Code Red: Two Economists Examine the U.S. Healthcare System

January 17, 2010

Jon Gruber and the Massachusetts Referendum

Filed under: Health Reform,Health services research,Health spending,Research methods,Tax deduction,Uninsured — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 9:00 am

I don’t know if my friend and colleague, MIT economist Jon Gruber, enjoys being in the frying pan, but that is right where he has landed. What started several years ago as a good faith effort to expand health insurance coverage in his home state of Massachusetts has combined with Tuesday’s special election to replace Senator Edward Kennedy to become the single most important political event in the history of health reform. While no election is ever about a single issue, Tuesday’s vote is, more than anything else, a referendum on Gruber’s brainchild, the Massachusetts Health Plan. Gruber now hopes to take his ideas nationwide, with the President’s blessing. But if residents of Massachusetts decide that the experiment has failed, or if they think that Congress’ perverse rewrite of the plan will only make things worse, Republican Scott Brown will upset Democrat Martha Coakley and national health reform will be dead once again.
I suspect that most of you know Jon Gruber. He is a brilliant public finance economist — maybe the best of his generation. (He is also a really nice guy.)  His work on the impact of health insurance costs on labor markets is seminal. Massachusetts could not have chosen more wisely when it asked Gruber to play a lead role in designing a reform plan. It has been a noble experiment. But Gruber has come under attack from some circles for failing to “properly” disclose a $300,000 contract with Health and Human Services to evaluate the impact of national health reform. Yes, there is the potential for conflict of interest, inasmuch as Gruber is more or less evaluating his own proposal. But no one has accused Gruber of fabricating numbers and they shouldn’t – I have never known a more careful researcher. The fact is that Gruber is the most qualified person out there to conduct this research. Yet given the circumstances, perhaps HHS should have asked someone else to conduct the study (or at least ponied up a little bit more money to have some independent validation.)

(Memo to the Wellpoint, whose study showing that health reform could raise premiums by as much as 100% and is praised by the Wall Street Journal: Perhaps you could submit your study to an academic journal and get some serious feedback that would help sharpen your analyses and generate more accurate predictions. The peer review process is a wonderful thing.)

While I think the world of Gruber, I am not sold on his reform proposal and it seems that many in Massachusetts share my skepticism. The state appears evenly split between supporters, those opposed, and the undecided. The plan has sharply reduced the number of uninsured, but taxes have soared and so have premiums. The plan has no serious cost controls and taxpayers appear fed up with having to pay more for their own healthcare while subsidizing health care for others. The national plan is no better, now that the Democrats in Congress have eviscerated the one semi-serious cost containment mechanism by granting favorable tax status to unions and government workers. Add to that the perverse bribes offered to Nebraska’s Ben Nelson and others and the Massachusetts plan looks far more attractive than what Congress will give us.

Economists rarely have the national spotlight shined on them. It is Gruber’s time. The vote on Tuesday is a referendum on his ideas. But if the Republican wins, it may also have been a referendum on the corruption that now pervades Congress. The Democrats are subverting Gruber’s good faith efforts. Maybe it is time for him to respond. Either fish or cut bait.

2 Comments

  1. Professor Gruber may be brilliant and nice but his assertion that the Mass. reform would be covered by the funds they were already spending on uncompensated care was a gross under-estimate and the state is now burdened by massive increases in costs and entitlements- his failure to disclose that he was being paid by the administration was a clear violation of the NY Times policy for op ed writers.

    Comment by JLSchroeder — February 24, 2010 @ 5:35 pm

    • I think the cost of the Mass reform was a big unknown to everyone — Jon would readily admit that. But I doubt anyone thought it would be cheaper than it turned out.

      The skill set required to be a great academic and the skill set required to negotiate the world of politics are obviously very different. I think a lot of economists who can contribute in the policy arena may have been chilled by the way some have reacted to this incident. Being in DC must leave an awful stench if good guys like Gruber end up carrying it around with them.

      Comment by dranove — February 24, 2010 @ 5:43 pm


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