Remembering a Giant in Health Economics: Our Interview with Uwe Reinhardt

Uwe Reinhardt

[Music]

Mark Masselli: This is Conversation s on Healthcare, I am Mark Masselli.

Margaret Flinter: And I am Margaret Flinter.

Mark Masselli: Well Margaret 2017 is drawing to a close , it ' s been a tumultuous
one for healthcare. The year is marked by s everal attempts to repeal the
Affordable Care Act under the new administration of President Trump and while
those efforts failed, congress has found other avenues that could compromise
and weaken parts of the law.

Margaret Flinter: The legislation remove s the ACA’s individual mandate which
requires all Americans to buy insurance or pay a tax penalty. Removing that
incentive that’s expected to lead to millions of Americans not having coverage in
the coming years.

Mark Masselli: And of course no surprise those most likely to opt out of
purchasing coverage are expected to be young healthy when their group stays
away from the insurance pool the price goes up to cover the sicker members in
the insurance pool. The congressional budget offers another analyst all concur
that it’s going to lead to significantly higher premium cost and higher out of
pocket expenses for those purchasing insurance.

Margaret Flinter: And it’s also expected that congress will have to cut a number
of social programs in the coming ye ars to make up for the 1.5 trillion dollars in tax
cuts to help address the deficits that will grow in the wake of this tax bill. So it
appears that a lot of vulnerable people could end up on the losing side of this
equation Mark.

Mark Masselli: We lost something very important Margaret last year renowned
health economist Uwe Reinhardt passed away in 2017. His theories
underscored much of the affordable Care Act and his brilliance will be missed.

Margaret Flinter: He has been a guest on the show Mark as you know a number
of times over the years. Most recently in 2015 so we thought this w ould be a
g ood time to revisit that conversation with an old friend and colleague and reflect
on the great contribution that he made to the broader understanding of he alth
economics.

Mark Masselli: Really looking forward to revisiting that interview Margaret.

Margaret Flinter: And Lori Robertson will stop by, the M anaging Editor of
FactCheck.org.

Uwe Reinhardt

Mark Masselli: But no matter what the topic, you can hear all of our shows by
going to www.chcradio.com .

Margaret Flinter: W e will get to our interview with Dr. Uwe Reinhardt the Late Dr.
Uwe Reinhardt in just a moment.

Mark Masselli: But first, here is our producer Marianne O’Har e with this week’s
Headline News.

[Music]

Marianne O’Hare: I am Marianne O’Hare with t hese Healthcare Headlines.
Insurance companies are bracing themselves for what could be a significant shift
in the landscape if the congressional tax reform bill goes through as it’s written.
Part of the 1.5 trillion dollar tax cut involves removing the individual mandate
requiring all Americans to purchase health insurance. Insurers are viewing this
development with some trepidation already scrambling to adopt rate estimates
upward next year to accommodate what is likely to be a sicker p ool of customers
on the exchange. An estimated 1 3 million Americans are expected to be without
insurance coverage over the next 10 years , some will chose not to be covered
while the increased rates will price many others who are sicker out of the
insurance market places.

Meanwhile Congress’s failure to reauthorize the Children’s Health Insurance
Programs since it expired at the end of September is putting health coverage for
the nati on’s children in jeopardy , and the state of Alabama seems to be leading
st
the charge . They announce that on January 1 coverage for at least 7,000
children will not be renewed and that they will suspend any new signups f or
health coverage under the program . Nine million mostly poor and vulnerable
children are covered by the Chip program. P reemies and ADHD a recent study
showed babies born at 32 weeks gestation were twice as likely to develop
Attention Deficit Hyper Activity Disorder, and babies born befor e 28 weeks were
four times as likely to develop the condition. Researchers are viewing these
findings as an important benchmark for understanding at least some of the
causes for developing attention Deficit Hyperactivity Disorder.

