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Cognitive Dissonance in U.S. Health Care

Princeton economist Uwe Reinhardt is well known as one of the bluntest—and wittiest—critics of U.S. Healthcare.  Last week, we both spoke at a conference organized by Princeton’s Policy Research Institute on “Access to Universal Health Care: New Jersey, the Nation and the Globe. As usual, I learned something from Professor Reinhardt.

Earlier this year, New Jersey Governor Jon Corzine received a somewhat startling letter from Princeton economist Uwe Reinhardt. The missive was appended to a report from the “New Jersey Commission on Rationalizing Health Care Resources,” a Commission that Corzine had asked Reinhardt to chair.In the letter, Reinhardt expresses “some personal observations on the inconsistent expectations Americans have of their health system,” describing “these inconsistencies” as “a form of cognitive dissonance.” Reinhardt goes on to explain that, in his view, these inconsistencies reflect “certain deeply ingrained traits in American culture that stand in the way of a rational health care system.”He concludes: “In short, Governor Corzine, in my professional view, the extraordinarily expensive, often excellent just as often dysfunctional, confused and confusing American health system is a faithful reflection of the minds and souls making up America’s body politic.”After reading the letter, Governor Corzine had one question: “You’re not going to publish this in the report, are you?”

In fact, the letter did appear at the front of the report. And last week, at a conference on “Access to Universal Health Care: New Jersey, the Nation and the Globe” sponsored by Princeton’s Policy Research Institute, Reinhardt circulated said letter. It served as a good companion to Reinhardt’s speech, which compared what we euphemistically call our health care “system” to systems in other parts of the world.

Reinhardt began his talk by considering the fact that, in the U.S. insurance is often tied to one’s job. “No one –in his wildest dreams—Drunk!!—would design a health care system based on employment,” Reinhardt declared, barely containing his outrage at such a truly bone-headed idea. After all, the unintended–but inevitable– consequence of an employer-based system is this:  if you lose your job, you also lose your health insurance—at exactly the worst possible time.

In his letter to Corzine, the Princeton economist elaborates: “the reluctance of Americans to countenance government financing of health care outright…has led them instead to prefer inherently temporary private health insurance tied to a particular job with a particular company (and then to look helplessly for rescue by federal or state governments, when, in their 50s and early 60s, they may find themselves structured out of their jobs and the health insurance that came with it and unable to afford coverage in the private insurance market for individuals). When,” he asks, “will it dawn on the American voter that, in an age of fierce global competition and ever novel disruptive technology, any individual American corporation is a fragile institution and, at best, a highly unreliable source of health insurance…?” This is especially true for those forced into early retirement.

Reinhardt is right. A great many Americans do not want “Big Government” interfering with their health care. Unless they lose their insurance and then they expect “their government” to bail them out.

In theory, our government will come to your rescue if you’re poor enough, offering Medicaid and SCHIP to millions of families and children who simply do not have the money to purchase their own health insurance.  We take care of our poor—or at least that is what we like to tell ourselves.

In fact, Reinhardt points out, a 2008 brief by the National Institute for Health Care Management Foundation reveals that  12 million Americans who are uninsured  are eligible for  public programs—but are not enrolled. Of these, more than half are children.

Why aren’t they enrolled?  In many cases, the application process is filled with roadblocks which can include 14-page application forms.

“And this is deliberate,” Reinhardt added, quoting a Harvard economist who has suggested that “the way to manage entitlement programs is to harass people.”

The problem, Reinhardt explains in his letter to Corzine, is that we are of two minds about providing care for the poor. While “many Americans do believe that health care is a social good that should be available to all socio-economic classes on roughly equal terms…just as many other Americans believe that health care is essentially a private consumer good—like clothes, food and shelter—whose procurement and financing is primarily the individual’s responsibility, and they routinely (and quite incorrectly) deride the former school of thought as ‘socialists.’”

The way we pay health care providers who take Medicaid patients illustrates just how conflicted we are. Doctors who treat these patients are paid much less then they would be if they were treading Medicare patients. In other words “Americans tell providers that the value of their work is lower when applied to uninsured patients or to patients insured by Medicaid.” Reinhardt observes. As a result, Medicaid patients often have difficulty finding a provider. A 2007 study published by the Commonwealth Fund reports that when Community Health Centers (CHCs) try to refer Medicaid patients to a specialist for “high tech services,” 16 percent of those patients  “never” or “rarely” are able to obtain access. When it comes to Medicaid patients referred by CHCs for hospital admission, nearly 12 percent find the door blocked.

