Supreme Court Unleashes Corporate Campaign Cash In Citizen's United Decision

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images5thumbnail1.thumbnail11The stunning and decisive loss by Martha Coakley to Scott Brown in the Massachusetts Senate special election has already caused a tsunami of fear among Democrats, and corresponding joy among Republicans, heading toward next fall’s midterm elections. If you think this is cause for concern for Democrats looking forward to the 2010 midterm elections, picture the scene if the Republican party were also able to benefit from removal of restrictions on corporate and financial industry cash infused into their electoral coffers heading into the midterms and 2012 Presidential election.

As I wrote back last August, the Supreme Court took very unusual steps in a case by the name of Citizens United v. FEC to craft a case – originally argued on separate grounds – into a vehicle to make a Supreme Court declaration on the constitutionality of campaign finance restrictions and regulations. As Adam Cohen of the New York Times put it:

If the ban is struck down, corporations may soon be writing large checks to the same elected officials whom they are asking to give them bailouts or to remove health-and-safety regulations from their factories or to insert customized loopholes into the tax code.

Citizens United v. FEC was originally argued on March 24, 2009; but subsequently noticed for re-argument on the new grounds involving the opening of corporate campaign contributions on September 9, 2009. The general consensus among the cognoscenti is that the Justices were leaning heavily toward blowing up the regulations and restrictions on corporate campaign contributions. For a complete blow by blow procedural and substantive history leading up to the decision, see Lyle Denniston’s SCOTUSWiki on this case.

Well, the decision in Citizens United v. Federal Elections Commission is in and attached hereto. As you can see, it is a 5-4 split decision with Justice Kennedy writing the majority opinion. The decision below is reversed in part and affirmed in part, and the seminal case of Austin v, Michigan is hereby overruled as is that part of McConnell v. FEC which upheld the resitrictions on independent corporate expenditures. In dissent, and/or partial dissent is Justice Stevens, joined by Ginsburg, Sotomayor, and Breyer. Justice Thomas also filed an opinion concurring in part and dissenting in part.

Today’s decision in Citizens United v. FEC abolishes the previously settled distinction between corporate and individual expenditures in American elections and would appear to apply to state and local elections as well as Federal ones given that the Court recognizes such a First Amendment right. This is literally an earth shattering change in the lay of the land in campaign finance, and it will have ramifications in every way imaginable for the foreseeable future.

Quoting a very interested observer, Senator Russ Feingold, he of McCain-Feingold fame, John Nichols had this to say in The Nation:

But U.S. Senator Russ Feingold, the Wisconsin Democrat who has been in the forefront of campaign-finance reform efforts for the better part of two decades, is worried.

“This would be in my view, a lawless decision from the Supreme Court,” says the senator who gave his name to the McCain-Feingold law. “Part of me says I can’t believe they’ll do it, but there’s some indication they might, and that means the whole idea of respecting the previous decisions of the Supreme Court won’t mean anything anymore.”

A lawyer who chairs the Constitution Subcommittee of the Senate Judiciary Committee, Feingold notes with regard to controls on corporate campaigning: “These things were argued in 1907, when they passed the ban on corporate treasuries. It was argued in 1947, Taft-Hartley did this. The Supreme Court has affirmed over and over again that it’s not part of free speech that corporations and unions can use their treasuries (to buy elections).”

If the court does overturn both law and precedent to advance a corporate Read more →

Lanny Davis's Rent-a-Wisdom

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Lanny Davis has wasted no time trying to spin MA voters’ rejection of Obama’s focus on corporations rather than people into an attack on progressives. He starts by ignoring that aspect of the liberal complaint and (as the Administration is doing) blaming all of this on Coakley.

Liberal Democrats might attempt to spin the shocking victory of Republican Scott Brown in Massachusetts by claiming that the loss was a result of a poor campaign by Martha Coakley. Would that it were so.

