The Future of Healthcare

Key architect of national reform assesses the law


MIT economist Jonathan Gruber talks with two IPR graduate research
assistants about research and policymaking after the IPR/Hollister lecture. 

At the IPR/John H. Hollister Lecture, one of the nation’s top healthcare economists retraced the challenges of passing and implementing the nation’s most sweeping reform of healthcare since the 1965 passage of Medicaid and Medicare.

Jonathan Gruber of MIT was a key architect of Massachusetts’ 2006 healthcare reform and the federal 2010 Affordable Care Act (ACA) and “has twice been called one of the 100 most powerful people in healthcare in the United States,” said IPR Director David Figlio in introducing him to the crowd of more than 80 attending the March 7 event at Northwestern University. “He’s also one of the most powerful people in economics.”

Relying on images from his graphic novel on healthcare reform, Gruber began by citing its unsung hero—former Massachusetts’ governor Mitt Romney, with a supporting role played by the Bush Administration.

“Mitt Romney is the hero of our story actually,” Gruber said, “and don’t let anyone else tell you otherwise.”

Gruber went on to describe how as governor of the state, Romney developed a plan he called “incremental universalism,” to work towards providing universal healthcare coverage by incrementally building on what works.

Gruber, who helped Romney develop the plan in 2005, described it as a “three-legged stool” that involved fixing insurance markets, implementing the individual mandate, and then making health insurance affordable.

In the 1990s, Gruber explained how the state became one of seven to implement a system to guarantee that anyone, regardless of the state of his or her health, could purchase insurance for the same price. As in all the other states, the Massachusetts market collapsed because people waited until they were sick to buy it and insurers lost money.

In 2005, they vaulted over that hurdle by requiring everyone in the state to have health insurance.

“In my graphic novel, the individual mandate is the spinach we have to eat to get to the dessert that is fairly-priced insurance coverage,” Gruber said.

The final hurdle was making such plans affordable, and they did that by offering subsidies.

“You can’t mandate a family with $22,000 of income to buy a $12,000 policy,” Gruber said, referring to the average price of plans at the time.

Jonathan Gruber
Jonathan Gruber describes how, after 2014, no one in the
United States will go medically bankrupt "because they have
bad genes or a bad traffic accident."

While acknowledging his intimate involvement in writing and implementing the Massachusetts law, Gruber cited that by objective standards, it exceeded its two goals: It covered the uninsured—with the state’s rate now down to between 2 and 3 percent compared with 18 percent nationally—and it righted insurance markets—with non-group premiums falling by half after its passage.

Though other states like California became interested in developing similar plans, Massachusetts had a “dirty” secret—the federal government paid for its plan.

Former Senator Edward Kennedy (D-Mass.) managed to set up a program whereby the federal government was sending $400 million per year from Medicaid to fund public hospitals in the state. Once the Bush administration realized this, they moved to stop the funding. Romney, however, asked the administration to divert the money to covering the uninsured. The Bush administration agreed.

“That was how we got our law started,” Gruber said. “We got the federal government to pay for it. States like California didn’t have that leg up, so they couldn’t do it.”

This was also how the Massachusetts model moved to the national stage, becoming the basis for the federal Affordable Care Act, Gruber said. While both have the same three-legged structure, there are some differences. The federal law will be less effective because it does not apply to illegal immigrants, who represent a quarter of the uninsured in populous states like California and Texas, but it is also more ambitious in terms of how it pays for itself and seeks to control costs.

President Obama laid down the law that the legislation would not increase the deficit, Gruber said. He cited the Congressional Budget Office’s scorecard, in which it projects the ACA to lower the deficit by $100 billion over the next decade and by another trillion in the decade after that.

“It’s the first law that, in my lifetime, gets more fiscally responsible over time instead of less,” Gruber said.

The second major issue is controlling costs. Gruber highlighted a glaring contradiction: Though healthcare has vastly improved and per capita spending has grown, approximately one out of every three healthcare dollars spent is wasted.

“We used to spend less than 5 percent of our economy on healthcare, now it’s 18 percent,” Gruber said, pointing to today’s better life expectancies and health outcomes. “And it’s been worth it.”

Yet two major hills remain to be crossed in controlling costs without compromising health. The first is scientific, developing better forecasting methods and empirically validated cost controls; and the second is political, where “controlling costs means making the hard decisions politicians hate making.”

David Figlio and Jonathan Gruber
IPR Director David Figlio (left) presents Jonathan Gruber with a
commemorative IPR mug.

Gruber ended his discussion with the four major challenges the ACA faced. First, Congress had to pass it, where it squeaked by. Second, it was challenged in the Supreme Court. Fortunately, Chief Justice John Roberts found a loophole, Gruber recalled, so it “barely passed” there.

Third, President Obama had to be re-elected, which, of course, has happened, and fourth, the law has to be implemented.

“This is the least worrisome because it’s going to be implemented successfully in a number of places,” Gruber confirmed. “It’s also the most worrisome because it’s going to be a nightmare in many places.”

Gruber rolled off the remaining hurdles to implementation: States can opt out of Medicare expansion due to the Supreme Court ruling, the mess to come as evidenced by the recent experience in implementing Medicare Part D, the prescription drug benefit plan. Part D implementation was disastrous at first, but most problems were resolved within two months, with the public coming to love it after six. And the last is getting the public to accept and support the law.

Gruber sees public support as fundamental. He pointed to Massachusetts’ outreach campaign that greased the law’s acceptance, where they ran ads during Red Sox games.

“And you know what? People went out and got it—no one complained,” Gruber said.

The impending outreach battle, especially in states with a strong Tea Party presence like Louisiana, between advocates for and opponents of the law will be interesting to watch, he said. He then referred to the 2009 healthcare town halls when a woman stood up and yelled, “Keep the government’s hands off my Medicare!”  

“I have this dream that someone will stand up and say, ‘Keep the government’s hands off my ACA,’ ” he concluded.

Jonathan Gruber is Professor of Economics at MIT and Director of the National Bureau of Economic Research's Healthcare Program. David Figlio is Director of IPR and Orrington Lunt Professor of Education and Social Policy and of Economics.