- How to cure American healthcare.

This week on "Firing Line."

- We have this thing called health insurance.

But if you think about the concept of insurance, insurance is protection against catastrophic events.

Health insurance is like if your auto insurance covered oil changes.

Health insurance itself is a little bit of a misnomer.

It's prepaid healthcare.

- [Margaret] Lanhee Chen has been thinking about how to fix healthcare for decades.

He's been an advisor for George W. Bush, Mitt Romney, and Marco Rubio.

He says his party has dropped the ball on the issue.

- Today we take the next step to repeal and replace Obamacare.

(House Republicans cheering) - For too long, Republican policymakers were animated by one goal, and that was the repeal of Obamacare.

Ultimately, if all of your argument is "no, no, no," at some point, that falls short.

- [Margaret] But, he says, there are good ideas on the right about how to fix America's healthcare system.

What does Lanhee Chen say now?

- [Announcer] "Firing Line" with Margaret Hoover is made possible in part by: Robert Granieri, Vanessa and Henry Cornell, The Fairweather Foundation, The Tepper Foundation, Peter and Mary Kalikow, The Beth and Ravenel Curry Foundation, Pritzker Military Foundation, Cliff and Laurel Asness, The Margaret and Daniel Loeb Foundation, and by the following.

- Lanhee Chen, welcome to "Firing Line."

- Great to be here.

Thank you.

- You are a healthcare policy expert and have an affiliation at the Hoover Institution, where I serve on the Board of Overseers.

You are full of ideas of how to reform our healthcare system.

First, crystallize for me, why is the American healthcare system and the American healthcare marketplace so broken?

- Well, to answer that question, we gotta do a little bit of history.

The American healthcare system was built over many, many decades with a series of decisions, none of which were particularly coordinated with one another.

- So you're saying if you had to make it today- - You would not design.

- You wouldn't do it the way it is now?

- There's no way you would design the system that we have if you went back and started over.

We had a system that grew out of a desire, really, fundamentally, to get around wage controls after World War II.

- This is when Franklin Delano Roosevelt signed an executive order to cap wages.

- Yep.

- Fearing in a labor shortage that inflation would be created.

- And companies had to figure out how to compete in that environment.

And so one of the things that companies said was, "Well, what if we give people health benefits?"

- Because that didn't count against the wage cap.

- So they went to the IRS and said, "Can we basically circumvent the wage caps this way?"

And the IRS said, "Sure."

They had a revenue ruling that came out.

And they said, "Absolutely."

And that was the genesis of the modern American healthcare system.

Now, that was part of it.

We have a healthcare system now where most Americans do get their healthcare through their employers, but we also have these huge public programs.

We have Medicare, which is very popular, a program called Medicaid, which is a joint federal state program that became very large after Obamacare passed in 2010.

I mean, this is really the big challenge, is that if you were to go back and redesign the healthcare system, you might have private components and you might have public components, but the way they would fit together would be pretty different from what you have today.

And so I guess my point is, the reason that the system is broken is because it was not designed to work together in the way that it works together day.

- It's a patchwork.

- It is.

It is.

I mean, it's a good patchwork in the sense that it produces outcomes that in many ways are better than any other outcomes for peer systems around the world.

But that's the paradox of our healthcare system, you see?

Like, there are things our healthcare system does really well.

So, if you have an advanced cancer, if you have heart disease, if you are looking to have a significant surgical procedure, you're probably gonna do it in America.

Yet we have a healthcare system that produces unreasonably high rates of infant mortality.

- Yeah.

- We have too many moms who die giving birth, still.

I mean, this is something that you think, how can a civilized society still have this challenge?

So we've gotta figure out how to get our healthcare system to a slightly different place over these next several decades.

- I've heard you call the employer-provided health insurance the original sin of an American healthcare system.

- Yeah.

- If it's the original sin, why not unwind it?

- It's tough to take things away from people when they like it.

