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Navigating the Labyrinth

Krugman and Cheng at Labyrinth Books. (Photo courtesy of Labyrinth Books)

Uwe Reinhardt, Tsung-Mei Cheng, Paul Krugman, and the U.S. Health Care Crisis

By Donald Gilpin

Have you tried recently to obtain health insurance or choose a health care provider? Tried to find out the price for a procedure or surgery? Tried to understand the bill from your doctor or the statement from your insurance company?

More critically, have you been unable to afford a necessary surgery or crucial prescription in this wealthy country, where health care costs so much more and delivers so much less than the health care systems of every other advanced country?

“Confusion, ignorance, and misinformation are rampant out there,” said Princeton University Research Scholar Tsung-Mei Cheng, speaking with Nobel Prize-winning economist Paul Krugman at an April 30 Labyrinth Books event featuring the recently published Priced Out: The Economic and Ethical Costs of American Health Care, written by Cheng’s late husband Uwe E. Reinhardt, renowned health policy expert and Princeton University economics professor.

Emphasizing Reinhardt’s drive to combat the chaos, inefficiency, and, inequity surrounding health care in the U.S., Cheng, one of the world’s top experts on health care systems, argued that the real debate, and all the controversy over the Affordable Care Act (ACA, also known as Obamacare), though “conducted in the jargon of economics and Constitutional federal-state relations,” is not about economics and the Constitution at all.

“The heart of the debate,” for Cheng and for Reinhardt, “is a long-simmering argument over the following question on distributive social ethics: To what extent should the better off members of society be made to be their poorer and sick brothers’ and sisters’ keepers in health care?” she said. “That is the question. Social ethics was a big thing for Uwe.”

Health care could be the key issue in the 2020 election. Voters have consistently indicated that affordable health care is a priority, and health care reform bills continue to be debated in Congress.

The ACA, despite numerous court and legislative challenges, is still in effect, and Medicare and Medicaid continue to be popular. This may possibly be due to the fact that it tends to offer Health insurance plans for every stage of life. Besides, health insurance is also available for most employees through their workplaces.

As the 2020 election approaches, Republicans are still calling for the repeal of the ACA, with few indications of how they would replace it. Democratic presidential candidates favor a range of proposals from single-payer (“Medicare for all”), a government-operated program like that of Canada and the United Kingdom. In such countries, it is generally easy to obtain a life insurance policy or health insurance plan favorable to all classes of people in society.

Reinhardt, a “Beloved Teacher”

Reinhardt, who died in November 2017 at age 80 and had taught at Princeton for almost 50 years, wrote a regular column for the New York Times’ Economix blog. He was regarded as one of the most influential health economists and health policy experts in the country, and Princeton University President Christopher L. Eisgruber described him as “one of this University’s most beloved teachers.”

A New York Times obituary referred to him as a “listened-to voice on health care policy” and “a national conscience in policy debates about health care.” He was known for his ability to advise and work with legislators and politicians on both sides of the aisle and for his ability to explain and clarify the most complex health care issues for a broad audience.

All of the remarkable attributes noted above are apparent in Priced Out, which combines scholarly, in-depth analysis with rich insight, delightfully sharp humor, and deep moral seriousness – all in consistently clear, engaging prose.

Cheng, at the Labyrinth forum, which was attended by a standing-room-only crowd of more than 150, described how her late husband’s thinking on health “was driven by his values.”

She described his childhood. “Uwe knew what it meant to be poor. He grew up in post-war Germany, where his family often went hungry.” As a young man, he ran away from Germany to Canada, landing in Montreal with only $90 in his pocket.

“Uwe talked about how he and his family had health insurance in Germany,” she said. “Every German had health care insurance. Without that he might not have survived childhood.”

Cheng went on to read a quote from Reinhardt: “We had health insurance, like everyone else in Germany. I have never forgotten that, and I would like Americans to have what I had and my mother had when I was a kid, so that is why I care.”

She continued, “So Uwe believed that everyone should have health care that is based on medical need, not the ability to pay. That is the basis of his work and his advice to anyone who would listen. He was a well-trained economist with a heart.”

Krugman at Labyrinth Books. (Photo courtesy of Labyrinth Books)


In his conversation with Cheng, Krugman, New York Times op-ed columnist, an economics professor at CUNY Graduate Center, and emeritus professor of economics and international affairs at Princeton University, talked about his own attempts to understand the complications of the U.S. health care system.

Claiming not to be a health economist, “though sometimes I play one on TV,” Krugman said, “I learned when I first was getting into this around 2005, I didn’t know a blessed thing. Fortunately, I had America’s best health care economist down the hall. I always could rely on Uwe.”

Krugman discussed Reinhardt’s perspective on health care.

“Way back in 1992 he wrote a paper that talked about ways you can have health care, ways you can achieve coverage, and basically he said there’s no single way that you have to do it,” Krugman noted. “You can do it different ways. You can do it single-payer. You can do it regulated and subsidized. What you can’t do is have a system like the U.S. system that leaves a lot of people out in the cold.”

In a March 21, 2019 New York Times op-ed titled “Don’t Make Health Care a Purity Test,” Krugman, looking ahead to the Democratic presidential primaries, presented an argument similar to Reinhardt’s, arguing that the Democrats don’t need to be purists for single-payer, “Medicare for All.” Rather, he argued, a “Medicare for America” plan, with a private-insurance component, could also work. There are multiple ways to achieve universal coverage. The Democrats, he contended, need to debate, decide on their best strategy, and unify behind that plan.

He cited the Commonwealth Fund survey of major nations’ health care systems. “America always comes in last,” he wrote. “In the latest edition, the three leaders are Britain, Australia, and the Netherlands,” which have three radically different systems.

