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What Uwe Reinhardt taught me about health care

Reinhardt's influence on American health policy is hard to overstate.

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Earlier this week, we learned of the death of famed health economist Uwe Reinhardt. The Princeton professor was 80 years old.

Reinhardt's influence on American health policy is hard to overstate. Aaron Frakt wrote a wonderful remembrance at the Incidental Economist, and the New York Times also has an obituary that speaks to Reinhardt's constant curiosity, his personal warmth, and the great joy he always took in trying to understand the maddening, baffling inner-workings of the American health care system.

I wanted to take today's VoxCare to tell you about a Reinhardt paper I think anyone interested in health policy ought to read. It fundamentally shaped how I think about the biggest problems in American health care — and the right solutions to fix them.

The paper is called "It's the prices, stupid!" It is co-authored with Gerald Anderson, Peter Hussey, and Varduhi Petrosyan.

The thrust of the argument is this: America does not have an overuse problem when it comes to medicine. We do not go to the doctor more than people in other countries — we actually go to the doctor a little bit less.

The reason that American health care is so expensive is that, each time Americans do go to the doctor, we pay outlandishly high prices. We're not consuming lots and lots of health care. We're just paying higher price tags.

This is a fundamental fact about American health care that often gets lost in our debate. We have a lot of discussions about "waste" in American health care or "overuse" in our fee-for-service system.

One poll of 627 doctors, published in JAMA Internal Medicine, found that 42 percent of physicians thought their own patients were receiving too much medical care. “You’re getting too much health care,” a headline in the Atlantic bluntly declared.

Most of the policy interventions we see from Congress or statehouses target the volume of health care in America. They try to tamp down on unnecessary scans, procedures, or prescriptions as a way to ratchet down American health care spending.

But as Reinhardt and his co-authors argue in this paper, those policy interventions don't get at the fundamental problem of the American health care system: our prices. Reducing the number of MRI scans in the United States, for example, won't change the fact that an MRI in the United States costs an average of $1,119 — but $503 in Switzerland and $215 in Australia.

Here is how Reinhardt described the situation in a 2013 blog post for the New York Times:

Traditionally, the theory driving discussions on the high cost of health care in the United States has been that there is enormous waste in the system, taking the form of excess utilization of care. From that theory it follows that methods of controlling the growth of health spending should focus on ways to reduce the use of unnecessary or only marginally beneficial health care.

Largely overlooked in these discussions has been the elephant in the room: the extraordinarily high prices Americans pay for health care. However, as a group of us noted in a paper in 2004, “It’s the Prices, Stupid,” it is higher health spending coupled with lower — not higher — use of health services that adds up to much higher prices in the United States than in any other member nation of the Organization for Economic Cooperation and Development. Aside from a few high-tech services, Americans actually use less health care and rely on fewer real health-care resources than do residents of other industrialized countries.

Reinhardt's relentless focus on American health care prices has shaped my own reporting. It's made me question the policy interventions that tackle the volume of health care, and how far they can really take the United States to better controlling our health care costs.

What Uwe Reinhardt taught me about American health care is exactly the title of his paper: It's the prices, stupid. And that has shaped what I decide to report on. It is why I tackle projects that try to bring more transparency to American health care pricing, and the reason I think it's important to tell the stories of the medical bills my readers send me.

These aren't one-off, sad stories. These are, as Reinhardt rightfully spent his career arguing, small windows into the systematic way the American health system charges sky-high prices.

I'm so glad I had the chance to interview Reinhardt as a health reporter and learn from his work. This 2004 paper remains just as relevant to explaining American health care now as it was at the time of publication — and I highly recommend taking the time to read it.

GIF of the Day: How Centene made a fortune on Obamacare

Bloomberg goes deep on how one little-know health plan bet on Obamacare — and won. This is a fantastic read from Bryan Gruley, Zachary Tracer and Hannah Recht that profiles health plan Centene, which has quietly and successfully become a dominant player on the ACA marketplaces.

"Since Centene took its first wary steps into these marketplaces in 2014, its stock price has tripled, annual revenue has climbed from $10.9 billion to more than $40 billion, and net income has swelled more than threefold, despite thin margins," Bloomberg reports. Definitely read the full story, available here.

Kliff’s Notes

  • “Pro-Obamacare group targets swing Republicans on taxes”: “A pro-Obamacare coalition that spent big during this year's health care battle is going back on the airwaves, urging the three GOP senators who tanked their party's Obamacare repeal plan to vote against the massive Republican tax bill.” —Elana Schor, Politico
  • “House GOP’s Tax Bill Would Trigger A $25 Billion Cut To Medicare”: “Two weeks after its introduction and following zero hearings, the House of Representatives passed an approximately $1.5 trillion dollar tax cut on Thursday. Most of the focus has been on the bill’s tax benefits for the wealthy and corporations, but some lawmakers are sounding the alarm that passage of the bill will also trigger an estimated $25 billion cut to Medicare.” —Alice Ollstein, Talking Points Memo
  • “Murkowski Suggests Tax Vote Depends on Stabilizing Individual Health Insurance Market”: “Alaska Republican Sen. Lisa Murkowski suggested Thursday that her vote on the current version of the Senate GOP tax overhaul is contingent on the passing of a separate bill to stabilize the individual health insurance market.” —Joe Williams, Roll Call

Analysis and longer reads

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