And as it turns out, most Americans like their healthcare coverage.

People like the coverage they have even if they don't like the system, even if things cost too much.

So, the reason why we can't go back and fix the original sin in some ways is because doing so would be tremendously politically unpopular.

- Gallup says 70% of Americans say our healthcare system has major problems or is in a state of crisis and healthcare costs are a top source of economic anxiety for most voters.

Does that set a predicate or set a foundation for fundamental change?

Or does that mean, as you advocate- - Yeah.

- Incremental change is really the way to reform the system.

- It definitely sets a predicate for some form of change.

I will tell you that the politically progressive side of the debate has an answer that is systemic reform, which is single-payer, Medicare for all, whatever you wanna call it.

The concept of the government coming in and controlling the healthcare system.

So that's the answer that they give.

And the reason why I argue for a more incremental approach is, A, because I don't think that's a good idea.

And I think to fix the system and to turn it in the direction we wanna turn it in but retain the elements of it that work well, incrementalism is the only answer.

- And you said healthcare, but you really mean health insurance.

- Yeah, and it's important to separate those concepts out.

You have this thing called health insurance.

But if you think about the concept of insurance, what is insurance?

Insurance is protection against catastrophic events.

Think about homeowners, think about cars.

- Your house burnt down.

Or floods.

- Sure, you get a big car wreck.

- Yeah.

- Health insurance is like if your auto insurance covered oil changes.

That's what health insurance is.

So this is the problem we have, is that the system of health insurance itself is a little bit of a misnomer.

It's prepaid healthcare.

- It's prepaid healthcare.

How would the left, 'cause you work across the aisle.

- Yeah.

- You're not an ideologue.

- Yeah.

- How do you think the mainstream left, I don't mean Bernie Sanders, Medicare for all.

- Yeah.

- How does the mainstream left characterize the fundamental flaw with our system?

- I don't know that they would characterize it a whole lot differently, except what they probably would add is this: There is a layer of, let's call, the middlemen in our healthcare system that they argue add to the cost of American healthcare because everybody gets their cut.

- Yeah.

- And the conclusion from that is get rid of the middlemen and put government in.

Right?

Government can do it at more scale, at lower cost.

- What would you do with the middlemen?

- Well, I think, in some cases, we do have to get them out of the way.

So, for example- - But do you replace them with a market function?

- I think, in some cases, the better answer is to have a pure connection between the purchaser of healthcare and the consumer of healthcare.

That is a pure market function.

But, you know, listen, there are other situations where government should probably play a bigger role.

And I'll give you one example, which is when you think about transparency of price, government can play a role, for example, in letting us know what some of those prices are, letting us know what some basic quality metrics are.

There is a role to be played there.

- Explain why it's important for healthcare users to understand the price of their drugs and the services they're receiving.

- In a true marketplace, the consumer has awareness around these things because it influences their behavior.

It influences how much of a product they consume as well as what kinds of products they consume.

When you don't have this information, a couple things happen, right?

First of all, you're making decisions in the dark, so you're not necessarily getting access to the products that work best, so that's one problem.

But a second problem is you can have, in certain cases, overuse.

And I think that as a whole drives up cost for the healthcare system, because the more healthcare we consume, the higher prices go.

- I'd like to talk about some of the ideas you've proposed.

One of the ideas you have really promoted is putting patients in control of their spending through what you call individual health accounts.

- [Lanhee] Mm-hmm.

- Many Americans are aware of health savings accounts, which were expanded this last year in Trump's One Big Beautiful Bill.

So, what problem does individual health accounts solve that the existing flexible spending accounts and health savings accounts don't address?

- So, part of the problem is we have too many of these accounts.

- Yeah.

- And I know that sounds crazy because we're proposing another one.

But the idea is, first of all, to try and consolidate some of the existing accounts into a single vehicle that people can understand.

- And so, then what is the vehicle?