“Many people realize, I think, that we’re the only advanced country that doesn’t guarantee essential health care to its legal residents,” he added. “My guess is that fewer realize that nations achieve that goal in a variety of ways – and they all work.”

Princeton University Research Scholar Tsung-Mei Cheng. (Princeton University, Woodrow Wilson School of Public and International Affairs, Kevin Birch)


Cheng and Krugman went on to discuss some of the bizarre attributes of what Krugman called “the American health care wonderland – and that’s not in a positive way.” The first section of Priced Out is titled “A Visual Stroll Through America’s Health Care Wonderland.”

“You ask ‘what does a particular procedure cost?’ and the answer is, ‘well, it sort of depends,'” Krugman said.

“Providers charge vastly different prices,” said Cheng. “We started to ask questions about that, and we never could get a straight answer. I called Princeton Hospital and wanted to know what they charge for a normal delivery, and I never got an answer, even after repeated calls. Then Uwe called in and asked about the price for a regular colonoscopy. ‘It depends,’ they said. He never could get a straight answer. Prices are all over the place.”

Krugman mentioned the consumer-driven health care movement of the early 2000s. “But it’s impossible to find out what things cost,” he said. “You can’t make choices the way you can in other marketplaces, the way you choose a new car or a piece of furniture. The information overload is impossible.”

Cheng agreed, “Consumers of health care should be given information on price and quality, both of which are missing in all this great big talk about consumer-driven health care.”

If two of the most knowledgeable economists in the country find themselves in a wonderland of insufficient information and unsatisfactory answers to their queries, what hope is there for the rest of us to understand the health care world in which we must make literally life-and-death choices?

Krugman described the frustrations of trying to understand medical insurance. “I took early retirement from Princeton and moved to City University of New York,” he explained. “Princeton has a standard health insurance plan for its employees, but CUNY has 19 different insurance plans from different providers that you can choose from.

“And I sat there and said, ‘I know something about health care. I can figure this out,’ but I couldn’t make heads or tails of the choices, so I went to HR and said to them, ‘Can you explain to me the difference between these plans?’ And they said, ‘No.’ And since I have two jobs and the New York Times has a standard plan for its employees, I went with the Times‘ plan.”

“It’s the Prices, Stupid”

Frequently citing Reinhardt’s book, Krugman and Cheng went on to discuss the reason for high U.S. health care costs. Referring to studies done in a number of different countries, Cheng noted, “The prices vary a lot, but the highest prices are always in America.”

Krugman pointed out that Reinhardt’s most cited paper was “It’s the Prices, Stupid,” a comparison of the U.S. with other countries. “We spend vastly more on health care, but he was able to show that we don’t actually get more health care,” Krugman said. “We just pay more for it.”

Cheng added, “He showed why health spending is so high, why health care is so expensive, and the No. 1 reason is prices. We spend a whole lot more for the same thing that people in other countries get, a whole lot more.” She claimed that the complexity of the system and the extremely high overhead expenses are also to blame for exorbitant health costs.

“There’s a number that Uwe has in Priced Out,” Krugman added, “that for every doctor there are 16 other people involved in health care, of whom six are in clinical roles, nurses, and so on. The other 10 are in one way or another administrators, basically billing clerks. It‘s amazing – as we said, a wonderland.”

Looking Overseas for Clues

Arguing that we can learn from many other countries that have successfully created health care programs, Krugman pointed out that there is an abundance of information and evidence available. “Often in the U.S. we talk about things as if there wasn’t the rest of the world to learn from,” he said. “But in fact, every other advanced country has some form of universal health coverage, and they do it in a bunch of different ways. We have lots of metrics for comparing, so there’s no excuse for throwing your hands up.”

Among the many different examples discussed in Priced Out and mentioned by Cheng and Krugman is Taiwan’s successful system, which Cheng and Reinhardt helped to establish. Reinhardt, as an advisor to the Taiwan government, recommended the single-payer system for Taiwan in 1989. Within six months the government accepted his recommendation, and in 1995, with the guidance of Reinhardt and Cheng, implemented what Reinhardt, for the sake of clarity and down-to-earth understanding, renamed “the one-pipe system.”

Today, according to Cheng, 99.99 percent of the people in Taiwan are insured. “Uwe recommended this single-payer system for Taiwan because it is the most affordable system that people can access,” she said. “Everyone gets the same health care regardless of your socio-economic status. And secondly, the single-payer system is effective for controlling costs.”

Reinhardt, “when he had the opportunity to start from scratch in Taiwan was basically for Medicare for all,” Krugman added, “but he saw that the trouble is that our political system is too corrupted by money. But you can do it in other ways, and the polycentric system is less likely to be corrupted by the flows of money in American politics.”

Cheng concurred, “The Medicare-for-all system would not work in the U.S. because we do not have a dominant system of governance. Can you imagine physicians’ groups accepting the government’s set fees? The answer is no.”

For the U.S., Cheng said, Reinhardt would recommend a system such as the system in Germany, Switzerland, or the Netherlands, with private health insurance funds or social insurance sickness funds, prices that are negotiated between providers and payers, and a standard fee schedule. “There is not the kind of price discrimination that is so rampant in our system,” she said.

In his foreword to Priced Out, Krugman describes Reinhardt’s depiction of “a system that’s both cruel and inefficient.” He writes, “What emerges from all of this is a devastating portrait of a system that doesn’t just consume huge resources to no good end, but denies care to many Americans, not because it would really be too expensive to provide, but because the system prices them out by making care arbitrarily expensive – and/or rations health care in ways that are fundamentally indefensible.”

Cheng titled her epilogue to the book “Health Reform for a Kinder America.” She begins that epilogue with a quote from her late husband: “The issue of universal coverage is not a matter of economics. Little more than 1 percent of GDP assigned to health could cover all. It is a matter of soul.”

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