A Response to Gruber on RomneyCare & Health Care Costs

I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber. I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.

Joseph Rago’s article on Massachusetts health‐​care reform (“The Massachusetts Health‐​Care ‘Train Wreck’,” op‐​ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health‐​care reform have been relying over the past year.

No comment, other than remember the phrase “selectively misleading use of facts.”

Health‐​care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.

Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent. In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher. The study on which Gruber relies — like all other such studies — neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains. Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60‐​percent reduction in the uninsured appears to be an upper‐​bound estimate, rather than a point estimate.


Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009. I’d like to see an updated, non‐​whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.” Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.

The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre‐​reform…

Here’s where Gruber engages in his own “selectively misleading use of facts.” Yes, non‐​group premiums appear to have fallen for the 4 percent of residents in the non‐​group market — because RomneyCare shifted those costs to workers with job‐​based coverage.

It is true that reform has not slowed the growth of group health‐​insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.

The first part of this sentence is an understatement; the second part is false. This report from the left‐​wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation. And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment‐​based coverage by 6 percent (see cost‐​shifting, above).

Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health‐​care cost growth.

It should be obvious by now that RomneyCare wasn’t designed that way. But it sure was sold that way. And so was ObamaCare. Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?

The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate‐​setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open‐​ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.

So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance. Bra‐​vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing — nothing! — that means the bar for “best thinking” isn’t very high.

In the end, it is impossible to control health‐​care costs without first bringing as many citizens as possible into our health‐​insurance system.

As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending — or at least pretend to — they must first create more wasteful government spending.