James Surowiecki calls David Cutler “the most important health care economist in the U.S. today,” and I think he’s right. Among his many accomplishments, Cutler has profoundly helped to shape President Obama’s mindset on health care.

Surowiecki, a columnist for New Yorker‘s The Financial Page, interviewed David Cutler on his views on health reform, posted December 31, 2009, for a New Yorker video. “It’s an amazingly good step forward for the country,” Cutler told Surowiecki. “It’s something we’ve tried to do for 80 years so the timing is right.”

Cutler bases his “good step” on 3 key principles:

1. What does the legislation do for covering uninsured people?

2. What does reform do to modernize the U.S. health system so it (a) works better and (b) costs less?

3. What does reform do about the public health infrastructure in helping Americans live longer, healthier lives?

One of the things that’s surprised Cutler in the past year of health reform wrangling in Congress and in the public arena was the negative response, in some quarters, to the public option. He said, “I like having a public option because people should have the choice between a public and a private” plan. “I’m surprised we’ve focused so much on this versus how much we’re giving in subsidies for people, to reform insurance markets, and to save money in the bill.”

Cutler co-authored a Commonwealth Fund study, Why Health Reform Will Bend the Cost Curve, saying that health reform will lower health costs, even as 30+ million uninsured people would be absorbed into the system. How is that possible, Surowiecki asked? “Every study we know of,” Cutler explained, “says the US health system is loaded with inefficiencies. Administrative costs are way too high: costs are 1/3 higher than they have to be.” Cutler estimated that about $2.5 trillion will be spent on health care in 2010, so about $700-800 would be wasted.

Administrative waste is also bound up in the labor required to manage insurance paperwork. “Every middle manager who used to work in every other industry, they now work in health care,” Cutler quipped. “At Duke University Hospital there are 900 hospital beds and 1300 billing clerks. Get admitted to the hospital and get 1.5 billing clerks with your admission,” he joked. (For more on administrative waste, see the work of the U.S. Healtcareh Efficiency Index).

Getting sober about the prospects for health reform, Cutler pointed out: “it could fail: we could appoint lousy people to run it. The private sector – doctors, hospitals, and insurers – could spend next decade fighting it.”

But turning that half-empty glass to a half-full one, Cutler envisioned that, “All provider organizations are going to have to say it’s a new world I have to figure out how I’m going to adapt here.”

What we’ve learned the most in past 10-20 years, he said, is that we can have enormous impact on what’s done in health care by changing the financial incentives and information available to the provider. If you give a provider the right information, hold them accountable, and give them incentives to do the right thing, the health system will transform.

“Name an industry that got better without knowing what it’s doing,” he challenged.

In closing, Cutler said that the worst thing we did in U.S. health care was to think of the industry as being the hospital, the doctor, the pharma companies. “No one I know cares who physically provides the care–they care did they get better. We have to make ‘did the patient get better?’ the operative idea.”

The health reform bill lays a foundation, a road, that we can travel on, Cutler explained. It is up to us to make it work over the next decade, when the health system will look very different from how it looks today.

Health Populi’s Hot Points: David Cutler is one of the voices of reason in the health care debate. If you’ve developed ennui — or are a lifelong learner of health economics and politics — listen in on the dialogue between Cutler and Surowiecki. You’re sure to have a lightbulb moment or two, and be entertained in the process.

It’s not all dismal science, this economics! It really can be soulful, as David Colander’s great book, The Soulful Science, tells it.