Here’s the full transcript from the David Gratzer interview—if you prefer the podcast version I’ve linked to it here. There are lots of comments there too.
Matthew Holt: This is Matthew Holt, and we’re back with another podcast on the Health Care Blog, and today my guest is David Gratzer. David is a psychiatrist who is still practicing psychiatry, but is also, part-time, a Fellow at the Manhattan Institute, and has written a new book called "The Cure", subtitled "How Capitalism Can Save American Health Care." David, welcome to the Health Care Blog.
David Gratzer: Good afternoon.
Matthew: Let me start off, David. Obviously, with your subtitle, you’re a proponent of free markets in health care, but you come at this from a couple of interesting backgrounds. One is that you’re a Canadian who has moved down to the U.S., to practice medicine down here. The other one, which I found was very interesting is, at the very start of the book, in the introduction, you raise the entire issue of what it’s like to be somebody who has a relative, in this case your wife, who has no insurance in the U.S. and needs medical care. You raised the issue of your wife’s treatment, and I hope she’s fine now, without being overly personal about her, how did you end up in the situation that you were in the U.S. without insurance? David: Well, it certainly was an unfortunate circumstance. A lot of people go without insurance for a variety of reasons. I had access to American health care, but not access to American health insurance. My wife had, as you know from the start of the book, injured her back on the bunny trail on a ski trip. She tells the story slightly differently involving a large mountain, gale-like winds, and heroic efforts on her part. But she had ruptured a disc in her back, and she, as a result, needed surgery. And I’d certainly read much about the American health care system, but what came across me then was not just the confusion about pricing, and I talk about the foot-and-a-half-long bill that I had received, which, as a doctor, I could see was completely inscrutable. But also just the issues around quality.
There we were, trying to find a neurosurgeon, and I went to the Internet and found no information. I went about calling neurologists and trying to get their opinions on neurosurgeons in western New York. So I have a greater appreciation of the frustration that millions of Americans, not just those, incidentally, without insurance. I think even if you’re insured, health care is such a black box of uneven quality, of difficulty gathering basic information, and at the end of the day you’re left with ever-rising prices, with inscrutable bills. I wanted to start the book that way because even though I think there’s greatness in American medicine, and I think one should never lose sight of that, and there’s never been a better time to be, frankly, a patient or a doctor than today, I also wanted to emphasize, literally from page one of the book, that there were huge problems with American health care. And, that even though I took a free market approach to looking at reforms, I wasn’t going to undermine that or downplay that. Matthew: And I understand that. Were you living in the U.S. as a resident at the time? David: I was actually, as I am now, dividing my time. I opted not to get health benefits when I joined the Manhattan Institute. To provide the answer to the insurance question, that’s why. Matthew: The reason I raised that is, and to get to the nitty-gritty of it, you’re not going to get any argument from me about the U.S. health care system having many, many problems, but you’ll get an argument from me about the solution to that. But one of the things that I find curious, from those people that are on the right – the thinking libertarians, to tease my colleagues at the Cato Institute about being, and I think you voice a similar opinion in the book, is the solution to the problem of access. There are many different ways you can talk about solving the problem around pricing and transparency, and getting to understand what people are purchasing, and I think people agree that there needs to be more of that, however it comes out. But the question is, how do you get people to not be uninsured? And I think you’re basically suggesting a voluntary solution here. Do you want to say a bit more about what you think the solution is to dealing with the lack of insurance?
I’m not sure I see it completely as a voluntary solution. I spent a
whole chapter in my book talking about the uninsured. I think that so
much of that debate is, unfortunately, dumbed down. I think people on
the left are too quick to say: "46 million people lack health
insurance, and as a result, the entire American health care system
should be damned." And I think people on the right are too quick to
say: "That figure is inflated, and as a result we don’t have to pay
attention to the issue."
As I point out in my book, there are
people who fall through the cracks. What I argue, though, is that if
you want to get the right treatment for a patient, you have to get the
diagnosis right. And I point out that when you look at that "46 million
uninsured" figure, it’s somewhat misleading, that a third of the
uninsured have family incomes in excess of $50,000 a year, a third
already qualify for Medicaid, and that remaining third, many of them
turn over within the course of a year. So I prescribe different
solutions to those different groups.
For the people who have an
income of 50,000 or more a year, I think we should make health
insurance more of an attractive option, and that’s why I talk about
some of the disasters that State regulations have had in the
availability and pricing of health insurance. With regard to the third
that are already available for Medicaid, well, one simply needs to sign
them up. With the remaining third, I think, are interesting, and I talk
about the fact that there are a core group of uninsured Americans who
fall through the cracks.
I also point out that the Federal and
State governments spend billions of dollars a year already on the
uninsured, but they do it, I think, in an unsatisfactory way, mainly by
funding health bureaucracy in hospitals. I would actually turn over the
money presently spent on uncompensated care by the Federal government
to the states, let them experiment, and I think some states would
simply expand Medicaid, I think that is probably a mistake, some states
would be more innovative and probably buy private insurance, I think
that’s the way to go. But I’m not totally sure! I think that we should
allow the states to experiment the way we allowed the states to
experiment with welfare reform, and I think we got far more information
through experimentation than in really clever people sitting in
Washington churning out smart papers.
Well, to a certain extent I agree with you, but I raise this because
you seem to be the perfect example of someone who, I assume, was in
that upper-income, when your wife had her issue, she was in that
And it was decided, for whatever reasons, that insurance wasn’t for
you, even though and it has to be said at that time that in fact there
were high-deductible policies available just as there are now, and I
happen know this because I had one in 1997 and 1998. And people, for
whatever reason, in that income group, which although it does make up a
sizable chunk of the uninsured, it’s actually a low share of that
income group, and the number of uninsured below 50,000 is much higher.
And as a share of those only below $50,000, the below $30,000 uninsured
is a much higher percentage.
So I think it is primarily an issue
for them but, even in that income group, people are not going to do
that. And yet, we tend to see that if you want to expand Medicaid,
which is for the lower chunk, although that has been happening at a
fairly big rate, what we’ve seen as to the expansion of Medicaid, it
has certainly been what people on the right would call a "crowding out"
of private insurance, and what people on the left would call a "mopping
up" from the decline of employer-sponsored insurance. So, you end up
with the snapshot number of 46 million, or that number’s 15%, or
whatever that number happens to be.
