Our Dishonest Health Care System
Professor Uwe Reinhardt
Professor of Political Economy at Princeton University and expert on Health Care Issues

"I sincerely believe that ours is the most dishonest health system in the world."

The dishonesty resides on at least two facets of the system.

FIRST, we flatter ourselves with the pretense that our health system treats all people equally which, presumably, means that persons afflicted with the same illness will have roughly the same health-care experience. Yet thepayment system virtually screams at physicians, other health professionals and executives of health facilities to let the health-care experience of Americans vary by income class. I think it is dishonest to teach physiciansand other health professionals that all patients should be treatedequally--and to hold them to that ethical precept in the media witherroneous allusions to the Hippocratic Oath-- and then to confront these professionals with a payment system that signals vastly different social valuations of these professionals' work--valuations that make the social value of that work a function of the recipient's wealth or insurance status.

To illustrate, American legislators who budget $10 per well baby visit under Medicaid, but are perfectly willing to pay pediatricians $50 or more to see their own children, clearly signal to physicians that, in the legislators' view, the social value of treating poor, inner city children on Medicaid is one fifth of the social value of treating children of the legislators' own social class. Could they possibly not realize it? Given that signaling, it is no surprise that many American physicians get the clue and refuse to treat Medicaid patients at all. As an economist, I can sympathize with them.

Just how dishonest our system is can be inferred from the fact that insured middle class Americans get very upset over the (presumably novel) prospect of boutique medicine for the very well to do, while for almost half a century they have accepted with equanimity the fact that, relative to Americans covered by Medicaid (and the uninsured), the regular commercial insurance and Medicare enjoyed by the middle class have always been a sort of boutique medicine, providing superior access to the nation's health-care resources. The system is so inherently dishonest that normal Americans don't even seem to realize that boutique medicine is not a new phenomenon, but as American as apple pie.

SECOND, our health system is inherently dishonest because it steadfastly refuses to convey ex ante to Americans who must pick up part or all of the tab for their health care the prices they will be charged ex post. In fact, so unwieldy and opaque is the system that most prices in our health system are a well kept, proprietary secrets. Even Medicare's fee schedule is not routinely and easily made available to patients. (The AMA was granted by Reagan proprietary rights over the nomenclature used in the Medicare fee schedule--the CPT-4 which was developed and has been maintained by the AMA. Ideally, Medicare should have developed its own nomenclature and made it a commonly owned good).

People who argue that patients can shop around for cost effective health care in this market either wear blinders or consciously and quite cynically practice a cruel joke on Americans (take your pick). The argument that transparency of prices would come automatically with a free market in health care can be discounted. After all, we have heard talk of "shopping around for cost effective health care" ever since Ronald Reagan proclaimed the era of "pro-competition" twenty years ago. Although Americans often do share in the cost of health care, the system's prices have remained opaque. If in two decades the market has kept prices hidden, why would we think it will make them transparent in the coming decade?

I tend to liken our "market" for health care to a situation in which employers wish to see their employees come to work properly dressed and, therefore, agree to pay 80% of the "reasonable cost" of their employees' attire. Imagine now an employee going into a shirt shop in which all shirts are displayed in white boxes, each properly labeled "shirt." There may be information on the outside of the box on the color of the shirt (the medical specialty of the physician), but not on its size (the physician's treatment intensity or "practice style"), on its material (the quality of care), or on its price. The employee, however, is free to "shop" around for a shirt by picking one, perhaps with the help of the shop keeper, who may suggest a particular box (treatment). A month later the employee gets an almost incomprehensible bill whose only comprehensible line, framed in red, reads: "Pay this amount: $ 56.89." The employer paid the rest of whatever the store charged for the shirt. The shirt may or may not have fit the employee.

That, in my view, fairly describes the U.S. health care retail "market" as it exists today and as it will exist in the coming decade. To pretend that this is a market that even vaguely resembles the model trotted out in economics textbooks is, in my view, inherently dishonest. It is also cruel.

Let me emphasize where the dishonesty resides. It resides not in the idea that health care should be rationed by income class. That is an ideology people are entitled to hold, and one that deserves respect (if not concurrence), AS LONG AS ITS PROPONENTS ARE HONEST ABOUT IT. The dishonesty lies (a) in not being forthright on the advocacy of rationing health care by income class and (b) in the pretense that the retail "market" for health care is a properly functioning market that will allow individuals to shop around for cost-effective care.