Controlling Health Care Costs President Bush is expected to announce proposals for health-care policy in his State of the Union speech. One expert weighs in on the big picture: why American costs are so high, and which plan looks promising.

Controlling Health Care Costs

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MADELINE BRAND, host:

For the big picture, how we got into this situation, why health care costs are so high and which plan looks the most promising - and we'll talk about the president's plan in a moment - we're joined by Uwe Reinhardt. He's a professor at Princeton University and an expert on healthcare economics. And Professor Reinhardt welcome to the program.

Professor UWE REINHARDT (Princeton University): My pleasure. Thank you.

BRAND: Well, the United States spends more per capita on health care than any other country, also has the fastest growth rates in health spending, and yet does not always achieve the best outcomes in terms of many measures of health. Why are costs so high and why can't we achieve the best results given that the costs are so high?

Professor REINHARDT: There are two major reasons. One, the costs are high because we are a high-income country. But the real reason is that we have always allowed the supply side of the healthcare system, the doctors, the hospitals, to run the show and kept the demand side, which are patients or insurers, fragmented and weak. So therefore the supply side pretty much has been able to do what they want to do, including keeping themselves away from accountability.

BRAND: So you're saying that doctors and hospitals are simply charging too much money.

Professor REINHARDT: Not that they're charging too much money, but they very often do procedures that are not indicated or with — where the medical value is dubious.

BRAND: Talk about the president's plan, if you would, for a few moments. That also calls for a tax increase of a sort, but this tax would go to consumers who already have insurance.

Professor REINHARDT: Actually, it's a little bit different. The president would say when an employer gives you, pays your health insurance premium, that premium payment will now be added to your W-2 form and be taxable income to you. So that means taxes go up. However, he would also allow every individual to deduct $7,500 - or a family, $15,000 - from the taxable income.

The White House estimates that about 80 percent of families will have no tax increase or even a cut. Only twenty percent will have an increase. There's no question that ten years from now, Americans will pay taxes on an increasing chunk of their employer-provided insurance. That's what the president is proposing to do. But at some point, Americans really do have to step up to the cashier's window and pay for what they consume.

BRAND: Well, I think a lot of Americans would say I already am paying a lot.

Professor REINHARDT: We don't like choose. We always want the very latest drug, the very latest equipment, and when you always want the best that's best or the latest, latest, even if it isn't the best, you pay a lot. That's what the American people want so they should pay for it. If you go to a restaurant and order Chateau Brion, an expensive champagne, your bill will be high. And that's how Americans have behaved in health care. So they should stop cretching(ph) about it and pay up or accept the structures that Canadians have.

Canadians spend only half as much per capita on healthcare as we do. They're healthier than we are and live longer than we are. But they have to sometimes wait for elective surgery, and Americans think that's un-American. So I tell my fellow Americans shut up and pay up.

BRAND: Uwe Reinhardt, Princeton University Professor, expert on health care economics, thanks a lot for joining us.

Professor REINHARDT: Oh, it's been my pleasure.

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