But as you say, there’s a
huge churn within that entire number of people going from insurance to
uninsurance. And it seems to be that we’re playing a lottery system,
where you end up with, if you’re in that number and you don’t have any
need for care and it’s not too big a deal. But if something bad
happens, like you rupture a disc, then it becomes very serious all of a
sudden, and most people cannot afford the care that comes up if they’re
uninsured. Now, it seems to me that you can argue that there are many
different ways you could make insurance attractive, and I think that
the path you’ve taken that argues there isn’t any consequence from
this, is essentially to say that you’ve got a broken insurance system.
You’re better off getting people into some level of catastrophic care
and making that more attractive, but I don’t see you actually saying
you have to make that mandatory.
Matthew: As they’re doing in Massachusetts.
Well, Massachusetts didn’t quite do that. That’s the way the Governor
has sold his plan. In fact, what happens in Massachusetts is if you
choose not to buy health insurance, you’re just not eligible for a tax
break. That’s actually not quite an individual mandate. It is coercive,
it’s not an individual mandate.
What do I think about the
concept of an individual mandate, which I guess is what you’re driving
at and what I should’ve picked up with your initial question… I’m
still opposed to the idea. I think that it would be better off if more
people were insured, but if you’re well-incomed and you opt not to get
health insurance, I think it’s a mistake. That’s my bias and my belief.
But I also come out opposed to individual mandates because I don’ think
it gets us that much further ahead and I think one of the great things
about America is you can make choices and live with the consequences of
So, essentially, do you realistically think that without an individual
mandate and without some particular program aimed at that middle third
or even to expand the expansion of Medicaid or whatever, we’re actually
hearing… You say yourself in the book, there’s still 7% who are kind
of intractable to get at in terms of the uninsured, just over half of
Are you OK with America carrying a large number
of uninsured people with the consequences that has for cost switching
to the rest of the system, the consequences for the health of the
uninsured and the knock on public health effects. Is that just
basically OK with you?
I think that we need policies to get more people insured, but I think
that certain people are going to game the system and I would prefer
that they don’t, but I think you’ve prevented them (from) employer
based health insurance system. I think we’re just going to have to live
Now, I’m not totally sure with rising health costs in
10-15 years time we are going to have an employer-based health
insurance system, but as long as you do people are going to leave jobs,
in fact, the turnover rate amongst people working for small or
medium-sized businesses approaches roughly every 15 months, right? And
I think as a result there are just people who are going to go through
periods of uninsurance.
Unless we’re going to abandon the entire
approach of employer-based insurance, unless you’re going to put in an
individual mandate, you’re just going to have to accept that. Before I
accept an individual mandate, I would like to make insurance as
attractive as possible to as many people as possible and see what
I think unfortunately, most states like New York, we’ve
moved in the opposite direction, where we’ve so badly regulated the
individual insurance market that it’s made it difficult for people to
opt for an individual policy, and as a result, you’ve more uninsured as
Lets get on to that issue because it seems to me that the majority of
people who write about this… and you kind of go both ways on this in
the book, but the majority of people claim that this is an issue of
adding mandated benefits… of providers and others forcing their way
into the state legislature to add treatments that are unnecessary or
whatever, procedures as part of a mandated package. But the real reason
is, for all I can see, that it’s so expensive to buy individual
insurance in New York or other regular states is because they have
Which would you say is the bigger problem,
because if it’s community rating, what you’re essentially saying is
that we can have relatively cheap health insurance, and you quote this
eHealth insurance study in the book which says that, hey we can buy
insurance in California for $150 a month, the same insurance is $400 or
$500 in New York.
But if you say that, what you’re also saying
is that therefore, we’re going to allow insurers to underwrite the cost
to sick people in those other states, so, to my mind, in other words,
we’re only going to sell insurance to people that don’t need it.
So, is that a fair reflection of your point of view, that community rating is in itself a bad thing?
Well, I think mandates are certainly part of the problem. I don’t think
they’re the entire problem but I think community rating plus guaranteed
issue laws are very problematic. I think you end up with this situation
where you can buy health insurance after you get sick. I mean, if we
did that with house insurance, you’d buy house insurance or a home
ownership insurance after your house had caught fire.
don’t think the principles of insurance work like that. You’re right
that some people then would have a difficult time buying insurance
policies, and I think at that point, when you’re looking at the
chronically ill people who are more advanced in age, that might well be
a reason to have a high-risk pool. I mean, a functional high risk pool,
not the sort of high risk pool most states have.
Lets talk about that a little bit, because this is very similar to the
point raised in the Hubbard book, to a certain extent although they
didn’t get very far with it, Michael Cannon’s book from Cato, I think
Arnold Kling raises the same thing, which is that the way to deal with
the fact that if you’re going to allow an individual market so that
people can buy a $100 individual policy, which is a high deductible
policy, the sick people can’t. I think, that as you’ve probably seen my
blog, I’ve been on both sides of this divide depending on which day the
underwriters looked at my application—so you’re going to end up with
these high risk pools.
Why, given that they are going to have
naturally have… You’re legitimizing adverse selection of these pools,
you’re only going to let sick people in these pools, and given that
there hasn’t been much support from states for them, how do you
realistically expect that to play out?
Well, I’m not sure there hasn’t been that much support for them, I
think some States like Minnesota probably do have pretty functional
high risk pools. I will also point out that the ultimate high risk pool
is employer-based health insurance, right? I mean, that is part of the
problem that companies like Wal-Mart have.
Anyone in America can
go work for Wal-Mart. You’re qualified to work for Wal-Mart if you’re a
PhD nuclear engineer from Pakistan, or you dropped out of grade eight.
And as a result, I think people sometimes now go work for companies
simply for the health insurance. They’re shopping for a good health
insurance plan, not necessarily for a good company to work for.
Still, there was an article in the New York Times today about people
who are not retiring because they can’t get health insurance in the
individual market. It seems to me that that’s the great argument with
saying, well, employer-based healthcare doesn’t work, we have a
dysfunctional insurance market and we know it’s going to be
dysfunctional if we allow to people to voluntarily dip in when they
want it, when they need it, but not when they don’t need it.
therefore the immediate answer is, well, in that case, lets force
people to buy health insurance but at a community rated level so that
you’re not left with the problem of the people who are sick and who
would be underwritten against in a voluntary market.
