Health Care Policy and the Next U.S. Administration

author: Jonathan Gruber, Department of Economics, Massachusetts Institute of Technology, MIT
published: Jan. 28, 2013,   recorded: October 2008,   views: 2981

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In an energetic talk delivered prior to the U.S. presidential election, Jonathan Gruber provides a useful breakdown of the two candidates’ remedies for the nation’s troubled health care system. His detailed analysis of the key issues around health care may prove invaluable as the next president assumes office.

After decades of discussing health reform and watching national health costs balloon uncontrollably, says Gruber, we may finally be watching a consensus emerge to fix what’s broken: a crisis where more than 47 million Americans lack health insurance, and “are a car accident away from being bankrupted.” Gruber describes key areas that reform must tackle: pooling of health care markets, affordable plans, and mandates. The left and right differ on how to guarantee that sick, poor, young and old pay a fair price for medical care, the degree to which government must subsidize the poorest Americans, and whether the nation should or can achieve universal coverage. One side favors a single payer system, and the other tax credits, and both sides contain fatal flaws, says Gruber.

A new way is coalescing called incremental universalism, says Gruber, and its basic outlines emerge from Massachusetts’ 2006 health care system. There’s heavily subsidized insurance for folks below the poverty line, as well as insurance that works for those above poverty cutoffs. Every employer in the state with 10 or more employees must offer health insurance. There’s also an individual mandate (a source of contentious debate, as Gruber attests), so no one can skirt the issue of holding health insurance and hoping for the best. Gruber says after two years, the plan “is doing fantastically,” with a huge pickup (440 thousand) of previously uninsured people onto the health care rolls. The cost of people getting free care at hospitals fell almost by half in the first quarter of 2008.

But Gruber admits he’s not sure what to do about cost control. We currently spend 16% of GDP on health care. Obama’s plan, modeled after Massachusetts’ but with no mandate, will likely cost between $60-100 billion. McCain advocates ending the tax exclusion for employer sponsored insurance, and handing out tax credits. Says Gruber: “Obama’s got a terrific plan that needs money and McCain’s got money in need of plan so put them together.” Add a mandate to Obama’s plan, and then get rid of the tax exclusion. “You could have universal coverage in America more generous than in Massachusetts, and have 50 billion a year left over to spend on wars or whatever.”

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