Dan Gorenstein: Kate, can you start by just explaining the system you are exploring in this paper?

Kate Baicker: What we’re really trying to highlight is the rising cost of having a generous insurance plan like Medicare that delivers the same health insurance benefit to everyone it covers. What we point to in our paper is that in a world where there is increasingly expensive medical technology, where tax rates are going up, where there’s growing income inequality, it is increasingly costly to have a one Medicare fits all program for the people who are covered by Medicare. We propose an alternative where you have a more basic insurance plan with great financial protections for patients, that pays doctors adequately, but only covers services that are of sufficiently high value in terms of the health that they produce. That more basic plan could free up a lot of money to spend on other things and give higher income people the option to “top up” that insurance with an insurance plan that covered those things the public plan didn’t. If you had that more basic Medicare plan, you could then extend it to the rest of the population if you wanted to in a way that didn’t cost as much as expanding the current Medicare program we have today.

DG: Ultimately, Kate, the difference between the Medicare program that we have today versus this alternative, more basic Medicare program you are proposing is that you would strip out reimbursements for what some people call low-value care.

KB: The alternative basic Medicare program that we are proposing just wouldn’t cover care that didn’t produce enough health benefit. People could go purchase that care on their own if they wanted to. They’d be free to do that. That means that higher income people would get probably more health care than lower income people. And that’s something that we have to decide whether we’re comfortable with as a nation, as a body politic. But it would mean that our public program dollars could be stretched further. You could cover more people with the same amount of money if you were providing a more basic benefit than the current Medicare program provides.

DG: What is something that our current Medicare program covers that would not be covered under the Kate Baicker Medicare plan? 

KB: Well, I’m not sure I’m ready to have this plan named after me. Let’s be clear. But it’s important to distinguish between care that is of high value and care that’s expensive. There is expensive care that’s really high value and expensive care that’s virtually wasted. And there’s low cost care that’s extremely high value and low cost care that’s virtually wasted. So we want to cover everything that produces a lot of health for every dollar spent. So, for example, statins to lower cholesterol. For some patients, like diabetic patients, they are extremely effective and they ought to be covered. But for some patients who have elevated cholesterol, but no other risk factors, there is no evidence that these are effective in reducing heart attacks or extending life, and they probably shouldn’t be covered by the public program. I don’t want to pretend that all of the care we’re suggesting not covering through Medicare is of zero value. It’s of lower value than covered services, but that doesn’t mean it’s of no value. So a natural consequence of this is that higher income people are going to get more care, and we ought to be sure that that’s a consequence we’re willing to live with.

DG: So, Kate, you and I have known each other for a long time, and something that I’ve heard you talk a lot about is your concern over how much we spend. And the more we spend on health care, the less there is for education, public safety, food or housing assistance and effectively some sort of like crowding out. At the end of the day, is that what’s sort of driving this idea here? 

KB: That’s a really important issue you’re raising. But I want to put a fine point on the question of how much we spend on health care. That’s not actually the problem in my view. We could spend 20% of how of GDP on health care, and if we were then living to age 200 in fine health, I would think that was money extremely well spent. But that’s not the outcome we’re getting. I think there’s ample evidence that we spend a lot of our health care dollars on things that are not high enough value, that don’t improve our health and longevity enough when there are these other pressing needs. When people don’t have enough food, don’t have access to education, don’t have housing. There are a lot of uses that those public dollars could be put towards, and we need to evaluate whether that extra dollar spent on health care is really worth it when there are lots of other things we could do with that money. 

DG: You talk about in the paper a “Medicare dividend.” If we were to move to this system, not in a universal system where everybody has this, but just a reform of Medicare itself, ballpark, Kate, how much money are we talking about saving?

KB: Well, of course, it depends crucially on what we decide to cover in this basic Medicare program, and that’s something that warrants serious public debate. But you could easily imagine spending 30% less per person in public dollars on a Medicare program. 

DG: And so if we talk about 30% less per person, you know, I’m not the mathematician here. You are more so than me at least. How much money are we talking about? 

KB: Well we spend, what, about $750 billion on Medicare a year? I’m going to pause, and I’m actually going to look up how much we spend on Medicare right now. I’m just pulling it up. Huh, in 2018, it looks like we spent $750.2 billion on Medicare, so we could spend a third less, $500 billion. So it’s not like I’m saying we as a nation could spend 30% less on health care. I’m saying our public program could cover 30% less. High income people would then go buy it back so, in essence, the same amount would be spent on their health care as is spent now. But for lower income people, they would have 30% less spent on their health care. But that would leave that money to be potentially, depending on what the policy and political decisions were, it would leave that pool of money to spend on other things that might be higher value to those families. The thing to realize is that our current system sounds generous. We are covering all sorts of care for everyone. And it sounds like that must be to the advantage of lower income households. But really, if they had a choice about how those resources would be spent, many would choose to have less spent on health care and more available to spend on food and housing and education for their kids and all sorts of other things. 

DG: Kate, what makes you say lower income people would rather have the federal government invest in food, supports housing supports, job development supports?

KB: So there’s this really valid question: How do I know? The answer, of course, is that we can only try to infer based on what people choose for themselves when they have flexibility.  So do I know for sure that every low income household would rather have a smaller share of federal resources devoted to health care than currently are? Of course, I can’t say that with certainty. But our best guess, based on bodies of evidence about how people choose to allocate their resources and what their preferences seem to be, is that we are currently spending too great a share of public dollars on health care for low income households based on their preferences and their income constraints.

DG: In the paper, you and your co-authors acknowledge that there’s no guarantee how this money would be spent. You acknowledge that the savings you mention — this Medicare dividend — could go from being progressive if it’s used to fund other social safety net programs, to punitive if it’s used to fund some massive tax cut that would largely benefit high income earners. How comfortable are you proposing an idea that could lead to low income people ending up with less health care and no additional social safety net services? 

KB: This is a crucial point. I think we have highlighted a real cost of our current system and proposed a stylized alternative that has the potential to make everyone better off. But the devil is in the details in this and so much else. And of course, I am concerned about to what use the Medicare dividend would be put. We’re proposing spending substantially less on public health insurance programs. Where those savings go is a matter of the political process, so I think we want to think really carefully about how we envision the whole social safety net as well as how we envision the health insurance system functioning.

DG: What excites you the most about this idea?

KB: Getting our Medicare program operating more efficiently could have system wide ramifications for improving the health that we all get from the health care system while freeing up resources for lots of other important things. I would love to see Medicare being a more active force towards a high performance, high value health care system.

DG: In in this political climate, you’ll hear a lot of people arguing over the question, “Is health care a right?” But when I read your paper, it doesn’t really seem like that’s the question you think we should be asking.

KB: I don’t think that’s the right question. The question we ought to be asking is, “How much health care is a right?” Right now, in essence, we’re saying for people who aren’t covered by public health insurance, no health care is a right. And for people who are covered by Medicare, pretty much everything is included. I think we ought to be deciding what’s the floor, what’s the basic health care to which everyone is entitled? The floor could be very high. That’s what we have to have a public debate about. And it has consequences in terms of how much money we spend on health care, and just as importantly, how much money that leaves for everything else. By asking the question, is health care a right, we kind of box out that crucial debate we ought to be having.

DG: Kate, thank you very much for joining us. 

KB: Thanks, Dan.