Uwe Reinhardt, middle, talks with Dr. R. Sanders Williams, dean of the School of Medicine, and Dr. Victor Dzau, chancellor for health affairs. Photo credit: Butch Usery

Durham, N.C. - To free up money to pay for growing numbers of Americans who are going without basic health care, the U.S. health care industry has the moral responsibility to address rising administrative costs in the system, a leading health economist said March 3.

Uwe Reinhardt, James Madison Professor of Political Economy at Princeton University and a current trustee of Duke University and the Duke University Health System, told a capacity audience at the Washington Duke Inn that in a decade as many as one-third of Americans will be either uninsured or underinsured.

"Right now, the only people who can help the poor are the leaders of the health care system," Reinhardt said. "If we can get a handle on that, we can get [care for the poor] done. We will need to be more affordable, because the message to the health care system is that we are alone in solving this."

Reinhardt started his talk by noting that politicians routinely begin discussions of health care by claiming the U.S. has the "greatest health care system in the world." And in many ways, he said, that claim is correct: American doctors and nurses are the best trained in the world; there is an abundance of technologically sophisticated health care facilities; the system is innovative and generally patient-friendly; and health care is supported by the best medical research.

"That's a long list of good stuff, not one to take lightly," he said.

But on the debit side, there are shocking flaws in the delivery of health care, he added. There is a troublesome variation in health care spending in communities across the country. At the same time, a scarcity of general practitioners in many places drives up health care costs without bringing significant improvement in outcomes, he said.

"States with more general practitioners have more efficient care and have lower spending," he said. "Good primary care is the foundation of a good health care system."

However, the biggest issue the system faces is the inequality of health care delivery. He noted that in his home state of New Jersey, the state legislature mandated limiting Medicaid payments to $20 per pediatric visit while offering to pay $60 per visit for the legislators' own children. With such disparities, some physicians are refusing to treat low-income and Medicaid patients, he said.

And the situation will get worse. By 2015, nearly one-half of the gross domestic product will go to health care expenditures. Most Americans can afford the increased costs "for a while, but about one third won't," he said. In a decade, he predicted, health care costs for a family of four will reach $20,000 annually. As costs to employers rise, he also predicted they will simply stop covering employees' health care expenses.

There are solutions, he said, but the country has shown little political will to take the necessary steps. Political leaders refuse to raise taxes to pay for care for the poor, even though the United States is one of the least taxed nations in the industrial world, he said. And political forces also work against promoting wellness issues.

"We are a country where we put soda and candy machines in our schools to help fund the schools," Reinhardt said. "That brings with it a whole series of health problems that we will pay for later.

"But solutions require us to intervene in ways we're not used to. We could pass a law eliminating soda and candy machines in the schools, but some state will fight it. People will fight for the right to poison their own kids."

That leaves it to health care leaders to rein in administrative costs, he said. He noted there was needless duplication in insurance and medical information that require costly administrative structures. "We spend $300 billion a year on health care administrative costs" he said. "That figure can be cut in half without any loss of health care outcomes."

The talk was the first William G. Anlyan, M.D., and Richard Jenrette Lecture in Health Economics and Policy, sponsored by the School of Medicine to promote understanding of health care policy issues. The lecture series is funded by a donation from Jenrette, a founder of the Wall Street firm Donaldson, Lufkin and Jenrette.