Then, incredibly, Lanny says something I agree with:

This was a defeat not of the messenger, but of the message—and the sooner progressive Democrats face up to that fact, the better.It’s the substance, stupid!

But from there, Lanny makes several mistakes of analysis you’d expect from someone with a history of selling out real Democratic values.

Lanny says backroom deals sunk Coakley; but then says this is the fault of progressives (Ben Nelson? Hello!!!)

Lanny turns on the insurance industry’s second-biggest champion after President Lieberman, President Nelson, and disowns his smarmy deals.

Then there were the two “deals” that put congressional Democrats in a worse light than the infamous “Bridge to Nowhere”—as impossible as that might have seemed—as an emblem of the special interest politics Barack Obama ran against. We Democrats had to explain to Massachusetts voters and other Americans why non-Nebraskans and nonunion members have to pay more taxes, while Nebraskans and union members get to pay less. Those two deals seem to have alienated most people across the political spectrum.

It is true that voters soured significantly on Coakley after Ben Nelson got his deal. Of course, one big reason for that is that, after MA primary voters picked Coakley partly for her very strong stance defending choice, her election would simply have empowered people like Nelson to gut choice. But somehow Lanny ignores both the demands Nelson made on choice as well as Nelson’s and Lieberman’s insistence that insurance companies not face any competition from Medicare or a public option.

Lanny says a deal that had not yet happened–the excise tax deal–and actually explicitly benefited more than unions was the cause of Coakley’s loss because it painted unions as exceptionalists?

And then there’s Lanny’s attempt to throw the unions–who have been negotiating a deal on the excise tax–in with Ben Nelson. Thing is, that deal, unlike Nelson’s deal, hasn’t happened yet! Not to mention the fact that the deal proposed between the unions and the Administration would have helped all middle class families by exempting dental and vision coverage, making sure older and sicker workers weren’t unfairly punished, and raising the amount at which the excise tax kicked in.

Lanny celebrates getting everyone health insurance–but not care

Then, Lanny makes the mistake that many supporters of the insurance friendly bill make: confusing health insurance with health care.

The Democrats have a simple message on health care that has still not really gotten through: If our bill passes, you never have to worry about getting, or losing, health insurance for the rest of your life.

Thing is, people from Massachusetts know better, because they’ve already got precisely the kind of system that ensures everyone has health insurance even if 21% of those paying lots of money to insurance companies can’t actually afford to use that insurance. MA voters know better than many that having health insurance doesn’t necessarily mean you can get health care.

Lanny mysteriously talks about an Obama plan that didn’t include EITHER a public option OR a mandate–yet there was no time when that was true (and polling still says the PO was the only thing that made this palatable)

Finally, Lanny invents a mythical Barack Obama who at one point supported neither a mandate nor a public option.

The purists on the left of the Democratic Party who demanded the “public option” or no bill at all apparently forgot that candidate Obama’s health-care proposal did not include a public option; nor did it include a government mandate for everyone to either purchase insurance or pay a significant tax approximating the cost of that insurance—the “pay or play provision” in both the Senate and House bills.

Candidate Obama supported a public option with no mandate. President Obama supported a mandate and paid lip service to a public option. But at no point did “his plan” lack both a public option and a mandate. Though I guess Lanny is distinguishing here between the mandate in Obama’s bill (up to 2% of income) and the mandate–like the one in MA’s program!–that is tied to the cost of insurance premiums. I’m not sure why that distinction would be relevant to MA residents though.

And of course, polling still shows that having a mandate is more popular when people can choose not to give their money (20% of which can go to profit and marketing) to private insurance companies.

Now, I don’t blame Lanny for staying up all night to try to spin Coakley’s loss as a call to move to the center. The more logical lesson to draw from it is that Americans are sick of corporatists like Lanny Davis (he rather amusingly adopted the label “liberal” for himself in this piece, though I suspect WSJ may have just stripped the “Neo-” that came before it). Which is precisely what Lanny’s extensive parsing tries to deny.

