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Health Care Reform in the US: What Will it Look Like and What Does it Mean?

01/26/2010 12:00 PM 32"123
Jonathan Gruber, '87, Professor of Economics MacVicar Faculty Fellow; ; Andrea Louise Campbell, Associate Professor, Political Science; Joseph J. Doyle, Associate Professor, Economics, MIT Sloan School of Management; Amy Finkelstein, Professor of Economics

Description: Years of extreme partisanship and lobbying have left Americans cynical and bewildered about health care reform, but, say these panelists, the urgency of achieving some measure of change is not diminished, both for American families and the nation as a whole. The sad truth is that the problem may have become too complex and provocative for either public discourse or constructive legislative action.

In his overview of the reform debate to date, Jonathan Gruber describes "what needs to be resolved to make it across the finish line." He invokes the example of Massachusetts, which implemented an approach to health care in 2006 that Gruber calls "incremental universalism." The system rests on three pillars: reforming insurance markets, an individual mandate, and making health insurance affordable for the poor. The bills idling in the House and Senate generally follow Massachusetts' approach, but differ from each other around affordability and financing. Another big issue, cost control, is a hard sell to the majority of Americans currently carrying health insurance, since many would stand to lose. Cherry"picking popular pieces of legislation will fail, because "you need all three legs of the stool." Gruber warns that "the Democrats and the President have to decide: Are they willing to go for all or live with nothing?"

Today, one in every five dollars spent by the federal government goes toward health care, says Joseph J. Doyle, and in a decade or two, the U.S. will spend 10% of its GDP tending to health needs. Bending this steep cost curve, with or without expanding access to the uninsured, must be a priority because of the ballooning federal deficit. But doing so poses difficult choices: while the U.S. has an expensive health care system, rooting out waste isn't easy, since "some things are expensive and save lives." Doyle approves the current Senate bill's demonstration projects that seek "to cut costs without hurting patients." Experimenting with financial incentives for providers and consumers while capping insurance payments may help with rationing.

Amy Finkelstein examines the economic consequences of expanding health care insurance. She anticipates increased spending, whether public or private, as a larger population consumes more medical services, sheltered from actual costs by insurance. This will put even greater pressure on the federal budget. But benefits of expanded coverage include improved financial security for families who might otherwise face catastrophic financial loss due to a significant health problem; possible improvements in the overall health of the population; and likely progress in medical technologies and drugs.

While President Obama may have avoided pitfalls encountered by the Clinton administration around health care reform, he ran up against an American political system that strongly discourages "redistributive policy," says Andrea Louise Campbell. Historically, Americans only buy into transformative legislation "when everyone gets a benefit" (e.g., Social Security); or when the target groups are sympathetic (e.g., the elderly and Medicare); when public support is overwhelming; or when the economy "is good or catastrophically bad." The current political environment does not bring these conditions into play for Obama. Says Campbell, "Though it appeared people were ready for health care reform this time 'round, I don't think they were."

About the Speaker(s): Jonathan Gruber has taught at MIT since 1992. He is also the Director of the Program on Children at the National Bureau of Economic Research, where he is a Research Associate. He is a co"editor of the Journal of Public Economics, and an Associate Editor of the Journal of Health Economics.

Gruber received his B.S. in Economics from MIT, and his Ph.D. in Economics from Harvard. He has received an Alfred P. Sloan Foundation Research Fellowship, a FIRST award from the National Institute on Aging, and the Kenneth Arrow Award for the Best Paper in Health Economics in 1994. He was also one of 15 scientists nationwide to receive the Presidential Faculty Fellow Award from the National Science Foundation in 1995. During the 1997"1998 academic year, Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. Gruber was elected to the Institute of Medicine in 2005, and in 2006 he received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under. In 2006 he was appointed to the board of the Massachusetts Insurance Connector, the main implementing body for the state's ambitious health care reform effort, and was named the 19th most powerful person in health care in the United States by Modern Healthcare Magazine.

Gruber's research focuses on the areas of public finance and health economics. He has published more than 100 research articles, has edited four research volumes, and is the author of Public Finance and Public Policy, a leading undergraduate text.

Host(s): Office of the President, Office of the President

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