There 's been an uproar surrounding the se seven dirty words now ban from use
at the Centers for Disease Control and Prevention it was reported that the Trump
A dministration has cast an edict that seven words o r phrases are no longer
allowed to be used in policy discussions especi ally those are vulnerable
entitlement, diversity , transgender, fetus, evidence based and science based .
The CDC Director under Trump Dr. Brenda Fitzgerald did not deny the word ban
exist but insist that the CDC is still committed to applying scientific ri gor to their
a gend a . I am Marianne O’Hare with these Healthcare Headlines.

[Music]

Uwe Reinhardt

Mark Masselli: We are speaking today with Uwe Reinhardt James Madison
Professor of Political Economy and Professor of Economics and Public Affairs at
Princeton Universit y . Professor Reinhardt is considered one of the Nation’s
leading experts on healthcare economics. Professor Reinhardt is a member of
numerous editorial boards including Heath Affairs and the Journal of American
Medical Association. He earned his P h D in Economics from Yale. Dr. Reinhardt
welcome back to Conversations on H e althcare.

Dr. Uwe Reinhardt : Pleased to be back.

Mark Masselli: L ots of good things have been happening with the Affordable
Care Act , and yet the landscape is fraught with change. As a leading health
economist, you have been able to analyze the ACA from a uniquely informed
vantage point. So how do you think it's going overall?

Dr. Uwe Reinhardt: After the first rough introduction in 2013, I think it's running
much more smoothly, in many ways reaching its intended objective which was
very simple, to give the peace of mind that comes with having health insurance
which is enjoyed by 85% of the population as a matter almost of right and only 50
million were excluded from that social c ontract. So in that regard I think it's doing
what it was supposed to do.

Margaret Flinter: Well Dr. Reinhardt you have described the Affordable Care Act
as maybe the best we could have done under the circumstances . But contrary to
public opinion you h ave also said you think it's a surprisingly simple law relative
to just how complex the American health care system is . Can you elaborate for
us on just what makes this task of health reform in this country so utterly
challenging?

Dr. Uwe Reinhardt: I r emember giving a talk at a Congressional retreat where I
showed them the complexity of the American health insurance system. So we
have a single payer system for the elderly , w e have 50 state Medicaid programs,
w e have purely socialized medicine. We have that reserved for the American
veterans and then we have a complete mismatch of systems under the private
employment based health system, then we have the individual market, and then
there 's quimby - slimby s pecial Medicare b enefits and so on, and it look l ike a
Mondrian painting. Now I ask these Congressmen i f you want to reform any
piece of this patchwork, you are going to touch all the other patches and that is
why every single health reform plan is a huge mess because the system is a
huge mess. And the refore any bill, othe r than the bill that doesn’t do anything it
will be complicated and in that sense the ACA is actually simpler than the
existing system.

Mark Masselli: You know as we look back at t he sort of formation of the ACA
there were lot of che fs in the kitch en , o ne of th e chefs was Dr. Jonathan Gruber

Uwe Reinhardt

an MIT economist . Y ou have lauded Dr. Gruber as one of the great minds in
health economics. But he recently found himself in the woodshed if you will for
some of his recent comments. But you to ok on this issue in the Health Affairs
blog and tried to sort of look at the difference between maybe ignorance and
stupidity, maybe you can inform our listeners what you were trying to get out in
your blog.

Dr. Uwe Reinhardt: S tupid means unable to lear n t hat is decidedly not true of the
American people w e are pretty quick learners. Ignorant means poorly informed a
lack of information and Americans cannot possibly say they are very well -
informed . It's very, very difficult to accurately inform any peopl e about something
as complicated as the Affordable Care Act to inform the voters properly is a
monumental task. I am totally ignorant on climate control w hy? I don’t have
time. The trouble with economics in general is that every cab driver think s he is
a fully trained economist. They are not, and that’s what I mean by ignorant. The
American people are very poorly informed on the ACA, and Kaiser Family
Foundation has run survey after survey showing that Americans are ill - informed.

