Will health care reform work out? An interview

Jonathan Gruber views health care reform from a unique vantage point.

Gruber, an MIT economics professor, was a principal architect of the Massachusetts reform law. And he was a key adviser to the Obama administration in its crafting of the Affordable Care Act.

Jonathan Gruber
Jonathan Gruber

Last week, Gruber visited Atlanta to address a forum on health costs and quality sponsored by Healthcare Georgia Foundation.

In a GHN interview, he discussed the rocky rollout of the ACA, comparisons with the Massachusetts experience, Medicaid expansion, and the challenges ahead for the federal law.

Q: What’s your overall assessment of the progress of the Affordable Care Act so far?

A: My overall assessment is that it’s too early to have an assessment. We know this is a slow rollout process. In Massachusetts, when we rolled out the predecessor to the ACA, the first month people could pay and sign up, 123 people did. By the end of the year, it was 40,000.

I think it’s just too early to say anything useful. The real news comes as we approach March 31, which is the deadline to sign up before the individual mandate. In Massachusetts, we saw a huge influx of people, particularly young and healthy people, right before that deadline.

In some sense, the key date when we’ll know something is in May, when the insurers release their next year’s rates. What matters is not really how many people sign up, it’s the mix of the young and healthy and old and sick. And it’s even more complicated than that – it’s not just the mix, it’s the mix relative to what insurers expected. So if insurers expected a certain percent of young and healthy, and they get a different percent … they’re going to have to raise their rates [or, if it’s a favorable percent, keep them the same].

The key date I’m looking for that date is the end of May, when insurers release what their rates are going to be for 2015. That’s really, in some sense, the fundamental [indicator of] whether this succeeded or not.

Q: Has there been evidence of young, healthy people signing up?

A: It’s just too early. The one piece of evidence from one state, California, is about a quarter of the people signing up are under age 35. That’s almost exactly what we saw in Massachusetts at the beginning of our enrollment. By the end of the year, that raised to over a third. I expect we’ll see more young and healthy people signing up as the deadline approaches.

Q: You have been involved in the rollouts in both Massachusetts and with the ACA. Has the federal rollout been a messier process?

A: I think it’s been a messier process largely because there has been more attention paid to it. As I mentioned, the first month we could enroll people in Massachusetts, 123 people enrolled.

I think even more fascinating than that: You can find no one who paid more attention to the Massachusetts health care reform than me. I was in it from the beginning. And yet when someone asked me [recently] how many people enrolled the first month, I didn’t know. I had to go back and look up that number. That to me is the major difference between Massachusetts and the national reform. We weren’t operating in this hyper-focused environment.

In Massachusetts, it was just mellower. We just weren’t under this constant stress of every minute, and every hour, worrying how things were going. I just wish the public could be that way about this as well.

Q: It was a more bipartisan process in Massachusetts?

A: It was a much more bipartisan piece of legislation . . . [than] the ACA was. My favorite quote about the ACA is, it’s the most bipartisan piece of partisan legislation ever.

Look, in Massachusetts, you had a Republican governor endorsing what was essentially a Republican plan that was begrudgingly endorsed by a Democratic Legislature. The biggest opposition to our law in Massachusetts came from the left, not the right. Because this was a conservative plan. When [Gov.] Mitt Romney signed this, on the podium with him was [Democratic U.S. Sen.] Ted Kennedy on the left, and a speaker from the [conservative-leaning] Heritage Foundation on the right, talking about what a great conservative plan this was. It was a much less partisan environment.

Q: Are you saying the Dec. 23 date for signing up for coverage Jan. 1 is not as important as other dates?

A: The Dec. 23 date is very important for people whose plans have been canceled and who don’t have a reasonable substitute. It’s important that the government can find a way to get them signed up. That’s a small minority of Americans who got an outsized amount of attention. But it could be a couple of million people. It could be a lot of people. And it’s incumbent upon the administration and states to help them find a source of coverage.

I’d be remiss if I didn’t say that the No. 1 way that states can help people find a source of coverage is to expand their Medicaid programs.

Not expanding a Medicaid program is nothing short of political malpractice. In a state like Georgia, with 1 million uninsured individuals below the poverty line, where the federal government saying we’ll pay the full costs of insuring these people, and the state has said no? It’s nothing short of political malpractice. A lot of people who are dropped [from previous coverage] could be on Medicaid if the state would just allow it.

Q: Talk about the cancellations, which have received a lot of attention.

A: It’s a lot of people but it’s a small number relative to the attention it’s getting.

There really are three kinds of cancellations. The majority of people in individual market got cancellation notices. Many of them, probably about half, can find a new plan fairly easily that’s very comparable to their previous plan.

The price may be higher, but prices in this market go up all the time. That’s the other thing that people are missing: People say prices go up, it’s Obamacare’s fault.

Prices go up 30, 40, 50 percent all the time in this market.

The majority of people will find a plan that’s comparable to what they had.

