MIT’s John Gruber On Obamacare’s Meltdown
MITs Jon Gruber, widely regarded as the father of Obamacare, joined me for a wide-ranging discussion of the program’s meltdown on today’s show. The audi and transcript will be psosted ASAP below. I look forward to Avik Roy’s (and other’s) detailed responses.
HH: We continue our focus on the five alarm fire that is Obamacare. I’m so pleased to welcome back now Jon Gruber, professor of economics at MIT. Professor Gruber, welcome back, it’s always a pleasure. You know, I have to be nice to you, because my friends Professor Poterba and Professor Rose are old pals, and I can’t really beat up on one of their colleagues.
JG: Well, that’s nice. I’m glad we arranged that. I’ll have to thank them.
HH: I know, it’s like one hand behind my back, so I’ll go slow. Now I watched you on earlier with Jake Tapper, and I’ve read some of your interviews today, and I’m actually not that interested in the website. The website will eventually get fixed. And I’m not interested in the Romney/Obamacare comparison. Glenn Kessler gave the President one Pinocchio for that comparison. I’m actually interested in what it’s going to look like over the next six months. So let’s begin with what Avik Roy told me yesterday. As best they can tell, the average premium increase for every American is 40%, for premium payers. That does not mean Medicaid recipients, but for premium payers. Their premiums are going up 40%. A) Do you dispute that? B) If you don’t, is that what you expected?
JG: Well, I dispute two aspects of it. First of all, what Avik is always careful to avoid mentioning is he’s not talking about the vast majority of Americans who have employer-sponsored insurance. He’s just talking about the twelve million Americans who are about four percent of the population that buy insurance on their own. That’s the first important point. The second point is by my estimates, I don’t think he’s that far off. My estimates are more like thirty percent. I don’t think he’s that far off. But what he also misses, the other big thing he doesn’t mention is that there’s tax credits to offset that increase. And actually, when you factor in tax credits, the average American will pay less, not more.
HH: Okay, so when he says that the forty percent premium increase is coming, he’s wrong, or he’s deceptive, or he is simply not informed as to how the program works?
JG: Oh, he knows how it works. He’s just being deceptive.
HH: All right.
JG: I mean, now basically, now there will be differences across people, but on average, people will pay less. And we’re only, once again, we’re only talking about a minority of people, where I’m talking about the majority of Americans who have insurance from their employer.
HH: So I’m actually glad to hear you make a blanket statement like that, because that means you’re comfortable with it. Now I come to this statement.
BO: Here’s a guarantee that I’ve made. If you have insurance that you like, then you will be able to keep that insurance. If you’ve got a doctor that you like, you will be able to keep your doctor.
HH: Was the President being deceptive?
JG: The President was, no, he was not being deceptive. I don’t think he was being deceptive. I think the President was not being fully clear in what he said.
HH: What’s the difference between Avik Roy being deceptive, in your view, and the President’s not being fully clear?
JG: Avik Roy’s being deceptive, because if you take Avik’s statement, he’s basically getting the sign wrong, he’s saying they’re going up when they’re going down, and he’s implying it applies to ten times as many people as it does. So he’s being massively wrong on two fronts. The President was implying a hundred percent of people when really, he should have said ninety-five percent of people. That’s a much smaller difference than saying something applies to everyone when it only applies to twelve million people, and saying premiums are going up when they’re actually going down.
HH: Well then, that’s a scale of lie. It doesn’t really make it not a lie, correct?
JG: I don’t think either of them are lying. I think lie is the wrong word to use. I think that they are both being misleading. I think that Avik’s misleading was a much bigger magnitude, but the President was oversimplifying.
HH: When the President misled…
JG: He was oversimplifying…if the President, look, let’s make, let’s put it this way. If the President had said by and large, you get to keep the doctor, the plan you like, that would have been totally honest, whereas if Avik had said by and large premiums will go up, that would have been still dishonest. That’s the difference.
