David Goldhill’s popular Atlantic article was about “What Washington Doesn’t Get About Health Care.” We asked him if Obama learned anything in time for his September 9th bicameral speech on the subject.

Question: How well did Obama address healthcare issues in his September 9th speech?

David Goldhill: Well, I think the President has an admirable and important objective at the core, which is to create a genuine safety net for all Americans, cradle-to-grave, to cover health catastrophes; those things that not just threaten our physical well-being in a serious way, but also threaten the financial stability of American families and households. And I think and I completely agree that that is the most essential element of healthcare policy. My concern is that I think our current system of allocating resources to healthcare, paying for them, and distributing them, if you will, among our population is inherently unsustainable. That at one, two, three percent increases greater than increases in income over that what's now almost four, almost five decades, you have something that just – you simply can't pay for. And those issues I believe or not inherent in healthcare, but in the way we have chosen to finance healthcare and the way we've chosen to account for how healthcare services deliver the quality and service aspects.

So, to me, most of the proposals that we see in politics are really about how many stories we should add to a collapsing building. Now it may be well intentioned and we may get to live in a stories for a year or two, but ultimately we haven't solved the problem which is our safety net is frayed in this country because healthcare is so expensive; and healthcare gets ever more expensive every year. And until we can get past that issue in a meaningful way, whatever additional access we bring to the system will be offset by the limits in that access once in the system.

So we can talk about ensuring the 45 million uninsured, that would be a terrific thing, but we have to recognize that unless we can control prices in healthcare, the cost of that is going to be the value of that net to each of us is going to be less. And if you’re employer covered already, you see that, right? You see higher co-pays, higher deductibles, more limits on coverage, and more pre-existing conditions making you an ineligible. Now, the President has proposed mandating that those things can’t happen. But, from an economic perspective, I view that sort of as squeezing on a balloon while blowing it up. You may well affect the shape of that balloon, but you're not going to affect the size. That money is going to have to come from somewhere, and out of somebody.

I think the best example is Medicare. The President presented Medicare as something that is successful and needs to be protected. And there is certainly an argument that Medicare has allowed for a much better medicine available to a much broader number of seniors. But we need some perspective on Medicare. The average senior citizen today pays a greater percent of his income out-of-pocket for his healthcare than the average senior citizen did in 1964. And I don't think you'll find many senior citizens today, in fact, I think in that town halls were seeing echoes of this, feel more secure about the possibility of needing to pay for large amounts of healthcare out of pocket than the senior citizen did in 1964. Now we've spent, I think it's now close to $6 trillion on Medicare. If that is the result of a successful program, how are we judging success? And how are we building on this structure based on what we've learned?

Question: Are you in favor of free-market competition among health insurers?

David Goldhill: The issue in the healthcare system I think is important as to how we use competition because we've decided on a private enterprise system, which, frankly I favor, I'm know there are others who don't, but private enterprise delivers most care, the public finance and somewhere between 45% and 50% depending on how you count, maybe even more if you count the tax credits and employer insurance. But this hybrid system I think combines the worst of both worlds because what you have is, you have the profit motive, you have private enterprise, you have organized interest groups, you don't have a lot of competition. I think most of us when – and by the way, that’s not just because of the industrial structure, it’s also because of the position we're in as consumers. Very few consumers are really incentivized to do the type of price shopping they do in almost anything else in their lives, even casual price shopping. And I'm as guilty of this as anybody because I've been uninsured for two episodes in my life, insured for the rest of it, and there's an enormous difference in the way I approach the price of my care when I was insured and uninsured. I consider myself a reasonably thoughtful consumer, but the reality is I was a pretty a dumb consumer when I was insured. I went wherever my physician referred me and I paid whenever the bill was, knowing very little of it was mine.

The core issues of how you bring in the type of discipline on price, but not just on price, also on quality and service that competition gives you is missing in our healthcare system. And one of the great ways to see the contrast is to look at those health services for which there is relatively little insurance coverage. If you look at cosmetic surgery, if you look at a lot of dental surgery, a lot of eye work, I mentioned LASIK in the article that I wrote. But you'll see it at – some rehabilitation work, there is an extraordinary difference, not just in the price competition you’ll see amongst providers there and their willingness to disclose prices and compete on price, but also almost everything about the look and feel of their service, right. There's no crowded waiting room when you go to see a cosmetic surgeon. Rarely is if you go see if eye surgeon. And why is that? Why is it when you see a GP or any other specialist you’re sitting in a waiting room for an hour? You don't even see that at the DMV anymore. It tells you something about how important competition for consumers, to get consumers is in the insured part of healthcare versus the less insured part of healthcare. It’s an important canary in our coal mine.

Question: Would nationalizing health care provide some benefit?

David Goldhill: I hear a lot of my very liberal friends saying, “We have been trying to get national health insurance in this country for almost 80 years and maybe we're finally going to get it.” You know, after 80 years you may want to question whether what you wanted is still what you should have. A lot of the things we tried to get in the 30s we don't want now, we shouldn't want now, and have nothing to do with the way we live now. My basic point is not that healthcare has become less important, but it's become bigger and more integrated in our lives. And it is impossible to finance it in an efficient way. Efficient both in terms of its own costs, and efficient in terms of the amount of societal resources it consumes without bringing elements of choice into the system, without having some mechanism for recognizing the trade-offs because healthcare is no longer just the, I got sick, I can't work, my income is suffering, my family is suffering. It is some of that. And it's interesting, whenever I have this conversation with someone who is more traditional about it, they always focus on the, ‘hey, nobody chooses to get cancer. How can you make this a consumer product?’ Of course, that's right. But interestingly, one of the things we have sacrificed in keeping this old concept of what healthcare is, is we can’t afford and haven’t built a real safety net for those people who suddenly find out that they have cancer.

Interestingly, in choosing to treat all healthcare as mattering equally, as being well-financed by insurance, what we've done is we haven't properly funded the true catastrophes – matter of fact, that had the chance of affecting all of us. So we've got this incredibly wide safety net with massive holes in it. And I guess what I'm saying is, you might be better having a narrower safety net that rests on firmer foundations, a little bit of a mixed metaphor, but I think you know what I mean.

Recorded on: September 11, 2009