FEBRUARY 17, 2015
ANYTHING PEACEFUL
8 Goofs in Jonathan Gruber’s Health Care
Reform Book
This Obamacare architect’s propaganda piece is a
comic of errors
by MATT PALUMBO
In one of life’s bitter ironies, I recently found a book by Jonathan
Gruber in the bin of a bookstore’s going-out-of-business sale. It’s
called
Health Care Reform: What It Is, Why It’s Necessary, How It Works.
Interestingly, the book is a comic, which made it a quick read. It’s just
the sort of thing that omniscient academics write to persuade ordinary
people that their big plans are worth pursuing.
In case you’ve forgotten and to compound the irony
Gruber is the Obamacare architect who received negative media
attention recently for some controversial comments about the stupidity of
the average American voter. In Health Care Reform, Gruber focuses
mainly on two topics: an attempted diagnosis of the American health care
system, and how the Affordable Care Act (the ACA, or Obamacare) will
solve them. I could write a PhD thesis on the myriad fallacies,
half-truths, and myths propounded throughout the book. But instead, let’s
explore eight of Gruber’s major errors.
Error 1: The mandate forcing individuals to buy health insurance is
just like forcing people to buy car insurance, which nobody
questions.
This is a disanalogy and an important one. A person has to purchase
car insurance only if he or she gets a car. The individual health
insurance mandate forces one to purchase health insurance no matter what.
Moreover, what all states but three require for cars is
liability insurance, which covers accidents that cause property
damage and/or bodily injury. Technically speaking, you’re only required
to have insurance to cover damages you might impose on others. If an
accident is my fault, liability insurance covers the other individual’s
expenses, not my own, and vice versa.
By contrast, if the other driver and I each had collision insurance, we
would both be covered for vehicle damage regardless of who was at fault.
If collision insurance were mandated, the comparison to health insurance
might be apt, because, as with health insurance, collision covers damage
to oneself. But
no states require collision insurance.
Gruber wants to compare health insurance to car insurance primarily
because (1) he wants you to find the mandate unobjectionable, and (2) he
wants you to think of the young uninsured (those out of the risk pool) as
being sort of like uninsured drivers people who impose costs on others
due to accidents.
But not only is the comparison inapt, Gruber’s real goal is to transfer
resources from those least likely to need care (younger, poorer people)
to those most likely to need care (poorer, richer people). The only way
mandating health insurance could be like mandating liability car
insurance is in preventing the uninsured from shifting the costs of
emergent care thanks to federal law. We’ll discuss that as a separate
error, next.
Error 2: The emergency room loophole is responsible for increases in
health insurance premiums.
In 1986, Reagan passed the
Emergency Medical Treatment and Active Labor Act, one provision of
which was that hospitals couldn’t reject emergency care to anyone
regardless of their ability to pay. This act created the “emergency room
loophole,” which allows many uninsured individuals to receive care
without paying.
The emergency room loophole does, indeed, increase premiums. There is no
free lunch. The uninsured who use emergency rooms can’t pay the bills,
and the costs are thus passed on to the insured. So why do I consider
this point an error? Because Gruber overstates its role in increasing
premiums. “Ever wonder why your insurance premiums keep going up?” he
asks rhetorically, as if this loophole is among the primary reasons for
premium inflation.
The reality is, spending on emergency rooms (for both the uninsured and
the insured) only accounts for
roughly 2 percent of all health care spending. Claiming that health
insurance premiums keep rising due to something that accounts for 2
percent of health care expenses is like attributing the high price of
Starbucks drinks to the cost of their paper cups.
Error 3: Medical bills are the No.1 cause of individual bankruptcies.
Gruber doesn’t include a single reference in the book, so it’s hard
to know where he’s getting his information. Those lamenting the problem
of medical bankruptcy almost always rely on a
2007 study conducted by David Himmelstein, Elizabeth Warren, and two
other researchers. The authors offered the shocking conclusion that 62
percent of all bankruptcies are due to medical costs.
But in the same study, the authors also claimed that 78 percent of those
who went bankrupt actually had insurance, so it would be strange for
Gruber to claim the ACA would solve this problem. While it would be
unfair to conclude definitively that Gruber relied on this study for his
uncited claims, it is one of the only studies I am aware of that could
support his claim.
More troublingly, perhaps, a bankruptcy study by the Department of
Justice which had a sample size five times larger than Himmelstein and
Warren’s study found that 54 percent of bankruptcies have no medical
debt, and 90 percent have debt under $5,000. A
handful of studies that contradict Himmelstein and Warren’s findings
include studies by Aparna Mathur at the American Enterprise Institute;
David Dranove and Michael Millenson of Northwestern University; Scott
Fay, Erik Hurst, and Michelle White (at the universities of Florida,
Chicago, and San Diego, respectively); and David Gross of Compass Lexecon
and Nicholas Souleles of the University of Pennsylvania.
Why are Himmelstein and Warren’s findings so radically different? Aside
from the fact that their study was funded by an organization called
Physicians for a National Health Program, the study was incredibly
liberal about what it defined as a medical bankruptcy. The study
considered any bankruptcy with any amount of medical debt as a medical
bankruptcy. Declare bankruptcy with $100,000 in credit card debt and $5
in medical debt? That’s a medical bankruptcy, of course. In fact, only
27 percent of those surveyed in the study had unreimbursed medical
debt exceeding $1,000 in the two years prior to declaring
bankruptcy.
