Avik Roy is the co-founder and president of the Foundation for Research on Equal Opportunity (FREEOP). Avik joins Policy@McCombs to make the conservative case for universal health insurance.
- Avik RoyPresident, Foundation for Research on Equal Opportunity
Welcome to the Policy of McCombs podcast, a data driven conversation on the economic
issues up today in this series. We invite guests into our studio to provide a highlight
of their work presented during a visit to the University of Texas at Austin Policy.
Emma Combs is produced by the Center for Enterprise and Policy Analytics at the McCombs School of Business.
I am your co-host, Carlos Carvalho, with my colleague Mario Villarreal.
Our guest today is over Roy overcash, a scientist, investment analyst, journalist and policy
advisor. He co-founded the Foundation for Research on Equal Opportunity, a nonpartisan think tank
focusing on expanding economic opportunities for those with these have over has been policy adviser
to three Republican Party presidential candidates and is also the policy editor for Forbes magazine over.
Welcome to Policy McCombs. It’s great to be here. I think this is the first podcast I’ve ever recorded in
the presence of Steinway Piano. Oh, yes, we are in very fancy studio
here at u._t. So let’s start by telling us. Tell us a little bit about
free Opta. The foundation you started. Yeah. Thanks, Carlos. Good to be with you. So
that free up or the Foundation for Research on Equal Opportunities, a new think tank. We found that it in 2016
is about two and a half years old and we founded it because we came away
from the 2016 election and a lot of things that have been building up in
our politics leading up to 2016. Concluding that our politics were broken,
and I don’t just mean that in the way that a lot of us mean it. You know, there’s
a lot of yelling on cable news. We have the sense that that we’re hopelessly divided American.
If you watch TV a lot, you you will be confused. You could conclude fairly that we’re hopelessly
divided. But the thing is, I think what a lot of people out there in the country and in places like
Austin realize is that we’re not actually hopelessly divided, that if you look at public opinion
surveys, if you look at political signs, if you talk to people, your neighbors, your family,
your friends, your community, you realize that we’re actually almost entirely united
on what America ought to stand for. And that is to say about 80 percent of Americas,
if you look at polls, agree with the principle that America should be a place
where there’s equal opportunity, not necessarily equal outcomes. You can’t guarantee equal outcomes.
But we should be a country in which every American, regardless of where whether you came, where you came from,
where your parents came from, what side of the tracks you grew up on, how much
money your parents make, that you should have a fair shot at success in America, that those things
should not be a barrier to you achieving your aspirations in your dreams,
and that 80 percent may have different views as to exactly how you define equal opportunity or what policies
you might need to implement in order to achieve equal opportunity. But if we’re starting from the same principle,
that’s 80 percent of the battle. I think, you know, again, those the conventional wisdom that we’re
hopelessly divided is that we can’t agree on the basic principles and therefore we’ll never agree on
policies and we won’t agree on reforms. But have 80 percent of Americans agree on the principle of equal
opportunity, then what we’re really debating is evidence. We’re debating the evidence as to whether
certain policies work better than others. And that is the perfect place for a think
tank to set itself up, to set up shop, to say, you know what? We don’t care if you’re a Democrat or Republican.
If you believe that every American ought to have a fair shot at success, we’re going to try to do research
on developing a set of policies that that both Republicans and
Democrats can rally around because they both believe in equal opportunity. And
and that’s why we focus on, in particular, the way in which free enterprise and
technological innovation and individual individual initiative lead to equal opportunity,
because that to us is the true bipartisan consensus that the
you get the Republicans on free enterprise and the Democrats on social mobility. And that’s how you get
get 60 votes for them and a lot of think tanks there. The while
they are technically 5 or 1, see through your organizations that are nonpartizan de facto, they
end up being partisan and they rely on and wait for either the Democrats or the Republicans to have complete
control of the government before they can actually hope that any of their ideas make it into legislation.
Our approach is the opposite. We’re actually trying to setup ideas and reforms and policies
that can work and be enacted in any government, whether it’s Democrat or Republican
or where it’s split like it is today. So that’s what’s been one of the exciting things about working at FROMTHOSE. When
we started it, this was a theory we had this theory that there was this massive gap we could
call in the middle. But we’re talking about 80 percent between the between the 10 yard lines on the football
field that others weren’t as as as as occupying with as much alacrity.