- It's basically a savings account.

- [Margaret] Well, explain how it works.

- It's a savings account that allows you to save tax-free for healthcare, healthcare expenses, that is to an amount higher than what's permissible now under the law.

And you could use that account to spend on a broader variety of healthcare needs.

One of the challenges we have with the existing frameworks is that they actually really limit what you can spend your savings account money on.

So there might be limitations, for example, around using them to pay for health insurance premiums.

Like, that's kind of weird, right?

So, what we need to have is an account that's a little bit of a supercharged account that could be used to pay for many different things.

Now, I'll tell you the ultimate vision.

The ultimate vision is to create a savings account that's a savings account, whether you use it for healthcare, for retirement, right?

We've got all these different vehicles, 401ks and IRAs and Roth, people just get confused.

- Yeah.

- And they're like, "It's too much for me to think about."

Wouldn't it be easier if we just had an account- - A tax-free savings account.

- A tax-free savings account that could be used for health and retirement?

That is the ultimate goal.

Now, there are some steps we've gotta take to get there, but ultimately the individual health account that we propose is the shell- - I see.

- That we see eventually being that.

- So, one of the arguments, critics of this concept sort of put forth is that nearly 40% of Americans have less than $500 in savings.

So, how will they suddenly become active healthcare consumers with savings that they don't even have?

- Yeah, it's not for everybody at this point and maybe not for some period of time.

Health savings accounts as they exist now are predominantly a vehicle for middle, upper middle income, higher income folks to save for their healthcare expenses.

Now, there are some things we can do to integrate the big public programs with these savings accounts so that if individuals can't save, the government can help them save.

So instead of, for example, the government spending all of its money on an insurance plan, it could spend some of that money on insurance plan and some of that money funding these savings accounts for people.

And the benefit of that gets back to the point we made earlier, which is if you can figure out a way to introduce a consumer dynamic in healthcare where people are spending what is essentially their own money, that impacts their behavior in a way that's different than if they're spending someone else's money or if they don't even know what money they're spending, right?

So if the government said, "Look, here's a certain amount of money that's gonna be your money, but once that money is used, that's it," that affects spending in a way that the open-ended set of coverages doesn't.

And that's ultimately one of the dynamics we're trying to get to.

- An underlying problem you also point to is simply a shortage in healthcare supply.

- [Lanhee] Yeah.

- Both in doctors and in facilities.

In 1974, William F. Buckley Jr.

welcomed Max Fine to the program, and they spoke about a doctor shortage that was occurring then.

Take a look at what they said for the solution.

- For most people, the so-called crisis in healthcare boils down to cost.

But it's also a problem of chronic manpower shortage, particularly a physician shortage.

And the only way that we're even halfway satisfying the need for medical care in this country is by importing foreign physicians, particularly from countries that need 'em far worse than we do, countries like the Philippines and India.

- So how were they solving the healthcare shortage?

(Lanhee laughs) Importing doctors!

- [Lanhee] Yeah, which, by the way, is harder to do now.

- Well, you know why it's harder to do?

- Because we don't have immigration policy that's rational, but that's a different debate.

- 25% of U.S.

doctors are foreign-born.

- [Lanhee] Yeah.

- Many of them and many foreign medical students are leaving the United States because they have been sidelined by U.S.

hospitals and the Trump administration's immigration policies.

So, sounds like you think our immigration policies are undermining our healthcare supply.

- Well, I think our immigration policies are undermining supply of labor in a lot of different areas, including and particularly healthcare.

Lee me start with a story, if I might, which is, my dad was a doctor trained in Taiwan, moved to the United States to finish his medical training, stayed here because of immigration policies that encouraged foreign-born doctors to practice in rural areas.

And so I was born in a small town in North Carolina, spent the first six years of my life in a town of about 800 people because we had a government policy that said, "We recognize that there is a physician shortage that is critical in parts of our country, and we gotta figure out a way to address that."

