WEBVTT 00:00:00.000 --> 00:00:02.488 align:middle line:90% [SQUEAKING] 00:00:02.488 --> 00:00:03.979 align:middle line:90% [RUSTLING] 00:00:03.979 --> 00:00:04.973 align:middle line:90% [CLICKING] 00:00:04.973 --> 00:00:09.317 align:middle line:90% 00:00:09.317 --> 00:00:11.400 align:middle line:84% JON GRUBER: We're going to continue our discussion 00:00:11.400 --> 00:00:13.320 align:middle line:90% today of Medicare. 00:00:13.320 --> 00:00:16.200 align:middle line:84% Remember, we're talking about the fact that Medicare's costs 00:00:16.200 --> 00:00:19.840 align:middle line:84% rose very rapidly, and the government was trying to find 00:00:19.840 --> 00:00:21.860 align:middle line:84% ways to control them in the early 1980s, 00:00:21.860 --> 00:00:23.240 align:middle line:90% and they took two routes. 00:00:23.240 --> 00:00:27.960 align:middle line:84% One route was to stay within the existing Medicare structure, 00:00:27.960 --> 00:00:30.320 align:middle line:84% but to move towards a prospective reimbursement 00:00:30.320 --> 00:00:33.300 align:middle line:84% system, which, as we said, worked somewhat, 00:00:33.300 --> 00:00:36.680 align:middle line:84% but only partially because of the hazards of partial reform. 00:00:36.680 --> 00:00:39.280 align:middle line:84% The other approach was to actually lean 00:00:39.280 --> 00:00:41.940 align:middle line:84% into managed care as a tool of Medicare. 00:00:41.940 --> 00:00:43.400 align:middle line:84% This is the elusive Medicare Part 00:00:43.400 --> 00:00:47.080 align:middle line:84% C, which is now called Medicare Advantage. 00:00:47.080 --> 00:00:49.480 align:middle line:84% It's had various names along the way. 00:00:49.480 --> 00:00:53.920 align:middle line:84% The basic idea was to say that enrollees, instead of signing up 00:00:53.920 --> 00:00:57.360 align:middle line:84% for Medicare, would sign up for a Medicare HMO, what's 00:00:57.360 --> 00:00:59.710 align:middle line:90% called Medicare Advantage Plan. 00:00:59.710 --> 00:01:02.830 align:middle line:84% The way that works is you, as the enrollee, 00:01:02.830 --> 00:01:05.310 align:middle line:84% agree that you will get your health care delivered 00:01:05.310 --> 00:01:07.270 align:middle line:90% by this Medicare HMO-- 00:01:07.270 --> 00:01:09.530 align:middle line:84% they're run by folks like Aetna and Humana, 00:01:09.530 --> 00:01:12.550 align:middle line:84% et cetera, big insurance companies-- 00:01:12.550 --> 00:01:16.190 align:middle line:84% including any limitations on their doctor networks. 00:01:16.190 --> 00:01:17.950 align:middle line:90% So it's an HMO. 00:01:17.950 --> 00:01:21.697 align:middle line:84% In return, the HMO gets a fixed reimbursement 00:01:21.697 --> 00:01:22.530 align:middle line:90% from the government. 00:01:22.530 --> 00:01:23.770 align:middle line:90% It's a capitated arrangement. 00:01:23.770 --> 00:01:26.110 align:middle line:84% The government pays the HMO a fixed amount, which 00:01:26.110 --> 00:01:29.070 align:middle line:90% depends on your age initially. 00:01:29.070 --> 00:01:30.870 align:middle line:90% Depending on your age-- 00:01:30.870 --> 00:01:35.430 align:middle line:84% so 75-year-olds the government paid more than 65-year-olds. 00:01:35.430 --> 00:01:38.237 align:middle line:90% And what do you get? 00:01:38.237 --> 00:01:39.570 align:middle line:90% So what does the government get? 00:01:39.570 --> 00:01:41.050 align:middle line:90% The government sheds the risk. 00:01:41.050 --> 00:01:44.230 align:middle line:84% The government says, I'm going to pay a fixed amount. 00:01:44.230 --> 00:01:46.650 align:middle line:84% And this managed care company is going to bear the risk. 00:01:46.650 --> 00:01:48.270 align:middle line:90% I'm out of the business. 00:01:48.270 --> 00:01:49.770 align:middle line:90% For enrollees, it's a trade-off. 00:01:49.770 --> 00:01:53.390 align:middle line:84% On the one hand, you have a limited doctor network. 00:01:53.390 --> 00:01:55.550 align:middle line:84% On the other hand, these Medicare Advantage 00:01:55.550 --> 00:02:00.080 align:middle line:84% plans typically cover all the cost sharing that's in Medicare. 00:02:00.080 --> 00:02:03.380 align:middle line:84% Remember last time, if you look back at table-- 00:02:03.380 --> 00:02:09.940 align:middle line:84% if you look back at table 16-2, you see Medicare has a lot 00:02:09.940 --> 00:02:14.980 align:middle line:84% of cost sharing, in particular, the uncapped doctor coinsurance. 00:02:14.980 --> 00:02:18.220 align:middle line:84% That all goes away under Medicare Advantage. 00:02:18.220 --> 00:02:19.980 align:middle line:84% So the idea is you basically save 00:02:19.980 --> 00:02:22.220 align:middle line:84% a lot in out-of-pocket costs in return 00:02:22.220 --> 00:02:24.980 align:middle line:84% for a more restrictive doctor network and more 00:02:24.980 --> 00:02:27.780 align:middle line:90% management of your care. 00:02:27.780 --> 00:02:32.360 align:middle line:84% So a couple of things I want to talk about this. 00:02:32.360 --> 00:02:35.520 align:middle line:84% Well, first of all, what was the effect of this on enrollees? 00:02:35.520 --> 00:02:39.020 align:middle line:84% There's now been a number of studies, including by myself. 00:02:39.020 --> 00:02:41.740 align:middle line:84% And the bottom line is that Medicare Advantage 00:02:41.740 --> 00:02:46.100 align:middle line:84% appears to deliver much less costly care-- 00:02:46.100 --> 00:02:48.100 align:middle line:84% to deliver much less expensive care 00:02:48.100 --> 00:02:49.540 align:middle line:84% than does traditional Medicare fee 00:02:49.540 --> 00:02:52.040 align:middle line:84% for service, which is what we'd expect from the managed care 00:02:52.040 --> 00:02:52.660 align:middle line:90% evidence. 00:02:52.660 --> 00:02:55.202 align:middle line:84% In other words, what we talked about with managed care, which 00:02:55.202 --> 00:02:57.912 align:middle line:84% is managed care, saves money, is true as well 00:02:57.912 --> 00:02:58.870 align:middle line:90% for Medicare Advantage. 00:02:58.870 --> 00:03:02.290 align:middle line:84% It seems to save money without a meaningful effect 00:03:02.290 --> 00:03:04.150 align:middle line:90% on patient outcomes. 00:03:04.150 --> 00:03:06.410 align:middle line:84% That is, once again, Medicare was operating 00:03:06.410 --> 00:03:07.650 align:middle line:90% the flat of the curve. 00:03:07.650 --> 00:03:10.690 align:middle line:84% And so we moved people to these Medicare Advantage plans. 00:03:10.690 --> 00:03:13.730 align:middle line:84% They are able to operate more efficiently to lower costs 00:03:13.730 --> 00:03:16.942 align:middle line:90% without worsening outcomes. 00:03:16.942 --> 00:03:18.650 align:middle line:84% Now, worsening outcomes, let me be clear, 00:03:18.650 --> 00:03:20.650 align:middle line:84% along the dimensions we care about most, 00:03:20.650 --> 00:03:23.530 align:middle line:84% like things like mortality and hospitalizations. 00:03:23.530 --> 00:03:25.450 align:middle line:84% They may make life less pleasant. 00:03:25.450 --> 00:03:27.030 align:middle line:84% You have to shop around for a doctor. 00:03:27.030 --> 00:03:28.590 align:middle line:90% Your wait times can be longer. 00:03:28.590 --> 00:03:30.657 align:middle line:84% People bitch about them constantly. 00:03:30.657 --> 00:03:32.490 align:middle line:84% But the bottom line is it turns the outcomes 00:03:32.490 --> 00:03:34.490 align:middle line:84% we care most about-- things like mortality-- 00:03:34.490 --> 00:03:38.610 align:middle line:84% they appear to be no worse and they save money. 00:03:38.610 --> 00:03:41.258 align:middle line:84% The interesting question here is, how much 00:03:41.258 --> 00:03:42.550 align:middle line:90% should the government pay them? 00:03:42.550 --> 00:03:43.490 align:middle line:84% I said the government was just going 00:03:43.490 --> 00:03:44.390 align:middle line:90% to pay them a fixed amount. 00:03:44.390 --> 00:03:45.765 align:middle line:84% Well, how do you set that amount? 00:03:45.765 --> 00:03:48.010 align:middle line:84% Well, the government said, we've got a good idea. 00:03:48.010 --> 00:03:49.190 align:middle line:90% We want to save money. 00:03:49.190 --> 00:03:51.530 align:middle line:84% That's the whole idea we set these things up. 00:03:51.530 --> 00:03:58.800 align:middle line:84% We will pay them 95% of what a typical Medicare enrollee would 00:03:58.800 --> 00:04:00.680 align:middle line:90% cost at that age. 00:04:00.680 --> 00:04:04.360 align:middle line:84% So if you get a 70-year-old, we'll compute the average cost 00:04:04.360 --> 00:04:07.120 align:middle line:90% of 75-year-olds on Medicare. 00:04:07.120 --> 00:04:08.820 align:middle line:90% We'll pay you 5% less. 00:04:08.820 --> 00:04:11.400 align:middle line:84% And woo-hoo, the government makes money. 00:04:11.400 --> 00:04:12.680 align:middle line:90% Except it doesn't. 00:04:12.680 --> 00:04:15.520 align:middle line:84% In fact, the government lost massive amounts of money. 00:04:15.520 --> 00:04:17.832 align:middle line:90% Why? 00:04:17.832 --> 00:04:20.399 align:middle line:84% Why did the government lose money 00:04:20.399 --> 00:04:23.560 align:middle line:84% by setting up this new program people could enroll in 00:04:23.560 --> 00:04:26.120 align:middle line:84% and paying 5% less than the average cost of people 00:04:26.120 --> 00:04:28.960 align:middle line:90% on Medicare? 00:04:28.960 --> 00:04:29.575 align:middle line:90% Yeah. 00:04:29.575 --> 00:04:31.200 align:middle line:84% AUDIENCE: Because it's the average cost 00:04:31.200 --> 00:04:32.660 align:middle line:84% and there's an adverse selection. 00:04:32.660 --> 00:04:34.840 align:middle line:84% JON GRUBER: Yeah, because the people who signed up are who? 00:04:34.840 --> 00:04:36.040 align:middle line:84% Who's going to sign up for a program that 00:04:36.040 --> 00:04:37.500 align:middle line:90% limits the number of doctors? 00:04:37.500 --> 00:04:38.680 align:middle line:90% The healthiest people. 00:04:38.680 --> 00:04:40.340 align:middle line:84% And the government paid the average. 00:04:40.340 --> 00:04:43.200 align:middle line:84% We could see this illustrated, an example of this, 00:04:43.200 --> 00:04:44.760 align:middle line:90% in figure 16-4. 00:04:44.760 --> 00:04:48.320 align:middle line:84% So imagine there's three types of people, OK? 00:04:48.320 --> 00:04:51.570 align:middle line:84% People who cost on average $1,000, $2,000, and $3,000. 00:04:51.570 --> 00:04:54.590 align:middle line:84% Imagine there's 100 of each of these people in a group. 00:04:54.590 --> 00:04:58.030 align:middle line:84% And imagine that they're all on traditional Medicare. 00:04:58.030 --> 00:05:01.090 align:middle line:84% Then on average, the government spends $2,000. 00:05:01.090 --> 00:05:03.670 align:middle line:84% This is the left-hand column in figure 16-4. 00:05:03.670 --> 00:05:06.710 align:middle line:84% On average, the government spends $2,000 and total costs 00:05:06.710 --> 00:05:08.928 align:middle line:90% are $600,000. 