I think things are disorganized and much of it is inefficient and misallocated. We have a lot of inequities in the system. There are some people who get too much care, a lot of people who get too little care and people [who] get the wrong care at the wrong time. There are a lot of reasons why that is the case, and there are many, many opportunities for improvement.

What do you think about the Obama administration’s plan?

There are a few facts to start with. We spend about 1/7 of our GDP on health care and that’s twice what almost any other advanced Western country spends. Canada spends about 8 percent. We spend about 14-15 percent. It’s not clear that we’re healthier than the other countries. Clearly something’s not working. We also have 14-15 percent of the population uninsured and that’s not good for a whole bunch of reasons. We’re starting from a position that is clearly far from optimal. There’s this history of failed reform. I think what’s interesting is I believe that the Obama administration has been more successful at changing the dialogue, changing the system and highlighting the role of special interest as a barrier to reform. There are many parties who have an interest in things staying as they are. I think [the Obama administration has] been pretty politically savvy when trying to emphasize the value of the system, trying to do incremental reform. If you think back to the Clinton reform that fell flat, part of [the failure] was that [the administration was] so secretive about making the reform and it was such a huge change. What we’ve seen thus far is that several of the key pieces of the Obama reform are already underway in the stimulus package. [Obama and his administration] really are taking an approach of incremental reform rather than trying to leap from one state to another. There are still going to be big moments where you have to sign on, but it’s bit by bit. I think they’re taking smaller bites.

He really has several main pieces to the plan. The first, which is actually the one that the media misses when looking at it, is really best described as improving the value of the system. This means not just lowering costs but getting rid of things that are high cost and don’t provide much benefit and reallocating dollars and resources to things that are of high benefit with a relatively low cost, such as additional tests and MRIs that are done with certain cases. There are few resources for preventive care, so there are many ways that resources are misallocated and one of the key features of the Obama plan is to try and realign incentives. That is a complicated thing to do because you need to realign incentives for patients, physicians, hospitals [and] insurance companies. It’s a complicated process but it’s definitely worth doing because there are so many huge inefficiencies that even if they don’t get at all of them, you can find some really easy things that are hugely inefficient [to change]. If we can change the behavior of the market around these things we can have huge improvements not just in terms of reducing costs, but also what we get for that cost. That’s piece one and that’s the piece that’s largely ignored in media coverage and I really think is at the core of what he’s trying to do.

Piece two is moving towards universal coverage. Currently what we have is that most people get their coverage through their employer, but about 15 percent of the population is uninsured and many more people are under-insured, meaning they don’t have very good insurance. There are a number of explanations why people are uninsured but it’s not as simple as that they don’t have jobs. Figuring out why people are uninsured is complicated and consequently figuring out how to get these people insured is even more complicated. What President Obama has proposed is that people that have insurance stick to what they have. Then there’s this sort of baseline plan. It’s essentially what members of Congress have, and anyone can apply. [They] can be accepted into the baseline plan and there’s a sliding scale using tax credits to make it affordable for individuals. Hopefully then, [the] many people [who] are uninsured unwillingly would be able to move into insurance.

One small piece of this that the media has paid a lot of attention to is that [Obama] does not have a mandate in the plan and currently has not required people to get insurance, as Senator Clinton did when she was a candidate. During the Democratic primaries, that was what was emphasized as the big difference between the two. It’s an important difference but it’s much less important than President Obama’s emphasis on the value of the system. I see his plan as having two parts. That first part is much more complex, improving the value and equity of the system, and the second piece is the move towards universal coverage. His advisor, David Cutler, is an economist. We actually read his book in my health economics class. He’s the one who designed the Obama/Biden plan. At various times, he has said that it’s not clear that a mandate would be necessary and that’s partly because the public’s perception of who is uninsured is really off. People have the impression that people who are uninsured are uninsured by choice, and if you look, it’s just not a clear picture. It’s very clear that it’s across ages, a lot of them are better off than you’d think they would be, 60 percent of them have a full time worker in the family — it’s not who you think. What Cutler has said is that it’s not clear that mandates would be necessary, [but] they’re willing to consider [them] if that becomes a problem.

What would this plan specifically cover?

That has not been made particularly clear. What has been said is that it would be a decent plan; right now, it’s what members of Congress have. It would be a relatively comprehensive plan but the idea is that it would include a framework that provides patients, physicians, hospitals and other providers [with] incentives to improve the value of the system. You need to change behavior with incentives. For example, the kind of thing that David Cutler has discussed in the past and that was discussed during the campaign are bonuses for physicians that check blood pressure, provide nutrition counseling or show measurable improvements in patient health. The current system really rewards spending. Instead of that you have a more nuanced system that tries to award health. There are other aspects of the system that the administration is targeting to eliminate waste, which is why in the stimulus there’s money for electronic records. This would fix the problem that if one doctor gives you a test, but another doctor doesn’t have the records, he’ll give it to you again. They also want to eliminate medical errors, which kill about 100,000 people in the U.S. every year. There are all of these different options and they all reduce costs by a bit, but if they’re all done, they can make a big difference.

So do you believe that President Obama is doing a good job thus far?

I think [his health care plan] is very well thought out, there’s very good economics behind what they’re doing, and there’s a lot of evidence that they really have drawn from the evidence. They’re trying to be careful and navigate the potential pitfalls better than we have seen others do in the past. I would say that it’s moving along reasonably well. I think they’ve also made it clear that it’s not a choice, and [it’s not] that we’re in an economic crisis and therefore can’t afford this. They’re making the argument that we can’t afford not to. Medicare is incredibly expensive and dominates the budget, and baby boomers are getting old. We can’t afford to let the costs continue to go up. We can’t afford to let all these inefficiencies stay as they are. We need to start finding a way to improve.