On Gruber: I Don't Want Apologies. I Want Independent Analysis.

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Between the auto show and the Prop 8 trial and associated travel, last week was tremendously exhausting for me and it will take me several days to actually report on those two events. But it seems one thing hasn’t moved on very much since last Sunday–the reporting surrounding Jonathan Gruber’s role in pitching the Administration’s health care. Gruber’s defenders are still falsely claiming I accused Gruber of tainting his analysis for pay (I said, “I don’t doubt he believes all this stuff”) and suggesting that I’m ignoring Gruber’s qualification for the HHS contract (I wrote an entire post affirming that the sole source on it made sense). Now, the debate has ratcheted up as some very able commentators call for apologies.

Unfortunately, that debate–like Gruber’s failure to reveal his conflicts in the first place–has supplanted what is really long overdue in this policy debate: real analysis of the assumptions behind the $850 billion plan about to be enacted by Congress, the assumptions that Gruber had a key role in formulating.

Gruber’s public claims delayed real analysis of the claim that the excise tax would raise workers’ wages

To explain why this is important let me make a suggestion that I can’t prove, but which is the reason I started looking at this in the first place: because someone as credible as Gruber made certain claims about the excise tax, others in his field did not examine his claims in timely fashion.

Gruber, in conjunction with the Joint Committee on Taxation, has long been claiming that the excise tax would raise workers’ wages. I first started challenging that claim in October, in response to an Ezra Klein post that relied on Gruber’s faith-based claim that the excise tax would lead to higher wages. On November 5, Gruber quantified the benefit as $74 billion in 2019. And by December, I was in full panic mode, given that no economist could point me to a study proving the point, even in the face of benefit consultants’ surveys refuting it. Economists kept pointing me to Gruber’s papers and telling me not to worry my sweet little non-economist head about such matters.

Perhaps because of the work of the Economic Policy Institute, people finally started looking at this key claim in the last two weeks. No lesser economist than Gruber’s chief defender, Paul Krugman, judged that those making the claim (Krugman implied, but did not say explicitly, that this criticism was directed at Gruber) were exaggerating. And Gruber, who backed off the claim slightly after having had his conflicts exposed, has since admitted privately that he “over-reached” in his earlier statements.

So to review what happened: for a number of months, unions and benefits professionals and dirty fucking hippies like me challenged this assumption, but no one in Gruber’s field appears to have done any independent analysis of his claims. As a result, the excise tax was passed by the Senate based on at least one erroneous assumption. But now, either because economists have weighed in or because Gruber’s conflicts have been exposed, a key part of those assumptions has been challenged (and, in a perhaps not unrelated development, unions have been able to negotiate a palatable deal on this issue).

This kind of analysis should have happened last fall, but it did not, at least partly (I would argue) because someone of Gruber’s prominence had strongly made the claim. His colleagues didn’t do what scholars normally do, regardless how prominent the scholar, which is to check his work. And again, none of this is meant to say Gruber “over-reached” with this claim intentionally. Rather, because the normal peer review of Gruber’s claims didn’t happen, he (and with him, the Administration and the Senate) made a mistake, one that has already had real policy implications.

The entire basis for the excise tax remains unexamined

Now, this matters to me not because a bunch of prominent people are accusing me of being a scandal-monger, but because I believe some more key assumptions about the health care reform have not been adequately examined. In fact, there are two key claims about the excise tax that have, at the least, gotten far too little scrutiny.

Start with the revenue model. Read more →

NY Times Admits Gruber Problem, Fails To Mention Krugman Problem

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imagesIn a full throated mea culpa by the New York Times Public Editor, Clark Hoyt, appearing in the Sunday edition, the Times officially describes the critical and material implications that arise when readers are misled by undisclosed interests of sources and authors in their paper of record.