00:05:08.928 --> 00:05:10.470 align:middle line:84% Now, the government says, we're going 00:05:10.470 --> 00:05:13.172 align:middle line:84% to introduce Medicare Advantage, and we're 00:05:13.172 --> 00:05:14.630 align:middle line:84% going to pay the Medicare Advantage 00:05:14.630 --> 00:05:19.750 align:middle line:84% plan 95% of what the average person costs on Medicare. 00:05:19.750 --> 00:05:22.770 align:middle line:84% Well, what happens when you do that? 00:05:22.770 --> 00:05:24.390 align:middle line:84% Well, the cheapest people, 30% of them 00:05:24.390 --> 00:05:27.410 align:middle line:84% move over because the healthiest people like these plans. 00:05:27.410 --> 00:05:30.570 align:middle line:84% Let's assume the middle people, 15% move over. 00:05:30.570 --> 00:05:32.990 align:middle line:84% None of the sickest people move over. 00:05:32.990 --> 00:05:35.590 align:middle line:84% What's the new average cost of medicare? 00:05:35.590 --> 00:05:38.790 align:middle line:90% It's $2,118. 00:05:38.790 --> 00:05:42.470 align:middle line:84% So you pay the HMOs 95% of $2,118, 00:05:42.470 --> 00:05:45.650 align:middle line:84% but it's actually costing them a ton less. 00:05:45.650 --> 00:05:49.110 align:middle line:84% It's actually cost them $1,333 because they're getting 00:05:49.110 --> 00:05:51.380 align:middle line:90% the healthiest enrollees. 00:05:51.380 --> 00:05:55.020 align:middle line:90% So the government loses money. 00:05:55.020 --> 00:05:58.980 align:middle line:84% This is a classic example of how adverse selection plays out. 00:05:58.980 --> 00:06:01.680 align:middle line:84% The government thought it was saving money. 00:06:01.680 --> 00:06:04.900 align:middle line:84% But since it was paying on the average and only the healthiest 00:06:04.900 --> 00:06:09.660 align:middle line:84% signed up, it actually lost money. 00:06:09.660 --> 00:06:12.660 align:middle line:84% So the government saw this and they said-- yeah. 00:06:12.660 --> 00:06:16.660 align:middle line:84% AUDIENCE: And it's average at the particular point in time? 00:06:16.660 --> 00:06:18.980 align:middle line:84% JON GRUBER: Every year, the average for that age. 00:06:18.980 --> 00:06:21.740 align:middle line:84% AUDIENCE: And that would be the average across both those in-- 00:06:21.740 --> 00:06:23.640 align:middle line:84% JON GRUBER: No, only those in traditional Medicare. 00:06:23.640 --> 00:06:25.932 align:middle line:84% AUDIENCE: Which means that that would also [INAUDIBLE]. 00:06:25.932 --> 00:06:27.540 align:middle line:90% JON GRUBER: Yes, exactly. 00:06:27.540 --> 00:06:29.518 align:middle line:84% AUDIENCE: Which of those two effects is bigger? 00:06:29.518 --> 00:06:31.060 align:middle line:84% JON GRUBER: The bigger effect is just 00:06:31.060 --> 00:06:33.990 align:middle line:84% the fact that the healthiest people are moving over, 00:06:33.990 --> 00:06:35.740 align:middle line:84% at least initially, because this was still 00:06:35.740 --> 00:06:38.380 align:middle line:90% a minority of the population. 00:06:38.380 --> 00:06:42.460 align:middle line:84% So if you look at figure 16-3, you can see Medicare Advantage 00:06:42.460 --> 00:06:44.460 align:middle line:84% really started to grow in popularity. 00:06:44.460 --> 00:06:45.600 align:middle line:90% Then what happened? 00:06:45.600 --> 00:06:47.360 align:middle line:84% Well, in 1999, the government said, 00:06:47.360 --> 00:06:49.100 align:middle line:84% look, we're losing money on this. 00:06:49.100 --> 00:06:50.560 align:middle line:90% We know how to do that. 00:06:50.560 --> 00:06:52.600 align:middle line:90% We'll cut the 95% to 90%. 00:06:52.600 --> 00:06:54.500 align:middle line:90% That'll solve the problem. 00:06:54.500 --> 00:06:58.758 align:middle line:84% Well, to some extent, it did slow the growth 00:06:58.758 --> 00:06:59.800 align:middle line:90% of Medicare managed care. 00:06:59.800 --> 00:07:04.540 align:middle line:84% You can see that number drop then in the early 2000s. 00:07:04.540 --> 00:07:06.900 align:middle line:84% Did that mean the government saved money? 00:07:06.900 --> 00:07:07.740 align:middle line:90% No. 00:07:07.740 --> 00:07:10.900 align:middle line:84% What happened was in some parts of the country, 00:07:10.900 --> 00:07:13.983 align:middle line:84% they could still make money at 90%. 00:07:13.983 --> 00:07:16.400 align:middle line:84% So those parts of the country, the Medicare Advantage plan 00:07:16.400 --> 00:07:17.067 align:middle line:90% stayed. 00:07:17.067 --> 00:07:19.400 align:middle line:84% In other parts, they couldn't, make money anymore at 90% 00:07:19.400 --> 00:07:20.233 align:middle line:90% so they dropped out. 00:07:20.233 --> 00:07:23.820 align:middle line:84% That is the selection wasn't enough to offset 00:07:23.820 --> 00:07:26.180 align:middle line:90% the drop to 90%. 00:07:26.180 --> 00:07:30.100 align:middle line:84% Now you might think, OK, well, that's all well and good. 00:07:30.100 --> 00:07:32.720 align:middle line:84% Clearly, we can't save everyone from Medicare Advantage. 00:07:32.720 --> 00:07:36.803 align:middle line:84% But we've still got-- it was something like 10%-- 00:07:36.803 --> 00:07:37.720 align:middle line:90% that shouldn't be a 1. 00:07:37.720 --> 00:07:38.470 align:middle line:90% It should be a 10. 00:07:38.470 --> 00:07:42.258 align:middle line:90% 00:07:42.258 --> 00:07:44.800 align:middle line:84% Valerie, could you send me an email to remind me to fix that? 00:07:44.800 --> 00:07:47.470 align:middle line:90% There's a typo on figure 16-3. 00:07:47.470 --> 00:07:49.250 align:middle line:90% There should be a 10, not a 1. 00:07:49.250 --> 00:07:50.730 align:middle line:90% So 10% were in. 00:07:50.730 --> 00:07:51.810 align:middle line:90% That's cool. 00:07:51.810 --> 00:07:54.410 align:middle line:84% The problem is, people lost sight 00:07:54.410 --> 00:07:56.410 align:middle line:90% of the point of this program. 00:07:56.410 --> 00:07:59.090 align:middle line:84% The point of the program was to save Medicare money. 00:07:59.090 --> 00:08:01.210 align:middle line:84% But people said oh no, all these people 00:08:01.210 --> 00:08:03.530 align:middle line:84% aren't able to access this new benefit. 00:08:03.530 --> 00:08:04.510 align:middle line:90% That's bad. 00:08:04.510 --> 00:08:07.410 align:middle line:84% We've got to raise what we pay them. 00:08:07.410 --> 00:08:10.430 align:middle line:84% So under the same bill that they include the Part D plan, 00:08:10.430 --> 00:08:12.570 align:middle line:84% they started paying Medicare Advantage plans 00:08:12.570 --> 00:08:16.598 align:middle line:90% 120% of traditional Medicare. 00:08:16.598 --> 00:08:18.390 align:middle line:84% Now here, you don't need adverse selection. 00:08:18.390 --> 00:08:19.973 align:middle line:84% See, that's going to be a money loser. 00:08:19.973 --> 00:08:23.530 align:middle line:84% When you add adverse selection, that's a huge money loser. 00:08:23.530 --> 00:08:24.790 align:middle line:90% And what happened? 00:08:24.790 --> 00:08:28.930 align:middle line:84% Well, enrollment took off, because this 00:08:28.930 --> 00:08:30.030 align:middle line:90% was a massive moneymaker. 00:08:30.030 --> 00:08:32.090 align:middle line:84% Indeed, for most of the major health insurance 00:08:32.090 --> 00:08:34.257 align:middle line:84% companies in America, this became their major profit 00:08:34.257 --> 00:08:35.409 align:middle line:90% center. 00:08:35.409 --> 00:08:38.610 align:middle line:90% Under the Affordable Care Act-- 00:08:38.610 --> 00:08:40.169 align:middle line:90% this graph ends early. 00:08:40.169 --> 00:08:42.530 align:middle line:84% If you look at recent data, this growth-- 00:08:42.530 --> 00:08:46.060 align:middle line:84% under the Affordable Care Act, they cut that 120%, 00:08:46.060 --> 00:08:49.520 align:middle line:90% but only down to about 105%. 00:08:49.520 --> 00:08:50.383 align:middle line:90% OK? 00:08:50.383 --> 00:08:52.300 align:middle line:84% So insurance companies are still making money. 00:08:52.300 --> 00:08:53.800 align:middle line:84% Medicare Advantage is still growing. 00:08:53.800 --> 00:08:56.200 align:middle line:84% At this point, about half of all enrollees in Medicare 00:08:56.200 --> 00:08:57.380 align:middle line:90% are Medicare Advantage. 00:08:57.380 --> 00:08:59.880 align:middle line:84% And now, as Steven said, that could lead to this cost spiral 00:08:59.880 --> 00:09:03.820 align:middle line:90% in this calculation over time. 00:09:03.820 --> 00:09:07.240 align:middle line:84% So we've got a situation where in some sense, 00:09:07.240 --> 00:09:11.120 align:middle line:84% we've gone away from the actual motivation for managed 00:09:11.120 --> 00:09:13.760 align:middle line:84% care, which was to save money, towards a goal of actually 00:09:13.760 --> 00:09:16.960 align:middle line:84% having people in those managed care programs. 00:09:16.960 --> 00:09:21.600 align:middle line:84% And that is good for many seniors, 00:09:21.600 --> 00:09:24.120 align:middle line:84% because this gives seniors a chance 00:09:24.120 --> 00:09:27.760 align:middle line:84% to cover those high out-of-pocket costs in Medicare. 00:09:27.760 --> 00:09:30.160 align:middle line:84% But it just means the government is spending more money 00:09:30.160 --> 00:09:31.577 align:middle line:84% on a program where it's originally 00:09:31.577 --> 00:09:32.980 align:middle line:90% designed to spend less. 00:09:32.980 --> 00:09:36.400 align:middle line:90% 00:09:36.400 --> 00:09:38.090 align:middle line:90% Now, what can we do about that? 00:09:38.090 --> 00:09:39.840 align:middle line:84% Well, one thing we can do about that is we 00:09:39.840 --> 00:09:43.410 align:middle line:84% can say, look, we don't know what the right number is. 00:09:43.410 --> 00:09:46.630 align:middle line:84% 95%, 90%, we don't know what it is. 00:09:46.630 --> 00:09:51.350 align:middle line:84% Let's just go ahead and let competition between the plans 00:09:51.350 --> 00:09:53.070 align:middle line:84% determine what the right number is. 00:09:53.070 --> 00:09:55.890 align:middle line:84% That is, basically we could say we're going to set-- 00:09:55.890 --> 00:10:00.510 align:middle line:84% let's move to a full system of what we call premium support. 00:10:00.510 --> 00:10:04.630 align:middle line:84% A premium support system will be we just literally send you 00:10:04.630 --> 00:10:06.083 align:middle line:90% a brochure with your choices. 00:10:06.083 --> 00:10:07.250 align:middle line:90% Here's traditional Medicare. 00:10:07.250 --> 00:10:09.310 align:middle line:90% Here's a bunch of plans. 00:10:09.310 --> 00:10:11.130 align:middle line:90% We're going to send you a check. 00:10:11.130 --> 00:10:13.150 align:middle line:90% It's like vouchers for schools. 00:10:13.150 --> 00:10:17.230 align:middle line:84% We're going to send you, Medicare recipient, a voucher. 00:10:17.230 --> 00:10:18.210 align:middle line:90% You can trade that in. 00:10:18.210 --> 00:10:22.792 align:middle line:84% If that covers the cost of your plan, 00:10:22.792 --> 00:10:24.250 align:middle line:84% then you might even get money back. 00:10:24.250 --> 00:10:25.730 align:middle line:84% If it covers it exactly, you get nothing. 