And two and half year, two and half years later, all I can say is that we’re we’re busier
than ever that that everything we we thought and hoped for about our politics, as has
been reflected in how busy we are and how much traction our ideas are getting into today.
Join us to talk about, I guess, an example of of this. Does being in the
eight yards, eight yards between the middle of the field. You’re joining us to talk about the conservative
case for universal health insurance. So so two sides of the discussion
in health care. So to make that case. Yeah. In fact, it’s
apropos what we’re just talking about in that it was my experience writing about and studying
health care policy that led me to have this broader view of American politics.
That is to say, our health care system is so messed up that conservatives
and progressives can win at the same time with the right reforms. You can have a health
care system in America in which everyone has health insurance, something that progressives traditionally
care about a lot, but also a system that’s more fiscally sustainable, that has
more choice and less heavy handed intrusion in order to guarantee that
basic financial security for every American. So there are things that we can do to make the health care system more
conservative in ways that also achieve outcomes that progressives care about. And as
I mentioned, that’s that’s that’s not just true in health care. That’s true in housing policy. That’s true in education
that. True, when it comes to the cost of living, that is true when it comes to economic growth, there are lots of
areas where both progressives and and conservatives can win. But in health care specifically,
it’s especially true if you look around the world. I think something we actually don’t do enough in our health
care debates. You know, you hear people say, well, the one thing you hear people say is, well, we spend more than every other country.
And we our health care outcomes are no different than other countries that you hear. But but if you’d just
if you go beyond that superficial description and really dig into how it
is that other countries have achieved universal coverage and how it is they’ve
achieved better outcomes than the United States. There’s actually a really broad diversity
of ways in which other countries have achieved that. It’s not just single payer. So there’s
there’s actually this kind of stereotype on both the right and the left that the only way to achieve universal coverage
is through single payer healthcare in which the government is the only insurance company. But that’s not actually true.
There are countries like Switzerland that have universal private health insurance systems
where in fact there is no public option or any government run health insurer. Then there are a lot
of countries, for example, like Germany, which are a hybrid, where there are public insurers and their private insurers
that work in concert and compete against each other in the open market. So there are a lot of
different ways to achieve universal coverage. And as a part of what we’ve been doing,
it free up is to try to bring some of those more market based models into focus in the United States
policy discussion. Let’s try to clarify the role of markets where where would the market forces
be playing a role in in the case that you’re putting forward here?
Well, let’s let’s step back a little bit again philosophically. So the there are I’d say there
are two coherent, economically coherent ways to run a health care system.
One is to have a single payer system in which the government is subsidizing health insurance for everyone.
And in order to control the costs, if you make something free and you don’t have cost
controls and it’ll be like me in an open bar. People will consume the most expensive care at wasteful
rates and and that will lead to a lot of overspending. So single payer countries deal with
this by regulating access to costly services and regulating the price
of health care services. So price controls, rationing are really a central features of a true single
payer system because that’s how you keep the costs down and that works. So contrary to what a lot
of conservatives believe, single payer systems like Canada, for example, or the
U.K. do actually spend a lot less than the U.S. and have universal
health insurance. There are a lot of drawbacks to those kind of system, but they do they are more fiscally rational
than the U.S., where we actually subsidize health insurance for almost everybody. Not everybody would. Almost everybody
let’s say 90 percent of the country has subsidized health insurance in one form or another. But we
have no cost controls. And not only no cost controls, we actually reward
the suppliers of health care services and products if they charge higher prices. We
don’t reward them for competing and charging lower price. So we have an incredibly perverted system in the U.S.