Margaret Flinter: S o there were a few key areas that just ended up being points
of confusion, and I think one of them was around this notion of consumer driven
choice and you have noted that in selling the idea of health care for all American
people we needed that notion of c onsumer - driven choice. You 've used a great
example I think of high deductible plans that could in fact leave customers
vulnerable to much more out - of - pocket or higher health care expenditures, and
you use the term rationing by income w hat do you mean by t hat?

Dr. Uwe Reinhardt : There has always been affection of ideological thinkers, but
also among economists that says y ou really want to have the patients’ financial
skin in the game of health care because if you cover everything from the first
dollar on, people will over - consume health care because they think it's free. Now
when you do that though you have to realize you are basically saying that you
want to ration part of health care by income class. Think of a family with $5,000
annual deductible , i f that family has an annual income of $30,000 they will very
often forego health care when they actually think they need it. If a family with
$200,000 with a $5,000 deductible wouldn’t be fazed at all their behavior in
health care wouldn’t be changed at all . Deductible doesn’t deter us at all b ut it
would deter a waitress. So therefore , instead of saying consumer - driven health
care empowers you, that’s such deceptive language. Why don’t you speak
English and say y eah, we want to control health care cost i n part by rationing by
income class, and that’s what we are going to do and rich people yes, will have
better access to health care than poor people.

Mark Masselli: We are speaking today with Uwe Reinhardt, James Madison
Professor of Political Economy an d Professor of Economics and Public Affairs at
Princeton University . Professor Reinhardt is considered one of the nation’s
leading exp erts on health care economics and you are a firm believer that

Uwe Reinhardt

physician compensation should be directly tied to performa nce and quality of
care . A nd now we are starting to see a shift in the landscape moving towards
compensating providers and physicians for value not for volume. What needs to
be done to incentivize and accomplish real value in health care?

Dr. Uwe Reinhar dt: I f you look back in the last 40 years, we paid for a lot of junk,
a lot of unnecessary care that really should never have been purchased . F or
example, MRI ’ s that were really not needed, operations that were not needed,
and we should no longer pay for those. So that is what we now mean by value
based health care. It’s a ctually a better term would be not paying for junk
anymore or for unnecessary stuff anymore. That is one issue so that when we
do pay money for health care, we actually get something that makes a clinical
benefit in return. I think that’s a reasonable thing to ask no matter how much you
spend on health care. The other one is cost control really means saying w e 're
spending 17% of our GDP on health care. No other country spends more t han
11%, so we should somehow manage to get by with spending only 15% on
health care . That’s sort of spending control, and that’s a different issue where
sometimes you might say you might want to forego even clinical intervention that
has some benefit, bu t those benefits aren’t worth the cost of the intervention. For
example, where a doctor say w ell if I had one more MRI, it could marginally
change my diagnosis but the probability is quite low . May be in that case the
extra $1000 that MRI costs isn’t wor th it , t hat is cost control, which means you
sometimes withhold even clinically beneficial services, but they are only
marginally beneficial.

Margaret Flinter: Dr. Reinhardt, you have sort of synthesized say we are
heading towards a three tier system in health care with a third of the nation
c overed by Medicare or Medicaid , a third that will wake up and wish they were
Canadian, which has a single payer approach to health care . An d then a third
tier a kind of upper echelon that will increasingly seek bout ique - like coverage and
more concierge care. I s it three tiers all with equal potential for quality?

Dr. Uwe Reinhardt: No, it's a different degrees of quality. I am really thinking just
like housing, we have housing for very rich people, we have sort o f middle class
housing, and we have housing for the poor . A nd I think our health system is
lumbering towards this sort of arrangement where the quality of the health care
experience will vary by income class. If you are very poor, you will get health
car e but it may be in very sparsely equipped facilities. If you work for a
corporation, it depends how rich your paycheck is t hen of course if you are rich
and there is a growing number of fairly well - to - do people, you can have boutique
medici ne Disneyland, immediate access where you have 24 hours per day
access by cellular phone to some primary care physician, and they will arrange
stuff for you.