00:10:25.730 --> 00:10:27.330 align:middle line:84% If it's more than the cost of the plan, you get money back. 00:10:27.330 --> 00:10:28.537 align:middle line:90% If it's less, you pay in. 00:10:28.537 --> 00:10:30.870 align:middle line:84% So the idea is to basically give people a certain amount 00:10:30.870 --> 00:10:31.643 align:middle line:90% and let them shop. 00:10:31.643 --> 00:10:33.310 align:middle line:84% Essentially give people a certain amount 00:10:33.310 --> 00:10:35.150 align:middle line:90% and let them shop. 00:10:35.150 --> 00:10:37.150 align:middle line:84% So how would a system like that work? 00:10:37.150 --> 00:10:38.930 align:middle line:90% Well, if you look at-- 00:10:38.930 --> 00:10:49.573 align:middle line:90% 00:10:49.573 --> 00:10:50.240 align:middle line:90% oh, here you go. 00:10:50.240 --> 00:10:53.780 align:middle line:90% Yeah, table 16-3. 00:10:53.780 --> 00:10:59.460 align:middle line:84% So now imagine that you had a system with three plans. 00:10:59.460 --> 00:11:00.140 align:middle line:90% OK? 00:11:00.140 --> 00:11:04.040 align:middle line:84% One cost $1,800 a person, one cost $2,000 a person, 00:11:04.040 --> 00:11:06.620 align:middle line:90% and one cost $2,500 a person. 00:11:06.620 --> 00:11:09.540 align:middle line:84% And let's say you gave every senior a voucher. 00:11:09.540 --> 00:11:11.920 align:middle line:84% And you said, look, we're going to spend $2,000 a senior. 00:11:11.920 --> 00:11:14.700 align:middle line:90% And that amount can be anything. 00:11:14.700 --> 00:11:17.660 align:middle line:84% That's then pegged down by politics or something else. 00:11:17.660 --> 00:11:19.560 align:middle line:84% It's not a function of average cost anywhere. 00:11:19.560 --> 00:11:20.540 align:middle line:84% It's literally you just say, here's 00:11:20.540 --> 00:11:23.020 align:middle line:84% the amount of money we want to spend in this program. 00:11:23.020 --> 00:11:25.540 align:middle line:84% So it gives us cost-- the government gets cost certainty. 00:11:25.540 --> 00:11:28.220 align:middle line:84% The government says, we have a budget such that we can give 00:11:28.220 --> 00:11:30.060 align:middle line:90% every senior $2,000. 00:11:30.060 --> 00:11:32.540 align:middle line:84% Here's your $2,000 voucher, go shop. 00:11:32.540 --> 00:11:35.540 align:middle line:84% Well, in this case, if you sign up for plan A, 00:11:35.540 --> 00:11:40.090 align:middle line:84% you get $200 back from the managed care plan. 00:11:40.090 --> 00:11:42.390 align:middle line:90% You get $200 back. 00:11:42.390 --> 00:11:45.090 align:middle line:84% So for plan C, you have to pay an extra $500. 00:11:45.090 --> 00:11:45.990 align:middle line:90% And you shop. 00:11:45.990 --> 00:11:47.730 align:middle line:84% And then the government gets out of the business of figuring out 00:11:47.730 --> 00:11:48.895 align:middle line:90% what the right voucher is. 00:11:48.895 --> 00:11:50.270 align:middle line:84% The right voucher just determined 00:11:50.270 --> 00:11:53.273 align:middle line:84% by what the government's budget wants to be. 00:11:53.273 --> 00:11:54.690 align:middle line:84% You just say, this is how much you 00:11:54.690 --> 00:11:56.815 align:middle line:84% want to spend on the program, and then you can say, 00:11:56.815 --> 00:12:00.010 align:middle line:84% we could raise it by x percent a year. 00:12:00.010 --> 00:12:04.290 align:middle line:84% The problem with that is it gets rid of this problem 00:12:04.290 --> 00:12:08.550 align:middle line:84% of the base of the cost being itself determined by selection, 00:12:08.550 --> 00:12:10.970 align:middle line:84% but doesn't get rid of selection. 00:12:10.970 --> 00:12:14.390 align:middle line:90% So what happens if you do that? 00:12:14.390 --> 00:12:17.510 align:middle line:84% And then what happens and people sort themselves, 00:12:17.510 --> 00:12:21.490 align:middle line:84% so that the healthiest people go in the cheapest plan 00:12:21.490 --> 00:12:24.810 align:middle line:84% and the sickest people go in the most expensive plan? 00:12:24.810 --> 00:12:27.210 align:middle line:84% Well, then you could end up with a situation 00:12:27.210 --> 00:12:32.410 align:middle line:84% like the second panel, where suddenly, 00:12:32.410 --> 00:12:35.250 align:middle line:84% after adverse selection, plan A is cheaper because it's 00:12:35.250 --> 00:12:37.320 align:middle line:90% getting the healthiest people. 00:12:37.320 --> 00:12:40.080 align:middle line:84% Plan C is more expensive because it's getting the sickest people. 00:12:40.080 --> 00:12:43.320 align:middle line:84% Plan B is about the same, maybe a little more expensive. 00:12:43.320 --> 00:12:44.760 align:middle line:90% OK? 00:12:44.760 --> 00:12:47.560 align:middle line:84% What happens is, well, then the healthiest save more 00:12:47.560 --> 00:12:50.520 align:middle line:90% and the sickest pay more. 00:12:50.520 --> 00:12:55.040 align:middle line:84% Now, this is not inherently a problem 00:12:55.040 --> 00:12:57.640 align:middle line:90% from an efficiency perspective. 00:12:57.640 --> 00:13:00.520 align:middle line:84% The problem here is equity, which 00:13:00.520 --> 00:13:04.360 align:middle line:84% is that basically you end up with a system where, by allowing 00:13:04.360 --> 00:13:06.968 align:middle line:90% choice, you screw the sick. 00:13:06.968 --> 00:13:08.760 align:middle line:84% They end up having to pay more because they 00:13:08.760 --> 00:13:11.480 align:middle line:90% get stuck in expensive plans. 00:13:11.480 --> 00:13:13.952 align:middle line:84% It could end up being a problem if you end up 00:13:13.952 --> 00:13:16.160 align:middle line:84% with what I described a few lectures ago of the death 00:13:16.160 --> 00:13:17.440 align:middle line:90% spiral. 00:13:17.440 --> 00:13:19.583 align:middle line:84% If it ends up being that the top plan becomes 00:13:19.583 --> 00:13:21.500 align:middle line:84% so expensive that almost no one ends up in it, 00:13:21.500 --> 00:13:24.680 align:middle line:90% it becomes unaffordable. 00:13:24.680 --> 00:13:29.680 align:middle line:84% So there's two possible problems with adverse selection here. 00:13:29.680 --> 00:13:32.560 align:middle line:84% The first problem is literally the market could fail 00:13:32.560 --> 00:13:35.830 align:middle line:84% and the most generous option could become unaffordable 00:13:35.830 --> 00:13:38.030 align:middle line:90% and could go out of business. 00:13:38.030 --> 00:13:39.570 align:middle line:84% That's an explicit market failure. 00:13:39.570 --> 00:13:41.310 align:middle line:90% That's an efficiency loss. 00:13:41.310 --> 00:13:43.670 align:middle line:84% We talked about that with death spirals. 00:13:43.670 --> 00:13:46.070 align:middle line:84% The second problem is just redistribution, 00:13:46.070 --> 00:13:49.050 align:middle line:84% that you move to the system and now, given adverse selection, 00:13:49.050 --> 00:13:51.110 align:middle line:84% you're essentially redistributing from the sick 00:13:51.110 --> 00:13:52.750 align:middle line:90% to the healthy. 00:13:52.750 --> 00:13:56.870 align:middle line:84% And people might find that unattractive. 00:13:56.870 --> 00:14:02.110 align:middle line:84% So more generally, this ties to the fascinating issue of choice 00:14:02.110 --> 00:14:05.630 align:middle line:84% in the context of health insurance markets. 00:14:05.630 --> 00:14:10.310 align:middle line:84% We think about choice in the context of goods markets. 00:14:10.310 --> 00:14:12.230 align:middle line:90% There is a common-- 00:14:12.230 --> 00:14:14.010 align:middle line:90% it two big advantages, right? 00:14:14.010 --> 00:14:15.730 align:middle line:90% Why do we like choice in 14.01? 00:14:15.730 --> 00:14:20.030 align:middle line:84% Because people can shop so they can match their tastes, 00:14:20.030 --> 00:14:22.270 align:middle line:84% and because it induces competition, 00:14:22.270 --> 00:14:24.910 align:middle line:84% which gets us to the first fundamental theorem 00:14:24.910 --> 00:14:26.070 align:middle line:90% of welfare economics. 00:14:26.070 --> 00:14:28.550 align:middle line:90% It gets us to efficiency. 00:14:28.550 --> 00:14:30.370 align:middle line:84% In the context of health insurance, 00:14:30.370 --> 00:14:34.300 align:middle line:84% there are two countervailing problems that offset that. 00:14:34.300 --> 00:14:38.900 align:middle line:84% The first is adverse selection, that shopping 00:14:38.900 --> 00:14:42.820 align:middle line:84% leads to these potential market failures or at least 00:14:42.820 --> 00:14:45.820 align:middle line:84% redistribution from sick to healthy. 00:14:45.820 --> 00:14:48.220 align:middle line:90% That's the first problem. 00:14:48.220 --> 00:14:53.740 align:middle line:84% The second problem is that choosing health insurance 00:14:53.740 --> 00:14:55.132 align:middle line:90% plans is really fucking hard. 00:14:55.132 --> 00:14:57.340 align:middle line:84% Have any of you ever had to choose a health insurance 00:14:57.340 --> 00:15:00.060 align:middle line:90% plan from a menu of options? 00:15:00.060 --> 00:15:01.080 align:middle line:90% A couple of you. 00:15:01.080 --> 00:15:01.980 align:middle line:90% It's hard. 00:15:01.980 --> 00:15:03.980 align:middle line:90% It's really complicated. 00:15:03.980 --> 00:15:06.860 align:middle line:84% And in fact, I have a whole research agenda 00:15:06.860 --> 00:15:09.820 align:middle line:84% showing what a bad job people do choosing their health insurance 00:15:09.820 --> 00:15:11.820 align:middle line:90% plans in a variety of contexts. 00:15:11.820 --> 00:15:14.380 align:middle line:84% I mentioned this last time, research with Jason Abaluck 00:15:14.380 --> 00:15:15.360 align:middle line:90% at Yale University. 00:15:15.360 --> 00:15:17.060 align:middle line:84% We showed that only about 12% of seniors 00:15:17.060 --> 00:15:19.020 align:middle line:84% choose the lowest cost plan available. 00:15:19.020 --> 00:15:21.020 align:middle line:84% We've shown in many, many contexts 00:15:21.020 --> 00:15:23.100 align:middle line:84% it's a really hard decision, because you've 00:15:23.100 --> 00:15:26.100 align:middle line:84% got to anticipate where your medical spending is going to be. 00:15:26.100 --> 00:15:28.400 align:middle line:84% If you know for sure you're going to spend nothing, 00:15:28.400 --> 00:15:30.902 align:middle line:84% then you should buy a low premium, high deductible plan. 00:15:30.902 --> 00:15:33.110 align:middle line:84% But if you know for sure you're going to spend a lot, 00:15:33.110 --> 00:15:35.630 align:middle line:84% you may want to buy a high premium, low deductible plan. 00:15:35.630 --> 00:15:36.790 align:middle line:84% But you don't know what you're going to spend, 00:15:36.790 --> 00:15:38.490 align:middle line:84% and it's hard to figure that out. 00:15:38.490 --> 00:15:40.890 align:middle line:84% It's an incredibly complicated decision. 00:15:40.890 --> 00:15:43.410 align:middle line:84% So the trade-off with choice, we have the standard benefits 00:15:43.410 --> 00:15:47.070 align:middle line:84% of choice, which is it matches consumer sovereignty 00:15:47.070 --> 00:15:49.410 align:middle line:90% and it reduces competition. 