The single payer system can work. Now, the other the flip side of that is if you had a true market system,
what would that look like in a true market system? It would look more like the
countries like Switzerland and Singapore, where every individual in the case
of Switzerland in particular chooses their own insurance plan. So in America, most
of us, half of us, more than half of Americans get their insurance through their employer. And in that context,
you’re not choosing your plan. It’s chosen for you by some bureaucrat at the company you work for, and
it’s taken out. The premiums are taken out of your paycheck pretax. So you never actually see how
much is being taken out of your paycheck to spend it. That’s not a market based system. Again, it’s like me at the open
bar where I don’t know what, especially if it’s at an in-law’s wedding. I’m going over there and I’m getting the fanciest bourbon I
can find on. And I don’t care what it costs because they could charge 200 bucks for the bourbon is all I care cause cause
I’m not paying for it. Right. And our health care system is basically a three trillion dollar open bar. So in a true market,
what we would do is we would say to people, buy your own insurance and we’ll have a safety net in which
if you’re really poor or really sick or really vulnerable, we’ll subsidize the cost of your insurance
up to a point. But we’ll also reward you if you shop intelligently and find a plan
that is doing the best job of providing that range of services at the lowest possible price. And if you
do that, then you can keep those savings yourself. Save them for in a health savings account
or use them for other non health care spending. So if you do that, broadly speaking, the way
to think about it is to move our system to a more market based system, because our system is not
a market based system. You have to do two things. One, more people have to buy
their own insurance because today of the 90 percent of Americans who have health insurance,
about 90 percent of those don’t shop for their own insurance. They get it handed to them. Either
by their employer or the government. So the more you move to a system in which people are shopping for their own insurance,
the more you have a market that’s peace number one. And peace number two, which flows directly from
that, is if people are shopping for their own insurance, you’re you’re going to organically
move more to a system in which only the costliest things are insured.
So if you think about insurance today, compare health insurance to auto insurance. Right. When we buy car
insurance, the car insurance doesn’t pay for our gasoline at the Exxon
station or a change for oil change. Right. The insurance pays what your car
gets totaled or your car gets stolen. So that thirty thousand bucks you’d have to spend replacing
your car that’s covered by insurance. That’s how health insurance should
work to and did work until we started subsidizing it and all the nontransparent ways
we do. And if you had more of a market based system in which you as a patient control
the dollars that were being spent on insurance on your behalf. If you’re spending those yourself, you know what you’re gonna do?
You’re gonna move. Most people are gonna move to a model. It’s more like car insurance where, yes, I
want to make sure if I’m 26 years old or 35 years old, I’m fine. Probably if I’m in good health, then
I’m protected. If I get hit by a bus or I’ll have a stroke or I get cancer. But from my everyday expenses,
all that money I’m not giving to the insurance company, I can save and then spend on other things.
And so naturally, if people are shopping for their own insurance in a market, in an individual market, not
an employer based system or a government based system, then people will naturally
say, you know what, the things I really want to be protected against are these high costs. But for everyday
routine costs, I’m more comfortable paying for that directly. And so
so that that’s a second step. So that’s the first step is buy insurance yourself because then
you get the savings if you if insurance insurers are competing on cost. And then the second
bit of it is the more you’re buying insurance on your own. The more likely you’re incentivized
to insure a fewer things. And therefore more things are then paid for directly
by you rather than by a third party. And that’s once you get to that
point, then health care really looks like a true market. Think about it. A great example. So you hear people say,
well, if we want to have a market in health insurance or health care, we’ve got to have price transparency.
We’ve got to require that hospitals and doctors post the prices of all their services.
Well, you know, it’s funny. Very few people stop to ask why is it that we don’t have to the law forcing BestBuy
to post their prices when you go to shop for a TV at Best Buy? No. There’s no law needed because
Best Buy knows that if you want to buy a TV, you’re not going to buy the TV if you don’t know how much it costs.
Right. So why does that system work? Because you, the consumer, are controlling
the dollars. And in health care, if the consumer is controlling the dollars. Price
transparency will naturally flow from that because the doctors are not going to get your business
unless you know ahead of time how much is coming out of your pocket to pay for that service. Now, again,
there’s some subtleties and some asterisks that if you want to we can get into with all this, because health care has some quirks.