These examples have resulted in five embarrassing editors’ notes in the last two months — two of them last week — each of them saying readers should have been informed of the undisclosed interest. And on Thursday, the standards editor sent Times journalists a memo urging them to be “constantly alert” to the outside interests of expert sources. The cases raised timeless issues for journalists and sources about what readers have a right to know and whose responsibility it is to find it out or disclose it.

That is exactly right. One of the prime examples the Times’ Public Editor bases his proper conclusion on is that of Jonathan Gruber:

Jonathan Gruber, a prominent M.I.T. health economist, wrote an Op-Ed column and was quoted frequently in other Times columns, news articles and blogs on health care reform before it came to light that he had a contract worth nearly $400,000 to analyze health proposals for the Obama administration.

….

Gruber, the health care economist, wrote an Op-Ed column in July supporting an excise tax on so-called Cadillac health plans. Not long before, he had signed a contract with the Department of Health and Human Services to analyze the economic impact of various health care proposals in Congress. He did not tell Op-Ed editors, nor was the contract mentioned on at least 12 other occasions when he was quoted in The Times after he was consulting for the administration. After a blogger reported on Gruber’s government contract on the Daily Kos Web site, Gruber did volunteer it to Steven Greenhouse, a Times reporter interviewing him for an article on the excise tax. Greenhouse said he included the fact in a draft but struck it because the article was too long. Greenhouse said that Gruber’s views on the tax were so well-known that he did not think they would be influenced by a consulting contract. But had he realized how large the contract was, Greenhouse said, “I would have stood up and paid lots more attention.”

While it is nice the Times has admitted its problem with Gruber, and his wantonly serial failure to disclose material facts and appearances of conflict, it is extremely curious and convenient they dodge the most recent, and in many regards most glaring, example of their damage from Gruber’s Read more →

Marcy Wheeler TeeVee – Jonathan Gruber and the Cadillac Plan

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There has been a fair amount of misinformation and disinformation about what has been said by Marcy Wheeler on this blog about Jonathan Gruber, his modeling work on healthcare and relationship with the Obama Administration. One instance in this regard, quite unfortunately, was notably made by Paul Krugman. Mr. Krugman, who is a solid liberal voice and worthy of respect, nevertheless very unfairly tarred Marcy with complaints he had, or perceived, with others and he owes better.

First off, I would like to point out the matter of Gruber started primarily about the duty and obligation of disclosure, and there was, unequivocally, a failure in full disclosure by both Mr. Gruber and the White House, both relying on his work (inferring that it was independent), and simultaneously funding it, whether directly or indirectly. For Mr. Krugman to extrapolate that out to being “just like the right-wingers with their endless supply of fake scandals” was startling and beyond the pale. There was also no foundation for it from Marcy’s words and statements on this blog.

The foregoing is something that I, bmaz, felt compelled to say; if you disagree, then your beef is with me, not Marcy, not Firedoglake, nor anybody else. Now, with that said, I wish to present Marcy Wheeler and let her speak for herself about exactly what the Gruber matter is about, and what it means. The attached video clip is from a MSNBC interview of Marcy conducted by David Shuster Tuesday morning.

It should be noted that Marcy was covering the North American International Auto show in Detroit when MSNBC interviewed her, as David Shuster notes. What David didn’t catch was that, the whole time he was discussing the infamous “Cadillac tax” Mr. Gruber’s work is central to, Marcy was standing in front of the Cadillac display. Now that is product placement!

Interestingly enough, in discussing the Cadillac tax, Paul Krugman has flat out admitted the claims of insurance premium reductions leading to wage increases are “exaggerated” and that “Cadillac plans aren’t really luxurious — they reflect genuinely high costs.” Mr. Krugman might want to take a look at the most recent work by Larry Mishel, an economist Mr. Krugman has cited before; in fact the exact economist Paul cited as support for the fact that the wage growth claims were “exaggerated”. Mr. Mishel’s new article seems to undercut the entire Cadillac tax thesis as to wage movement.