00:15:49.410 --> 00:15:51.970 align:middle line:84% But now we have these interesting trade-offs 00:15:51.970 --> 00:15:55.050 align:middle line:84% which is choice leads to adverse selection 00:15:55.050 --> 00:15:58.570 align:middle line:84% and choice can lead to confusion. 00:15:58.570 --> 00:16:03.510 align:middle line:84% The adverse selection, by the way, just a side note. 00:16:03.510 --> 00:16:05.530 align:middle line:84% There's two types of adverse selection here. 00:16:05.530 --> 00:16:10.810 align:middle line:84% We talked about what you might call passive adverse selection. 00:16:10.810 --> 00:16:13.250 align:middle line:84% That's when people only sign up for the plan 00:16:13.250 --> 00:16:15.010 align:middle line:90% that's best for them. 00:16:15.010 --> 00:16:16.790 align:middle line:84% There's also active adverse selection, 00:16:16.790 --> 00:16:21.970 align:middle line:84% which is when plans do things to get the healthiest people. 00:16:21.970 --> 00:16:25.370 align:middle line:84% So there was the old saying was the first HMOs were 00:16:25.370 --> 00:16:27.570 align:middle line:84% third-floor walk-ups. If you could make it up three 00:16:27.570 --> 00:16:29.720 align:middle line:90% flights of stairs, you're in. 00:16:29.720 --> 00:16:33.108 align:middle line:84% The idea being they wanted to only have the healthiest people. 00:16:33.108 --> 00:16:33.900 align:middle line:90% Now, that's a joke. 00:16:33.900 --> 00:16:37.520 align:middle line:84% But actually, in reality, plans did many things. 00:16:37.520 --> 00:16:40.780 align:middle line:84% Plans would advertise not that their cancer doctors were good, 00:16:40.780 --> 00:16:44.160 align:middle line:84% but they offered free gym membership. 00:16:44.160 --> 00:16:48.480 align:middle line:84% They basically tilt their advertising and their focus 00:16:48.480 --> 00:16:51.720 align:middle line:84% towards things which would attract healthy enrollees 00:16:51.720 --> 00:16:55.120 align:middle line:84% and dissuade less healthy enrollees. 00:16:55.120 --> 00:16:59.545 align:middle line:84% And this comes to a head with one 00:16:59.545 --> 00:17:01.920 align:middle line:84% of the most significant changes we've seen in health care 00:17:01.920 --> 00:17:04.170 align:middle line:84% markets in the US, which is the growth of what we call 00:17:04.170 --> 00:17:06.280 align:middle line:84% narrow network plans-- plans with a very 00:17:06.280 --> 00:17:10.040 align:middle line:84% restrictive set of doctors and hospitals you can go to. 00:17:10.040 --> 00:17:11.800 align:middle line:90% The idea of that-- 00:17:11.800 --> 00:17:14.359 align:middle line:84% if you recall our discussion of PPOs-- 00:17:14.359 --> 00:17:17.119 align:middle line:90% it allows for tough negotiating. 00:17:17.119 --> 00:17:19.520 align:middle line:84% If you only let people go to a couple of hospitals, 00:17:19.520 --> 00:17:21.603 align:middle line:84% then you can negotiate harder with those hospitals 00:17:21.603 --> 00:17:23.400 align:middle line:90% to get their prices down. 00:17:23.400 --> 00:17:27.230 align:middle line:84% But at the same time, if you're a plan that only wants to have 00:17:27.230 --> 00:17:28.937 align:middle line:90% healthy people, what do you do? 00:17:28.937 --> 00:17:29.770 align:middle line:90% You don't negotiate. 00:17:29.770 --> 00:17:32.270 align:middle line:84% You don't include the cancer hospital. 00:17:32.270 --> 00:17:34.387 align:middle line:84% So I mean, every hospital treats cancer. 00:17:34.387 --> 00:17:36.970 align:middle line:84% But if you have cancer, you want to go to the cancer hospital. 00:17:36.970 --> 00:17:37.770 align:middle line:90% So you just say, I'm sorry. 00:17:37.770 --> 00:17:39.210 align:middle line:84% My network doesn't include the cancer hospital. 00:17:39.210 --> 00:17:40.050 align:middle line:90% You have cancer, that's too bad. 00:17:40.050 --> 00:17:41.925 align:middle line:84% You might consider this other insurance plan. 00:17:41.925 --> 00:17:44.510 align:middle line:90% They cover cancer really well. 00:17:44.510 --> 00:17:45.350 align:middle line:90% OK? 00:17:45.350 --> 00:17:47.858 align:middle line:84% So there's both passive selection, which 00:17:47.858 --> 00:17:50.150 align:middle line:84% is the sick people sign up for the most generous plans, 00:17:50.150 --> 00:17:53.150 align:middle line:84% and active selection, which is plans 00:17:53.150 --> 00:17:56.710 align:middle line:84% gear themselves to select out the sickest 00:17:56.710 --> 00:17:58.670 align:middle line:84% and selecting the healthiest through the way 00:17:58.670 --> 00:18:03.190 align:middle line:84% they set up their benefits and their networks of providers. 00:18:03.190 --> 00:18:04.190 align:middle line:90% OK? 00:18:04.190 --> 00:18:04.790 align:middle line:90% Yeah. 00:18:04.790 --> 00:18:06.390 align:middle line:84% AUDIENCE: What does the story look 00:18:06.390 --> 00:18:09.553 align:middle line:84% like for someone who has already enrolled in some plan? 00:18:09.553 --> 00:18:10.970 align:middle line:84% For instance, if they have cancer, 00:18:10.970 --> 00:18:14.110 align:middle line:84% want to go to a cancer hospital, and then is not covered there 00:18:14.110 --> 00:18:15.610 align:middle line:84% and wants to change their insurance. 00:18:15.610 --> 00:18:16.670 align:middle line:90% What does that look like? 00:18:16.670 --> 00:18:19.380 align:middle line:84% JON GRUBER: At open enrollment, you can change. 00:18:19.380 --> 00:18:20.630 align:middle line:90% AUDIENCE: So you have to wait. 00:18:20.630 --> 00:18:21.810 align:middle line:84% JON GRUBER: Yeah, you have to wait, basically. 00:18:21.810 --> 00:18:23.810 align:middle line:84% You have to wait till open enrollment, then you can change. 00:18:23.810 --> 00:18:24.560 align:middle line:90% AUDIENCE: January? 00:18:24.560 --> 00:18:26.580 align:middle line:84% JON GRUBER: Yeah, it runs like late fall, 00:18:26.580 --> 00:18:27.673 align:middle line:90% and then the year starts. 00:18:27.673 --> 00:18:29.340 align:middle line:84% In January, you start with the new plan. 00:18:29.340 --> 00:18:31.600 align:middle line:84% AUDIENCE: And if that doesn't align with your health timeline, 00:18:31.600 --> 00:18:32.100 align:middle line:90% you're screwed? 00:18:32.100 --> 00:18:33.540 align:middle line:90% JON GRUBER: Yep, you're screwed. 00:18:33.540 --> 00:18:35.720 align:middle line:90% Now, you can go out-of-network. 00:18:35.720 --> 00:18:37.360 align:middle line:84% Remember, HMOs cover certain things. 00:18:37.360 --> 00:18:39.380 align:middle line:84% You can always pay out of pocket and go wherever you want. 00:18:39.380 --> 00:18:41.160 align:middle line:84% But if you can't afford it-- if you have cancer-- 00:18:41.160 --> 00:18:42.540 align:middle line:84% if you find out you have cancer in February 00:18:42.540 --> 00:18:44.900 align:middle line:84% and you're locked in a plan without a cancer hospital-- 00:18:44.900 --> 00:18:46.560 align:middle line:84% once again, it doesn't mean you get no care. 00:18:46.560 --> 00:18:47.560 align:middle line:90% All hospitals treat cancer. 00:18:47.560 --> 00:18:49.810 align:middle line:84% It's just you might not get to go to the one you want. 00:18:49.810 --> 00:18:52.200 align:middle line:90% 00:18:52.200 --> 00:18:55.660 align:middle line:84% Now, here's what I find most fascinating about this 00:18:55.660 --> 00:18:57.980 align:middle line:90% from an MIT perspective. 00:18:57.980 --> 00:19:02.700 align:middle line:84% Both of these problems, adverse selection and difficulty 00:19:02.700 --> 00:19:07.160 align:middle line:84% in making choices, have technical solutions. 00:19:07.160 --> 00:19:07.660 align:middle line:90% OK? 00:19:07.660 --> 00:19:09.832 align:middle line:84% Let's talk about the second one first. 00:19:09.832 --> 00:19:11.540 align:middle line:84% How do we solve the fact that people have 00:19:11.540 --> 00:19:13.180 align:middle line:90% a bad time making decisions? 00:19:13.180 --> 00:19:15.600 align:middle line:84% We give them tools to make decisions easier. 00:19:15.600 --> 00:19:19.220 align:middle line:84% We use AI and other things to guide them through the decision 00:19:19.220 --> 00:19:20.860 align:middle line:90% and make it easier. 00:19:20.860 --> 00:19:22.850 align:middle line:84% So technically, we can solve that problem. 00:19:22.850 --> 00:19:25.120 align:middle line:84% In practice, we haven't figured out how. 00:19:25.120 --> 00:19:27.370 align:middle line:84% And part of the reason is because when you give people 00:19:27.370 --> 00:19:29.408 align:middle line:84% these tools, they don't use them. 00:19:29.408 --> 00:19:30.950 align:middle line:84% There are a bunch of tools like this. 00:19:30.950 --> 00:19:32.590 align:middle line:84% And people just say, nah, I'm just going to use this plan. 00:19:32.590 --> 00:19:33.552 align:middle line:90% It looks good to me. 00:19:33.552 --> 00:19:35.010 align:middle line:84% So part of the problem is you don't 00:19:35.010 --> 00:19:36.302 align:middle line:90% have to just provide the tools. 00:19:36.302 --> 00:19:38.050 align:middle line:84% You need to get people to use them. 00:19:38.050 --> 00:19:39.970 align:middle line:84% But in principle, that's solvable. 00:19:39.970 --> 00:19:43.850 align:middle line:84% With good decision support, you could solve that problem. 00:19:43.850 --> 00:19:45.230 align:middle line:90% What about adverse selection? 00:19:45.230 --> 00:19:48.050 align:middle line:84% Well, that's also solvable in principle 00:19:48.050 --> 00:19:50.870 align:middle line:90% by what we call risk adjustment. 00:19:50.870 --> 00:19:56.250 align:middle line:90% 00:19:56.250 --> 00:20:00.130 align:middle line:84% That is, instead of paying the managed care plans 00:20:00.130 --> 00:20:02.610 align:middle line:84% a fixed amount based on the age of someone, 00:20:02.610 --> 00:20:05.810 align:middle line:84% you pay them based on how unhealthy that person is. 00:20:05.810 --> 00:20:09.570 align:middle line:84% So if your managed care plan signs up someone who's diabetic, 00:20:09.570 --> 00:20:12.290 align:middle line:84% you get paid more than if they're not diabetic, 00:20:12.290 --> 00:20:14.755 align:middle line:84% or with cancer, you get paid more. 00:20:14.755 --> 00:20:16.130 align:middle line:84% As a result, there's no incentive 00:20:16.130 --> 00:20:18.730 align:middle line:84% to avoid the guy with cancer because now you're 00:20:18.730 --> 00:20:19.910 align:middle line:90% going to get paid more. 00:20:19.910 --> 00:20:24.675 align:middle line:84% That voucher you get is higher if you're a cancer patient. 00:20:24.675 --> 00:20:27.050 align:middle line:84% And therefore, managed care plans don't have an incentive 00:20:27.050 --> 00:20:29.410 align:middle line:90% to avoid the sickest patients. 00:20:29.410 --> 00:20:33.690 align:middle line:84% So in principle, you can solve the adverse selection problem 00:20:33.690 --> 00:20:36.890 align:middle line:84% by actually tying the amount plans are reimbursed 00:20:36.890 --> 00:20:41.250 align:middle line:84% to the underlying health level of the people who are choosing. 