But that’s the general principle. More people, if not everyone, shopping for their own health insurance
and then more and more things, more and more ways. Because of that, we move to a rational
insurance model where health insurance looks more like car insurance. That sounds great. But I think that the piece
that’s missing still and I am I understand is a how do we make it universal? What is that? So that’s the word,
the role of the government to come in and subsidize the purchase. Is that correct assumption? Yeah. So one of
the things that’s really amazing about American health care and this is one of the key
slides that I’ll present in the talk that that as accompanying this podcast at the University of Texas,
which which everyone can watch it later on in our website, is that the
the per capita public spend on health care in America is higher than almost
every other country in the world, despite the fact that we have 25, 30 million people uninsured.
Our health care system is so inefficient that we spend more on government spending than almost
every other country in the world. And we still have so many uninsured people. Why is that? There are two key reasons
why we spend all this money, and yet we still have a problem with people struggling to afford health insurance.
The first is what we’ve talked about already to a degree, which is that health care is so expensive in America. The unit price
of a day in the hospital or a prescription drug or a lab test is two to three
to five to 10x higher in the U.S. and in other countries. So we have to spend more subsidizing health
insurance and health care because the unit prices of everything are so much higher. That’s problem number one.
But problem number two, which is just as significant, if not more so.
Is that we subsidize almost everybody’s health insurance. So wealthy people get a massive
subsidy to buy healthy, generous health and insurance benefits in the U.S., the
upper middle class people making two hundred three hundred thousand dollars a year get generous subsidies in the employer
based system. Tax breaks to buy health insurance. So what’s the biggest difference between a country
like Switzerland, say, which has a universal market-based system in America? The biggest
difference is that in Switzerland, the government is only subsidizing the cost of health insurance
for the bottom 30 percent of the population in wealth or health status.
Whereas in America, again, we’re actually we’re subsidizing coverage generously for very, very poor people,
for the upper middle class and above. And it’s sort of the middle class and the lower middle class or people in that
range of incomes who are the most the least subsidized relative to their costs in
income and health status in America. So we have this upside down system where we over subsidized coverage
for the wealthy and under subsidize it for the working poor and the lower middle class. So
all you have to do, if I can put it put it very simplistically, is to actually
end and curtail subsidies for the wealthy and rectify some of the inequities
in how we subsidize coverage for the working poor. And you can spend a lot less money than we spend
now and cover everybody so you can have far less spending and universal
coverage. If you if you move this, if you rationalize away, we subsidize coverage. And then if you tackle the high cost
of care with things we can we can talk about for ages, for hours,
you can actually make the cost of health insurance overall less expensive, which also reduces the amount
of spending that covering the uninsured takes. All of you. You
discussed some of the drawbacks of the single payer system and you just elaborate
a little bit on those. Now how about your proposal? Some argue
that a consumer driven health care system may be problematic because
after all, consumers do not have all the necessary information to make educated choices about
things related to health care medicine. How would you respond to that criticism? Or do you
see any order drawbacks on your proposal? Do you know what LTE stands for? No, but
I will guess that you are going to tell me. No, I’m not going to tell. I’m really going to leave it a secret for for
you and our audience to look up. All right. But LTE is the protocol in which
most cell phones in United States run on. Oh, yeah, right.
Now, you didn’t know what l.T stands for, and again, we’re gonna keep it a secret so people gonna look it up later.
But you have a cell phone that uses LTE. Yeah. Just look at it. Not right now. And you’re you’re right. He says l.T.
Right. So, you know, isn’t it amazing that you’re able to buy a cell phone and use it every day and
check your email on it and not actually know how data is transmitted over the network and
gets to Carlos over here so you can tell him where to have dinner tonight. It’s amazing, right?
