system into a more publicly managed, cost-conscious enterprise that focuses more on wellness than sickness. Driving most government outlays, however, are the many millions of Americans, particularly the elderly, with extremely resource-intensive chronic diseases.

However, what's tried and true, is the government's power to restrict reimbursement and change medical behavior. Medicare, which covers virtually all of the elderly, can say "No" to expensive treatments. That's great if the care is unnecessary. But you can't always tell if you're not at the bedside.

Government-run Healthcare Insurance-Program Sure to Backfire
by Phil Gingrey, M.D.

My fear is that creating a government-run health insurance plan wouldn't guarantee quality care by physicians -- in fact, it will not guarantee care at all. The quality of care in a government-run health plan may seem irrelevant to those individuals who are happy with the coverage they currently have -- after all, President Obama promised during his campaign that, "If you like the plan you have, you can keep it." But most individuals don't really have their own health coverage -- they get it from their employers.

Obama's Uphill Battle to Reform Healthcare
by Kent Garber

President Obama stood at a podium flanked by six healthcare leaders and announced what he called "a watershed event in the long and elusive quest for healthcare reform." Obama, by almost any account, had just scored what appeared to be a major concession from several of the country's biggest healthcare players.

Obama's Hidden Business Tax Increase
by Matthew Bandyk

Obama's proposal would require companies to account for their inventories on a first-in-first-out (FIFO) basis rather than a last-in-first-out (LIFO) one -- an eye-glazing change that's highly significant. In an era of rising costs, to assume that you're selling your oldest inventory rather than your newest increases reported profits and thus taxes, even though nothing real has changed. If inflation turns worse, as many analysts predict, FIFO would force companies to pay real taxes on phantom profits as the value of goods gets inflated while they sit in inventory.

Healthcare Industry jobs

Find your next job in the Healthcare Industry. Search Healthcare jobs from thousands of job and career search sites.

(c) 2009 U.S. News & World Report