So I don’t
understand how you cure the problem of the chronic illness pool without
creating a separate but equal system which in the end will get
inevitably underfunded the way the Medicaid is.
Right, look, I suggest two general approaches. First of all, most of my
book is talking about simple, practical ideas to make American
healthcare better today, and I think if you get a more functional
insurance market, millions more would sign up for insurance.
the second point is, look, I’m not going to argue to you that the
employer-based health insurance plans make sense, as I talk about them
in my book, really the fact that employer’s government scheme has to do
with wage and price controls from the second World War and as a result,
it’s always going to be an unsatisfying system, particularly when
you’ve a labor market that turns over as much as it does, I believe
there’s a much more mobile workforce than we did sixty years ago in the
With that in mind, at the very end of my book I
do talk about what would a health insurance system look like if you
didn’t have it based on employers. Now you think that they way to go
is… you’re kind of outlining in your questions sort of a different
system, where everyone has to buy insurance. It’s community rated, and
there’s guaranteed issue, and people buy the plans and as a result
there’s no punishment if you’re chronically ill. I’m not sure I buy
into that model necessarily, I think it’s an interesting model, I still
think I would keep things voluntarily, I think if you wanted to get
employers out of the game then you could tax reform which is on the
table right now in Washington.
I think then I would want to make
it easier for individuals to pool risk, that’s ultimately what you’re
talking about, and I think I would allow people to pool risk on a
voluntary basis, allow them to pool risk through churches and
synagogues or associations or unions. And I think, ultimately, you
would find that people would naturally do that. Younger people probably
would be willing to pay a little bit more, and older people would best
get subsidized, and the chronically ill would get subsidized if you
could something into the market to increase choice.
Let me stop it a second there, because that comes down to the key point
about how people are going to buy insurance and whether there is a
possibility of voluntarily pooling risk. Most Americans don’t realize,
I think, when they get insurance through their employer that they are
pooling risk to a certain extent.
David: That’s right.
There are obviously bands within that for non-self-insured companies.
The elderly people in the workforce are charged more, the company is
charged more. But in the end, they understand that’s how it’s
happening. When you put people into the individual market, you go to
ehealthinsurance.com (which I happen to be a customer of, not a
particularly satisfied one, but a customer nonetheless), you see very
clearly, there’s a huge distinction between both people in different
age groups and people in different health status. Because there’s
different rates based on age and location. And once you get medically
underwritten, there are massively different rates, and in many cases
they won’t insure you. Individual insurance carriers will not insure
individuals with certain health conditions.
So you say that, but
now you’re going to tell me, "OK, I’m a 26 year old adult who feels
pretty bullet-proof" and get a high deductible policy at the moment for
$80 a month, so I’m kind of covering enough for myself, but I’m
certainly not putting into a pool out of which somebody who is elderly
or sick could draw out of, which is what we think of as insurance. Yet
how are you going to encourage a 26 year old to be saying, "I should be
paying $200 or $300 a month so that somebody who’s in their 50’s can be
paying $400, not $900?"
Right. First of all, I think that pooling is an issue. I don’t know if
pooling is as big an issue if you have a lot more voluntary
associations to offer health insurance. Why, look at the federal
employees health insurance benefit plan. I mean, it’s a very high
participation rate. Undoubtedly if you are younger, you end up paying
higher premiums than if you’re older, because there’s a certain amount
of risk pooling.
Yes, but that’s paid out of employment. That’s part of the cost of
employment, not paid out of pocket. If you look at people who are
actually buying their own insurance with their own dollars, I’m really
struggling to suggest that they’re going to visibly pool that. And
almost, I would think, for many employers (that’s not quite right), but
if you offered the young people a larger slice of cash to not be in the
employment pool, since more employers do that, there’s a tradeoff
they’re prepared to make. Whereas older people in the workforce are
much more interested in getting insurance. As you saw by the article in
the Times today about people not wanting to give up a job because they
want the insurance.
Maybe we just have to agree to disagree on
this, but it strikes me that your asking people to go against the laws
of economics, which doesn’t sound like a very free market approach!
Well, I would say the following. First of all, if health insurance
moved more towards higher deductible plans, I think there’s actually
less of a difference between premiums, even between the extremes in the
spectrum. Secondly, I think people would be happy to pool risk as long
as they gain something from it. And I think we’ll probably have to
agree to disagree on that. But I think if you could, through your
union, get a health insurance policy or get a menu of options of health
insurance policies that were relatively affordably, you’d probably be
more interested in that than trying to simply shop around. And that is,
I think, probably the way to go with health insurance.
might passionately disagree with me, and you might think that pooling
will never happen unless we have community rating and guaranteed issue.
Well, I’m not so sure. But I still think… I mean if employer-based
health insurance collapses in the United States, I still think you’re
better off than, and again, I don’t quite agree with your biases, but I
still think you’re better off than with a Swiss-style system, which
still gives individual choice and competition amongst health plans,
than a single payer approach. So look. I won’t agree with you, and we
probably don’t agree on our basic assumptions.
But maybe I’ll
meet you part of the way there. I think it’s important for us to
envision a health care system beyond employer-based health insurance.
Because as you well know, in the last five years the number of American
companies offering health insurance has dropped from 69% to 61%. And it
turns out most large employers, where millions of people work, still
offer health insurance. And as a result, the number of people who have
lost health coverage as a result actually is smaller than that
percentage drop would suggest if you just took a quick glance at the
Matthew: That’s true mostly because Medicaid is picking up a lot of the slack there, if you look at the…
David: I’m not sure that’s true. I mean, medically speaking, that’s…
Matthew: I’m not making that up myself, but we can argue…
I’m not sure if Medicaid’s picking up the slack. I’m also not convinced
that Medicaid picking up a lot of kids is rushing to meet a market
failure, or just politicians finding cheap people to sign up and
looking politically good. I mean, I think there is a huge crowding out
effect with Medicaid. Again, I wouldn’t suggest it’s 100%, but it’s
something between a quarter and a half of people historically who’ve
been signed up for Medicaid as part of the recent expansion. So look, I
think there is an issue here. I wouldn’t junk the entire American
health care system though because you think there are issues around
pooling. I don’t think those issues around pooling are as big an issue,
or are as traumatic and vast as you do. But even if I did, I still
think one could adopt some type of a giant risk pool approach as one
sees with federal employees health benefits plan.