UPDATE: Economist Larry Mishel, who was linked to in the main post and referred to with seeming approval by Paul Krugman as well (link to that also in main post) put the following in a comment to his FDL Seminal Post yesterday:

I do think Gruber’s claim about the wage impact of lower health care inflation in the 1990s (and the reverse trends in the 200s) was wrong: The simple tale seemed to support his policy desire to curtail health care costs via the excise tax but digging into the details shows that health care costs have not driven wage trends. This does not mean that lower health care costs might not lead to better wages, just that the scale of the impact won’t move wages appreciably.

I may differ with many of you on the site though in that I don’t impugn Gruber’s motives. I don’t think there’s much of a scandal regarding his contract with HHS. I think his error in the case I’m criticizing is that he’s a health care economist and doesn’t know the details about wage trends. I, on the other hand, have been studying wages for thirty years or more. Gruber clearly over-reached with the argument about health care driving wage trends and has acknowledged that to me privately (yesterday).

So, I think he’s wrong on this issue and I also disagree with him on the overall merits of the health excise tax. But I think he’s a pretty smart, reasonable and straightforward economist. I’ve had to debate some pretty scummy economists and he’s not one of them. (emphasis added)

I agree with Mr. Mishel about the absence of malice by Mr. Gruber. But malice was never ascribed by Marcy Wheeler, she merely pointed out that there was a simple failure to fully disclose potential conflict information, that others had an interest in knowing, and that the assumptions Mr. Gruber’s model was based on may not be correct. These points have been borne out by others, indeed effectively by Paul Krugman himself and other experts he relies on. The tarring that occurred from Paul should be retracted.

Krugman on the Cadillac-as-Chevy

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A number of people have pointed to this Krugman post, in which he seemingly agrees with the excise tax apologists.

I think that states his position too strongly. What Krugman does is argue is that it makes sense to limit the tax exclusion for benefits. At the same time, he admits there are problems with imposing the excise tax as a flat dollar amount, not least because it’ll end up targeting older workers and those with chronic medical issues. In that stance, Krugman endorses a key point raised by excise tax critics–that it is taxing people who need the insurance, rather than just the affluent.

Here’s how Krugman weighs in on the Excise Tax Raise claim.

Second, there’s the argument that any reductions in premiums won’t be passed through into wages. I just don’t buy that. It’s true that the importance of changing premiums in past wage changes has been exaggerated by many people. But I’m enough of a card-carrying economist to believe that there’s a real tradeoff between benefits and wages.

Maybe it will help the plausibility of this case to notice that we’re not actually asking whether a fall in premiums would be passed on to workers. Even with the excise tax, premiums are likely to rise over time — just more slowly than they would have otherwise. So what we’re really asking is whether slowing the growth of premiums would reduce the squeeze rising health costs would otherwise have placed on wages. Surely the answer is yes.

I’ll come back to that, but first I want to treat his rebuttal of the third complaint about the excise tax–that it targets unions that have exchanged salary increases in the past for benefits–because I think it is illustrative to the question of the Excise Tax Raise.

The last argument is that this hurts unions which have traded off lower wages for better benefits. This would be a bigger issue than I think it is if the excise tax were going to kick in instantly. But it won’t, giving time to renegotiate those bargains. And bear in mind that this kind of renegotiation is exactly what the tax is supposed to accomplish.

Krugman suggests, I think, that the unions that will be disproportionately affected by this tax will have three years to negotiate new contracts that (presumably) take more compensation in wages and less in health care.

Nationally, one of the unions that will be most affected by this is AFSCME–national, state, and local government workers. The teachers unions are also likely to be affected.

So what do you think the chances are, in an economic environment in which many states are struggling to close budget deficits, in which states are cutting basic services and educational resources dramatically, that any contract renegotiation in the foreseeable future would involve a one-to-one swap of wages for health care costs or even any raise at all? What are the chances that elected government officials would give public employees salary increases when all their constituents were struggling, rather than putting that money back into the services that constituents need?