This is the legacy of racism. As  Henry J. Aaron and Jeanne M. Lambrew point out in Reforming Medicare: Options, Tradeoffs and Opportunities, Southern Congressmen refused to vote for the 1965 legislation that created both Medicare and Medicaid if physicians and hospitals were going to be paid as much to treat the poor as they were paid when treating the elderly. These Congressmen wanted to preserve medical apartheid. (Most Southerners over the age of 65 were white: a combination of poverty and a lack of healthcare ensured that few African-Americans lived that long.)  Ultimately President Johnson had no choice but to cave to the legislators’ demands. What is both shameful and startling is that forty-three years later, this wrong still has not been righted.

But, as Reinhardt notes in his letter, our feelings are confused on this issue. Thus, even while signally to providers that we don’t value their work as highly when they are treating the poor, we don’t want to make the distinction explicit.

“A ‘rational’ health system responsive to this powerful economic signal [of lower pay for Medicaid providers] would be openly two-tiered,” Reinhardt writes in his letter to Corzine, “with bare-boned facilities devoted strictly to Medicaid patients and the uninsured…and much more luxurious, better equipped and better staffed facilities for commercially insured patients whose insurers are willing to pay higher fees.”

But in the U.S. a “citizenry which signals its preference for a class-based health system through the payment mechanism, soothes its conscience by holding physicians and hospitals to strictly egalitarian standards when it comes to the treatment of patients of all socio-economic classes.”

Since this is an unfunded mandate, many doctors reject all Medicaid patients; others take only a few. Hospitals, too, have found ways to avoid charity cases, “stabilizing the patient” who stumbles into the ER, as the law demands, but refusing to admit him as an outpatient so that he can receive the services the ER doctor recommends.

In other countries, where there is widespread agreement that equal healthcare for all is a right, our sharply tiered system is viewed as unacceptable. “If you want to kill a health care proposal, whether in Taiwan or Germany” Reinhardt told his audience last week, “all you need to say is, ‘if you do this, you’ll wind up with the U.S. system.’  It’s amazing,” he mused, “how they manage to avoid adopting ‘the best health care system in the world.’”

Why don’t we just raise fees for Medicaid providers? “We would have to pay higher taxes,” says Reinhardt.  “We can’t have the Chinese temporarily pay for it” (the way China and other countries fund so much of our deficit spending by buying our bonds.)

When we try to think about health care markets and regulation, we also experience “cognitive dissonance.”  For many Americans, Reinhardt notes, “it is an article of faith that private commercial markets are inherently more efficient than government will ever be. At the same time…the same Americans seem troubled and unwilling to accept for health care—and now even for mortgages—the harsh verdicts of the ‘free markets’ among which are:

(1) That a market allocates resources not to individual most in need of them, but to those who have the most money to bid high prices for them.

(2) That individuals or institutions, including hospitals, unable to fend for   themselves in the competitive market’s free-for-all—among them hospitals in low-income neighborhoods—should be allowed to wither away; and

(3) That in the free-for-all of the marketplace, not only the quick-witted and better-informed, but also the morally more flexible participants often will take advantage of less quick-witted and less well-informed market participants who are naive enough to trust the morally flexible.”

Free market enthusiasts often speak as if “the market” is a benign intelligence, hovering over the marketplace to ensure that gains and losses are fairly distributed. In fact, the market is not fair—nor is it unfair. It is amoral, totally indifferent to whether individuals are getting their just desserts. The most virtuous man may lose the roll of the dice by investing too early, or too late. Often he is duped by those Reinhardt describes as “morally flexible,” truly believing that his mortgage broker has his best interests at heart.  When it comes to healthcare, a seven-year-old who needs a $100,000 cancer drug may not get it; if an 89-year-old has the cash, the drug is his.

Because most Americans are unwilling to accept what Reinhardt rightly describes as “the harsh verdicts of the market,” they believe that the government should protect the weak. On the other hand, they don’t want the government to disrupt free markets which, they insist, are “efficient.”  The result, says Reinhardt, is “a bewildering system of half-hearted competition and half-hearted regulation” of health care.