Yeah, and I think realistically, politically, we’ll end up with
something that looks something like that. I think we’ll just have to
agree to disagree on the issue of whether the mandate is necessary or
One thing, though, that I’ve always wanted to sort of try
to put people on the spot on and not always got there, is the concept
that if you’re talking about selling high deductible policies in
basically a broken individual market, which is what we really are at
the moment, I understand how you can cover more people by making it
easy to buy high deductible policies. I think you’ll actually end up
getting more people out of low deductible policies into that market
than getting uninsured into it, but I certainly understand how you can
expand the insurance market doing that.
But what worries me, has
always concerned me about this, is that if you get to essentially 100%
of the population in a high deductible market in which the deductible,
or the money they keep in a health savings account, is equivalent to
essentially half of what they would have put into the pool in premium,
then you end up… Let’s say it was a $10,000 family premium and
there’s a $5,000 deductible which goes to a health savings account
which people keep and $5,000 goes into the pool. On the 80/20 rule, you
don’t end up year one with enough money in the pool to fund the care of
the sick people who actually need it. It strikes me that it works on
the margins, but if you wanted to put this as a nationwide system—and
there are some advocates of doing that—I don’t see where you’re not
essentially handing money over to the healthier people, and therefore I
don’t understand why, how this could work on a system-wide basis
without either the taxpayer, or maybe the providers or somebody
providing extra money or extra work into the system for free. And
that’s fundamentally the struggle I’ve always had with providing high
deductible policies as an overall solution. I understand on the margins
they may get more people covered in a system that’s broken anyway.
Is that something that you’re advocating as a whole, or…
Well, look. I think Americans are over insured for historical reasons.
I think employer-based coverage tends to cover much. And of course
public coverage tends to cover. And I think as a result we confuse the
concept of health insurance in the United States. Insurance as a
general rule of thumb covers you for rare events or catastrophic
events. You buy car insurance for, God forbid, the incident of having
an accident. You don’t buy car insurance to cover you for filling your
tank with gas, or if you have trouble with your windshield wipers.
No, no, no. I’ve heard this argument before so many times. But what I’m
getting at is the fact that if I’m putting $10,000 into a premium which
goes into a pool, and it encourages me to have a few more doctor visits
at the margin or whatever, that’s not going to change the basic facts,
which is that there are few very sick people in the pool who are going
to take all the money, or 80% of the money, as we know it’s the 80/20
rule and it’s the 10/50 rule so that most of the money goes on a very
few people and they’re going to be spending significantly. You know, if
I’ve withdrawn from the pool $5,000 which goes into the health savings
account which theoretically makes me a better spender at the margin on
doctors and tests and that kind of stuff, I’m going to end up keeping
the balance of that. Then it’s not going to be available for those very
sick people, and they’re not going to be able to influence—I mean, you
can argue back and forth—but most of their spending is not as
influenced by their ability to choose doctors and tests at the margin.
Maybe they’re over-insured at the catastrophic end, but most of their
spending is going to be imposed upon them by the healthcare system.
Right. Undoubtedly, year-to-year you find a disproportionate number of
people use… a small percentage of people use a disproportionately
large amount of healthcare. I still think the high deductible plans
make sense and I still think the basic concept of it makes sense,
thought I don’t particularly care for a lot of the restrictions and
ideas that congress ended putting on it. It’s a pretty rigid structure
which comes out of the tax committee of congress and not out of
mainstream America. But still, I think the basic concept is sound, I
hear what you’re saying that a lot of people are either going to have
one-off expenses year to year and are going to use up much in the way
of resources. Still, even with health dollars, getting them to ask
questions of their providers, getting them to shop around, I think goes
much further than a co-pay or a deductible would, and it gets them to
think a little bit harder about where they’re money is spent and gets
them to ask harder questions as well, and I think that’s part of the
way you’ll see more innovation in America today.
you’re hit by a truck, you’re not going to shop around, you’re going to
hit that high deductible pretty quick, but I still think separating out
smaller expenses… discretionary spending, from catastrophic events,
is an important thing.
You’re right, we still have trouble on
high expense and part of that might be addressed if people shopped
around more. You can hit the catastrophic plan with the way congress
set it up, at $1050 right now, right? It’s really not a catastrophic
event, in some parts of the country that’s an MRI. But I still think
that you’re better off taking that path. That doesn’t mean that we
don’t have some other fundamental issues, but I do see that as a step
in the right direction.
Matthew: Well let’s sort of migrate
here to the other point I wanted to discuss because we’re now going to
start talking a little bit about what do you do about the care of the
sick? And how do you constrain or contain costs on that? And this kind
of migrates to the other areas where I’ve linked to some of your
writing in the past and have found it most troubling, shall we say,
which is around the international comparisons. I come from a country
which clearly has a medical culture that says that we are going to do
less rather than more, being a Brit. The Canadians are somewhere in the
middle, but that gets decried immediately in the US as being “these
people ration, they ration by waiting list and that’s un-American and
that’s not acceptable for us”. And my sense is that you’ve got to
somehow do as John Goodman was quoted this morning as saying in Health
Affairs, you’ve got to ration care somehow, and he was arguing
obviously for doing it by rationing it at the front end, by consumer
pricing. But my sense is that you’ve got to figure out some way of
controlling the cost spent on the very sick people, and that in some
ways you’ve got to do that either by rationing the supply side, or by
in some ways controlling what’s done to people on some kind of
cost-effectiveness basis, or something. You’ve got to try and do
something, and in this country we really haven’t done much of that so
far.You’ve been extremely critical of the Canadian system, and
I want to come back to a couple of points about that, but what would be
your point – what would be your way that uncontrolled… You know, the
sort of flat of the curb medicine, the really expensive spending on
people for whom it probably doesn’t make much difference, would be
controlled under a system that you propose?
Well, right now I think things are so absolutely chaotic and everyone
would acknowledge that. I mean, one can simply look at Medicare
spending statistics across the country that somebody in Florida can
spend twice as much money as somebody in Minneapolis and there’s no
real difference in health outcomes.
Matthew: Of course, yes, of course.
