Although Alexander Hamilton is not the best known, he helped create the world’s first national compulsory health insurance system. This insurance scheme, funded by the taxpayers and approved by Congress in 1798, covered sick and disabled sailors.
“It involves the interests of mankind,” Hamilton wrote.
As Massachusetts Institute of Technology professor Amy Finkelstein points out in her new book, they still do. The United States has repeatedly attempted to provide health care to those who need it but cannot afford it. These efforts may have started in Hamilton, but they have continued to the present day, with policies requiring emergency room care for everyone and insurance coverage for those with certain serious illnesses.
Again, no policy perfectly addresses the needs of the American people. About 30 million Americans do not have health insurance. Even for the insured, it is common for the costs to exceed the benefits of the plan. Americans have $140 billion in outstanding medical debt, more than all other personal debt combined, and three-fifths of it is borne by health insurance policyholders.
That’s why Finkelstein, in his new book with Stanford University economist Lilan Einuff, calls for a complete overhaul of the U.S. health care system.We’ve got you covered: Rebooting America’s healthcare” was published today by Portfolio. In it, the academics envision an approach of one tier of free, automatic health insurance for everyone, and another tier of private insurance for those seeking additional care amenities.
“In the United States, we always have a promise to do something when people get sick, and we’d better do it effectively and efficiently,” says Finkelstein, professors of economics at the Massachusetts Institute of Technology, John S. Macdonald and Jenny S. Macdonald. “I don’t think anyone would argue that our healthcare system is great and works well.”
patchwork program
Finkelstein was awarded the John Bates Clark Medal and a MacArthur Fellowship for empirical research in health insurance and healthcare, including research on Medicaid and Medicare, the economic impact of hospitalization, and geographic variability in healthcare costs. Finkelstein and his girlfriend Einav are also co-authors with Ray Fisman on his 2023 book on the insurance industry, Risky Business.
Through two decades of intensive research, neither Finkelstein nor Einaf ever advocated a particular health policy.
“We feel that we have something to share with the general public about this problem and its solutions,” says Finkelstein. “We focus not only on the uninsured, but also on the insured.”
In fact, about 150 million Americans rely on private insurance provided by their employer. But if you lose your job or change jobs, you risk losing that insurance. Those with public health insurance, such as Medicaid, face almost the opposite problem. If any family member earns enough to bring the household above the poverty line, they may be disqualified. The end result is that about one in four Americans under the age of 65 will be without insurance at some point in the next two years.
In fact, many of them offer free or heavily discounted coverage. About 18 million Americans who are eligible for public health insurance remain uninsured due to lack of information and complicated enrollment procedures. And even Medicare, the go-to public insurance program for many seniors, is an open-ended co-payment program. A quarter of Medicare participants spend a quarter of their income on health care.
Some reforms have provided better protection for more people. As academics point out, the Affordable Care Act of 2010 (co-developed by Massachusetts Institute of Technology economist Jonathan Gruber) brought insurance to 10 million Americans who were previously uninsured. However, it did not change the risk of losing coverage or incurring a large medical liability due to very incomplete coverage.
The book argues that the United States has followed a long and gradual policy to solve the health insurance problem. One long-standing approach was to create disease-specific treatment subsidies, beginning with a 1972 law extending Medicare to all patients with end-stage kidney disease. Similar programs were recently passed for patients with tuberculosis, breast cancer, cervical cancer, sickle cell anemia, ALS, HIV/AIDS and Covid-19.
However, Finkelstein and Einuf are skeptical of this approach due to its patchwork nature. Passing separate laws for different diseases always leaves gaps in coverage. Why not automatically include everyone?
“That’s the universal base coverage when it comes to covering all the gaps,” says Finkelstein.
land of freedom
As “We’ve Got You Covered” points out, the current US approach to health insurance is largely unspecified. The medical care provided by his employer actually dates back to his 1950s. And the authors emphasize that the United States’ continuing policies to make basic care universally accessible, such as opening emergency rooms and subsidizing the treatment of critical illnesses, speaks to the nation’s ultimate hope of providing humane care when it’s needed most.
“The reason we’re putting these patches on is because, as hard as it may be to believe, we actually have a strong social norm, an unwritten social contract, that people shouldn’t be allowed to die in the streets,” Finkelstein said. “When people are in dire health situations and have no resources, we as a society are inevitably compelled to try to help them.
For Finkelstein and Einaf, the solution is to provide free basic health care to everyone. No hassle of signing up. Registration is automatic. There is no charge for basic care. You don’t lose your insurance when you retire. Crossing the poverty line does not drop you from the ranks of public insurance.
At the same time, they envision the United States creating another layer of private health insurance to cover medical facilities, such as private hospital rooms and other optional elements of health care. “You can pay to upgrade,” says Finkelstein.
While that won’t lead to the fully equal and universal system of care some envision, Finkelstein believes it will improve the status quo.
“We have inequalities in all aspects of our lives, but this is another issue,” says Finkelstein. “The key is to provide essential basic coverage.”
Could the United States afford a free, basic, self-registration health care system? “Yes, of course.” In the United States, 18% of GDP is spent on healthcare. Half of it goes to public health care and half goes to private health care. Coincidentally, European countries spend 9% of their GDP on public health systems.
“In the United States, we already pay for universal health care, even if we don’t,” Finkelstein said. “We already spend 9 percent of our GDP on publicly funded health care. Indeed, we can do it for the same price as every other country.”
We’ve Got You Covered opposes even modest out-of-pocket payments (despite research showing that they reduce doctor visits), saying that it “contradicts the rationale for universal health care: access to necessary health care regardless of health.” [financial] We need it,” says Finkelstein.
until the impossible becomes inevitable
But if the Finkelstein-Einaf health insurance scheme is rational on merit, is it likely to survive?
“What I am not optimistic, but at least not overly pessimistic, is that this is an argument that appeals to people across the political spectrum, and it does,” argues Finkelstein. While health insurance expansion usually conjures up progressive politicians, this book refers to a group of conservatives who have supported universal health care well into the 21st century.
Certainly other experts have praised “We’ve Got You Covered.” Physician and award-winning author Siddhartha Mukherjee called the book “the clearest diagnosis of the American healthcare system that I have ever seen,” adding that it “should and will reset the debate about how to rebuild healthcare.”
Dr. N. Gregory Mankiw ’84, Robert M. Bellen Professor of Economics at Harvard University and chairman of the President’s Committee of Economic Advisers under former President George W. Bush, calls the book “an enlightening, compelling, and highly readable look at the U.S. healthcare system and what can be done to fix it.”
Even if the change to a free system of basic health care doesn’t happen soon, Finkelstein and Einuff suggest in the book that their role in writing We’ve Got You Covered is to do what economist Milton Friedman suggested: to develop ideas until “the political impossibility becomes the political imperative” and to keep them in the public domain.
And on the other hand, Finkelstein and Einuff urge people to take more seriously the way U.S. health policy implicitly assumes it should help everyone. And for the same reason, Hamilton wanted to help his sailors, to keep their lives “from want and misery.”
