Network News

X My Profile
View More Activity

MIT Economist Jon Gruber Counters the Insurance Industry's Analysis


This morning, I wrote that "the insurance industry's analysis isn't credible, but the administration needs to get some credible numbers, or some numbers they can call credible, out there quick. The nightmare scenario is that someone more legitimate than the insurers, but still opposed to reform, beats them to it." It's a bit after 7 p.m., and the administration is now pushing its own set of numbers. That was quick.

The analysis comes from MIT health economist Jon Gruber. Gruber is, undoubtedly, pro-reform. He's advised the Senate Finance Committee and served as one of the architects of the Massachusetts plan. But he's also one of the most-respected health economists in the country. Gruber runs the numbers for an average family, a 25-year-old and a 60-year-old, looking at different income levels for each, and paying close attention to the role subsidies will play. In each case, he finds the people likely to save money under the Senate Finance Committee's plan. You can download his analysis, which is based on Congressional Budget Office data, here.

Is his analysis correct and the insurance industry's analysis wrong? Hard to say. Neither group has their model out in the open, and neither group is taking a comprehensive look at the bill's many parts (in particular, the money-saving delivery-system reforms are totally excluded). But Gruber certainly has a lot less incentive to twist the facts than the insurance industry does, and his numbers, at least, are free from any glaring deficiencies.

By Ezra Klein  |  October 12, 2009; 7:32 PM ET
Categories:  Health Reform  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Tab Dump
Next: Bad Language



And now the cavalry should be on it's way...

Posted by: umesh409 | October 12, 2009 7:55 PM | Report abuse

How is an interested reader supposed to interpret either set of numbers? MIT's over 60 numbers are most relevant to me and they look terrible. Also, what would the deductible and co-insurance be? Drug coverage? Co-pays? Total out-of-pocket costs per year?

It's good that some sets of premium projections are starting to appear, even if only for propaganda purposes. Either way, they provide a picture that makes health care expenses continuing to be unaffordable except for those with way above average resources.

Posted by: NealB1 | October 12, 2009 8:38 PM | Report abuse

Color me unimpressed. Gruber's rebuttal is like a still photo that's been Photoshopped. I've been think about these two scenarios:

PATIENT A: Salary $100, Premium is $14, Patient pays $13, Government pays $1, Excise tax (40%) maximum $5.60

PATIENT B: Salary $100, Premium is $140, Patient pays $13, Government pays $127, Excise tax (40%) maximum $56

As I see it, this is a set-up for premium hyperinflation. In a hyperinflation scenario, the amount of any FPL-based subsidies and excise tax cutoffs quickly becomes trivial and employers will drop coverage. I suspect we're seeing the tip of this iceberg reflected in the AHIP data.

Posted by: bmull | October 13, 2009 2:01 AM | Report abuse

Wow, kudos to Professor Gruber proving that getting beaten and robbed is a better deal than getting shot, beaten and robbed.

Let's compare the Baucus SFC bill to Congressman Pete Stark's Americare bill (HR 193), a Medicare-based public option proposal. The SFC caps are premiums only, the Stark caps are inclusive of premiums, deductible and copayments (with no cost sharing required of medical bills incurred by children or pregnant women).

175% of FPL-- SFC $2200 Stark $0
275% of FPL-- SFC $6520 Stark $3032
375% of FPL-- SFC $8340 Stark $4000
475% of FPL-- SFC $8340 Stark $4000

Posted by: beowulf_ | October 13, 2009 2:43 AM | Report abuse

I'm with NealB1.

Without the details this -and the insurance company model is just another set of hurling numbers.

Posted by: RedBird27 | October 13, 2009 7:14 AM | Report abuse

and this is nice that you compare it with the one of two small groups that will absolutely benefit from reform (and no one is debating that) the individual market and the uninsurable due to pre-ex). Sure they'll benefit.

Now I'd like to see your analysis of how the currently insured family of 4 is going to benefit. Use an example of someone who is in the small employer market and or large group market (50+).