HH: Here’s what Clarence Page, liberal, had to say to me when we talked about the President’s, I think, outright lie.
HH: He knew he was lying?
CP: Probably. Probably. But that’s one of those political lies.
HH: Now if a liberal like Clarence Page is willing to say he is lying, and if President Clinton is willing to say this…
BC: Third problem is for young people, mostly, but not all young, who are in the individual market whose incomes are above four hundred percent of the poverty level, they were the ones who heard the promise that if you like what you’ve got, you can keep it. I met a young man just this week who has a family, two children, bought in the individual marketplace. His policy was cancelled, and one was substituted for it that doubled his premium. Now I asked him, I said same coverage? And he said yeah. And I said but are your co-pays and deductibles the same? And he said no, they’re much, much lower. So he said in the years when I use health care, I might actually save money. But he said you know, we’re all young and we’re all healthy. So I personally believe, even if it takes a change in the law, the President should honor the commitment the federal government made to those people and let them keep what they got.
HH: So the President is saying, President Clinton, is saying he made a commitment. Clarence Page is saying it’s a lie. You’re saying it’s a small deception as opposed to Avik’s deception. These are all hairsplitters, aren’t they, Jon? The guy out and out misrepresented the program.
JG: I just don’t, I guess, look, first of all, I think this is sort of an irrelevant debate. But I just disagree with the out and out…look, if the truth is that ninety-five percent of people are going to get to keep their plan, and he said everyone will get to keep their plan, that, I think to say he out and out misrepresented the program is too strong. You can say he was too specific when he should have been, he should have said by and large, they’re willing to keep it, or for the vast majority of Americans, they’ll get to keep it. I don’t say you can call that a massive lie when in fact, you know, he’s right. For more than ninety-five percent of Americans, they’ll get to keep it. He shouldn’t have said for every American, they’ll get to keep it. That was a mistake. He shouldn’t have said that. But like, to compare that to the legion of political misstatements we’ve been subjected to by Democrats and Republicans for the last fifty years, that’s pretty small.
HH: Let’s play Marco Rubio earlier today on this program, cut number two:
MR: I think if he had felt, had said to people that under this law, if you have insurance that you’re happy with, you probably won’t get to keep it, because we’re going to make everyone get a certain kind of insurance, it never would have passed. It just would not have passed. Even Democrats would have peeled off. But either they chose to believe that, or they chose to look the other way. And now it’s the law, and it’s hurting people very badly.
HH: Is Senator Rubio incorrect, Jon Gruber?
JG: Well, he did one very subtle thing, which is he said if Obama had said that most people would have to change insurance. If that’s true, he’s right. If this law had, has, interestingly, as President Clinton’s law did, makes most people change health insurance, then it wouldn’t have passed, as President Clinton’s law didn’t. But that’s not what this law does. It makes a small minority of people change insurance. That’s the difference. That’s the mistake in Senator Rubio’s statement. So if Obama had stood up and said the vast majority of Americans will keep their insurance, the law still would have passed. I wish he’d said that. I think it was a mistake to make a blanket statement that didn’t apply to every American. I think that was a mistake. But I think the truth is, here’s the key thing. There is no law which can fix what’s wrong with American health insurance markets and be less disruptive than this law. This law is a little bit disruptive, okay? But there’s no way to fix insurance markets without being somewhat disruptive, and I can think of no way, and nobody who’s being honest can think of any way to fix insurance markets in American being less disruptive than this law.
HH: I don’t know, to call this law a little bit disruptive is sort of like to say December 7th in Pearl Harbor in ’41 was simply inconvenient for the people on the boats. That’s a marvelous example of masterful understatement, and that brings me to the next question.
JG: No, whoa, whoa, whoa, whoa, whoa. You cannot compare this. Pearl Harbor got us into a war. This is saying four million Americans will have to pay more for health insurance. Give me a break.