00:20:41.250 --> 00:20:44.370 align:middle line:90% In practice, it's super hard. 00:20:44.370 --> 00:20:46.970 align:middle line:84% It's hard because people's health is not 00:20:46.970 --> 00:20:49.370 align:middle line:90% easily predictable. 00:20:49.370 --> 00:20:52.210 align:middle line:84% If you run a regression, a statistical model that 00:20:52.210 --> 00:20:53.830 align:middle line:84% tries to predict people's medical care 00:20:53.830 --> 00:20:56.710 align:middle line:84% spending on everything you know about them, everything, 00:20:56.710 --> 00:20:59.210 align:middle line:84% you can explain at most about 20% of the variation in health 00:20:59.210 --> 00:21:00.610 align:middle line:90% care spending. 00:21:00.610 --> 00:21:05.010 align:middle line:84% Basically, health care spending is very, very unpredictable. 00:21:05.010 --> 00:21:08.070 align:middle line:84% Moreover, the plans are very good at gaming the system. 00:21:08.070 --> 00:21:10.650 align:middle line:84% So for example, the government set up 00:21:10.650 --> 00:21:14.290 align:middle line:84% a system where it paid more for diabetics, for example. 00:21:14.290 --> 00:21:17.042 align:middle line:84% What the plans did is they said, well, within diabetics, 00:21:17.042 --> 00:21:19.500 align:middle line:84% some are sicker diabetics and some are healthier diabetics. 00:21:19.500 --> 00:21:21.280 align:middle line:84% So they avoided the sicker diabetics, just 00:21:21.280 --> 00:21:24.520 align:middle line:84% took the healthier diabetics, that made even more money. 00:21:24.520 --> 00:21:28.240 align:middle line:84% So it turns out, once again, this is hard to carry out. 00:21:28.240 --> 00:21:31.053 align:middle line:84% So this is why I find this a fascinating topic I've worked 00:21:31.053 --> 00:21:32.220 align:middle line:90% a lot on for a lot of years. 00:21:32.220 --> 00:21:33.845 align:middle line:84% I still haven't cracked this nut, which 00:21:33.845 --> 00:21:35.587 align:middle line:90% is we have these two problems. 00:21:35.587 --> 00:21:37.420 align:middle line:84% We love competition and choice in economics. 00:21:37.420 --> 00:21:39.378 align:middle line:84% I wish we could make that work in this context. 00:21:39.378 --> 00:21:41.003 align:middle line:84% But we haven't figured out how to solve 00:21:41.003 --> 00:21:42.560 align:middle line:84% the two fundamental problems, which 00:21:42.560 --> 00:21:45.280 align:middle line:84% is, how do we solve this adverse selection problem, which 00:21:45.280 --> 00:21:48.420 align:middle line:84% can destroy markets or at least cause bad redistribution? 00:21:48.420 --> 00:21:50.680 align:middle line:84% And how do we solve the fact that people aren't 00:21:50.680 --> 00:21:52.840 align:middle line:90% good at making these choices? 00:21:52.840 --> 00:21:54.000 align:middle line:90% OK? 00:21:54.000 --> 00:21:55.100 align:middle line:90% Questions about that? 00:21:55.100 --> 00:21:55.997 align:middle line:90% Yeah, Enoch. 00:21:55.997 --> 00:21:58.580 align:middle line:84% AUDIENCE: So outside of equity concerns, earlier in the class, 00:21:58.580 --> 00:22:01.920 align:middle line:84% you mentioned it's hard to basically create incentives 00:22:01.920 --> 00:22:04.080 align:middle line:84% for people to, for instance, not drink soda 00:22:04.080 --> 00:22:07.880 align:middle line:84% and live healthier lives, I suppose. 00:22:07.880 --> 00:22:09.960 align:middle line:84% Assuming we are ignoring people who 00:22:09.960 --> 00:22:13.200 align:middle line:84% have chronic illnesses and just people who's, I don't know, 00:22:13.200 --> 00:22:16.040 align:middle line:84% decisions they make when they're 30 or 40 00:22:16.040 --> 00:22:18.270 align:middle line:84% could affect their health in the future, 00:22:18.270 --> 00:22:20.670 align:middle line:84% would the idea of paying healthier people 00:22:20.670 --> 00:22:25.908 align:middle line:84% and charging sicker people more address that? 00:22:25.908 --> 00:22:27.950 align:middle line:84% JON GRUBER: Well, yeah, I mean, basically there's 00:22:27.950 --> 00:22:29.670 align:middle line:90% essentially the same trade-off. 00:22:29.670 --> 00:22:33.230 align:middle line:84% And the trade-off is, to the extent 00:22:33.230 --> 00:22:36.750 align:middle line:84% that you are in control of your future health care expenditures, 00:22:36.750 --> 00:22:39.950 align:middle line:84% then we should basically use financial incentives to get you 00:22:39.950 --> 00:22:40.950 align:middle line:90% to where you need to be. 00:22:40.950 --> 00:22:43.630 align:middle line:84% To the extent you're not, then you're discriminating. 00:22:43.630 --> 00:22:47.110 align:middle line:84% So if, for example, a plan says, I'm 00:22:47.110 --> 00:22:50.230 align:middle line:84% going to charge you more if you're overweight, 00:22:50.230 --> 00:22:51.855 align:middle line:84% is that an incentive or discriminatory? 00:22:51.855 --> 00:22:53.730 align:middle line:84% Well, it depends on why people are overweight 00:22:53.730 --> 00:22:55.150 align:middle line:90% and how you feel about that. 00:22:55.150 --> 00:22:57.630 align:middle line:84% So that's a very tricky ethical line 00:22:57.630 --> 00:23:01.830 align:middle line:84% between incentivizing an discriminating that gets hard. 00:23:01.830 --> 00:23:02.470 align:middle line:90% Yeah. 00:23:02.470 --> 00:23:04.720 align:middle line:84% AUDIENCE: I was curious on the line of discrimination. 00:23:04.720 --> 00:23:07.710 align:middle line:84% If government is paying more for these plans 00:23:07.710 --> 00:23:10.390 align:middle line:84% to take up, say, diabetics or otherwise people who 00:23:10.390 --> 00:23:15.180 align:middle line:84% have higher health care costs, is that basically the same 00:23:15.180 --> 00:23:20.807 align:middle line:84% as if the insurance company was charging an increased 00:23:20.807 --> 00:23:22.640 align:middle line:84% premium for having a pre-existing condition, 00:23:22.640 --> 00:23:24.060 align:middle line:84% except the government's the one footing the bill? 00:23:24.060 --> 00:23:24.893 align:middle line:90% JON GRUBER: Exactly. 00:23:24.893 --> 00:23:28.860 align:middle line:84% So it's basically saying-- it's as if we're allowing insurers 00:23:28.860 --> 00:23:30.320 align:middle line:90% to charge sicker people more. 00:23:30.320 --> 00:23:32.123 align:middle line:84% But the government's paying the insurers 00:23:32.123 --> 00:23:34.040 align:middle line:84% more than insurers and the people paying more. 00:23:34.040 --> 00:23:35.480 align:middle line:84% So it's not discriminatory in that sense. 00:23:35.480 --> 00:23:36.897 align:middle line:84% It's just the government is trying 00:23:36.897 --> 00:23:39.700 align:middle line:84% to offset this adverse selection with this risk adjustment. 00:23:39.700 --> 00:23:43.520 align:middle line:84% So look, this is in the weeds, but it's very important. 00:23:43.520 --> 00:23:45.040 align:middle line:84% Just like we talked about with PPS, 00:23:45.040 --> 00:23:47.540 align:middle line:84% this whole point of the end of last lecture and this lecture 00:23:47.540 --> 00:23:51.340 align:middle line:84% is there's lots of smart, productive directions 00:23:51.340 --> 00:23:53.560 align:middle line:84% to go when dealing with these problems. 00:23:53.560 --> 00:23:55.960 align:middle line:84% But they're all hard and they all raise new issues. 00:23:55.960 --> 00:23:58.740 align:middle line:84% And it means there's always room to keep improving-- things like, 00:23:58.740 --> 00:24:01.020 align:middle line:84% how do we reimburse providers in a way which 00:24:01.020 --> 00:24:02.340 align:middle line:90% gets their incentives right? 00:24:02.340 --> 00:24:04.940 align:middle line:84% How do we protect against adverse selection destroying 00:24:04.940 --> 00:24:05.720 align:middle line:90% markets? 00:24:05.720 --> 00:24:08.140 align:middle line:84% There's constant work on improving that. 00:24:08.140 --> 00:24:09.060 align:middle line:90% OK? 00:24:09.060 --> 00:24:11.220 align:middle line:90% Questions about that? 00:24:11.220 --> 00:24:13.235 align:middle line:90% All right. 00:24:13.235 --> 00:24:15.110 align:middle line:84% I have some other stuff I want to talk about, 00:24:15.110 --> 00:24:16.670 align:middle line:84% but I want to make sure we have time. 00:24:16.670 --> 00:24:19.890 align:middle line:84% So why don't we talk about health care reform? 00:24:19.890 --> 00:24:24.170 align:middle line:84% So let me talk big picture about health care reform. 00:24:24.170 --> 00:24:27.390 align:middle line:84% This will be pretty boring if you guys don't ask questions. 00:24:27.390 --> 00:24:30.330 align:middle line:84% So please, along the way, fire away. 00:24:30.330 --> 00:24:32.810 align:middle line:90% OK, let's set the stage. 00:24:32.810 --> 00:24:34.310 align:middle line:90% OK, let's set the stage. 00:24:34.310 --> 00:24:41.450 align:middle line:84% Basically in 2009 America, you have-- or let's go back further, 00:24:41.450 --> 00:24:43.450 align:middle line:90% early 2000s America. 00:24:43.450 --> 00:24:47.330 align:middle line:84% You have a system with basically three groups. 00:24:47.330 --> 00:24:52.090 align:middle line:84% You got about 60% of people with employer-sponsored insurance. 00:24:52.090 --> 00:24:55.830 align:middle line:84% You got about 20% of people with government insurance-- 00:24:55.830 --> 00:24:57.859 align:middle line:90% Medicare for the? 00:24:57.859 --> 00:24:58.442 align:middle line:90% AUDIENCE: Old. 00:24:58.442 --> 00:24:59.945 align:middle line:84% JON GRUBER: And Medicaid for the? 00:24:59.945 --> 00:25:00.570 align:middle line:90% AUDIENCE: Poor. 00:25:00.570 --> 00:25:02.730 align:middle line:84% JON GRUBER: And then you have about 20% 00:25:02.730 --> 00:25:05.790 align:middle line:84% of people who, to put it in strict economic terms, 00:25:05.790 --> 00:25:07.750 align:middle line:90% are fucked. 00:25:07.750 --> 00:25:08.690 align:middle line:90% Why is that? 00:25:08.690 --> 00:25:10.798 align:middle line:84% Because those people, if you don't get insurance 00:25:10.798 --> 00:25:12.340 align:middle line:84% from the government or your employer, 00:25:12.340 --> 00:25:14.800 align:middle line:84% the only option was the non-group insurance market. 00:25:14.800 --> 00:25:17.640 align:middle line:84% And as I said, in those days, the non-group insurance market 00:25:17.640 --> 00:25:20.480 align:middle line:84% was a market where insurers were free to discriminate and not 00:25:20.480 --> 00:25:21.318 align:middle line:90% cover you. 00:25:21.318 --> 00:25:22.860 align:middle line:84% So once you got cancer, you were out, 00:25:22.860 --> 00:25:26.120 align:middle line:84% or they could raise your premiums 1,000,000% or whatever. 00:25:26.120 --> 00:25:29.960 align:middle line:84% As a result, of that remaining 20%, most of them 00:25:29.960 --> 00:25:31.080 align:middle line:90% were uninsured. 00:25:31.080 --> 00:25:34.240 align:middle line:84% We had about a 16% uninsurance rate. 00:25:34.240 --> 00:25:38.080 align:middle line:84% A few people did enter that market, but most were uninsured. 