Not. Gonna. Happen.

In another economic environment, unions might be in a position to negotiate for raises to offset hits to their benefits package. But not in this economic climate, not these unions.

Which brings me back to Krugman’s take on the Excise Tax Raise.

Krugman starts by ceding that “the importance of changing premiums in past wage changes has been exaggerated by many people.” “The Shrill One” is being polite here in not naming names. But the report he links–the EPI report I’ve cited–introduces the claim this way:

Jonathan Gruber, an economics professor at M.I.T., argued in an op-ed in the Washington Post on December 28, 2009:

And when firms reduce their insurance generosity, they make it up in higher pay for their workers. We saw this in the late 1990s, when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years. But as soon as managed care was weakened and health costs rose again, we once again saw flat or declining real wages in the United States. (Gruber 2009)

The paper then goes on to name Ezra Klein and NYT’s David Leonhardt as the others making this claim.

In other words, Krugman starts by saying that Gruber and others are exaggerating the degree to which wage increases in the late 1990s were caused by a slowing rise in health care premiums. So Krugman’s rebuttal is, in part, a Nobel Prize winner affirming that the excise tax’s biggest boosters are overselling their case.

Read more →

Gruber Caveats the "Excise Tax Raise" Claim

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Earlier today, DDay pointed out that the NYT, after issuing a fairly pointed correction revealing Jonathan Gruber’s ties with the Administration, then used a quote from Gruber without disclosing his role in the Administration. DDay was focusing on the NYT’s actions. But I would like to focus on the quote.

Jonathan Gruber, a Massachusetts Institute of Technology economist, predicted the excise tax would raise workers’ wages from 2010 to 2019. “There are many academic studies showing that when health costs rise, wages fall,” he said. “In the mid- and late 1990s, when we got health costs under control, wages rose nicely.” But he added that other factors could have also lifted wages during that period.

According to Stephen Greenhouse, Gruber repeated the claim that the excise tax would result in a pay increase for the little guys, and then did the following:

  • Noted that “many” academic studies (though he doesn’t say it, some of them are Gruber’s own studies) show that “when health costs rise, wages fall”
  • Pointed out that during the late 1990s, the slowing rise in health care costs coincided with wage increases
  • Admitted that “other factors could also have lifted wages during that period”

With this formulation, Gruber dramatically backs off one of the key claims excise tax supporters make about the tax–that it will result in a pay increase for those affected. Indeed, he seems to suggest (though I’d need to see a direct quote to be sure) that he doesn’t actually know whether decreasing health care costs would increase wages. He certainly doesn’t appear to say he’s got a study to prove that.

This is one of the reasons why I believe Gruber’s now-revealed ties to the Administration are so important.

The Recursive Claims To Support the Excise Tax Raises

As you might recall, one of my biggest gripes about the excise tax have to do with a bunch of seemingly unexamined assumptions that go into it. For example, the claim that employers would have actual savings from cutting back expensive insurance plans, rather than managing simply to keep health care spending constant; or the claim that increasing out-of-pocket claims will decrease costs without affecting outcomes. Both are dubious and, if they’re wrong, then not only will the tax not generate the revenue promised, but it will make people less healthy.

But one of my biggest gripes was precisely this claim, that employers would pass on presumed savings to employees. I first questioned the claim when Ezra made it based on an uncritical demonstration of the relationship in the 1990s that Gruber points to. Then, I spent an entire post both trying to trace how the White House had justified that claim in a blog post, and pointing out the evidence that contradicted it. I also spent the better part of a day asking economists to point to proof that employers would pass on savings to employees; one normally friendly economist who has elsewhere backed the claim ignored my question; several more pointed to studies showing, again, the inverse (that when health care costs rise, wages fall). More recently, the Economic Policy Institute did analysis–partly based on White House aide Jared Bernstein’s work–showing that wages didn’t go up in the 1990s because health care cost increases slowed.