There are a lot of things about our world that we don’t understand how they work, but we use them every
day. So it’s not actually necessary to know the intricacies
of how the met the practice of medicine happens or or the latest
in medical science or the way the details, the intricacies of how health economics works to
have to have a user friendly system in which health insurance and the basic
utility of health insurance and health care is usable for you. So so
that’s one that’s one element of this whole thing about, you know, people will say, well, you know, if consumers
don’t really understand health care, therefore there’s an asymmetry of information and therefore,
they should never be allowed to actually have any choices. Well, this is true of airlines, right? Like, I don’t know how
to fly a plane. I’m trusting that the you know, the mechanics fix that plane, that it works and that the pilot
knows how to fly it. And, yes, there are regulations that help govern that. But I still have an
option to fly on American Airlines or United Airlines or Delta or Allegiant or Southwest or whatever
I want to do. Right. So similarly, in health care, the asymmetry
of information is not unique to health care. So that, as you know and you’re alluding to, there was a Stanford economist
or is a Stanford economist named kenora Canâ€t, who a little over 50 years ago made this
argument that, well, there’s this asymmetry of information and health care and therefore we should
remove people even more from the choices that they’re making. And that makes absolutely
no sense, because actually everything that we do, every choice we make, every day, every product or
service that we consume contains some asymmetry of information. In fact, the original
legal structure of asymmetry information or that description of it was in the real estate.
The ancient Latin phrase caveat emptor comes from the idea that if I sell you
a house, I know a lot more about whether that house is in good repair than you do. And yes, we try to
address that through having an inspection in this and that. But there still may be something about that house that I’ve hidden
from you that you know, you’re not going to know about. That’s why that we say let the buyer beware. Right. It’s a buyer’s
responsibility. No. There’s an asymmetry of information there. There’s an asymmetry of information with a car mechanic. You
take your car to the mechanic and, you know, you’re trusting that he’s telling you what’s actually wrong with your car instead of selling
you an extra set of services. You don’t really need. So we but we don’t yet have a single payer system
for car mechanics. Maybe we ought to know where we really should have a single payer system is for league for lawyers,
because if there’s anything I don’t understand, it’s the law. And so I really do understand, given the asymmetry of
information with lawyers, that we don’t have a single payer system for law. But but by one, I don’t wanna get too
far afield here. So so so what is it? But this is but this is an important part
of the debate, right. So that the people who are more market oriented philosophically and comes to health care, the market based advocates
like myself have much more confidence in the consumer to make choices that maybe
people on the other side of this debate don’t. But that isn’t to say that we shouldn’t
be mindful of asymmetry of information. We should do it. We can do to solve it. Technology
allows us to do that more and more every day. Right. So think about the fact that, you know, until
about 15 years ago, you couldn’t go online and look up diseases right the
way you can. Now with Web M.D. era, an infinite number of Web sites where, OK, I’ve got this weird kind of
red scratchy thing on my tummy and I don’t know what it is. And do I have eczema or not? I don’t know. I’m gonna
look it up and see and see what what I should do about it. It’s like an instant second opinion. Any physician who
you talk to, if you really want to, you can, of course, deliver, delve into the medical literature and find out what the latest
treatments are. So all these opportunities are available and more available every day, particularly
as artificial intelligence and machine learning allow those kinds of technologies
to be more accessible to the everyday person. Think about this. There are apps. They’re not legal in the
U.S. because of our wonderful regulatory system, but in other countries, are there smartphone apps
that allow you to take a photograph on your iPhone camera or smartphone camera of a little
splotch you have on your skin? And the the camera sends the image
to a to a cloud based artificial intelligence
program that analyzes whether that lesion could be melanoma or whether it’s
harmless. And statistically speaking, that system is more accurate
than your local dermatologist. Now, why do we have that system in the U.S.? Again, it’s because the FDA
has been very cautious in entrusting patients with their smartphones to make
these kinds of diagnoses themselves. Those, but more and more, the asymmetry of information
is going to go in the other direction where the patient actually has more accurate knowledge of his own medical
condition than does his primary care physician, because the particuarly for rare diseases,
right. Because if you’ve got a rare disease and your primary care physician doesn’t see that often or ever, you’re gonna be
the one who’s done all the research on that disease. Doctor’s not going have done it right. So you’re
gonna be able to go that doctors say, hey, I saw that there’s this new drug that just came out or there’s a drug in Phase 3 clinical
trials. What do you think about the doctors not going to know. He’s going to have to kind of give you some, you know, kind
of superficial answer when he goes back to his computer and looks it up. So all this to say that asymmetry of
information is it goes in two directions in health care and we need to create
more space for four patients and entrepreneurs to find
those opportunities where the patient actually has more useful information
than the physician does. We shouldn’t assume that the physician has this encyclopedia in his head
with every piece of medical information in it. And so if anything, technology is going to move us more
in that direction are we ought allow that to happen. That’s a key part of where market based healthcare can be
better than single based single payer health care because it creates more opportunities for
consumers and entrepreneurs and patients to think up ways to solve problems. Like the smartphone thing I
was mentioning with the melanoma’s that a single payer system would never consider or invent.