When it comes to health insurance, Reinhardt writes, once again “confusion reigns.”  On the one hand, “many Americans decry as outright un-American the idea of mandating the individual to procure adequate health insurance coverage for at least catastrophically expensive care.” Those same youthful libertarians, however, would “bristle at the idea that…a hospital should have the right to withhold from them for want of ability to pay, costly life-saving medical interventions, should [they] be seriously injured or become critically ill…These unfunded mandates on hospitals effectively ask hospitals to provide uninsured individuals with the catastrophic health insurance they are free not to procure, at the expense of insured patients…”

“Just as inconsistently,” Reinhardt notes, many Americans believe that insurers have no right to refuse to sell insurance to individuals suffering from “pre-existing conditions.”  Everyone has a right to buy insurance, they say. But many of these Americans also believe that the government has no right to insist that everyone purchase insurance. We should be able to wait until we are sick, and then buy insurance when we need it.

Of course if everyone followed this rule, only the sick would purchase insurance and it would become exorbitantly expensive. This is precisely what  happened in New Jersey when, as part of  the “New Jersey Individual Health Coverage Program,” the state passed legislation requiring that insurers sell policies to everyone in a given community at the same price.  After the law was passed in 1993, more and more healthy individuals decided to forego insurance. They would buy it when they became ill, secure in the knowledge that insurers would have to sell it to them.  As a result, Reinhardt observes, enrollment inNew Jersey’s Individual Health Coverage Program plummeted. In 1995 186,130 New Jersey citizens had been enrolled in the program; nine years later 84,968 were covered—and since so many were sick, premiums had spiraled two to three-fold.

New Jersey’s experience illustrates why we cannot insist that insurers sell policies to everyone, young or old, sick or healthy at a reasonable price—unless we also insist that everyone must join the pool by purchasing a policy. Only then will insurance be affordable.

In other words, markets need rules.  But before we can draw up regulations, we have to agree on our goals.  If we, as a nation, believe that health care is not a right, but a consumer good, then a multi-tier system makes sense.  But we should be honest about this and say the poor deserve only so much care—and no more.

Alternatively, if we agree with the Supreme Court of Taiwan, which has ruled that healthcare is a “right”—a pure social good, to be available to all on equal term—then we all must contribute, based on our ability to pay, to a insurance pool that provide equal protection for all citizens.

Until we do this, true health care reform will remain a figment of our collective but deeply divided American imagination.

Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of  “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.

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JamesannerbarrbarDeron S. Recent comment authors
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James
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James

Hi, I live in Australia. Our medical system is a universal health care system whereby everyone is levied 1% of their income per annum. This gives every Australian access to healthcare. Everyone is insured. If an individual chooses to go private, they may pay an insurance company’s fees instead of being levied. With this system everyone is covered, and those who wish to increase their level of care to private or who earn too much to justify 1% levy for cover may do so. This gives the socialists an equitable medical system to be proud of and gives the fascists… Read more »

anne
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anne

I am watching the US healthcare ‘debate’ from London with increasing disbelief. I had an ulcer problem some two years ago and called my doctor. Within ten minutes, I had a home visit (try that in the US!), the ambulance arrived ten minutes after that, and within half an hour of feeling poorly, I was in emergency. Everything proceeded swiftly, efficiently and it cost me nothing. Yes, the NHS is sometimes slow when a condition causes inconvenience but not danger, but no one in this country would want to be without it. The scale of invented facts and false reporting… Read more »

rbar
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rbar

Deron, Even though I am not Peter, let me try to answer you penultimate post because I think it’s an interesting question. I do think that the bottom socioeconomic groups (I say groups because they tend to be divided by ethnicity) have ingrained attitudes that are counterproductive (both to the individual and society). I have little doubt that a subculture in which drug dealing and teen pregnancies are common promotes exactly these types of behavior. I think it will not only take Bill Cosby’s encouragement to break up the patterns of a dysfunctional subculture. (And no, I do not think… Read more »

Deron S.
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Peter – So I guess you’re going to choose not to answer my question. How Democratic of you.

Peter
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Peter

Ah yes Deron, the old bootstraps argument. We’ve discussed it here beofore. It happens but can’t be applied as an economic policy, except as a reason to do nothing. This one’s a favorite of Republicans whose father or grandfather may have pulled himself up by the bootstraps, but they’ve reaped the benefits of the accumulated wealth and connections. It takes a lot of money and effort to change the life attitude a child is born into. Why else would the children of Republicans also be Republicans, no other explaination since the ideology in practice as we’ve seen does not work.… Read more »

Deron S.
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Peter – Are we failing to educate the poor or are they failing to take advantage of the educational resources available to them?
Outstanding point about role models. I don’t think anyone can disagree that we need more of them.