00:25:38.080 --> 00:25:40.880 align:middle line:84% And that's the situation as it stood. 00:25:40.880 --> 00:25:45.720 align:middle line:84% Now, for many decades, we'd had this problem with the uninsured. 00:25:45.720 --> 00:25:50.200 align:middle line:84% And the world was divided into two types of solutions. 00:25:50.200 --> 00:25:53.240 align:middle line:84% The solution on the right was too much 00:25:53.240 --> 00:25:57.100 align:middle line:84% government, more market, that will solve the problem. 00:25:57.100 --> 00:25:59.477 align:middle line:84% We need freer competition, freer choice in health care. 00:25:59.477 --> 00:26:02.060 align:middle line:84% I think I've been clear enough that that's just not going to-- 00:26:02.060 --> 00:26:03.540 align:middle line:84% I think I've explained enough about this market, 00:26:03.540 --> 00:26:05.760 align:middle line:84% going back to Kenneth Arrow in 1963, that wasn't 00:26:05.760 --> 00:26:06.920 align:middle line:90% going to solve the problem. 00:26:06.920 --> 00:26:09.255 align:middle line:84% More freedom would not allow insurers to-- 00:26:09.255 --> 00:26:10.630 align:middle line:84% insurers would still discriminate 00:26:10.630 --> 00:26:11.910 align:middle line:90% against the uninsured. 00:26:11.910 --> 00:26:13.350 align:middle line:90% That wasn't going to get them-- 00:26:13.350 --> 00:26:14.058 align:middle line:90% against the sick. 00:26:14.058 --> 00:26:16.470 align:middle line:84% That was going to get them health insurance. 00:26:16.470 --> 00:26:19.450 align:middle line:84% On the left, the answer was single-payer health care. 00:26:19.450 --> 00:26:21.190 align:middle line:84% Let's do what the rest of the world does. 00:26:21.190 --> 00:26:25.350 align:middle line:84% Let's just have one national government insurer. 00:26:25.350 --> 00:26:27.330 align:middle line:84% And that has two huge advantages. 00:26:27.330 --> 00:26:30.270 align:middle line:84% First of all, everyone's insured from birth. 00:26:30.270 --> 00:26:31.930 align:middle line:84% No adverse selection about insurance, 00:26:31.930 --> 00:26:33.718 align:middle line:84% no signing up, none of this stuff. 00:26:33.718 --> 00:26:35.010 align:middle line:90% You're just insured from birth. 00:26:35.010 --> 00:26:37.390 align:middle line:90% Zero uninsurance. 00:26:37.390 --> 00:26:40.880 align:middle line:84% Second of all, lower costs, because think 00:26:40.880 --> 00:26:42.630 align:middle line:84% about why US health care costs are higher. 00:26:42.630 --> 00:26:44.230 align:middle line:84% We talked about it two lectures ago. 00:26:44.230 --> 00:26:45.730 align:middle line:84% Administrative costs are much lower. 00:26:45.730 --> 00:26:47.897 align:middle line:84% Administrative costs in the Canadian National health 00:26:47.897 --> 00:26:52.390 align:middle line:84% insurance are like 2%, compared to 15% in the US. 00:26:52.390 --> 00:26:54.790 align:middle line:84% And it's easier to regulate and control 00:26:54.790 --> 00:26:57.050 align:middle line:84% health care prices in a single-payer system. 00:26:57.050 --> 00:26:58.670 align:middle line:90% One payer, they set the prices. 00:26:58.670 --> 00:27:00.970 align:middle line:84% You have full market power to set the prices 00:27:00.970 --> 00:27:03.390 align:middle line:90% and regulate the system. 00:27:03.390 --> 00:27:10.480 align:middle line:84% Now, there are economic arguments against this approach, 00:27:10.480 --> 00:27:13.102 align:middle line:84% primarily the fundamental economic argument 00:27:13.102 --> 00:27:15.560 align:middle line:84% that goes back to what I talked about in the first lecture, 00:27:15.560 --> 00:27:17.180 align:middle line:84% which is just because the government can make something 00:27:17.180 --> 00:27:18.940 align:middle line:90% better doesn't mean it will. 00:27:18.940 --> 00:27:20.540 align:middle line:84% That once the government is running the whole health care 00:27:20.540 --> 00:27:21.900 align:middle line:84% system, the problem is the government 00:27:21.900 --> 00:27:23.500 align:middle line:84% is running the whole health care system. 00:27:23.500 --> 00:27:26.083 align:middle line:84% And the government makes a lot of mistakes on a lot of things. 00:27:26.083 --> 00:27:27.260 align:middle line:90% So there's those challenges. 00:27:27.260 --> 00:27:29.380 align:middle line:84% In particular, the challenge you face 00:27:29.380 --> 00:27:32.860 align:middle line:84% is you want to set prices high enough so people still want 00:27:32.860 --> 00:27:35.195 align:middle line:84% to be doctors and still want to invent drugs, 00:27:35.195 --> 00:27:36.820 align:middle line:84% but also low enough that the government 00:27:36.820 --> 00:27:37.945 align:middle line:90% can afford the health care. 00:27:37.945 --> 00:27:39.980 align:middle line:90% And that's a tough spot to hit. 00:27:39.980 --> 00:27:44.180 align:middle line:84% But in some sense, that's irrelevant, 00:27:44.180 --> 00:27:47.180 align:middle line:84% because the fundamental problem of single payer is political. 00:27:47.180 --> 00:27:49.380 align:middle line:84% And the reason that single payer never 00:27:49.380 --> 00:27:52.060 align:middle line:84% made any headway is because supporters of single payer 00:27:52.060 --> 00:27:56.300 align:middle line:84% never have found a way to get past three fundamental barriers 00:27:56.300 --> 00:27:58.900 align:middle line:84% to single-payer health care in America. 00:27:58.900 --> 00:28:05.930 align:middle line:84% The first barrier is the fact that most people get 00:28:05.930 --> 00:28:08.130 align:middle line:84% their insurance from their employer, 00:28:08.130 --> 00:28:12.010 align:middle line:84% and they pay for it with what you might call a hidden tax. 00:28:12.010 --> 00:28:13.350 align:middle line:90% What do I mean by that? 00:28:13.350 --> 00:28:16.270 align:middle line:84% Remember I said, MIT gives me health insurance. 00:28:16.270 --> 00:28:17.270 align:middle line:90% I pay about $6,000 year. 00:28:17.270 --> 00:28:19.810 align:middle line:84% MIT pays about $18,000 a year for my family. 00:28:19.810 --> 00:28:22.450 align:middle line:84% MIT doesn't just do that out of the goodness of their heart. 00:28:22.450 --> 00:28:24.908 align:middle line:84% They do that because they're in a competitive labor market. 00:28:24.908 --> 00:28:26.930 align:middle line:84% I wouldn't work here without health insurance. 00:28:26.930 --> 00:28:28.750 align:middle line:84% And in a competitive labor market, 00:28:28.750 --> 00:28:32.490 align:middle line:84% they make me pay for that with a lower wage. 00:28:32.490 --> 00:28:34.610 align:middle line:84% Indeed, there's lots of evidence that higher costs 00:28:34.610 --> 00:28:37.515 align:middle line:84% of health insurance are reflected in lower wages. 00:28:37.515 --> 00:28:38.890 align:middle line:84% So I pay for my health insurance. 00:28:38.890 --> 00:28:40.182 align:middle line:90% My health insurance isn't free. 00:28:40.182 --> 00:28:41.690 align:middle line:84% The $18,000 doesn't come to me free. 00:28:41.690 --> 00:28:44.302 align:middle line:90% I pay for it in lower wages. 00:28:44.302 --> 00:28:45.760 align:middle line:84% Let's say we got rid of that system 00:28:45.760 --> 00:28:48.135 align:middle line:84% and moved to a single-payer system, where now we all have 00:28:48.135 --> 00:28:50.770 align:middle line:84% government insurance provided by the government, paid 00:28:50.770 --> 00:28:52.530 align:middle line:90% for by a tax. 00:28:52.530 --> 00:28:55.050 align:middle line:84% Now, roughly speaking, what that would mean is it would just 00:28:55.050 --> 00:28:59.690 align:middle line:84% shift from my getting $18,000 lower wages to my getting 00:28:59.690 --> 00:29:02.810 align:middle line:84% $18,000 higher wages and paying $18,000 in taxes. 00:29:02.810 --> 00:29:05.300 align:middle line:84% And I'd I be in the same spot, roughly speaking. 00:29:05.300 --> 00:29:09.160 align:middle line:84% There's a lot of little bits, but you get the idea. 00:29:09.160 --> 00:29:11.270 align:middle line:84% So from a social efficiency perspective, 00:29:11.270 --> 00:29:12.380 align:middle line:90% it wouldn't really matter. 00:29:12.380 --> 00:29:13.560 align:middle line:90% It's just who I'm paying. 00:29:13.560 --> 00:29:15.380 align:middle line:84% Either way, I'm paying for my insurance, 00:29:15.380 --> 00:29:17.880 align:middle line:84% plus this $6,000 I pay out of pocket. 00:29:17.880 --> 00:29:22.020 align:middle line:84% The problem is that it's hard to explain to people. 00:29:22.020 --> 00:29:24.932 align:middle line:84% People say, wait a second, you're going to tax me $18,000 00:29:24.932 --> 00:29:27.640 align:middle line:84% and my employer is going to make all this extra money by dropping 00:29:27.640 --> 00:29:28.515 align:middle line:90% the health insurance? 00:29:28.515 --> 00:29:29.140 align:middle line:90% That's crazy. 00:29:29.140 --> 00:29:30.460 align:middle line:84% It's just a big win for employers. 00:29:30.460 --> 00:29:32.085 align:middle line:84% You try to explain, well, no, employers 00:29:32.085 --> 00:29:34.880 align:middle line:84% will shift that to lower-- and they tune you out. 00:29:34.880 --> 00:29:37.960 align:middle line:84% So basically the problem is it is politically very challenging 00:29:37.960 --> 00:29:41.560 align:middle line:84% to replace a hidden tax with an overt tax. 00:29:41.560 --> 00:29:43.880 align:middle line:90% That's the first problem. 00:29:43.880 --> 00:29:47.680 align:middle line:84% The second problem highlights why 00:29:47.680 --> 00:29:50.400 align:middle line:84% it's so important when you set up government policy to get it 00:29:50.400 --> 00:29:55.960 align:middle line:84% right the first time, which is that it is very hard to change 00:29:55.960 --> 00:29:57.760 align:middle line:90% an existing system. 00:29:57.760 --> 00:30:00.040 align:middle line:84% Once you've gotten it wrong for long enough, 00:30:00.040 --> 00:30:01.750 align:middle line:90% it's hard to fix it. 00:30:01.750 --> 00:30:03.250 align:middle line:90% What do I mean by that? 00:30:03.250 --> 00:30:07.430 align:middle line:84% Which is, well, 80% of people have insurance 00:30:07.430 --> 00:30:09.130 align:middle line:90% and it largely works for them. 00:30:09.130 --> 00:30:10.990 align:middle line:90% People don't like aspects of it. 00:30:10.990 --> 00:30:13.490 align:middle line:84% But they like it enough that if you come to them and say, 00:30:13.490 --> 00:30:14.670 align:middle line:84% do you want to give up your insurance 00:30:14.670 --> 00:30:15.850 align:middle line:90% for some unknown thing? 00:30:15.850 --> 00:30:18.270 align:middle line:90% We'll call it Berniecare. 00:30:18.270 --> 00:30:20.670 align:middle line:90% They're going to say no. 00:30:20.670 --> 00:30:23.910 align:middle line:84% And you're not going to win with a policy 80% of people oppose. 