HH: This is actually saying that the health care system as we know it is burning to the ground. And I think…
JG: No, that’s not true at all. Hold on, this is the important thing, Hugh. And I, it’s important. My wife is saying why do you go on shows like this? And the reason I go on shows like yours is I think that you have listeners who really don’t necessarily fully understand this law and want to, and they truly want to. And so let’s be honest what this law does. This law does not burn the health care system to the ground. This law does not, is not a socialist takeover of one-sixth of our economy. That’s all hyperbole. This law, as the law in Massachusetts, which was pioneered by a Republican based on conservative principles, what it does is it says we’re going to leave the system primarily alone. Those Americans who have employers, insurance from their employer, leave you alone. Those Americans who have insurance from the government, leave you alone. Those minority of Americans who are buying their insurance in a broken market today, we’re going to fix that market. That means some of you, a minority of you, are going to have to change your plans and pay more. And that is the price of reform.
HH: Jon Gruber, very simple question. In 2014 and ’15…
HH: …as the small employers have to adopt to the Obamacare standards, will they have to, in many cases, replace the plans they have with plans that add new benefits that previously were not there?
JG: Not for small employers, no.
HH: They never have to change their plans?
JG: No, but you said in many cases. No, some will, but a very small minority. If you look at the benefits that are the minimum under Obamacare, they are below what virtually every employer offers today. Virtually every employer today offers prescription drug coverage. Virtually every employer today offers mental health coverage, stuff like that.
HH: But there are many employers, and I’m thinking primarily of the Catholic Church, that does not offer, for example, contraceptive coverage, which they’re going to have to change. And therefore, all of those employers who have religious-based exemptions but do not qualify under the definition of a religious organization, they’ll have to change their health care plans, won’t they?
JG: That’s a good point. That’s a good point. What I don’t know for sure, and I have to look at the law on this, this compromise they reached at the end was something about they don’t have to pay for that, but the insurance company has to offer it to the people, so I think it’s…
HH: They have to change, they have to change their health care plan. When we come back, we’ll talk about that, because I think what Jon Gruber and his allies are doing is significantly understating the out year impact of Obamacare in sort of a Cortez option. They have burned the boats and burned the health care system down. But I’m glad he’s come on to tell me why we’re all wrong about the changes we’re all feeling.
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HH: Dr. Gruber, intellectual question. I’m concerned that a lot of the architects, Dr. Emanuel, yourself, of Obamacare are so invested in the success that it’s sort of like owning the patent on cold fusion. You just can’t find the distance to see where it’s shipwrecked. And do you think you have that capacity if the data comes in that it’s an overwhelming failure to come out and admit you were wrong?
JG: Yes. Yes, I do. I think that basically if we find, and you know, I’ll tell you what that looks like. So if, for example, the website isn’t working in time for people to sign up to avoid the individual mandate, then that’s a failure, okay? So if the website isn’t working and up and running, and people can’t get health insurance on the website by March, who need to have health insurance due to the individual mandate, then that’s a huge problem.
HH: Let me read you, though, a story that just came out this afternoon and get your reaction. Officials at one of the nation’s oldest and most elite historically black colleges are citing the Affordable Care Act as the reason they’ve cancelled a school-wide affordable health care plan they had offered students. The official website for Bowie State, a Maryland public school less than an hour’s drive from Washington, D.C., explained that Obamacare’s new regulations would force the cost of insurance to rise from $50 dollars to $900 dollars a semester. “The cost of the insurance for domestic students will increase to approximately $1,800 dollars per year.” “Bowie State University has suspended offering health insurance for domestic students for 2013-2014 academic years, states the school’s official website due to new requirements of the Affordable Care Act which will go into effect on 1/1/14. The cost of insurance for domestic students will increase to approximately $1,800 dollars per year.” Is that, now anecdotes, a collection of anecdotes do not make evidence, but they are very telling. What’s that tell you?
