Tear it down, start over.
That’s the recommendation from economists Liran Einav of Stanford and Amy Finkelstein of MIT for how to fix the $4 trillion apparatus that is U.S. health care — and it’s detailed in their new book, We've Got You Covered: Rebooting American Health Care (Portfolio, 2023). Having researched the patchwork of U.S. health care policies for nearly 20 years, Einav and Finkelstein declare it’s time to stop putting Band-Aids on a system they diagnose as “incoherent, uncoordinated, inefficient, and unplanned.” Their two-part solution: free, automatic, and basic health care for every American together with the option to buy supplemental insurance. If this sounds like universal coverage, it is. But as Einav and Finkelstein explain, this isn’t about politics: The U.S. has unofficially enacted universal coverage already — it’s just botched the implementation of it.
The book marks the second from Einav and Finkelstein and comes less than a year after their first, Risky Business: Why Insurance Markets Fail and What to Do About It, was released (written with Ray Fisman of Boston University and named to two separate Financial Times lists of the best books to read). Einav, a professor of economics in the School of Humanities and Sciences and the Tad and Dianne Taube Healthcare Fellow at the Stanford Institute for Economic Policy Research (SIEPR), recently spoke to SIEPR about We’ve Got You Covered and what Finkelstein and he hope it inspires.
You’ve written We’ve Got You Covered in the same Freakonomics-style as your first book — complete with personal stories and cultural references ranging from Stephen Colbert and Walter Cronkite to “The West Wing.” Who is your intended audience?
The general public mostly. People know what kind of insurance they have, but they don’t understand that there are so many different parts to the U.S. health care system. They also know the jargon — “Medicare for all,” for example — but they don’t always know what it actually means.
Our hope is that we can educate people — at a very blue-sky, high level and without boring them to death — about all the different pieces and how they fit together and how they don’t fit together.
You make a very important point early on in the book about how fragile access to health care is for most Americans.
The problem confronting U.S. health policy isn’t just about the 12 percent of Americans under the age of 65 who are uninsured. It’s much bigger and deeper than that. There are also many insured people who are facing an ongoing risk of losing their insurance. In writing the book, we wanted to find out how many people are potentially uninsured. Our research shows that one in four Americans under the age of 65 will be uninsured at some point during a two-year period. That is more than twice the number of people who are uninsured in any given month.
The book makes a very compelling case for why guaranteed access to health care is critical. In fact, you say the United States has it already.
The U.S. has, since the 18th century, operated under an unwritten social contract to provide access to medical care for those who are ill and can’t provide it for themselves. American leaders from across the political spectrum, liberal and conservative, have embraced this. The problem is that we have never had a coherent approach to universal health insurance and so the history of health policy has resembled, as we say in the book, a game of Whac-a-Mole.
You explain in the book that it’s time to formalize what has long existed. What are you two proposing?
Our proposal has two parts: The first would guarantee every American a basic level of medical care that is automatic and free — meaning no one pays premiums or anything out of their own pockets.
To economists, of course, removing cost-sharing is heresy: Demand is always lower when people have to pay for a good or service. But we realized that, when it comes to health care, making people pay even $5 for a medical visit means some would go without and others would take on debt. We know, based on the social contract that already exists, that policymakers would then create exemptions and then the whole system would become costly and messy all over again.
The second part, and we feel very strongly about this, is that people must have the option to buy supplemental coverage on top of — but not instead of — basic coverage.
That’s the entire blueprint. The rest, as we say in the book, is just commentary.
Can you elaborate on what “basic” health care means?
By basic, we mean very basic: primary and preventive care, essential medical care for the critically ill, specialist care, outpatient care, emergency room visits, and hospital care. There is a large gray area of medical care that would be excluded. But because our goal with this book is to lay out general conceptual guidelines, we don’t get into the specific services that we think should be provided for under basic coverage. Practically speaking, even if we did compile such a list, it would become outdated as new treatments and medical technologies emerge.
Think of basic care as similar to low-cost airlines in Europe. The planes get you from Point A to Point B. The experience isn’t great, but you get to where you need to go without crashing. So, yes, wait times would get longer for patients, there would be less choice of doctors, and hospitals would be less comfortable.
How would basic care be paid for?
Out of taxpayers’ pockets. It may come as a surprise that taxpayer-financed health-spending in the U.S. is already large enough to pay for universal basic coverage. Taxes need not rise, but they might rise depending on how much basic coverage is offered.
One point you make in the book is that your blueprint, far from taking political sides, has something “to upset everyone.” Some might say the supplemental insurance option is unfair given that not everyone will be able to afford it.
Amy and I would disagree. In simple economic terms, think of basic health care as a “special” good — distinct from other goods like cars, homes, or food. Once basic health care is covered for everyone, additional coverage is, by design, for non-essential elements of health care. These non-essential elements become like any other standard good. So why shouldn’t people be allowed to buy medical care that is no longer about basic health and survival just like they can buy a nicer car, a nicer home, or better food?
Ultimately, what do you hope this book inspires?
We wrote this book because, after studying U.S. health policies for almost two decades, Amy and I realized that we have something to say about the big picture. And because we are outside of the political world, we think we have a fresh perspective and can maybe move the conversation in the right direction.