In other words, no one has been able to point to a study that supports the case. And a lot of data from the real world suggests just the opposite would occur–that employers would pocket the savings as profit rather than passing them onto employees.

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Gruber Did Not Disclose Conflict to the WaPo

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One of the biggest puzzles in Jonathan Gruber’s explanation for why he hasn’t been disclosing his $400,000 HHS contract as he has led the campaign to support the bill is timing. By his own admission, he revealed the contract for a disclosure form associated with a December New England Journal of Medicine article. That form was dated November 30.

But the WaPo did not disclose the relationship for an op-ed published almost a month after he filled out that disclosure form.

Now, Gruber says he has disclosed the contract whenever he has been asked.

Gruber told POLITICO that he has told reporters of the contract “whenever they asked.”

But in a follow-up with the WaPo, Ben Smith reports that Gruber was asked by the WaPo, and he said he didn’t have any financial conflicts.

Washington Post op-ed editor Autumn Brewington emails that the Post, as a practice, asks writers to disclose any “conflicts of interest that might be relevant to this op-ed, including but not limited to financial or family relationships with any of the subjects of the article” and that Gruber, when asked whether he “received any funding, for research or otherwise, from organizations or persons identified in the column,” answered “no.”

Now, perhaps there’s some wiggle room here. Perhaps, since Gruber’s op-ed doesn’t mention HHS, even though it mentions the health care reform he was hired to consult on repeatedly, he felt he didn’t need to reveal the conflict. Perhaps there’s some confusion at the WaPo, which itself is having problems disclosing ethical conflicts (though Ben says Brewington was quoting directly from the exchange on disclosure).

But, at least given what we know, it looks like Gruber felt obliged to reveal the conflict to the NEJM on November 30, but when asked a similar question about financial conflicts less than a month later, he did not disclose it.

Reinhardt: Gruber's Simulations Better than Private Sector Ones

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After I learned that Jonathan Gruber–one of the biggest pitchmen for the Administration’s health care reform–had also gotten a significant sole source contract from HHS, I wanted to get a sense of how sound the justification for the sole source on it was. I asked Dr. Uwe Reinhardt about the contract. Reinhardt, a professor at Princeton, has himself testified on health care financing to Congress. And he has been critical of the whole hocus pocus that lies at the heart of the excise tax proposal.

“The consumer-directed-health-care crowd argues that with high cost-sharing, patients will do the only legitimate . . . cost-benefit calculus — but that surely is nonsense,” said Princeton economist Uwe Reinhardt. “None of these proponents has ever shown that patients are even capable of evaluating the clinical merits” of treatment options.

That said, Reinhardt does vouch for the quality of Gruber’s simulations. When I asked him whether he could have applied for this contract (given that he, like Gruber, is an acknowledged expert in the financing of health care), he said,

If I had constructed as a sophistiated a simulation model for health reform as has Jon Gruber, I certainly would have been in the running for a competitive bid. But there are not many sophisticated models of this sort around.

Gruber is one of the brightest young health economists (and public-finance specialists) in the field. He thinks and writes twice as fast as most of his peers (although David Cutler at Harvard comes to mind as well). So I am sure that, too, weighed in his favor with this contract. Just have a look at his textbook in Public Finance to get a feel for the man.

All simulation models suffer from the fact that their predictions are a function of a series of assumptions that must be fed into the models. I certainly would trust one of Gruber’s simulations more than those produced for much higher fees for trade associations.

Mind you, that doesn’t excuse Gruber’s disclosure lapses, nor does it recommend having the top pitchman for a policy also be the guy running simulations to see how it’ll turn out. But at least according to Reinhardt, we’re not going to get better simulations than we’re getting from Gruber.