JG: That tells me if they were offering insurance for $50 dollars a semester, that tells me that it wasn’t really insurance. Basically, what a lot of schools had were things like we’ll cover a doctor’s visit, but we won’t cover you in the hospital, okay? That’s not insurance. So it tells me they had something which wasn’t really insurance. They’re basically getting their students to throw away $50 bucks a semester, and now the law’s requiring they offer real insurance. There’s no such thing as insurance for $50 dollars, for $100 dollars a year. It just doesn’t exist.
HH: So they just dropped it. They probably ran a campus university health clinic, right, where people could come in and get antibiotics or get a sore throat checked, or get a strep throat test, or something like that, and then get referred out.
HH: But is it better that they had to cancel that completely rather than…
JG: No, there’s no, I don’t know if they had to cancel their campus health clinic. I don’t know, there’s nothing in that that says they had to. They had to cancel, they were offering kids this $50 dollar policy which basically said essentially, I don’t even know what it was. I can’t really comment on it, because I have no idea what you buy for $50 bucks. I just have no idea what it was.
HH: All right. Now let me go to some things that were said on this show today. Marco Rubio, cut number one:
MR: This program was never designed to work. It, from the very beginning, it was never going to work. And I’m starting to get the sense that perhaps all of this is now just a big excuse to come back at some point and say you see, this is why we need a single payer system, which some Democrats actually either secretly want, and some of them openly want.
HH: Dr. Gruber?
JG: Basically, this is a line I’ve heard a lot, and I think, look, just look at the history. We’ve tried to reform health care every twenty years since Teddy Roosevelt. Every single time, we’ve moved to the right. So Obamacare is much more conservative than what Nixon proposed in the early 1970s. I don’t see how you look at that historical thing and say the next move is going to be radically to the left. Every time we’ve done it, we’ve moved to the right. Why would we suddenly jig and suddenly move massively to the left? It just doesn’t make sense.
HH: Well, that’s because in 2006 and 2008, a unique moment in American political history empowering the progressive left took place that allowed this enormous lurch without a single Republican vote, and that’s why it happened.
JG: Right, why Obamacare happened. But Obamacare is incredibly far. It is, look, Obamacare, once again, the core of Obamacare are principles laid out by the Heritage Foundation, a right wing institute, conservative institute, to a Republican governor, Mitt Romney, okay? And that became the core. This is, I’ve heard described, and I like this description, it’s the most partisan bipartisan legislation in American history. This is a bipartisan piece of legislation crafted on core Republican principles that many, that some Republicans, or at least a group of Republicans, were interested in supporting early on and they all ran away from. And that’s their right. But to call it left wing socialist when in fact just the basic law itself is based on conservative principles, just because the Republicans decide not to vote for it, you can’t call something left wing because Republicans decide not to vote for it. That’s just politics.
HH: Because this is an interview and not a debate, I will let that lie, but want to note for the audience that’s wholly incorrect. Let me go to cut number three, though, because I want to get your reaction to Senator Rubio saying this:
MR: Clearly, she has a history of being in favor of the kind of big government intervention into health insurance, that is kind of, I guess, the underpinning of this long term desire that many on the left have had for a universal payer, for a one insurance for every American, Medicare for all type concept, which I think if, of course, would never work and is a disaster for the middle class and for the American dream.
HH: So is Hillary Obamacare’s grandmother, Jon Gruber?
JG: Well once again, I think Obamacare is not single payer. It’s not socialism. And look, you can look at my record. I’ve not come out in favor of single payer socialism. I don’t think it’s the right system for America. And that’s not what Obamacare is. Hillary is not, Hillary, basically, she did endorse what became Obamacare in the 2008 elections, 2008 primaries. She endorsed that. But prior to that, she had a very different plan. She had a plan which was much more interventionist. The Clinton, that’s the irony of Bill Clinton criticizing Obama for taking away people’s health insurance. The Clinton health care plan was much to the left of Obamacare. It would have more radically changed our health care system. Obamacare is really, it’s a big intervention, but it is much to the right of anything that’s been tried before.
HH: So Hillarycare would have had far more disruptive consequences for American health care than even Obamacare has?