The answer is you can't. Because its those that will be paying for the uninsurable and individual market. There's no problem with that as long as "YOU'RE HONEST" about it. The fact that the administration is not being honest about who is paying for this is the biggest problem of all.

Posted by: visionbrkr | October 13, 2009 7:41 AM | Report abuse

At a minimum, Gruber should include people with incomes higher than 400% FPL. And instead of using 2009 dollars (which makes subsidies look better than they actually will be) he should do what the PwC report does and use place current law side-by-side with reform.

Posted by: bmull | October 13, 2009 9:11 AM | Report abuse

Good comments above.

I'm honestly pretty shocked that Gruber would attach his name to this analysis. Its really pretty shoddy and doesn't address the questions that have been raised:

1) Level of mandate penalty and associated rate of free-riding

2) Impact of free-riding on premiums

3) Impact of excise tax on premiums

Gruber is answering a different question altogether. He's ignoring 2, and 3, and merely just running some numbers using the CBO's analysis, which I don't believe have assessed the impact of 2 or 3.

Given that he was integral to the Massachusetts experiment, which also has token penalties, he could actually potentially provide some helpful analysis to the debate. Instead, he's decided to provide an analysis that's tangential to the discussion, something he clearly knows isn't directly relevant, but serves as a well-branded disinformation campaign.

The PWC analysis has similar issues which Ezra notes, but I'd expect better from an MIT economist.

He wouldn't be pulling this stunt without tenure, that's for sure.

Posted by: wisewon | October 13, 2009 9:13 AM | Report abuse

A few folks mention the cherry-picked examples (25 yo, 60 yo, family under 400% FPL) above, which is another important point.

We all deserve an intellectually honest analysis. We haven't seen one yet.

Posted by: wisewon | October 13, 2009 9:15 AM | Report abuse

the one thing that I don't get honestly is that MA does have token penalties as wisewon puts it but they cover 97% of people in their plans. The question is:

How are they getting there?

If you could ensure we'd get to 97% then I'd be fine with it. We need a good mix of the sick and healthy included.

Posted by: visionbrkr | October 13, 2009 9:28 AM | Report abuse

and if we don't get a good mix of the sick and healthy because of a strong individual mandate it will destroy reform much worse than a partisan insurance industry study could do.

Posted by: visionbrkr | October 13, 2009 9:38 AM | Report abuse

From above -- "We all deserve an intellectually honest analysis. We haven't seen one yet."

Amen. This year's health care debate has been filled with "crowd sourced" mathematics which would impress Orwell.

Posted by: rmgregory | October 13, 2009 9:51 AM | Report abuse

Re Massachusetts--already had the lowest uninsured before reform, officially ~10% but this included many people who had access but never bothered to sign up, so probably closer to 5%. MA is more like Switzerland than the rest of the US.

Posted by: bmull | October 13, 2009 10:35 AM | Report abuse


thanks. i'm aware as you are of Mass' percentage of the population with coverage to be around 96-97% but the question is how did they get there? Their tax is more than the Senate Finance bill so I'd expect as CBO does that we'll get to less people insured (94%). That's 18 million people. The big question should be will they be healthy? Sick? How much will the "cost of the uninsured go down?" You know that $1000 or so figure that liberals tell us that we all pay who have healthcare for those that don't have healthcare?

Posted by: visionbrkr | October 13, 2009 11:47 AM | Report abuse

Except, Ezra, these are statistical averages.

The 4:1 community rating that Gruber assumes won't make health insurance afforable enough for a 60-year-old. It will lower their premiums a little, but it won't make health insurance affordable enough. For a 60-year-old widow earning $46,030/yr., $6,175/yr. for a policy less rich having a $750 deductible and $5,000 out-of-pocket cap (0.67 AV) is a lot for someone of this income level to have to spend on health care.

Posted by: BradGabel2002 | October 13, 2009 1:18 PM | Report abuse

The comments to this entry are closed.

RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company