00:30:23.910 --> 00:30:27.310 align:middle line:84% Now, I lived through this personally 00:30:27.310 --> 00:30:29.170 align:middle line:84% because in the Affordable Care Act-- 00:30:29.170 --> 00:30:31.070 align:middle line:84% which I'll describe in a few minutes-- 00:30:31.070 --> 00:30:32.790 align:middle line:84% one of the things we did is recognize 00:30:32.790 --> 00:30:36.510 align:middle line:84% that many people had insurance which was not real insurance. 00:30:36.510 --> 00:30:38.830 align:middle line:84% There are many insurance policies being sold out there 00:30:38.830 --> 00:30:42.677 align:middle line:84% that, for example, would say, we will insure you, 00:30:42.677 --> 00:30:44.010 align:middle line:90% but we won't cover the hospital. 00:30:44.010 --> 00:30:46.147 align:middle line:84% They'd say it in the small print on page 16. 00:30:46.147 --> 00:30:48.730 align:middle line:84% Or we'll insure you, but if you spend more than $5,000 a year, 00:30:48.730 --> 00:30:50.030 align:middle line:90% we're not paying anything more. 00:30:50.030 --> 00:30:52.070 align:middle line:84% Those aren't real insurance plans. 00:30:52.070 --> 00:30:54.710 align:middle line:90% We banned them. 00:30:54.710 --> 00:30:56.650 align:middle line:84% As a result, on the order of about 3 million 00:30:56.650 --> 00:31:00.340 align:middle line:84% Americans had to change their insurance plans. 00:31:00.340 --> 00:31:02.628 align:middle line:84% And President Obama had promised you wouldn't 00:31:02.628 --> 00:31:03.920 align:middle line:90% have to give up your insurance. 00:31:03.920 --> 00:31:05.260 align:middle line:90% They were very upset. 00:31:05.260 --> 00:31:07.277 align:middle line:84% Now, they didn't really have insurance before, 00:31:07.277 --> 00:31:08.360 align:middle line:90% but they were still upset. 00:31:08.360 --> 00:31:11.300 align:middle line:84% In fact, they all emailed me, every single one of them, 00:31:11.300 --> 00:31:16.780 align:middle line:84% like it's my fault. And it was a big political drag on the ACA. 00:31:16.780 --> 00:31:19.400 align:middle line:84% Imagine that now with 250 million people, 00:31:19.400 --> 00:31:20.820 align:middle line:90% not 3 million people. 00:31:20.820 --> 00:31:23.660 align:middle line:84% It's just not going to-- that's just a nightmare. 00:31:23.660 --> 00:31:25.247 align:middle line:90% So that's the second problem. 00:31:25.247 --> 00:31:27.580 align:middle line:84% The third problem is related to the entrenched political 00:31:27.580 --> 00:31:30.900 align:middle line:84% interests issue, which is we now have a $1.2 trillion 00:31:30.900 --> 00:31:33.140 align:middle line:90% insurance industry in America. 00:31:33.140 --> 00:31:35.515 align:middle line:84% And it's not just going to go, say, it's been a good run. 00:31:35.515 --> 00:31:37.057 align:middle line:84% We don't need to make any more money. 00:31:37.057 --> 00:31:38.238 align:middle line:90% We're going to all quit now. 00:31:38.238 --> 00:31:39.280 align:middle line:90% It's not going to happen. 00:31:39.280 --> 00:31:40.580 align:middle line:90% They're going to fight. 00:31:40.580 --> 00:31:43.820 align:middle line:84% And that's a fight that the government is not going to win. 00:31:43.820 --> 00:31:46.277 align:middle line:84% So the bottom line is, I'm not saying 00:31:46.277 --> 00:31:47.360 align:middle line:90% single payer won't happen. 00:31:47.360 --> 00:31:48.820 align:middle line:84% It goes to an old joke that's told 00:31:48.820 --> 00:31:51.153 align:middle line:84% that I learned many years ago when I started as a health 00:31:51.153 --> 00:31:53.860 align:middle line:84% economist, which is the American health economist who dies 00:31:53.860 --> 00:31:55.980 align:middle line:84% and goes to heaven and gets there and God says, 00:31:55.980 --> 00:31:57.738 align:middle line:90% you can ask me one question. 00:31:57.738 --> 00:31:59.530 align:middle line:84% And the health economist says, will we ever 00:31:59.530 --> 00:32:01.238 align:middle line:84% have single-payer health care in America? 00:32:01.238 --> 00:32:04.650 align:middle line:84% And God says, yes, but not in my lifetime. 00:32:04.650 --> 00:32:07.550 align:middle line:84% So basically, it's not saying that it can't happen. 00:32:07.550 --> 00:32:09.250 align:middle line:90% It's just saying that-- 00:32:09.250 --> 00:32:11.050 align:middle line:84% I'm not saying it's not a good idea. 00:32:11.050 --> 00:32:12.330 align:middle line:84% I don't waste any time thinking about it's 00:32:12.330 --> 00:32:14.610 align:middle line:84% a good idea because I don't see how it's going to happen. 00:32:14.610 --> 00:32:16.450 align:middle line:84% And until someone convinced me they've solved all three 00:32:16.450 --> 00:32:18.750 align:middle line:84% of those seemingly intractable political problems, 00:32:18.750 --> 00:32:20.210 align:middle line:90% I don't see how we get there. 00:32:20.210 --> 00:32:21.175 align:middle line:90% So we were stuck. 00:32:21.175 --> 00:32:23.050 align:middle line:84% We had one side on the right, which basically 00:32:23.050 --> 00:32:24.257 align:middle line:90% didn't want to do anything. 00:32:24.257 --> 00:32:26.590 align:middle line:84% They couched it in ooh, we want free market health care. 00:32:26.590 --> 00:32:28.930 align:middle line:84% Basically, they were like, we like the system as it is. 00:32:28.930 --> 00:32:32.690 align:middle line:84% And one side which wanted to rip it up and start over. 00:32:32.690 --> 00:32:34.650 align:middle line:84% And every 18 years on average, we 00:32:34.650 --> 00:32:37.410 align:middle line:84% try to reform health in the US and the fight between those two 00:32:37.410 --> 00:32:38.530 align:middle line:90% sides. 00:32:38.530 --> 00:32:39.170 align:middle line:90% Yeah. 00:32:39.170 --> 00:32:42.610 align:middle line:84% AUDIENCE: Is there a chance that US health care costs 00:32:42.610 --> 00:32:45.450 align:middle line:84% go up so high that this overt tax would be so much 00:32:45.450 --> 00:32:48.990 align:middle line:84% lower than the hidden tax that people would want [INAUDIBLE]? 00:32:48.990 --> 00:32:50.990 align:middle line:84% JON GRUBER: No, because health care costs go up, 00:32:50.990 --> 00:32:52.850 align:middle line:84% the overt tax will have to go up too. 00:32:52.850 --> 00:32:54.650 align:middle line:84% AUDIENCE: But if single payer is much cheaper, wouldn't that-- 00:32:54.650 --> 00:32:56.442 align:middle line:84% JON GRUBER: No, that's right, that's right. 00:32:56.442 --> 00:32:57.910 align:middle line:90% And you can make that argument. 00:32:57.910 --> 00:33:01.250 align:middle line:84% But imagine the following political argument. 00:33:01.250 --> 00:33:03.910 align:middle line:84% Well, don't worry, now you pay $18,000. 00:33:03.910 --> 00:33:06.260 align:middle line:84% But in our system, you'll pay taxes of $14,000. 00:33:06.260 --> 00:33:07.510 align:middle line:90% They'll be like, I don't care. 00:33:07.510 --> 00:33:08.628 align:middle line:90% That's $14,000 in taxes. 00:33:08.628 --> 00:33:09.670 align:middle line:90% No, you don't understand. 00:33:09.670 --> 00:33:10.750 align:middle line:90% You'll get an $18,000 raise. 00:33:10.750 --> 00:33:11.990 align:middle line:84% My employer won't give me a raise. 00:33:11.990 --> 00:33:12.710 align:middle line:90% What are you talking about? 00:33:12.710 --> 00:33:13.810 align:middle line:90% My employer is an asshole. 00:33:13.810 --> 00:33:16.342 align:middle line:84% So that's the problem is even if it's $14,000 and $18,000, 00:33:16.342 --> 00:33:17.550 align:middle line:90% it doesn't solve the problem. 00:33:17.550 --> 00:33:19.090 align:middle line:84% AUDIENCE: But you're not paying it? 00:33:19.090 --> 00:33:21.130 align:middle line:90% JON GRUBER: It's still a tax. 00:33:21.130 --> 00:33:21.890 align:middle line:90% Yeah. 00:33:21.890 --> 00:33:23.890 align:middle line:84% AUDIENCE: What if you just taxed the employers? 00:33:23.890 --> 00:33:26.250 align:middle line:84% JON GRUBER: Well, that was actually 00:33:26.250 --> 00:33:29.850 align:middle line:84% Elizabeth Warren's solution was to basically try to essentially 00:33:29.850 --> 00:33:30.975 align:middle line:90% do it through employers. 00:33:30.975 --> 00:33:32.850 align:middle line:84% The problem is, what about employers that now 00:33:32.850 --> 00:33:35.090 align:middle line:90% don't offer health insurance? 00:33:35.090 --> 00:33:36.950 align:middle line:84% So that's a new tax on employers. 00:33:36.950 --> 00:33:39.610 align:middle line:84% Oh my god, you're crushing US business. 00:33:39.610 --> 00:33:40.550 align:middle line:90% Yeah. 00:33:40.550 --> 00:33:44.890 align:middle line:84% AUDIENCE: Wasn't that the point from earlier about wages, 00:33:44.890 --> 00:33:48.670 align:middle line:84% with interventions that affect the economy at this scale, 00:33:48.670 --> 00:33:49.910 align:middle line:90% how quickly [INAUDIBLE]? 00:33:49.910 --> 00:33:51.577 align:middle line:84% JON GRUBER: Awesome, we're going to talk 00:33:51.577 --> 00:33:53.170 align:middle line:90% about that in chapter 18-- 00:33:53.170 --> 00:33:53.940 align:middle line:90% chapter 20. 00:33:53.940 --> 00:33:55.400 align:middle line:90% So let me get to that later. 00:33:55.400 --> 00:33:57.960 align:middle line:84% AUDIENCE: And do some areas respond faster than others? 00:33:57.960 --> 00:33:59.160 align:middle line:90% JON GRUBER: Chapter 20, man. 00:33:59.160 --> 00:34:00.940 align:middle line:84% I don't want you to not come to class later. 00:34:00.940 --> 00:34:02.140 align:middle line:84% I want to give you the answer now. 00:34:02.140 --> 00:34:04.015 align:middle line:84% I can't give the answer out before drop date, 00:34:04.015 --> 00:34:05.960 align:middle line:90% because then who knows? 00:34:05.960 --> 00:34:08.380 align:middle line:90% OK, so that's where we're stuck. 00:34:08.380 --> 00:34:08.920 align:middle line:90% Yeah. 00:34:08.920 --> 00:34:11.170 align:middle line:84% AUDIENCE: How do you think having a single payer would 00:34:11.170 --> 00:34:13.080 align:middle line:90% impact drug prices? 00:34:13.080 --> 00:34:17.280 align:middle line:84% JON GRUBER: Well, clearly we know drug prices would go down. 00:34:17.280 --> 00:34:20.440 align:middle line:84% They're lower everywhere else in the world. 00:34:20.440 --> 00:34:22.862 align:middle line:84% See, the key thing is single payer confounds two pieces. 00:34:22.862 --> 00:34:24.820 align:middle line:84% And it's important to separate it in your mind. 00:34:24.820 --> 00:34:27.350 align:middle line:84% One is the coverage piece and one is the cost piece. 00:34:27.350 --> 00:34:29.100 align:middle line:84% The coverage piece is easy to think about. 00:34:29.100 --> 00:34:30.719 align:middle line:84% It's just everyone's just on one plan. 00:34:30.719 --> 00:34:32.380 align:middle line:90% The cost piece is separable. 00:34:32.380 --> 00:34:34.199 align:middle line:84% And we could do without single payer. 00:34:34.199 --> 00:34:35.527 align:middle line:90% That's just price regulation. 00:34:35.527 --> 00:34:36.860 align:middle line:90% Anybody can do price regulation. 00:34:36.860 --> 00:34:38.719 align:middle line:84% You can do it in our current system. 