Peter
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Peter

” I have a problem with poor people having 4 babies they can’t afford which creates a vicious cycle that is very difficult to break.” I have a problem with people buying houses they can’t afford and investment bankers buying the bad loans they can’t expect to get repaid on, then expecting the government to bail them out. Anyway that goes with the line, “If you think education is expensive, try ignorance.” as in, if we fail to educate the poor they will just assume there is no way out. No hope = same destructive habits. Much of life is… Read more »

Deron S.
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rbar – I am very intrigued by the comparison of the U.S. system to that of France and Germany. I think it would be very helpful to see a side by side comparison of the three systems using some key indicators of performance, such as preventive care rates, obesity rates, and chronic care rates. There’s no doubt that the per capita cost is much higher in the U.S., but I think we need to dig deeper to find out why. We have to be careful not to automatically assume that it’s all because of structural issues of the system, because… Read more »

rbar
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rbar

Deron, let me get back to you on diagnostic skills and compensation comparisons snice I have first hand knowledge. It is true that US physicians are better compensated than the rest of the world, although the degree varies dep. on country and specialty. (One should not forget either that you cannot simply compare incomes – for instance, I don’t know of any European doctors who think they have to save for their kids’ college education.) I moved to the US for family reasons and curiosity, not for money. I can tell you that most bright physicians from the EU don’t… Read more »

Deron S.
Guest

Peter – Great stuff! It’s coming across loud and clear that you’re not happy with our current administration. I lean to the right on a lot of issues, but I am definitely not in the running to be President of the George W. Fan Club. I think you would have a lot of problems finding support for your point about U.S. physicians having poor diagnosis skills. We’ve attracted some of the best physicians in the world thanks to the much higher income potential for physicians in the U.S. (2-3 times that of physicians in Canada, Germany and France) If your… Read more »

Peter
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Peter

Deron S., “How do we reduce physicians’ fear so we can cut back on defensive medicine?” I’m nut sure how much “fear” is involved over just plain poor diagnosis skills or pumping the system for docs in hospitals. When an individual’s healthcare costs are covered by a single-pay system then at least that takes that reason to sue off the table. As for out of control lawyers, you’ll have to take that up with the lawyers guild. Barry Carol has proposed health courts. “How do we address the fact that 40% of all births in the U.S. are financed by… Read more »

rbar
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rbar

Encouraged by Deron’s post, I will keep it simple. Among major industrialized nations, the US health care “system” is clearly the one being most capitalistic. I know from my own working experience that the US system can deliver good to excellent peek performances, but overall performs rather poorly, with lots of undersupply and very little bang for the buck. And this is reconfirmed by multiple studies/rankings. I have gained first hand health care experience in Germany and France. These symptoms easily outperform the US system, depending on most people’s expectations (see below). Both systems are heavily government regulated, although health… Read more »

Peter
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Peter

Well Ray, the fastest way to government run single-pay is for everyone to pay directly – as our esteemed leader who brought us this mess said; “Bring it on.” There won’t be any innovation in lower cost solutions until there is enforced health budgets – brought to you by – the government. But until government is not simply an extension of Corporate America we won’t get any solution for consumers. But this is all moot now since as taxpayers we will have to bail out dishonest rich guys who created fraudulent mortgage paper, and instead of our money going to… Read more »

Deron S.
Guest

Ray/Peter/rbar: You are all clearly very intelligent, but your conversation, like most healthcare blog conversations, is heavy on theory and ideology and light on practicality. I would love to see tremendous resources like the three of you working to hammer out real, workable solutions. How do we reduce physicians’ fear so we can cut back on defensive medicine? How do we address the fact that 40% of all births in the U.S. are financed by Medicaid? How do we cut down on our teen pregnancy rate which is the highest in the world (by far)? How do we address the… Read more »

Ray
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Ray

Peter, thanks for the article. There is competition in healthcare, but competition isn’t a good in and of itself. What drives innovation is the right kind of competition, at the right place and over the right kind of services. Competition has to be aimed at the consumer…but that doesn’t happen unless the consumer shops around, and pays with his own money. So long as we have medicare, medicaid, and employer based health insurance, we will have the wrong kind of competition. And the real motivating force in markets is entrepreneurship, not competition. There are excessive barriers to medical entrepreneurship in… Read more »