There is a minority who have to buy up. They will have to buy a more generous plan than they had before. Often because the plan they had wasn’t real insurance – it had annual limits, or paid only $500 a day for a hospital.

Another minority will have to pay a lot more. They were young and healthy and benefiting from the existing discrimination in the individual market. Any time you end discrimination in a market, the people who are benefiting from that discrimination lose. That’s just inevitable.

There are people who will have to pay significantly more.

Q: For better coverage?

A: For better coverage sometimes, and sometimes not even for better coverage. There’s a small minority of people who will have to pay more for the same coverage. The young and healthy were benefiting from this broken system.

Q: I thought that the ACA exchange benefits would be better than those of individual policies.

A: The minimum benefit of the ACA is worse than virtually any employer policy. It’s about at the midpoint of individual policies. The minimum ACA is about the average individual policy. There are a small number of young, healthy individuals who have policies that meet the minimum standards, or very close, who will have to pay more. It’s a fraction of a fraction, but it is real.

Q: When the president was saying, “You can keep your health plan if you like it,” was that an unfortunate use of words?

A: An unfortunate lack of vagueness. He should have said, “By and large, you can keep your health plan.” Or, “Almost everyone can keep their health plan.”

The point he was trying to make is that this is not a socialist takeover of 16 percent of the economy. The vast majority of Americans will not see their life change on Jan. 1.

I call this reform “incremental universalism,” which is getting to universal coverage but incrementally. Which means leaving people alone, by and large, if they’re happy. That means people with employer insurance.

Where he was wrong was, there is a small minority of Americans with individual insurance that does not meet the standards of the ACA. They will have to change their insurance. It’s a small minority, and I think if he would have just been a little vaguer, it would have been OK.

Q: You have emphasized that states like Georgia should expand their Medicaid programs.

A: I can’t be strong enough on this. There literally is no person in Georgia who is worse off if the state expands Medicaid.

Let me explain that. One million poor uninsured people get coverage. The rest of the state gets billions and billions of dollars of federal stimulus.

If the federal government were saying, “Georgia, look, I hope you don’t mind, we want to pay for your highway construction, instead of you paying for it,” Georgia would say, “Great.” That’s federal stimulus money. It’s the same thing [with Medicaid expansion]. Yes, it goes to 90 percent [from the initial 100 percent of federal funding] after a few years. But even at 90 percent it’s a huge moneymaker for the state. So literally there isn’t a person in the state who shouldn’t be outraged that the governor and Legislature aren’t expanding Medicaid.

Q: Did you expect the political opposition the ACA continues to encounter?

A: If you had asked me, I would have guessed many more states would have expanded Medicaid. I expected the partisan opposition in word but not in deed. I expected many governors would say bad things, but then expand Medicaid.

It violates everything I teach. I teach models of how politicians make decisions. In any model, if you say to a politician, here’s something that will make all your citizens better off, they’d do it.

I still think it will happen. What we didn’t anticipate, as crafters of the law, was that there were going to be huge differences across the states. What we’re going to see is the success in some states will put pressure on others to do the right thing.

Q: So it’s inevitable?

A: I think it’s inevitable in the long run. If you take the original [implementation] of Medicaid, it took 17 years for the last state, Arizona, to sign up. I hope it won’t take that long [with expansion].

In the next few years, you’ll see the second wave of not-too-red states signing up. Then we will see some holdouts. Eventually I think public pressure will move them over as well.

Q: States that aren’t expanding Medicaid are losing their disproportionate share (DSH) payments to hospitals that care for a large number of poor patients.

A: Every state sees its DSH payments go away [whether it expands Medicaid or not]. That’s why expansion is a no-brainer. The hospitals should be going crazy.

Q: Do you think the administration may allow the states that are not expanding to keep their DSH funding?

A: I hope not. I think it would be bad policy, but it would be good politics, so I don’t know. I hope they don’t.

Q: Where do you see the ACA in a year or two?

A: I think the right time frame to think about is three years from now. That’s how long it took us to ramp up to our steady state in Massachusetts.

In three years, I think it will be very much where the Congressional Budget Office projected. A change of 25 to 30 million uninsured [getting coverage], with a well-functioning exchange and a well-functioning market and basically an unrepealable law. I envision this as a huge plus in the 2016 elections.

I am more worried about the 2014 elections. I think, even in a few months, things [with the ACA] are going to look better and better.

There are two problems you have to fight against.

One problem is things in health care are always getting worse anyway. Health care costs are always going up. So the notion that if costs go up, it’s the Affordable Care Act’s fault, is just wrong. In fact, since the Affordable Care Act passed, health care costs have grown the slowest on record. But they’ve still grown. You’ve got to compare it to what came before.

And the second, to fight the fight, this is not perfect. You can’t compare this law to our ideal of where we should be – compare it to where we have been. For example, people will still pay more for health care than they wish they did, but they’ll pay less than they pay today.

The question politically is where this heads, is whether the supporters can win those two battles. I think they will in three years; I’m not sure they will win them by [election time in] November.