We’ve Got You Covered

Liran Einav and Amy Finkelstein are easily two of the best health economists of their generation. They have each spent twenty years churning out insightful papers published in the top economics journals. As a young health economist, I would read their papers and admire how well they addressed the technical issues at hand, but I was always left wondering what they thought about the big picture of health care in the United States. Their papers generally seem to come from a technocratic centrist point of view, but do not make it obvious what they would think about major health insurance reform proposals like Medicare for All. In We’ve Got You Covered, Einav and Finkelstein finally explain what they really think. As you would expect from top academic health economists, the book provides a highly accurate description of the current U.S. health system; unlike what you might expect, it is also engaging and almost breezy to read.

While the authors “have deliberately remained outside the political world” (p. xi), it turns out that their previous silence on big issues was not solely a way to avoid the inevitable criticism that comes with any political stance. Instead, they were silent for so long largely because they weren’t sure what to say. The book’s prologue describes how Finkelstein’s father-in-law finally bullied her into writing on the topic, using almost the exact words I always wanted to: “I know these are hard issues. But come on … You’ve been studying them for twenty years. You must be one of the best placed people to help us understand the options. Do you really have nothing to say on this topic?” (p. ix). Now four years after that conversation, Einav and Finkelstein have finally released the book explaining what they have to say about the U.S. health insurance system.

What they have to say is that it is unredeemable—that the U.S. health insurance system needs to be torn down and rebuilt from scratch to achieve “universal access to essential, basic health care, regardless of a patient’s resources” (p. xvi). The book is at its core a proposal for a new system, along with an explanation of why the authors believe in their proposal. Their proposal is to replace existing targeted government health insurance programs like Medicare and Medicaid with a new universal taxpayerfunded health insurance program that covers basic services with no cost-sharing for all Americans, but still allows those who wish to purchase supplementary private plans. The proposal is meant to express the authors’ ideals rather than to copy any particular existing system, but it bears strong similarities to the Australian and Israeli systems, along with the Purple Plan proposed by the economist Laurence Kotlikoff in 2011.

The book also explains many details of U.S. health policy and history, as well as details of other countries’ health systems, plus ideas and research from health economics. But at its heart the book is a policy proposal and therefore necessarily political. The proposal, together with the claim that “health care is a human right” (p. xvii), reveals the authors to be further to the left than I expected, but the spirit of technocratic centrism still shines through the book. It can be seen in important aspects of the policy proposals: that this new plan should cover only “basic” services, that supplemental insurance should be available for private purchase, and that government medical spending should be subject to a fixed budget (rather than being an open-ended commitment as currently). The technocratic spirit also shows in their style, where they argue that rather than imposing their own preferences on the country, they are only trying to efficiently deliver on what they say is the empirical, unwritten social contract of the U.S.: to provide access to essential health care to all Americans regardless of resources. They say we have historically gone about this goal in a patchwork and inefficient way, but should now instead replace it with one simple universal system.

This slightly-left-of-center technocratic approach means that, politically, almost everyone will find something to dislike. For leftists this could be the insistence on fixed budgets and coverage for only basic services, as well as the argument (obviously correct from looking at the experience of other countries) that universal coverage will not fix health disparities. Anyone with a conservative temperament will dislike their “tear it all down and start over” approach to the U.S. health financing system. Libertarians will dislike a huge new government program that provides “free” care entirely at taxpayer expense. Hayekians will dislike their implication that a patchwork system that was “never deliberately planned” (p. xvii) must be bad and that incremental reforms can’t work. Many will be baffled by their statement that “Adam Smith’s invisible hand can’t work its magic in the medical marketplace” (p. xvii).

Conversely though, the fact that there is something different for everyone to dislike means there is also something for everyone to like. Readers of The Independent Review are likely to appreciate the description of how means-tested programs like Medicaid can trap recipients in poverty, how Medicare is bad insurance for both enrollees and taxpayers, and how the “uninsured” are actually covered “to the tune of over $40 billion a year that is spent on health care for the uninsured but not by the uninsured” (p. 55). Or chapter 7’s extended argument that “differences in access to medical care—let alone health insurance—are not the main drivers of health disparities” (p. 83). The book is peppered with examples of how universal systems in many other countries successfully incorporate private markets. The authors draw on wide-ranging and eclectic sources of inspiration—Milton Friedman, Friedrich Hayek, and Ronald Reagan are quoted approvingly, as are Ruth Bader Ginsburg and John Rawls.

My biggest disappointment with the book, likely to be shared by readers of The Independent Review, is the lack of Public Choice thinking. Ideally a book on this topic would be written by authors with expertise in both health economics and political economy. In practice this book is written by top-tier health economists who acknowledge that “the inevitable question of how our proposal can be achieved politically … takes us considerably beyond our realm of expertise” (p. xxii). This would still make for a fine second-best book if the authors consistently stuck to their idea that their role as economists is to put forward the first-best solution, to focus on “what we should do rather than what some may think we currently can do” (p. xxii).

Instead, the book engages in the selective application of political realism. We need universal coverage because of the “empirical social contract under which—like it or not—the U.S. operates” (p. xviii). Coverage needs to be free at the point of care because politics will push it to be free for many people anyway, so to avoid administrative hassles it should just be free for all (p. 113). In these cases, the authors act as if politics is an unavoidable constraint that must be worked around. But the fact that the U.S. has a patchwork system and that the U.S. has repeatedly defeated attempts at universal coverage are treated as quirks of history that can be changed, rather than immovable constraints. The push to deliver covered services with no cost-sharing is treated as impossible to fight, but the push to cover more or higher-quality services must somehow be defeated to maintain their affordable plan that covers only “basic” services, because “public policy should be less impulsive and more rational than individual people” (p. 135).

The choice to mostly avoid questions of political realism is not only a problem for the authors’ plan and its chances of ever being implemented. It also allows them to punt on related questions that are important in their own right, and to which the book might have made valuable contributions. The book is generally strong on comparing how health financing currently works across countries, but on the specific question of how universal coverage was initially passed in other countries it offers only two pages in the epilogue. These cover only two countries, Britain and Canada, and offer no practical advice beyond to compromise with doctors when they threaten to strike. On the vital question of overall U.S. health care spending, the authors say they don’t know whether their proposal would increase or decrease it, and they don’t particularly care because they hold a self-described “blasé attitude toward the total level of health-care spending” (p. 152).

I nevertheless recommend the book to anyone interested in the U.S. health care system. The U.S. could do worse than the universal system they propose, but more importantly the book provides an accurate and highly readable portrayal of the complex patchwork system we currently use to finance health care in the U.S. While the heart of the book is their policy proposal, by word count most of the book describes accurate facts about the current U.S. system and its history, illustrated with memorable stories and anecdotes. I learned a lot reading the book, despite having already studied U.S. health financing for over a decade—for instance, that the first compulsory health insurance program in the U.S. was a 1798 law pushed by Alexander Hamilton to cover foreign sailors. While the authors are more used to writing mathheavy academic papers, We’ve Got You Covered reads like the popular press book it is. Perhaps the highest endorsement comes from a nonacademic family member of mine who picked up the book and noted, “These are not dry writers … this doesn’t sound like a book written by economists, no offense.”