Health

Jonathan Gruber’s Comments About Obamacare Are Offensive, But They Are Also Untrue

CREDIT: AP

In this May 12, 2009, file photo Jonathan Gruber, professor of Economics at the Massachusetts Institute of Technology, participates in a Capitol Hill hearing on the overhaul of the heath care system in Washington.

Health care economist Jonathan Gruber recently claimed at a policy conference that lack of political transparency helped Congressional Democrats pass the health care bill into law, attributing its success to “the stupidity of the American voter.” The comments have caused a firestorm of criticism and may even spark a Congressional investigation into the law. But despite the uproar, Gruber’s analysis does not reflect reality.

Gruber served as a technical consultant of sorts to the law’s framers, producing cost estimates of various provisions and providing technical advice garnered from his economic training and experience in overseeing Massachusetts’ fairly similar reforms. But that’s where Gruber’s knowledge of reform ends. His comments don’t actually reveal a conspiracy to hide the truth from the American people because that truth had been out there all along.

Just consider the two examples Gruber uses to demonstrate how Congress supposedly pulled the wool over Americans’ eyes. Democrats, he claimed, prevented the Congressional Budget Office from scoring the individual health care mandate as a tax and kept the public in the dark about the fact that young and healthy beneficiaries who enroll in Obamacare would subsidize the health premiums of the sick.

Here he is in his own words:

This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies. Okay, so it’s written to do that. In terms of risk rated subsidies, if you had a law which said that healthy people are going to pay in – you made explicit healthy people pay in and sick people get money, it would not have passed… Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really really critical for the thing to pass… Look, I wish Mark was right that we could make it all transparent, but I’d rather have this law than not.”

Both of those assertions are false — and demonstrably so.

The Congressional Budget Office and the Joint Committee on Taxation scored the individual mandate as increasing revenue by $4 billion in 2016, and, on average, “an estimated $5 billion will be collected per year over the 2017–2024 period.” Whether they viewed the mandate as a “tax” or not would not have affected their analysis because the economic effect is the same whether it is called a tax or a penalty. That penalty is collected under the Internal Revenue Code and policy makers have always claimed — and detractors complained about — the fact that individuals would have report it on their tax returns “as an addition to income tax liability.”

That same office — which produced a flurry of cost estimates throughout the legislative process — was also plainly clear that healthy people would have to subsidize sick people in a larger health care insurance pool. In this letter dated November 30, 2009 to then-Democratic Senator Evan Bayh (IN): “some provisions of the legislation would tend to decrease or increase the premiums paid by all insurance enrollees, while other provisions would tend to increase the premiums paid by healthier enrollees relative to those paid by less healthy enrollees or would tend to increase the premiums paid by younger enrollees relative to those paid by older enrollees.”

That concept of healthy people subsidizing the sick was also widely covered in media reports. In a Sep. 29, 2009 story titled, “Age and higher premiums go together,” Associated Press reporter Erica Werner explained that the various reform bills making their way through Congress rely on a concept called “community rating,” in which insurers would only be allowed to vary premiums by certain factors such as age, geographic area and tobacco use, within certain limits. Tying the rates of younger and healthier people to the rates of older and sicker beneficiaries causes the former to pay more.

In the House, Democrats sought to impose “an age rating limit of 2 to 1, meaning that a 60-year-old could only be charged twice as much as a 20-year-old based on age,” Werner wrote, while the Senate measure had “originally had proposed a 5 to 1 age rating limit.”

The question was relentlessly discussed in health committees and the White House’s very public webpage about President Barack Obama’s own health care proposal states that he wants to “limit premium variation based on age.” In fact, the president addressed the issue repeatedly while making the public case for reform.

During a 2009 forum with the AARP, Obama explained that “part of the insurance reforms we want to institute is to make sure that there’s what’s called a community rating principle” that would “reduce costs or level out costs for older Americans.” At a bipartisan White House forum on health care the following year, Obama said that healthy and sick people would enroll in a large insurance pool in order to better balance the risk and the cost of insurance. “[Y]ou get the healthy and the young people alongside the not-so-healthy and the older people. But we’re all kind of spreading our risk, because each of us don’t know at any given time what might happen,” Obama explained.

The idea of cross-subsidization was routinely used by Republican critics and lawmakers to slam Obama’s health care effort in 2009 and 2010, but it had been embraced by the GOP during debate over President Bill Clinton’s health care bill. In fact, an alternative to Clinton’s plan sponsored by Republican Sens. John Chafee (RI) and Bob Dole (KS) would have “spread risks and costs more broadly” by requiring insurers to adopt “modified community rating.”

Lawmakers were aware that this aspect of health reform could be seen as controversial, but they spoke about it openly without attempting to hide its effect. As Sen. Chuck Grassley (R-IA) explained during a February 2, 1994 Senate Finance Committee hearing on the matter, the issue was “a given.” “Well, I think it is almost a given that-it is a little more controversial on community rating, but it is almost a given that there is going to be some sort of community rating, modified community rating, and eliminating cherry-picking, et cetera,” he said.

UPDATE

Community rating has long been a topic of Congressional conversation. The committee sites aren’t great, but a search of Senate Finance shows 155 results, for “community rating.” A Congressional Record search (also, the tool doesn’t work super duper well) from 2009-2010 shows 35 mentions on the floor (a lot of them by Republicans disparaging the concept).

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UPDATE

In a video from 2010 uncovered by CNN’s Jack Tapper, Gruber argues that health care law does little, if anything to control health care costs and claims that there is no guarantee that it would lower national health expenditures.

Four years later, the Centers for Medicare and Medicaid Services estimated that U.S. health spending in 2019 will be $4 trillion, $500 billion less than the agency projected in 2010. The Congressional Budget Office also lowered its five-year cost estimates by $49 billion.

Economists attribute the savings to a multitude of factors, including a slowdown in health care spending during the economic recession. But they also argue that the law’s reduction in payments to providers and other incentives, such as encouraging providers to “limit unneeded procedures, and keeping people out of the hospital longer” have all contributed to the savings.

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