JG: The original Hillarycare as proposed in the early 90s would, absolutely, would have been much more disruptive.
HH: Okay, here is Marco Rubio’s cut number four:
MR: I believe they won’t, people will not sign up for this for reasons that we’ve been outlining for months, but it’s worse than that. It’s not just the people signing up. Among the people signing up, the pool of people signing up are just not the right mix for insurers. As a result, you’re going to see skyrocketing premiums, which is going to make even some of those folks decide not to stay on, and others not to sign up at all. I mean, the sticker shock is going to be real. Even with these subsidies they keep promising people, the cost for many people is going to be prohibitive. And one of the reasons why is because you’re forcing people to buy a package of insurance that the government has decided is good for them. They’ve completely taken away the power of individuals to have the flexibility to buy not just coverage that’s affordable, but the kind of coverage that they want, that features the things they need, and doesn’t force them to pay for parts of insurance that they do not need.
HH: So Jon Gruber, I don’t think anyone can deny that there will be millions of people with massive sticker shock, and as a result, in early January, there are going to be people who were previously covered who are not presently covered, whom if they encounter a catastrophic accident or illness, will be bankrupt of their assets. Don’t you agree?
JG: There will be some people who were previously covered who become uncovered. I agree. I think there will be at least ten and probably more like thirty times as many people who were previously uncovered who become covered. So basically, you have to ask yourself is your rule for legislation you can’t create any losers? Because if that’s your rule, you might as well shut down the government.
HH: But I want to know if you’ve thought through who those losers are, because what you’re talking about is basically the Medicaid expansion at the lowest end, for whom doctors will be limited, if at all, available, versus middle to upper middle class gap nakedness. And those people will lose their assets in a collision, assets they’ve worked their entire lives for and they’ve accumulated. And I think there’s a justice issue there that in order to expand at the low end the people who haven’t been previously covered, we expose the middle class to ruinous events.
JG: Let’s once again be clear what we’re talking about. It’s not just Medicaid. Everyone up to four times poverty, which is up to $80,000 dollars for a family, is eligible for a tax credit to make insurance affordable. So we’re not just talking about the very poor. We’re talking about actually above the median income in America, okay?
HH: But again, we’re talking about people with very little asset base that would lose in the catastrophic collision with the health care. Dr. Gruber, if you can hang around, I’d love to keep you. I hope you’ll find this conversation, your wife will understand it’s a different kind of conversation with a conservative critic. We’ll see if he can stick around.
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HH: I really appreciate the time and the extra segment, Dr. Gruber, and I hope your wife will understand that not all conservative talk shows involve screaming or anything like that. Here is Senator Ron Johnson on my show earlier today, his first cut, number five:
RJ: What we’re going to have to do is see what they are proposing. They are in full-fledged panic, and they should be, because millions of Americans are losing their coverage, cancer victims losing access to their doctors, to treatments that have kept them alive. Democrats have an awful lot to account for, so I think we will sit back and see what they’re proposing.
HH: Do you think fixes need to be made right now?
JG: No, I don’t. I think it’s too early.
HH: All right, here’s Senator Johnson, cut number six.
JG: I certainly appreciate the fact that he understands that a promise should be honored and calling out President Obama for totally breaking that promise. And you know, what’s, that guarantee, that false claim, that deception, that fraud was, that’s what it was, I mean, either President Obama was totally dishonest, or he was so disengaged, so uninformed, clueless about what his health care plan was, what its consequences would be, no matter which one of those alternatives you choose, it’s pretty unflattering for the president of the United States.
HH: Dr. Gruber, if a student of yours had plagiarized fifteen percent of a paper he turned in, would he be expelled from MIT?
JG: He’d certainly be up for disciplinary action, absolutely.
HH: And so if the President misled fifteen percent of the American people, and only fifteen percent, isn’t that a deception of the sort Ron Johnson’s talking about?