So let me let me turn to two winners and losers here. Right. If you’re able to get a proposal, all your ideas
through and, you know, into law, it sounds to me that at least in one component, when you mentioned that
currently we have a system that for a lot of services where two times three times up to 10 times more expensive then
than other rich countries in the world who pay for it, fought for it for the same service
somebody is going to lose if all of a sudden there’s a more competitive market that will bring those margins down.
Right. So who were the primary losers and winners of of of basically
what are the tradeoffs that we’re facing here? And who are the people that might resist this? Well, there’s basically
two. If you’ve really had a market based system in which there was real competition for health care
services and fewer opportunities from monopolies and rent seeking,
who would? Let’s talk about who would win first. The people would win. No. Above all else would be the patient,
right. The patient would have more choices. The patient would be spending less of his or her income
on health care and less of his or her income on health insurance. So the patient would have a much greater
amount of disposable income, which not only benefits that patient in terms of having money to
spend or save on other things. But if you think about it as a Keynesian stimulus, right, like think of
all the extra money that would flow to the rest of the economy, because instead of diverting all your money to
health insurance and health care, you’re spending that on a vacation or a new car or a new
TV, or maybe you’re getting a bigger apartment or you’re getting a new stove or you’re just able to
afford the everyday cost of living if you’re getting just to getting by now. So there’s an
enormous economic downstream stimulus that would lead to a lot of job growth, a lot of economic growth, not merely
the fact that that you would have this this this increased disposable income at the
patient or household level. So that but but that’s like big winner number one.
Big winner number two is the taxpayer, because the taxpayer
would have less pressure in terms of higher and higher tax bills if we’re spending less as a government
or at a federal, state and local level, governments plural on health care. So that
not only means less of your tax dollars going to the government because we’re spending
less money in health care, which is the biggest driver of our deficits and debt. But think about all the
other public needs, whether we’re where we’re starving, the government of the resource needs to
deal with other public challenges, whether it’s highways or schools or firemen
or anything else that you think is a is an important public priority that weren’t where we’re not spending money because
the health care system is squeezing all that out. So the so the so there’s not only on the taxpayer
side, but also for other government priorities. The military is another great example is where the military budget is getting
squeezed as a result of health care spending there. Whatever element of government spending
you care about is going to be better off in a system in which we’re spending less on health care than we do today. So
that that’s the kind of category number two of winners. Category number three of winners is people
who are savers, people who’ve put away a little bit of money every year, every month, every paycheck
throughout their lives and want that money to go farther in life, because the bigger our debts
and deficits get, what that does is that decreases the value of the U.S. dollar. And
as the U.S. dollar declines relative to the value of other currencies out there, then all that
money that you saved, it also decreases in value in terms of its purchasing power, particularly of
goods that are manufactured elsewhere around the world. As you know, as we know, a lot of what we buy
is is made around the world. So. So those are the. Three categories of big winners,
I’d say extra. There’s a fourth category two entrepreneurs. The people who the innovators will be
unleashed in a system where they have an incentive to to provide health care service that consumers
actually want and drive higher quality and lower costs
for the consumer using technology. The people who are able to do that, they’re going to be
billionaires because they’re going to find ways to save everyday consumers and patients
money in ways that enrich consumers and enrich them, too, which is how capitals is supposed to work. So those are four
categories of winners. So let’s not forget the currently uninsured. Oh, yeah, absolutely. So, yeah, I
count them in the patient model, right. The people who are going to have lower health care expenditures and therefore have
more are going to be able to afford their health care services. It’s not the uninsured is a big part
of the problem. But we should not forget the people who are just above being uninsured. Right. The people
who are just getting by, who are who could be uninsured tomorrow if health care costs keep going
up and up and up and will be, in fact. So it’s not just the 25 million or uninsured. It’s I think
in the next 50 million or so of Americans, if not 100 million or so of Americans for whom
health care costs are putting a lot of pressure on their disposable income. So those are four categories of winners.