So, what are ways of addressing that? Well, I mean again, I think part
of the approach is to get people more involved in the care they
receive, I think part of it is to take a good hard look at how we’re
spending money and what we’re getting for it. I also think ultimately
though, getting people more involved in the care they receive is the
ultimate way to go. That might mean more cost sharing even on a
high-deductible end. It might be companies taking more innovative
approaches and providing more information and providing more choice to
people. I mean, when you look at for instance John Wennberg’s work,
end-of-life care and Medicare, and you look at say Mount Sinai hospital
spending twice as much as the Mayo Clinic, and yet people are less
satisfied even for that expense.
I think given those sorts of
options people might think twice, so I think part of it is to get
consumers more involved in spending. I acknowledge that much of
spending is actually on the catastrophic side. I think we need to
experiment around with ideas about how to really approach that
populate. But, I also think more information, more accountability, more
transparency, would be useful as well.
I mean, we spend without
very much satisfaction, right? And I think if people had more options
and more choices, there was more transparency, they might make
different sorts of choices.
But, again… It’s completely so un-American and un-apple-pie-ish to
stand up and say that we shouldn’t give people choices and options, but
realistically, when you’ve been hit by a truck, when you have very
advanced cancer, when you’re one of those people in the ICU in Mount
Sinai, we are so far from giving those people realistic choices as to
what their care should be. I mean…
I guarantee that nobody in that ICU knew that they were getting three
times the services that they would’ve got had they been in the Mayo
David: OK but that…
Matthew: I just don’t understand how you get to that point.
With the ICU care it was end-of-life care, but look, I think
undoubtedly we need to cost things out better, we need to provide
people with more choices and more information. Are we still going to
have issues on a catastrophic scale? We might, we also might get a
little bit smarter about it, get companies to help inform patients
better, have living wills and so on. I’m not sure that this is such an
inscrutable issue. I’m not sure that the inevitable conclusion is we
simply need to ration in Medicare. Again, I would rather move to more
of a market for healthcare, get more transparency, have people more
informed and see where the dust settles before I jump to the inevitable
conclusion that you’ve jumped to.
Well, that may be very well that we’re going to have to agree to
disagree. I’d also argue that this is very much to do with medical
culture. If you go back to the classic Aaron & Schwartz book, The Painful Prescription
they basically said “Hey, the Brits are rationing care, look at the
amount of people they treat with kidney failure compared to everyone
else in the world, look at what they do at the end of life, they
basically don’t do much, they leave them to die.” And yet, when they
interviewed British physicians they felt they were taking very good
palliative care of their patients, they felt that somebody who’s 87 and
had multiple morbidities shouldn’t get more treatment. The pain versus
the outcome wasn’t worth it for them, and that was a different cultural
thing. So, a lot of this, I would agree, is somewhat cultural. But on
the other hand, we also have, as you know and maybe you can argue there
are ways that we can construct a market-based technique for releasing
this, we also have an entire health care industry which makes a lot of
money out of providing what I call excessive services to the virtually
dead. And it strikes me that without… I just don’t know how you would
rationally construct a system that transparently prevented that from a
consumer basis without some third party, presumably the government,
getting very highly involved, so maybe again, we’ll just have to agree
to disagree on that.
Again, I’m not so sure. Undoubtedly with aging demographics, in medical
advances, we’re seeing more pressure than ever before on Medicare. But
I think we need a smarter system. We do have a medical culture in
America, I wouldn’t debate that. On the other hand, part of it is
fueled by the fact that people pay so little out-of-pocket for
healthcare spending, right? Fourteen cents on every healthcare dollar.
And I think that is part of the issue as well. People do go to their
family doctors often, they do want expensive diagnostic tests, but it’s
not quite clear to me that they want that because it’s part of the
culture and they simply demand it, or they want that because it seems
reassuring, it buys them peace of mind, and also they’re not really
paying for it.
Now, you would obviously say the former. I’m not
sure it’s so much of a cultural issue so much as a payment issue.
Certainly I’d like to see what would happen if you had more health
savings accounts, if you had Medicare reform, where the dust settles
down. Again, it might prove that these measures, in the overall scheme
of things, touch on the margins — that’s your argument, I’m
unconvinced. But I think this is a step in that direction.
think even if we adopted your approach — and as you know, we’ll agree
to disagree — but even if we adopt your approach and eventually said,
look, there are just decisions that are beyond the individual in
Medicare, and we’re going to need to ration, the way they do in
Britain, because the British are a hardier lot, which is your
perspective, not necessarily mine…
a former colonialist rather than a citizen of her queen… But even if
one were to take that approach, I still think we need far more health
information. There were some exciting experiments in the public sector
on that end, in New York State, for instance, looking at cardiac death
after cardiovascular procedures. Suggests to me that, in fact, if you
provide report cards, people do change their choices, and that’s
useful. You know what I’m referring to, of course?
Yeah, and I don’t think there’s any disagreement from any thinking
person that we need better information about what’s going on. You just
look at the Wennberg stuff, I mean…
Sure. I think we need more information. I don’t think that’s going to
come about, though, until you have people with more — to use the
overworked expression — "skin in the game." Until you have more people
asking questions and more people getting answers around pricing and
quality, I’m not really sure that you’re going to have smart rationing.
If that’s what you want, and it seems that’s what you want, you’ll just
have to do the random rationing that one sees in Canada and Britain,
where you simply restrict on the supply side and hope that the sickest
of the sick rise to the top of the waiting list.
Well, let’s talk about that for a minute, because this is where I have
a real bone to pick with you. The chapter which you call "The Hip That
Changed History," which is your chapter about international
comparisons. I would argue that what you’ve done here is, you’ve picked
two or three points in which the American system looks particularly
good — and it tends to be around survival rates in cancer care — from
all the massed Commonwealth studies looking at different care in
different countries and have essentially ignored the rest of the
studies, which showed that in a lot of other areas, American care
wasn’t so good and was actually behind other countries, even though we
spent a lot more money on it. You’ve ignored things like the World
Health Organization saying that overall it was the 37th-best system,
and all that other stuff. But…
David: Hold on, let me respond to that first.
Matthew: Yeah, go ahead and respond to that.
What I wanted to do was look at outcome measures that I thought were
non-ideological, and that’s why I drew from Datamonitor, and the
Commonwealth Foundation, the WHO. What I said is, if you were sick,
where should you be? So many of those other studies I think are
ideological — on the left and the right, OK?