Mark Masselli: Dr. Reinhardt I wonder what happens to our larger economics if
we have a dramatic reduction in t he amount that we spend on health care? What

Uwe Reinhardt

if we were at 17% but actually got great value, would you have any problem with
it?

Dr. Uwe Reinhardt: You know, you are raising one of the most sophisticated
questions in health care that rarely is ever put. Health care is actually part of
GDP , I remember the very first speech I ever gave was in 1976 on the imperative
of cost containment . I showed it to my wife , s he looked at it and said i t is elegant
but trash and I said well, what do you mean by that ? A n d she says you take it as
a premise that we have to control health care cost , she says have you ever
worried how much money America spends on trucks ? A nd I said no I haven’t .
She said, s o why pick on health care ? The real issue though, an economist
would tell you is if the health care you produce is really unnecessary then that is
not good job creating . But I personally believe that a lot of health care is actually
highly valuable. I mean you look at sale value , e veryone hammers around a
$1000 pill, but don’t tell me that isn’t a high value product. If all of a sudden we
spent a whole lot less on health care, there woul d be a lot of unemployed people
and the question then is what else would they do ?

Margaret Flinter: So let me use the example you just raised of Hepatitis C what
do you say to these state governments and health care systems about the need
to make an expensive investment in curing a disease that otherwise i t' s highly
likely to lead to long term disability and premature death?

Dr. Uwe Rei nhardt: Well, I think you could teach a whole university course just
about Sovaldi [PH 17:03 ] because it raises all these economic, political and
ethical issues. We are basically being challenged by Sovaldi to say how much is
the life of someone in jail with Hepatitis C worth to you, the church or synagogue -
going taxpayer. And I have to say so far to my amazement American society has
said w e are willing to pay it even someone in jail is worth it to us . On the other
hand you could also ask, is it really necessary to pay Sovaldi a $1000 a pill? A nd
there I would say well actually not really, because Sovaldi bought the company
that invented the drug for 11 billion. Producing the drug is not that expensive but
the revenue they expect from it is something l ike $270 billion. I think if they made
only $150 billion, they would still be very richly rewarded. So you can at that
plane also say we will pay you 700 a pill and you 'll still make out like band its , you
know , think of the tax payer too because we have schools to pay for, we have
police to pay for, fire brigades to pay for, and you have to help us manage our
budget too. So you could see this as an issue where there isn’t a clear answer. I
could see Solvadi saying given what you have already spent on He p C for
interferon and for transplant, what we are offering you is no more expensive
which is true, and so we are really just shadow pricing, we saw what you were
willing to spend, we will charge you a little bit less, and given you we ' re willing to
spend that already why complain about us ? And that’s Gilea d Sciences point of
view a nd this point out to my students As you become an adult, you will realize
some things don’t have crisp answers. May be the Pope knows it , but I sure as
hell don’t , you know, a n d I have a PhD which is great for a mission, I don’t know.

Uwe Reinhardt

Mark Masselli: W e have been speaking with Dr. Uwe Reinhardt, James Madison
Professor of Political Economy and Professor of Economics and Public Affairs at
Princeton University. You can learn mor e about his work by going to
www.princeton.edu/~reinhard . Dr. Reinhardt, thank you so much for joining us
on Con versations on Health Care.

Dr. Uwe Reinhardt: It's been a real pleasure.

(Music)

Mark M asselli: At Conversations on Health Care, we want our audience to be
truly in the know when it comes to the facts about health care reform and policy.
Lori Robertson is an award - winning journalist and managing editor of
FactCheck.org, a nonpartisan, nonp rofit consumer advocate for voters that aim to
reduce the level of deception in U.S. politics. Lori, what have you got for us this
week?