And then who are the losers? The losers are in part
very the top seven executives at your at every hospital system in the country, because
right now those people are making enormous amounts of money, mainly because their monopoly powers that
can that that can overcharge patients and that money flows somewhere, particularly in nonprofit hospitals.
Three quarters of American hospitals are non-profits. They don’t they don’t give that that money to shareholders. They
give that money to themselves. And so senior management hospitals, that would be one
area, big losers, senior management and incumbent pharmaceutical and biotech companies similarly
won’t be as as wealthy as they are today. And there are a lot of middlemen who
benefit from the system as it is where there are people who you don’t see. You know, you know, they aren’t they aren’t the public
face of the system, but make a lot of money because there’s so much money sloshing around in the health care system
and so much regulation that the people who are administering the interstices
of that system collect a lot of dough. So there there will be there will certainly be compression
in in what we might call the income inequality of the health care system or the wealth inequality, the health
care system, where if you’re at the very top of an established player in the health care system, particularly hospitals
and drug companies, you’re making enormous amounts of money now because
because of the prices you can charge. And as prices go down, those individuals may make less,
but every other American will make more. Now, this is just a very interesting political
economy issue, which is the winners you described, 10 for most
part being not that well organized, disperse
their abilities to actually make a compelling case collectively are not the
same that these big potential losers. Right. That they are lobbying for
keeping the system as it is that have many resources, they have a lot of stake. So how do you see this
unfolding? How do you see the political economy, the political process of the health care reform unfolding
or not in the near future, given this potential tension? Let me add to that. You
have been working a couple bills, right? There are in Congress right now. So tell us a little bit about
that as well. In the same context. Yeah, those are definitely related questions. So it’s it’s a
general problem of political economy that policies in which the losers
are concentrated and the winners are diffuse are very difficult to enact.
A classic example, this is loopholes in the tax code, right, where we want to clean out the tax code, make it more fair.
But the people who benefit from this particular obscure loophole fight like hell to
keep it in there. And they often more often than not, when. And our health care system
is certainly a reflection of similar principles in that the beneficiaries of the high
unit prices in our health care system organize to defend
that that entrenched system, the incumbents, rather than to protect
the consumer. The the difference in health care is that
health care spending and the cost of health care is such a large percentage of not only our
economy, but of the average American’s income that the the
the losers are not. While they are diffuse in the sense that there are more of them for each
individual American. The cost of health care is a deeply personal and stressful
issue. There is the risk of losing one’s health insurance in particular, and therefore the fear of going
bankrupt due to medical bills is pervasive. And even for those who have insurance,
you know who. Let’s say you’re making thousand a year and you have a $6000 deductible and
you use it because you. Tweaked your knee or something. You know, that’s a big chunk of your
income that’s just gone, even though you theoretically have insurance. You like why would I have insurance for
if my deductible $6000 so. And because it’s not like the insurance is cheap. I mean, if the insurance was
actually cheap, if the insurer was costing you 10 bucks a month or something like that or 20 bucks a month. OK, fine.
But if the insurance is costing you a thousand bucks a month and you have a $6000 deductible,
that’s what people just just are exasperated by. I have another
one of the charts that I’ll I’ll present at this talk I’m giving today at the University of
Texas is something that I actually had to recheck three times,
that if you actually look at the average of the average American households tax rate, now that the after
this most recent tips around a tax reform in late 2017, the average household in America has
an effective tax rate of about thirteen and a half percent. In other words, thirteen and a half percent of their income
is going to the IRS, the federal government. The average household
share of national hospital spending is fourteen point eight percent.
And I talk about health care abroad, just talking hospitals. So if you add up what the average American household
pays for health insurance, what they pay in out of pocket costs and what they pay in taxes
for other people’s hospital costs, it’s actually more as a share of their income than
what they are spending, what they’re directly sending to the IRS, which is astounding.
Right. If you think about it like the. So so for the typical Republican who, you know, say
just pick on Republicans for saying typical Republican, you might say, well, you know, I’m not so I’m not a fan of Bernie’s system.