The WHO study is
the classic example of that. When they rank American healthcare 37th,
it makes for a great sound bite, until you actually look at their
study. They spend an enormous amount of time, as example, looking at
smoking rates. They spend time looking at egalitarian values and so on.
Timeliness of care and so on was actually relatively unimportant to
them. In my mind, that’s not a study, that’s an opinion piece. A rather
long opinion piece, but it’s an opinion piece.
What I said was,
there are huge problems with American healthcare; I spent an entire
book writing about the problems with American healthcare. But I said,
look, should we look at socialized medicine in Canada or Britain or
some sort of a European country as some type of a model? And I said
that people make arguments like that they spend less money and they get
more for it, and if you look at crude indicators of health like life
expectancy that seems to be true — and I explained why life expectancy
was so darn crude, as was infant mortality. And I said, but look, if
you say somebody has a diagnosis, where do they do better? I looked at
that particularly with cancer care, because I got pretty good data on
that. I also looked at that in terms of cardiac care; there was a
Canada/US study. I said, when you say somebody’s sick, where do they
get better care? I said, ultimately, it turns out to be the United
I’m not an apologist for the American healthcare system.
I think there are huge problems with it. We disagree on where one would
need to go, but as I started page one of the book by saying, I thought
there were issues here. All that being said, I think that you have to
be careful what you wish for. Americans who look north for answers, or
look to Europe, I think do themselves a disservice. I think in those
systems, you see rationing in a way that is unfortunate, and you see
rationing in a way that does impact on people’s quality of life, and
probably even quantity of life. That’s why, as well, I point out in
that chapter — and again, we’ll have to probably agree to disagree —
in those countries there’s so much talk about moving in the opposite
Well, let me stop you there, because there are two decided points here
where I think this chapter is disingenuous — disingenuous is a strong
word — leaves out some corresponding pieces. The first is, there was a
series in the Wall Street Journal, 2003, 2002, I believe, really
excellent series looking at Canadian healthcare and rationing and a
number of issues, and it clearly showed… It had a very interesting
example of how they rationed access to heart surgery in some of the
major teaching hospitals in Canada. There was a nurse there whose job
it was to get the sickest person to the top of the list at the right
time, and how it worked as effectively as it could, given the
constraints they had.
Now, the next article in the series was
about the University of Texas at Galveston, and how they did exactly
the same process of rationing, except that they weren’t rationing based
on who was the sickest, they were rationing based on whether you could
afford it and how much insurance you had.
I’d argue that it’s
fine to say that the US spends a lot of money on high-end cancer care
— although there are people, by the way, who argue both that we do
more diagnosis and we pick stuff up earlier, so the numbers are skewed
in this—but to my mind it doesn’t make much difference. But it’s fine
to argue that we do better in some things that we spend more money on.
You can make a series of value judgments — and in the UK the NICE, the
National Institute for Clinical Excellence, makes specific value
judgments about what’s worth spending money on and what’s not. But here
we basically give 95-year-olds dual angioplasties, as President Ford
had the other day at the Mayo Clinic. And it’s fine to do that, but
you’ve got to accept that there’s another side to it.
side to that is that it’s equally well-shown in exactly the same
Commonwealth studies that this is the country in which there are 35-40%
of the population who has trouble paying its medical bills, that we
have a large number of bankruptcies. And you can argue back and forth
about who you believe in that data, that bankruptcy’s caused by medical
care. The reason that people are looking to Canada, or looking to the
UK, or looking to Europe, or looking to any other universal system, are
not looking there because they believe necessarily that the quality of
care is better — although I think you could argue that’s a wash — but
because they’re not going to be exposed to the out-of-pocket costs or
the risks of being uninsured because they lost their job or they chose
their parents badly.
And I think that’s the piece that… It’s
not fair. I’ve written, as you know, an article called "Oh Canada"
about this, because I believe there are compromises everywhere, and
we’ve made some compromises here that… Well, not made, but for
historical reasons end up with these compromises, which to me look…
It’s all very well to say the Canadians are rationing care, or the
Brits are rationing care, or the Swiss don’t do it as well, or
whatever, without showing that there’s another part in the US, which is
around rationing care based on access to insurance, based on income,
which is a factor of things like education, which is a factor of things
like who your parents were.
OK, Matthew, as I said at the start of the interview and as I’ll say
throughout, I’m not an apologist for American healthcare. I think here
in the United States it’s too expensive, I think that there’s uneven
quality throughout, I think that in many ways Americans might well be
over-treated, and studies support that. I haven’t read this Wall Street
Journal piece on Canada…
Matthew: I’ll get it to you. It’s a great series of pieces.
I’ll look it up. As you know, I was born and raised in Canada. I
graduated from medical school and practiced in Canada. I think Canada
is largely a chaotic system where many people fall through the cracks.
As you’re well aware, one of the things central planners did in the
early 1990’s was to cut down on medical schools. And as a result, you
have chronic shortages of doctors right across the country. So much so,
that in a couple of Canadian cities, people actually participate in
lotteries to get appointments with physicians.
So I think you’re
quite right that there is rationing that goes on in every system. And I
also think you quite right to say, and certainly I wrote a book about
this, that there are problems with the American system. But to turn
around and say "they’ve got problems, we got problems, it’s a wash", to
use your words, not mine. I think we can all agree to disagree on this
point as well.
Well let me get to the last point of that, which is I think without the
benefit of speaking to you, if somebody read this chapter, "The Hit
That Changed History" or read some of your op-eds that you’ve written
on Canada and it’s cancer and cardiac death rates…And by the way, I
haven’t looked at this for about 15 years, but the Japanese do a
fabulous job with curing bowel cancer because they do all these early
screenings using sigmoidoscopies; it sounds really unpleasant. I’m sure
if we put their cancer rates of bowel cancer up against the US, they’d
look better. But that’s an aside as I haven’t looked at it for awhile.
I think if one read this chapter, you would get the impression that
Canadians and Brits are out there in the streets complaining about
their system, and demanding it be changed to a privatized, US-style
system. Let me just read you a quote, this was said by a leading
conservative politician in the UK, the head of the Conservative Party.
He says that, "I believe the creation of the NHS is one of the greatest
achievements of the 20th century", blah, blah, blah.
David: Yeah, I’ve read what David Cameron had said.