And by the way, he was able to get a green card, become a citizen, and practice medicine to this day in the United States.

This is how the American healthcare system has been able to become the finest in the world, in my view, is that we have been able to train and retain talent from around the world.

We need to be able to figure out how to get the best talent from around the world here to America to help Americans.

And that is a good immigration policy, it's a rational immigration policy, but it's also good healthcare policy, in my view.

So, this part of the healthcare proposal that I advocate for is really about expanding supply, because any economic transaction is rooted in this basic concept of supply and demand.

- [Margaret] Yeah.

- And the demand for healthcare services is increasing.

In case people haven't noticed, we are getting older as a population.

So that is increasing.

The only way that we really can stop the cost escalation is to also increase the supply of care.

So that means more providers, more facilities, and more healthcare.

- For many viewers, the idea that there are Republican ideas for increasing accessibility to healthcare and decreasing prices to healthcare may seem an oxymoron.

You have said that conservatives have, quote, "lost some moral high ground over the years because the public has developed a flawed sense that Republicans aren't interested in providing healthcare for everyone."

Why have Republicans lost moral high ground on the issue of healthcare?

- I will say that for too long, Republican policymakers were animated by one goal, and that was the repeal of Obamacare.

- Yeah.

- It was an argument in the negative.

- Yeah.

- And once that argument played out, and, you know, you may recall we had a series of votes in 2016 and 2017, I think, by one count, almost 50 votes to repeal Obamacare.

It ultimately wasn't successful.

I think in the course of that six or seven years, the better course would've been, in addition to saying we need to repeal Obamacare, for Republican policymakers to also articulate very forcefully what the alternative to Obamacare would look like.

And I think that some did, to their credit, but the vast majority did not.

It's one thing to critique it, it's another thing to say, "What are actual things that you can put in place?"

whether it's price transparency or more individual empowerment or policies that better get at how to price drugs effectively or removing middlemen from the system.

These are all appropriate things to look at, enhancing the supply of healthcare.

But ultimately, if all of your argument is "no, no, no," at some point, that falls short.

So I think from both a messaging perspective as well as a substantive perspective, the conservative movement has fallen short a little bit on healthcare.

And it's not because of a lack of ideas.

There are a lot of ideas out there that credible scholars and analysts who are market advocates of healthcare reform have advocated for for decades.

But policymakers, for one reason or another, broadly speaking, have not been willing to engage or have been unwilling to really move the ball forward on advancing some of these reforms, and I think that's the challenge.

- The left-leaning Center for American Progress put out what it calls the "Patients' Bill of Rights" just recently.

These proposals are really heavy on federal regulation.

- [Lanhee] Yes.

- They call for limits on premium increases, hospital prices, insurer profits, as well as getting rid of prior authorization for treatment.

What do you say to those who say, "Why don't you just let the government make healthcare cost less and make it more broadly available?"

- Yeah, I think the simple answer is because it won't cost less.

In the long run, it's not gonna cost less.

What it will do is create a precedent for the government aggressively rationing access to healthcare.

And that is, in my mind, not one of the strengths of the American healthcare system, right?

I mean, we've talked about how we have a public private system.

And if you start to squeeze out private sector involvement by putting in place what are effectively price controls, it might make you feel good, and it might actually work at capping costs for a short period of time, but over the long run, people want healthcare.

They're gonna consume more healthcare.

Costs are gonna rise.

What's your answer then?

Are you gonna keep capping, for example, how much doctors can make?

Well, then you're gonna end up with fewer doctors.

- Yeah.

- You're gonna cap how much drug costs?

You're gonna end up with fewer lifesaving drugs.

So, to get back to the point about the cap proposal or really any other proposal from my friends on the left, I don't think all the ideas are bad.

I do think there's a fundamental premise that we can regulate our way to a better healthcare system that I disagree with.