I don’t like price controls. So I’m going to I’m going to trust the status quo. I think that’s a free
market. And I’m going to listen to the hospital lobbyist who says don’t, don’t really mess with our income stream.
It’s a market based system. You’re having your voters tell you every day
that actually, you know, I don’t care about tax cuts anymore. You’ve cut my taxes. Thank you very much. But
you know what? What’s really affecting me and what’s going to make my life meaningfully worse in the future is not my tax
rate. It’s the amount of money that hospitals are taken out of my paycheck. The hospitals
are more permanent for the average American family. Hospitals are more dangerous economically
than the IRS, which is, you know, again, it’s an incredible fact, statistical fact.
But it is. And this gets to the point, Carlos, that you were mentioning, which is that there
are now a number of bills that have been introduced in the Congress based on our work.
One of them is a really ambitious, wide ranging bill that tries to tackle a broad range
of of these issues. It’s called the Fair Care Act by a congressman named Bruce Westerman, who tries to tackle
the high cost of hospital care, the high cost of drugs. The problems around
the regulatory regulations are on digital health that stymie entrepreneurs in the digital health space.
It tries to tackle the regulatory problems in Obamacare and the employer based market reforms entitlement. So it’s doing
a lot of different things to try to because it’s a big problem. You have to tack on a number of different ways. Bruce Westerman is Bill
the Fair Care Act as is is I have to give all the credit to him for willing to take on
these big challenges. And you can look up his bill online, which is the most the bill
that most broadly reflects the broad range of principles that we’ve been developing and free up. But
let me leave his bill aside for a second and talk about another congressman
named Jim Banks from Indiana who’s put out a bill called the Hospital Competition Act of Twenty.
In fact, Hospital Competition Act of 2019 is largely incorporated into Bruce
Westerman Bill. It’s actually title four of Westermann Bill. But let’s just take the hospital piece specifically.
So kind of like what we’re talking about before. The hospital lobby is very powerful
in every congressional district in America. The hospital sector is the second largest employer just behind
the public schools. And they say that if you if you ask us to if you
spend less money on us, then we’re gonna close. Then you’re not can have a hospital in your district. And every congressman shakes
with fear that this could happen to them. They get blamed for it. So so the hospital lobby is very powerful.
So I you know, when this congressman told me, Jim Banks, he’s like, I want to work on a hospital bill with you. Let’s let’s do this together,
because you’ve got some ideas I like in there. And I said, well, you know, Congressman, just so you know,
this is gonna be the hospital lobby is gonna fight you hard on this. And the year all the things are going to argue and they’re going to
assert and they’re going to claim and they’re going to say that you’re a really terrible guy. And he said, look,
you know, there are more constituents in my district and there are hospital executives.
And I’m I’m here to serve them. And I think you’re seeing more and more of that attitude
that for the average congressman, they’re hearing so many stories from their constituents,
from their voters about how people are struggling to afford their health care bills, how they’ve been laid low,
how their entire economic future is being curtailed by the high cost of health
care. That these handful of campaign contributions or lobbyists
or whatever it is from the industry are just not enough to outweigh that overwhelming
need to serve your constituents and solve this problem. And so I think we’re close to
a tipping point in that regard. If we aren’t already over it, which is to say that it used to be that only
people on the left really cared about health care costs. People on the right would get defensive and say, no, everything’s fine.
We don’t want price controls. We don’t want a government run system. And what we’ve tried to do it free up is to say
no, actually, that’s a false dichotomy. There is not you know, the only it’s not that the
only two choices are not price controls, government run single payer versus the status
quo. There is a third option, which is actually a market based system in which people
actually control those health called care dollars for themselves, where it’s affordable for everybody, where people
have the choice of multiple suppliers of any product or service, and where there’s more personal
a more personal touch and a more a more service oriented culture to our health
care system instead of a bureaucratic oriented culture. Well, Rick, thanks for. Work and
thanks for joining us at Policy McCombs. Hey, I appreciate it. Thanks for all you do.
Before we wrap up, you can get more information in our medium page. Thanks for listening to Policy
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