JG: Okay, the President, he did mislead a small share of the U.S. population. It’s not fifteen percent. As I said, it’s on the order of two to four percent.
HH: And so if your student had only plagiarized two to four percent of his paper, would he still be in trouble?
JG: Probably, yeah.
JG: And President Obama has certainly gotten in trouble for this.
HH: But why, but I think it’s so much more significant, because I believe if what we knew now, and I’m not talking about the website failure. I refuse to invest in that as a political issue, because that’s going to get fixed. And I think the ramp up may and well, in fact, occur according to the way you predict it. But at the end, the premium shock, the benefit mix, the intrusion on religious liberty, the chaos in the small insurance market, and in fact, the massive changes in the incentive for large employers to dump their employees into Obamacare exchanges will fundamentally, it is Cortez burning his ships. They’ve wrecked our health care system, Jon.
JG: You know, what’s exciting about this to me, Hugh, is hopefully, we’ll be able to see if you’re right or I’m right. What I’d love to have happen is for the opponents of this law to stand down and let’s run it out and see what happens. If you’re right, let me put it this way, if Republicans really believed all the stuff they’re saying, they’d be delighted to let this law take place. They don’t believe it. They know it’s not going to be such a failure, and that’s why they’re scrambling so much to stop it from taking effect, because they know that it’s going to be successful. So you know, if you’re right, then let’s let it play out and I’m absolutely happy to come back on your program. And if the things you, if the ship of American health care is burning, then you call me out on it. That’s fine. But let’s try it.
HH: Well, here’s, it’s not just Republicans. Here’s Mary Landrieu today on CNN, Senator from Louisiana.
ML: They know that I’m going to fight hard for them. This has been something that I’ve been working on for years, giving them better health insurance, providing opportunities for jobs and for education. They know that I am willing to fix this bill. I’ve always said that. So I have absolutely nothing to be defensive about.
HH: So what did Dianne Feinstein, Kay Hagan, Mary Landrieu, what are they all saying needs to be done that Jon Gruber doesn’t need to be done?
JG: What they’re saying is basically, they’re saying there should be a free lunch. Here’s where I disagree with them, and I don’t care if they’re Democrats. They’re wrong. Basically, they’re saying that there should be a free lunch, that we should make insurance affordable for the sick, but not make it more expensive for the healthy. That’s not the way insurance works. Insurance is the healthy and the sick pooling together to pay one fair price, which is what the American public wants. By an overwhelming majority, the American public wants fair insurance markets. Fair insurance markets mean the healthy pay more. That’s what fair insurance markets mean. So what Landrieu and Feinstein are those, they’re just not understanding basic economics. They’re claiming you can have it both ways. They’re claiming we can fix insurance markets and yet not make people pay more, and that’s simply wrong.
HH: And last question, the real more is thirty to forty percent before subsidy, taxpayer-funded subsidy in an era of massive deficits. Am I clear on that? That’s your estimate, is that the average cost of insurance for an American is going up thirty to forty percent?
JG: By my estimate, it’s thirty percent before tax credits, but that’s not relevant, because the tax credits will lower the cost. On average, it will fall once you factor in taxes.
HH: Did Americans know that when Obamacare was passed?
JG: Did Americans know, yeah, well, did Americans know that? I don’t know, actually, what Americans knew when Obamacare was passed.
HH: Do you think the President ever said your average cost is going up thirty percent, but you’ll get some tax credits?
JG: No, he didn’t say that.
HH: Do you think Democrats anywhere said that? Did you ever say it on the record?
JG: Did I ever say it, yeah, I did reports for a number of states which said exactly that.
HH: But did you ever come on a show like this and say hey, we’ve got to adopt this, your health insurance is going up thirty percent, but there’ll be some tax credits?
JG: I believe I did, but I don’t know for sure.
HH: I’d love for a citation, Professor. Come back. I appreciate the time very, very much. We’ll post the transcript and the audio of my conversation with Jon Gruber later tonight.
End of interview.