There’s interest in being able to trade up. Yes, I don’t want to wait
in line. In the UK, they’ve had that since the start. The Canadians are
not having it like that. But in the UK, you’ve always been able, if you
had outside private insurance or money, to trade up and get to a
private clinic. My father, bless his still beating heart, is a
gynecologist. The fact that he has a nice retirement lifestyle is
because he made his money off the private sector, as well as, the NHS.
But there’s no interest, as far as in those countries, in getting rid
of the basic safety of the universal health system.
David: But you’re putting words in my mouth.
Matthew: No, I’m saying if you read your chapter, that’s what you would think was going on.
No, I said that in those countries like Canada, there’s more talk about
private health reforms. Canada is a country that until very recently,
it was taboo to talk about the private sector and healthcare. You have
a huge sea change in public opinion. In part, because even the Supreme
Court of Canada has said that the healthcare system is a mess, right?
This is arguably the most liberal Supreme Court in the Western world.
This is a Supreme Court that says you have a constitutional right to
marijuana if you’re sick, allows gays to marry and federal prisoners
the right to vote.
Those might be wrong decisions or they might
be right decisions, but they’re fairly liberal decisions. That court
looks at this much vaulted healthcare system and says access to waiting
lists is not access to healthcare. It strikes down key laws in Quebec;
that’s a monumental decision. A private clinic opens up at a rate of
once a week in Canada. One of the foremost critics of Canadian
socialized medicine is Dr. Brian Dehue who was just elected president
of the Canadian Medical Association.
What I’m saying is that in
Canada, the socialist utopia you’ve got people reconsidering the
socialist paradise. There’s that, and they’re looking south and saying,
"we want an American-style system and employer-based health insurance."
No they’re not, and I didn’t say that in the chapter. In Britain again,
you’re seeing the Labour Party, which created the National Health
Service saying there has to be more of a role for the private sector,
and promising to triple the number of private sector surgeries over the
next five years. In Sweden, you’re again seeing some type of
privatization, including St. George’s in Stockholm, which is one of the
largest hospitals in the country.
I’m not suggesting that in
Sweden, they’re sitting around saying that the United States is the
answer when it comes to healthcare, and I’m not suggesting that of
Britain either. But I am saying that when you’re in the United States,
and people tell you that life expectancy is better in Britain, costs
are lower and people are generally more satisfied, that is
disingenuous. And I’m also suggesting that those countries that are
increasingly looking towards market reforms. I’m not suggesting that
they’re all sitting around reading Adam Smith, and their policies come
directly from those pages, and that they’ll outflank the United States
on the right.
Let me read you the last line of the chapter. It says, "In the streets
of Stockholm and London, it’s the ideas of Adam Smith that percolate."
David: In terms of market reforms.
Well I may be taking it out of context there. But "Introduction to
Market Reforms", which by the way, Thatcher talked about the same thing
in the 1980’s, and has been the stuff going on in many other countries.
Everyone’s going to try to figure out how do you do it more
efficiently. It’s clear that a single-state monolith with command and
control isn’t going to work in a more advanced civil society. You know,
the one size fits all model from the 1940’s and 1950’s isn’t going to
work forever. But I’m glad you’re on the record as saying that in those
countries, they’re not willing to abandon the concept of universal
healthcare; this is the statement that Cameron said. You have the
leading conservative politician in the UK basically saying that
healthcare should remain free, affordable and everyone should have
access to it, and we’re going to make the system better.
I’m surprised that you would quote from David Cameron and cite him as
an example. David Cameron as you know, wrote a very dogmatic and
conservative manifesto for Michael Howard, when Michael Howard was
leader of the Conservative Party. And when he lost, David Cameron went
back and thought that he had to run center-left in order to win. David
Cameron is 40 years of age and has suddenly become an environmentalist.
That he pays lip service to the National Health Service, I’m not sure
that one can cite that as an example.
Well it does tell you what British political public opinion is, when he
says that we need to be support it with funding, then we’re going to
make sure that the money is well spent.
Yeah. I think in socialist countries, it’s easy to talk about the fact
that you believe in socialism but you’re against waste, fraud and
abuse. But that doesn’t necessarily mean that he’s got an exciting
policy for how to do that. Look, as I pointed out in the chapter,
change in these countries is very modest, resistance is very strong and
the government’s role remains very large. I still think that you’re
still seeing discussion about free market reforms that you’ve never
seen in any of those countries.
Thatcher never talked about
privatizing surgeries. Thatcher talked about the fact that when you see
your family doctor, maybe he, not you, should have incentives to shop
around for specialist care, and some money should go there accordingly.
Publicly, she would not have talked about privatizing surgeries the way
Tony Blair has done.
I say that she was certainly interested in encouraging the market for
private insurance, and the continuance and expansion of that, and
personally used it. That’s been around since the start of NHS. It was
part of the deal crafted to make sure that surgeons and specialists
would stay in the system and not revolt. As we know in healthcare, you
can’t do too much in health reform without getting the doctors somewhat
on your side, as Bill Clinton and many others in the past have found
Part of what’s going on in the UK is that they’ve increased
a lot of spending and they voluntarily increased the share of GDP going
to healthcare. But because they haven’t spent much money in the
previous 20 years on infrastructure or training doctors, on the supply
side, they had to find the supply from somewhere else, and have been
paying it in India, France and wherever else.
And I get that as an election tactic. Obviously, the whole argument
about how you fund and organize healthcare is going to continue on;
health reform is never going to end. A lot of it is going to be how
much market yields, how much central planning and supply you use. But
there is a fundamental difference when you say, we think everyone
should be in the system and we’re going to either do it on a tax basis,
or a mandatory basis the way the Swiss do it, and everyone’s going to
have to pay in, but nobody is going to be exposed if they’re not in the
system but need care. And what we do in the US and I think the
Europeans and Japanese and basically everyone else in the industrial
world is on that side of the line, and if you look at the US, poll –
now admittedly polling data is terrible – Harris Polls done over the
years and an ABC poll done last week, when you ask people sort of on a
theoretical level do you think that in the US – 60 to 70% say yeah we
agree there should be a universal care system.
Now when you
start through on the details it’s very easy to derail reform from where
we are now in terms of getting everyone into some kind of universal
system. Because people start making remarks about well you won’t be
able to see your doctor or there will be rationing or whatever else. So
I understand why reform isn’t going to happen until life gets very bad
at one end or the other.
