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

November 21, 2014

Now who’s being stupid (and it’s not Jon Gruber)?

Filed under: Uncategorized — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 10:14 am

To date, we’ve consciously chosen not to blog about the recent controversy surrounding our colleague Jon Gruber.  This is not because we lack opinions on the issue, but mainly because as economists we didn’t think we had anything of value to contribute to the discussion, which was largely about scoring political points.  However, recent attempts to stop grant support for Jon’s academic research have drawn our attention and we think it is important to highlight some important issues.  Beyond being the “architect of the ACA,” Jon is one of the most prolific and influential economists in academia.  His academic research is exactly what we should be supporting with grants regardless of any regrettable comments he made.

Since these videos emerged online, Jon has been subject to a wide range of attacks on both his personal character and his intellect (though we note that in a battle of the brains between David Axelrod and Jon Gruber, we’re taking Gruber every day and twice on Sunday).  We are not naïve, and understand that some of this is just part of the overly political nature of the debate over the ACA, in which the videos of Jon’s various comments are just another pawn.  Academics who choose to become involved in the political process must play by a different set of rules – and in the age of social media these rules are different even from what they were 10 years ago.  Though we would also note that the clutching of pearls by various members of each political party about the content of Jon’s statements does make use think we are watching the audition tapes for Casablanca’s Captain Renault.

We should note from the outset, that any casual reader of this blog realizes that we sincerely disagree with Jon on many political issues, particularly those related to the design and implementation of the ACA.  In addition, neither of us was pleased with the manner in which the ACA was debated, designed, or passed.  That being said, in the past couple of days, Republican lawmakers sent a letter to the National Institutes of Health asking them to review one of Gruber’s recent grants.  This is simply a bridge too far, going well beyond the bounds of reasonable and fair outcomes from this kerfuffle.

Perhaps a little context will make clear why this is the case.

Throughout his career Jon has written on a wide variety of topics ranging from the crowd-out of public health insurance, supplier induced demand and the effect of health insurance as precautionary savings (and these are just his health care papers).  In more recent years, Jon has focused a lot of his work on understanding the decision making of enrollees in Medicare Part D (i.e. the prescription drug benefit available to seniors as of 2005).

As we all know, choosing the right health insurance plan is really hard.  Consumers have to consider premiums, deductibles, copayments, coverage limits, networks…it is extremely challenging.  (To be fair, making the right choice for purchasing a variety of good is hard but insurance is just far more complicated).   We know from personal experience how hard this can be.  A few years ago, our employer offered a menu of health plans and learned, after the fact, that the cost sharing provisions assured that one of the options was worse for all employees, regardless of their health needs.  Even so, this was one of the most popular choices, and one of us made the mistake of choosing this plan!  I don’t think we are being presumptuous to say that if consumers with PhDs have a hard time making sense of plan options, others are also likely to struggle.  Indeed, Jon’s research (with various coauthors) confirms that seniors have potentially been making systematic errors with their initial plan selections.  For example, in peer reviewed work he has shown that seniors appear to use premiums rather than out of pocket costs when choosing their insurance plans, even though this decision rule often leads to worse financial decisions.

Jon’s  work is important for understanding how to shape the options available to seniors under Medicare Part D.  But it also suggests that all consumers may face challenges when choosing plans in the ACA exchanges and helps explain some of the rules governing plan offerings, such as the classification into “medal” categories that greatly facilitate comparison shopping.  In addition, several private companies are now providing information to consumers trying to sort through their plan offerings.  Jon’s research, which has been instrumental in these important developments, represents the very type of work that the NIH should be funding.  Thanks to his work, we have made important progress in designing exchanges that promote efficient choices of insurance plans.

Beyond this particular topic it’s important that we avoid the blatant politicization of the grant making process.  While we understand how some people could be offended by the comments that Jon made, and we remain unimpressed with the debate over the ACA, this shouldn’t spill over to the academic side of this conversation. Even throughout this entire process, no one has questioned the quality of Jon’s work or analysis.  He is one of the best economists of his generation and someone whose research should be supported. Ultimately, we all need to realize that stopping support for Jon’s research in order to score political points is, well, just plain stupid.

1 Comment

  1. As a previous health insurance executive of many years, I must point out that while the ACA was being promoted by politicians, others expressed doubts frequently although not as loudly. The latter were not heard by the public because of shortage of media focus and also because they were not as glamorous. Perhaps, Gruber, instead of using the word stupid, could have used the word Naïve to describe the public. Also mention human nature that tends to espouse the pleasant and sweep the unpleasant under the rug. In general, we by and large tend to excuse the public of taking responsibilities and prefer to blame those who take advantage.

    Comment by Dhun Mehta — November 21, 2014 @ 10:52 am

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