Gruber Doesn't Reveal that 21% of MA Residents Can't Afford Health Care

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Picture 178I was intrigued to see Gruber link–in his response to Ben Smith–to his May 2009 analysis of how to measure affordability for a national healthcare reform plan. After all, I’ve been debating with people who love to cite Gruber on affordability for months, and I’ve never seen them cite it. Now there are several reasons they might not want to rely on this paper. It might be that he starts out by arguing that you can still call something “affordable” even if it isn’t affordable for everyone.

In considering affordability for a group, we need to establish a sensible benchmark whereby insurance is considered affordable if “most of” a group can afford it. We can disagree about what “most of” means, but it would be wrong to define “most of” only as “very close to 100%.”

This, of course, accepts as a baseline some continued medical debt (at least) or even bankruptcies in your definition of “affordable.”

Or maybe it’s the fact that Gruber insists that health insurance (not care) be considered as the same kind of necessity as food and shelter.

Second, it implicitly assumes that health care is less important than these other categories; that is, that if individuals have to spend their resources on these other categories, then they should not have to spend resources on health care. It is unclear why health insurance should take a lower position on the priority scale than other necessities.

But the thing I’m most troubled by in this paper is something Gruber neglects to mention: real data from MA on the number of people who forgo necessary medical care because it is not affordable.

In March 2009–two months before Gruber wrote this paper–MA released the first results [PPT] of how that state’s health care reform had improved access. It showed that 21% of the total population–and even 12% of children–forgo necessary medical care because they cannot afford it. Of the 21% forgoing care, most (something like 18 or 19%) have health insurance–but it is health insurance they can’t afford to use. In a paper contemplating what constitutes affordability for a national plan that resembles the MA plan in many ways, Gruber uses national Kaiser/HRET data, rather than the MA data that is much more directly on point.

Now, I might excuse other analysts for ignoring the MA results, except for two things. First, Gruber boasts of his involvement in the MA program as part of his explanation for his qualifications for the HHS contracts.

Throughout this year I have provided technical assistance to the administration and to Congress with my micro-simulation model, as well as based on my experience as a member of the Massachusetts health connector board.

Also, when the facts from MA suit his argument, he uses them, as he did in a November analysis of how much the Senate plan would reduce premiums.

So rather than looking at a real world study showing what happens when a program very similar to the Senate plan goes into effect–which shows that a significant number of people can’t afford to use their health insurance–here’s what Gruber says about how out-of-pocket expenses affect affordability.

A very conservative response would be to say that a plan is only affordable if the premiums plus the maximum out of pocket exposure does not exceed available resources. This is very conservative because while premium payments are certain, out of pocket payments are not, and a sizeable majority of enrollees will not reach the out of pocket limit.

Moreover, there is a strong argument that out of pocket costs should not be incorporated into a discussion of affordability of insurance. After all, individuals face more out of pocket risk without insurance than they do with coverage. Thus, if an individual is very ill and faces large out of pocket costs under an insurance plan, they would have faced at least those same out of pocket costs, and likely more, had they remained uninsured. So it would be wrong to say that those out of pocket costs were responsible for making insurance unaffordable. That is, it is nonsensical to argue that very sick individuals cannot afford insurance because they will have large out of pocket costs under the insurance plan; indeed, the problem is that these individuals cannot afford not to have insurance.

This is analysis that Jonathan Cohn, with data from Gruber, expands upon here.

But it all comes back to that underlying premise. So long as you define “affordable” in such a way that accepts ongoing medical debt for at least some of your sample in your definition of affordable, then this approach–looking at total risk, rather than whether insurance equates to care, makes sense. It transforms the question of whether health care (not health insurance) is affordable into one that measures degrees of indebtedness for using health care.

But then again, that’s what a lot of bill apologists do: consistently oversell what this kind of reform does, by conflating health insurance with health care.

Update: Fixed percentages forgoing care for clarity.