But I do think that there are somewhat
unusual anywhere in the Western world and there are people I think and
I can probably put you in this category, who say that some of the
things that go along with not having a universal healthcare system –
like people being uninsured, people who are unlucky ending up for
whatever reason having trouble getting insurance. or being uninsured
who have need care, ending up with huge hospital bills can go bankrupt
and can have all kinds of problems— are kind of worth dealing with for
the right to have voluntary purchase of insurance and in some ways
overuse of care or better care for cancer or whatever else. I think
that’s a pretty big sort of philosophical divide that I think still
separates us and I think that is going to continue to come into play.
Well I do. Though one has to emphasize the extraordinary extent to
which government colors American health care. And once you forget that
with Medicare and Medicaid and VA consuming almost 50 cents on the
dollar – but look I think the question is where to proceed. I think at
some superficial level we can maybe even agree on our goals, right?
We’d all want more coverage, we’d all want better quality, we’d all
want more information.
But you’re right there is a philosophical
divide. You look at these things and you say look universality is the
key and as a result you sound quite willing to make concessions on the
quality and on the rationing end that I don’t think I would be
comfortable with. You say my statistics are skewed and you call me
disingenuous. That’s your take but fundamentally that’s where you see
the goals are. I think more people gaining coverage and so on is a good
idea. I think to do that through socialized medicine is a mistake.
just turn it around and ask you the following question. If you think
that there are good things about the British system and you think they
get more for less, let me ask you this: would you advocate them cutting
in half the Medicare budget in the United States today?
Politically, completely impossible. I think the US spends far too much
money on health care so I wouldn’t cut in half the Medicaid budget what
I would do…
David: I said Medicare not Medicaid.
Matthew: Medicare, Medicare. What I
would advocate is the creation of, and it would have to be in a
uniquely American way and there would have to be room although – and
frankly I’m not sure this is how we’re going to end up. I think if you
play the tape out things are going to get worse for another 15 years
and we’ll end up with a rationing single payer system by default. But
that’s my analysis rather than what I think ought to happen.First
of all, what I think ought to happen is that we ought to find a way
that every American gets mandatory but also unthinking access to some
level of health insurance which basically covers them for the financial
risk of having problems because they can’t get access to health care.
But we pay for that by massively reducing what we do at the other end,
which includes both saying no to a lot of the things that we say yes to
now at the far end, which you would call rationing or which you say
would reduce the amount of care, and also by frankly reducing the
amount of money we spend on the people providing the care—whether it be
physicians, hospitals or people who make stuff that goes into the
So you know once you start, if you have an honest conversation like
that in America you’ll last about 15 seconds. But I think that would be
a better solution because it’s better that people should have not have
to worry about the financial side of getting sick, but get access to
health care that’s necessarily needed rather than have to be concerned
about that all the time and how they’re going to get insurance. But now
if they are well insured they can get the nth round of chemotherapy
which may prolong their life by a month. That’s I think the choice
You may fundamentally disagree about that but it’s almost not worth
discussing other than I think that choice hasn’t been offered to the
American people honestly and they may freak out if you did offer them
that choice honestly.
Well I mean in some ways what you’re simply saying is we over invest in
Medicare, right? I mean some people would argue that we over invest in
Medicare in part because it’s a black box we just throw money in and
we’re not sure what we get for it. You’re almost arguing that we over
invest in Medicare because it’s for the elderly. And you would rather
say OK you’re over 65 – life has been great for you, you’ve lived in a
time of unparalleled peace and prosperity, you had grandkids, that’s
terrific. Now you’re just going to have to die because young people
need to see the doctor for…
And you can say it that way Obviously that’s how people say it. But
what I would say instead is that President Ford is 95 years old, he had
two angioplasties last year at a cost of – make up a number 35, 40
thousand dollars. He may live another year and a half but probably you
could argue his time had come. Now this is an argument you’re not
allowed to have in the US—unless it’s about poor people in Oregon in
which case you can have the argument—but that’s the sort of rational
argument that’s all about resource allocation.
I would rather
that his access to that kind of care was limited and that a mom living
in South Central L.A. — or can I say a working mother in Ohio as the
ABC News featured the other day — get access to pre-natal care. But she
can’t because she doesn’t have a job which has insurance. She’s a
member of the working poor but earns too much for Medicaid. Call it a
value judgment but I think that’s the way you should put it.
I’m not sure we’ll ever get to have this argument in a rational
political way what I think will happen is that there will be some…the
people in the health care system now will continue to price themselves
out and eventually the insurance system will collapse. There won’t be a
good adequate private sector individual market to replace it and you’ll
get some kind of New Deal-run health care, which will involve an
expansion of Medicare to everybody. And after that the federal
government will then be entirely consumed by Medicare costs and will
start de facto rationing. So I think that’s where we’ll actually end up
in the next 15 years. But who knows?
Who knows and I would agree on this point everything that we know about
healthcare is about to go out the window. I don’t even think it’s 15
years I would say over the next seven years. We’re already struggling
to spend – pardon me we’re already struggling to pay what we already
are expected to right and which is about $2 trillion dollars. Each
year’s projections suggest that that’ll double over the next seven
years to about $4 trillion dollars or as a percentage of GDP will rise
from 16% to 21%. So if you think we’ve got trouble paying for things
now you ain’t seen nothing yet.
And I think fundamentally we’ll
need to choose amongst one of three options. We’ll either need to adopt
some type of a socialized medicine system, option number two is we’ll
go back to managed care which actually did contain costs, maybe it was
unpopular but it did what it was supposed to do at least in part, and
option number three is to try more free market reforms which is what I
wrote my book about.
Matthew: OK I think that’s good use of each other’s time and I think it’s been an interesting discussion.
David: I enjoyed the discussion even if we didn’t agree on much but I didn’t think we’d agree on nearly as much at the beginning.
Matthew: It’s a pity we haven’t changed each other’s minds but maybe it’ll happen more.
David: Well good discussions come out of disagreement sometimes.
My guest today has been David Gratzer, his book is "The Cure: How
Capitalism Can Save American Health Care." It’s available in stores and
at Amazon and it’s published by Encounter Books in New York and it’s a
very interesting read. I had plenty of sticky notes all over it which
implied that it obviously got me thinking. So David, thank you very
much for your time and look forward to discussing with you again.
David: A pleasure, cheers.