David Dranove and Michael L. Millenson at
the
Kellogg School of Management reexamined the Himmelstein and Warren
study and could only find a causal relationship between medical bills and
bankruptcy in 17 percent of the cases surveyed. By contrast, in
Canada’s socialized medical system, the percentage of bankruptcies
due to medical expenses is estimated at between 7.1 percent and 14.3
percent. One wonders if the Himmelstein and Warren study was designed to
generate a narrative that self-insurance (going uninsured) causes
widespread bankruptcy.
Error 4: 20,000 people die each year because they don’t have the
insurance to pay for treatment.
If the study this estimate was based on were a person, it could
legally buy a beer at a bar. Twenty-one years ago, the
American Medical Association released a study estimating the
mortality rate of the uninsured to be 25 percent higher than that of the
insured. Thus, calculating how many die each year due to a lack of
insurance is determined by the number of insured and extrapolating from
there how many would die in a given year with the knowledge that they’re
25 percent more likely to die than an insured person.
Even assuming that the 25 percent statistic holds true today, not all
insurance is equal. As Gruber notes on page 74 of his book, the ACA is
the biggest expansion of public insurance since the creation of Medicare
and Medicaid in 1965, as
11 million Americans will be added to Medicaid because of the ACA. So
how does the health of the uninsured compare with those on Medicaid?
Quite similarly. As indicated by the results from a two-year study in
Oregon that looked at the health outcomes of previously uninsured
individuals who gained access to Medicaid, Medicaid
“
generated no significant improvement in measured physical health
outcomes.” Medicaid is more of a financial cushion than anything
else.
So with our faith in the AMA study intact, all that would happen is a
shift in deaths from the “uninsured” to the “publicly insured.” But the
figure is still dubious at best. Those who are uninsured could also
suffer from various mortality-increasing traits that the insured lack. As
Megan McArdle elaborates on these lurking third variables,
Some of the differences we know about: the uninsured are poorer, more
likely to be unemployed or marginally employed, and to be single, and to
be immigrants, and so forth. And being poor, and unemployed, and from
another country, are all themselves correlated with dying
sooner.
Error 5: The largest uninsured group is the working poor.
Before Obamacare, had you ever heard that there are 45 million
uninsured Americans? It’s baloney. In 2006, 17 million of the uninsured
had incomes above $50,000 a year, and eight million of those earned more
than $75,000 a year. According to one estimate from 2009, between 12
million and 14 million were eligible for government assistance but simply
hadn’t signed up. Another estimate from the same source notes that
between 9 million and 10 million of the uninsured are not American
citizens. According to the Centers for Disease Control and Prevention,
slightly fewer than 8 million of the uninsured are aged 18–24, the group
that requires the least amount of medical care and has an average annual
income of slightly more than $30,000.
Thus, the largest group of uninsured is not the working poor. It’s the
middle class, upper middle class, illegal immigrants, and the young. The
working poor who are uninsured are often eligible for assistance but
don’t take advantage of it. I recognize that some of these numbers may
seem somewhat outdated
(the sources for
all of them can be found here), but remember: we’re taking account of
the erroneous ways Gruber and Obamacare advocates sold the ACA to
“stupid” Americans.
Error 6: The ACA will have no impact on premiums in the short term,
according to the CBO.
Interesting that there’s no mention of what will happen in the long
run. Regardless, not only have there already been premium increases, one
widely reported consequence of the ACA has been increases in
deductibles. If I told you that I could offer you an insurance plan
for a dollar a year, it would seem like a great deal. If I offered you a
plan for a dollar a year with a $1 million deductible, you might not
think it’s such a great deal.
A report from
PricewaterhouseCoopers’ Health Research Institute found that the
average cost of a plan sold on the ACA’s exchanges was 4 percent less
than the average for an employer-provided plan with similar benefits
($5,844 vs. $6,119), but the deductibles for the ACA plans were 42
percent higher ($5,081 vs. $3,589). The ACA is thus able to swap one form
of sticker shock (high premiums) for another (high deductibles). Let us
not forget that the ACA exchanges receive federal subsidies. Someone has
to pay for those, too.
Error 7: A pay-for-performance model in health care would increase
quality and reduce costs.
This proposal seems like common sense in theory, but it’s
questionable in reality. Many conservatives and libertarians want a
similar model for education, so some might be sympathetic to this aspect
of Gruber’s proposal. But there is enormous difficulty in determining how
we are to rank doctors.
People respond to incentives, but sometimes these incentives are
perverse. Take the example of New York, which introduced a system of
“scorecards” to rank cardiologists by the mortality rates of their
patients who received coronary angioplasty, a procedure to treat heart
disease. Doctors paid attention to their scorecards, and they obviously
could increase their ratings by performing more effective surgeries. But
as Charles Wheelan noted in his book
Naked Statistics, there was another way to improve your scorecard:
refuse surgeries on the sickest patients, or in other words, those most
likely to die even with care. Wheelan cites a survey of cardiologists
regarding the scorecards, where 83 percent stated that due to public
mortality statistics, “some patients who might benefit from angioplasty
might not receive the procedure.”
Error 8: The ACA “allows you to keep your current policy if you like
it… even if it doesn’t meet minimum standards.”
What, does this guy think we’re stupid or something?
http://fee.org/blog/detail/8-goofs-in-jonathan-grubers-health-care-reform-book
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