And so that's where I think we need to have a sane, calm debate about areas where we do think government could step in and be a player for good that wouldn't severely distort markets, that would expand access.

But the other side of that is, I would hope that, again, my friends on the left would see that there are areas where we do need to create a healthier market, where the answer is about competition and promoting competition and allowing people to make educated decisions, and not more government.

So this is the problem we have in healthcare, like many other areas.

It's, like, all or nothing.

- Yeah.

- And that all or nothing is not gonna work in our healthcare system.

- During his 2017 campaign, Governor Gavin Newsom promised to enact a single-payer health system in California.

- He did.

- You were a candidate for statewide office in 2022 in California, so you're very familiar with what is now one of Governor Newsom's biggest unfulfilled promises.

- Yeah.

- Many people expect that he will enter the Democratic presidential primary sweepstakes.

What can we learn from California's pursuit of healthcare reform?

- I'd say the single biggest lesson was that Governor Newsom didn't abandon that effort because he thought it was politically unwise.

I think he abandoned it because he realized it was practically unworkable.

- Why?

- Because the single-payer healthcare system that he proposed would've required tremendous tax increases, would have been fiscally unsustainable for a state that already is suffering under significant fiscal pressure.

In the context of the 2028 primary, it will be interesting to see how Governor Newsom talks about walking away from single-payer healthcare, but I will tell you that I think it's gonna be a political liability for him.

And I don't think there's any other way to see it politically, but I'm glad he abandoned it.

It was the right answer.

- [Margaret] Yeah.

- But for the wrong reasons, probably.

- Your former boss, Mitt Romney, spoke about healthcare in Massachusetts just this last week because it marked the 20th anniversary of Romneycare's passage when he was the governor of Massachusetts.

Romneycare, of course, became a political liability later, but it was a law that extended health insurance nearly to all Massachusetts residents.

He said that it was a bipartisan accomplishment that was possible because, quote, "Political rivals respected each other, buried political weapons, and worked together to find solutions."

So it's been 20 years since Romneycare, 16 years since Obamacare, since the Affordable Care Act passed.

Do you see, in the work you do with policymakers across the aisle, any hope for an emerging consensus on the degree of even incremental healthcare reform that you've described here?

- I think that both Republicans and Democrats recognize that our healthcare system has some things that need fixing.

I think that when you get them in the quiet of a room without cameras and without the media, they will be able to agree on a large number of things, some of which we've talked about today.

But the problem is our politics have become so polarized that when the cameras go on and the recorders start recording, it is hard, I think, for Republicans and Democrats to come together and even agree on basic things.

But I think there is a recognition of the challenges our system faces.

And if our healthcare system is going to continue to be the best or one of the best in the world, we have to figure out a way to make sure that as many Americans get access to it as possible.

Unfortunately, that is not the direction we're headed in.

We are headed in the direction of fewer Americans being able to access the system in the way that previous generations have been able to.

And that's what I really worry about, is that, are we leaving our kids and grandkids with a better healthcare system?

Surely, better technology.

There's no question about that.

But the technology's not all that useful if people can't get access to it.

If it can't save lives, I'm not sure it's doing a whole lot.

So, these are the sorts of things that keep me up at night.

- Yeah.

- How do we ensure that we don't change the character of our system, which is one that has been really effective and has saved a lot of lives and improved the human condition?

How do we keep the best parts of that while also recognizing that there's some things that need to change and there are improvements that need to happen if the system is going to work for generations to come?

- Lanhee Chen, thank you for joining me on "Firing Line."

- Thank you.

- [Announcer] "Firing Line" with Margaret Hoover is made possible in part by: Robert Granieri, Vanessa and Henry Cornell, The Fairweather Foundation, The Tepper Foundation, Peter and Mary Kalikow, The Beth and Ravenel Curry Foundation, Pritzker Military Foundation, Cliff and Laurel Asness, The Margaret and Daniel Loeb Foundation, and by the following.

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