Lori Robertson: The Head of the House Science committee made a false claim
about funding of g raduate s tudents from t he National Science Foundation.
Representative Lamar Smith Chairman of the House Committee on Science
Space and Technology said that the NSF funds quote more than twice as many
graduate students in the Social and Behavioral Sciences as in computer science
Mathematics o r Material Science. In fact 21.5% of the 22,821 graduate students
funded by the NSF in 2015 were in m ath, computer science and Material
Engineering according to the latest data. That’s more than three times the
number of psychology and Soci al Science Students. Smith made his claim in an
op - ed published in the newspaper Roll Call, he claimed the NSF is funding too
much low priority research in the Social and Behavioral Sciences including
Sociology and Psychology and not enough research in qu ote feels most likely to
yield scientific breakthroughs, technological innovations , and economic growth
such as computer science . Smith has a right to view some scientific fields as
more important than others but he is wrong about NSF funding for graduate
students. His office urged us to reach out to NSF for specific numbers so we did.
And NSF spokesperson told us that Smith’s statement only focuses on a single
program and therefore is inaccurate . If we look at NSF funding for graduate
students across t he agency, NSF funded the most graduate students in the
physical sciences including physics and chemistry , l iterally 18% of the 22,821
gra duate students with NSF funding. These numbers are for 2015 the most
recent available , in second place w as computer s cience one of the fields that
Smith highlighted. 14% of the students were in that field when we add in math
and statistics students and material engineering 21.5% of the graduate students
funded were in the field this mention , psychology and social scienc e students
meanwhile made up only 5.9% . You can see more on the breakdown of the
National Science Foundation graduate student funding on our website at
FactCheck.org . I am Lori Robertson, Managing Editor of FactCheck.org.

Uwe Reinhardt

Margaret Flinter: FactCheck.or g is committed to factual accuracy from the
country's major political players , and is a project of the Annenberg Public Policy
Center at the University of Pennsylvania. If you have a fact that you would like
checked, email us at www.chcradio.com . We will have FactCheck.org's Lori
Robertson check it out for you here on Conversations on Health Care.

(Music)

Margaret Flinter: Each week, Conversations highlights a bright idea about how
to make wellness a part of our communities and everyday lives. It's a known fact
that the current generation of American children is more obe se than any previous
generation and at a Washington DC Community Health Center, Unity Healthcare
a pediatrician was in a quandary over how to ta ckle this growing health scourge.
He began with a unique solution targeted to a teen patient whose Body Mass
Index or BMI had already landed her in the obese category. What he did was
write a prescription for getting of f the bus one stop earlier on her w ay to school .
Dr. Robert Zarr of Unity Community Health Center understood that without
motivation to move more kids just might not do it. The patient complied with the
prescription and has move d from the obese down to the overweight category,
certainly an improvement. He then decided to expand this program by working
with the DC Parks Department, mapping out all the potential walks and play area
kids have within the cit y’ s parks , 380 of them so far .

Dr. Robert Zarr : How to get there , p arking , is parki ng available , i f someone is
going to drive? Bike racks ?

Margaret Flinter: Dr. Za rr writes park prescriptions on a special prescription pad
in English and Spanish with the words R X for outdoor activity and a schedule slot
that ask when and where will you play outside this week?

Dr. Robert Za r r: I like to listen and find out what it is my patients like to do and
then ga u ge the parks I prescribe based on t heir interests, based on the things
they are willing to do.

Margaret Flinter: He wants to make the prescription for outdoor activity
adaptable for all of his patients and adaptable for pediatricians around the
country. He 's plan to create an app for his parks database where providers and
patients a like c an use it and one day he would like to be able to track his
patients’ activities in the parks. R X for outdoor activity , partnering clinicians, park
administrators, patients and families to move more yielding fitter healthier young
people , now that’s a bright idea.

(Music)

Margaret Flinter: This is Co nversations on Health Care. I am Margaret Flinter.

Uwe Reinhardt

Mark Masselli: And I am Mark Masselli, peace and health.
Conversations on Health Care, broadcast from the campus of WESU at
Wesleyan University, streaming live at www.wesufm.org and brought to you by
the Community Health Center.