00:34:38.719 --> 00:34:41.905 align:middle line:84% The question there is, do you regulate-- 00:34:41.905 --> 00:34:43.280 align:middle line:84% how do you choose that sweet spot 00:34:43.280 --> 00:34:46.840 align:middle line:84% where prices don't go so low we don't invent any new drugs, 00:34:46.840 --> 00:34:49.800 align:middle line:84% but we're not making excessive profits that they don't need 00:34:49.800 --> 00:34:53.310 align:middle line:90% that they're spending on ads? 00:34:53.310 --> 00:34:54.085 align:middle line:90% Yeah. 00:34:54.085 --> 00:34:55.710 align:middle line:84% AUDIENCE: Are there any other countries 00:34:55.710 --> 00:34:57.690 align:middle line:84% than the US that you think are doing it right, 00:34:57.690 --> 00:35:00.467 align:middle line:84% or have a single-payer system, because maybe they're smaller 00:35:00.467 --> 00:35:01.550 align:middle line:90% and it's more [INAUDIBLE]? 00:35:01.550 --> 00:35:04.438 align:middle line:84% JON GRUBER: Oh, I think once again-- 00:35:04.438 --> 00:35:05.730 align:middle line:90% so there's two answers to that. 00:35:05.730 --> 00:35:07.270 align:middle line:84% The first answer is I don't really 00:35:07.270 --> 00:35:10.078 align:middle line:84% care because we can't ever get there. 00:35:10.078 --> 00:35:11.370 align:middle line:90% So it's not really worth a lot. 00:35:11.370 --> 00:35:12.590 align:middle line:84% It's not that I don't care, but it's not really 00:35:12.590 --> 00:35:14.910 align:middle line:84% worth a lot of my intellectual effort to figure that out. 00:35:14.910 --> 00:35:17.118 align:middle line:84% Second is there's lots of countries that do it right, 00:35:17.118 --> 00:35:20.310 align:middle line:84% that I believe feature a system which 00:35:20.310 --> 00:35:21.670 align:middle line:90% are more attractive than ours. 00:35:21.670 --> 00:35:25.990 align:middle line:84% And typically what you see in other countries is-- 00:35:25.990 --> 00:35:28.470 align:middle line:84% we have in the US essentially an implicit two-tier health 00:35:28.470 --> 00:35:28.970 align:middle line:90% care system. 00:35:28.970 --> 00:35:30.012 align:middle line:90% What do you mean by that? 00:35:30.012 --> 00:35:32.490 align:middle line:84% I mean if you're in the system, you're getting good care. 00:35:32.490 --> 00:35:34.270 align:middle line:84% If you're out of system, you're getting bad care. 00:35:34.270 --> 00:35:36.290 align:middle line:84% Other countries have a different two-tier system. 00:35:36.290 --> 00:35:37.748 align:middle line:84% Everyone gets a base level of care. 00:35:37.748 --> 00:35:39.830 align:middle line:84% Then rich people buy up on top of that. 00:35:39.830 --> 00:35:42.308 align:middle line:84% That, to me, is better because at least it's explicit. 00:35:42.308 --> 00:35:43.850 align:middle line:84% Now, the rich are still getting more, 00:35:43.850 --> 00:35:44.930 align:middle line:90% but that's the American way. 00:35:44.930 --> 00:35:46.550 align:middle line:84% I don't think we're going to fight that. 00:35:46.550 --> 00:35:48.133 align:middle line:84% But basically, at least it's explicit. 00:35:48.133 --> 00:35:49.660 align:middle line:84% At least everyone gets a minimum. 00:35:49.660 --> 00:35:50.960 align:middle line:84% If the rich want to top up, they can. 00:35:50.960 --> 00:35:52.668 align:middle line:84% And that's more typical around the world. 00:35:52.668 --> 00:35:55.420 align:middle line:84% That would be a system I'd advocate for more. 00:35:55.420 --> 00:35:56.100 align:middle line:90% OK? 00:35:56.100 --> 00:35:56.740 align:middle line:90% Yeah. 00:35:56.740 --> 00:35:58.220 align:middle line:84% AUDIENCE: Do you attribute like the innovation 00:35:58.220 --> 00:36:00.180 align:middle line:84% that's happening in the US medical system 00:36:00.180 --> 00:36:01.253 align:middle line:90% to the higher cost? 00:36:01.253 --> 00:36:01.920 align:middle line:90% Do you see that? 00:36:01.920 --> 00:36:04.087 align:middle line:84% JON GRUBER: Yeah, there's definitely a relationship. 00:36:04.087 --> 00:36:09.140 align:middle line:84% There's no doubt that if we lowered the costs-- 00:36:09.140 --> 00:36:11.980 align:middle line:84% there is no doubt-- well, I won't say there's no doubt. 00:36:11.980 --> 00:36:15.380 align:middle line:84% It is very, very likely that if we significantly 00:36:15.380 --> 00:36:17.540 align:middle line:84% lower the prices that pharmaceutical companies can 00:36:17.540 --> 00:36:20.420 align:middle line:84% charge, they will spend less on R&D. I 00:36:20.420 --> 00:36:23.500 align:middle line:90% believe it's an elastic margin. 00:36:23.500 --> 00:36:26.020 align:middle line:84% The question you have to then ask is-- 00:36:26.020 --> 00:36:28.205 align:middle line:84% the interesting question then is, 00:36:28.205 --> 00:36:30.580 align:middle line:84% what is the welfare cost of that relative to the revenues 00:36:30.580 --> 00:36:32.100 align:middle line:90% you raise? 00:36:32.100 --> 00:36:35.580 align:middle line:84% So the welfare cost is, we get fewer drugs. 00:36:35.580 --> 00:36:37.560 align:middle line:90% But let's be clear. 00:36:37.560 --> 00:36:39.420 align:middle line:90% What drugs do we get fewer of? 00:36:39.420 --> 00:36:42.460 align:middle line:84% What is the innovation on the margin that we're not having? 00:36:42.460 --> 00:36:44.500 align:middle line:84% A lot of the innovation is inventing 00:36:44.500 --> 00:36:47.930 align:middle line:84% really expensive cancer drugs that you live a week longer. 00:36:47.930 --> 00:36:50.330 align:middle line:84% And it doesn't bother me so much if those drugs don't 00:36:50.330 --> 00:36:51.690 align:middle line:90% get invented. 00:36:51.690 --> 00:36:52.310 align:middle line:90% OK? 00:36:52.310 --> 00:36:54.690 align:middle line:84% So the question is, what is the actual impact 00:36:54.690 --> 00:36:58.010 align:middle line:84% on life quality that we're getting 00:36:58.010 --> 00:36:59.350 align:middle line:90% from this lack of innovation? 00:36:59.350 --> 00:37:01.650 align:middle line:90% That's a much harder question. 00:37:01.650 --> 00:37:03.750 align:middle line:84% Once again, I think the direction is clear. 00:37:03.750 --> 00:37:06.230 align:middle line:84% There is no doubt the more money the drug companies make, 00:37:06.230 --> 00:37:06.990 align:middle line:90% the more they'll innovate. 00:37:06.990 --> 00:37:08.930 align:middle line:84% And some of it will be very, very valuable. 00:37:08.930 --> 00:37:11.090 align:middle line:84% No doubt, the direction is clear. 00:37:11.090 --> 00:37:13.530 align:middle line:90% The magnitude is unclear. 00:37:13.530 --> 00:37:17.430 align:middle line:84% And what is also clear is that you are raising-- 00:37:17.430 --> 00:37:20.530 align:middle line:84% in the meantime, you're getting a lot of money, which 00:37:20.530 --> 00:37:23.210 align:middle line:90% can be used for other purposes. 00:37:23.210 --> 00:37:27.170 align:middle line:84% In particular, that money can be used to invest directly 00:37:27.170 --> 00:37:28.805 align:middle line:90% in pharmaceutical R&D. 00:37:28.805 --> 00:37:30.930 align:middle line:84% So if you think of the way pharmaceutical R&D works 00:37:30.930 --> 00:37:33.970 align:middle line:84% in America today-- did I already talk about this? 00:37:33.970 --> 00:37:34.790 align:middle line:90% OK, sorry. 00:37:34.790 --> 00:37:35.870 align:middle line:90% I hate to repeat myself. 00:37:35.870 --> 00:37:38.120 align:middle line:84% This is the argument laid out in my book Jump-Starting 00:37:38.120 --> 00:37:40.230 align:middle line:84% America with Nobel Prize winner Simon Johnson. 00:37:40.230 --> 00:37:42.968 align:middle line:90% 00:37:42.968 --> 00:37:44.510 align:middle line:84% It didn't really boost my book sales. 00:37:44.510 --> 00:37:45.030 align:middle line:90% I was very sad. 00:37:45.030 --> 00:37:46.680 align:middle line:84% I was like, woo-hoo, my co-author won the Nobel Prize. 00:37:46.680 --> 00:37:48.480 align:middle line:84% But it didn't really do anything. 00:37:48.480 --> 00:37:50.400 align:middle line:84% So basically, the argument we lay out 00:37:50.400 --> 00:37:54.200 align:middle line:84% is that essentially, if you think about the way-- 00:37:54.200 --> 00:37:56.560 align:middle line:84% our country is the most innovative country in the world, 00:37:56.560 --> 00:37:57.680 align:middle line:90% OK? 00:37:57.680 --> 00:37:58.240 align:middle line:90% It's ironic. 00:37:58.240 --> 00:37:59.560 align:middle line:84% That two most innovative countries in the world 00:37:59.560 --> 00:38:01.120 align:middle line:84% are the US and China, which are two very extremes 00:38:01.120 --> 00:38:01.997 align:middle line:90% of economic freedom. 00:38:01.997 --> 00:38:03.580 align:middle line:84% But ours is still the most innovative, 00:38:03.580 --> 00:38:04.760 align:middle line:90% at least traditionally. 00:38:04.760 --> 00:38:10.600 align:middle line:84% That really came from a marriage of a public investment 00:38:10.600 --> 00:38:14.760 align:middle line:84% in basic science and a private investment in applied science. 00:38:14.760 --> 00:38:16.940 align:middle line:84% And what we show in this book is that 00:38:16.940 --> 00:38:19.440 align:middle line:84% what happened in the decades after World War II when America 00:38:19.440 --> 00:38:22.280 align:middle line:84% was great, was that basically, the government 00:38:22.280 --> 00:38:23.800 align:middle line:90% invested massively in science. 00:38:23.800 --> 00:38:28.240 align:middle line:84% In 1965, 2% of the entire US economy 00:38:28.240 --> 00:38:30.078 align:middle line:90% was government-funded R&D. 00:38:30.078 --> 00:38:32.120 align:middle line:84% $1 in every $50 was the government spending money 00:38:32.120 --> 00:38:35.960 align:middle line:84% on NASA or energy or Department of Defense or health 00:38:35.960 --> 00:38:37.680 align:middle line:90% and human services research. 00:38:37.680 --> 00:38:39.560 align:middle line:90% That's now about 0.5%. 00:38:39.560 --> 00:38:41.640 align:middle line:84% We're about 14th in the world now. 00:38:41.640 --> 00:38:45.330 align:middle line:84% That innovation set the base for everything. 00:38:45.330 --> 00:38:47.950 align:middle line:84% Everything on your phone, every drug we take all 00:38:47.950 --> 00:38:50.255 align:middle line:84% came from that original public investment. 00:38:50.255 --> 00:38:52.130 align:middle line:84% So if you think about how drugs are invested, 00:38:52.130 --> 00:38:54.588 align:middle line:84% there isn't a single drug that's invented that doesn't rely 00:38:54.588 --> 00:38:56.090 align:middle line:90% at some extent on NIH research. 00:38:56.090 --> 00:38:57.798 align:middle line:84% NIH is the National Institutes of Health. 00:38:57.798 --> 00:38:59.910 align:middle line:84% They do the basic science research. 00:38:59.910 --> 00:39:03.357 align:middle line:84% So we did the following calculations-- my co-authors 00:39:03.357 --> 00:39:05.690 align:middle line:84% and I in our editorial, we do the following calculation. 00:39:05.690 --> 00:39:10.695 align:middle line:84% Which is we said, imagine you regulated the top 250 00:39:10.695 --> 00:39:11.570 align:middle line:90% most expensive drugs. 00:39:11.570 --> 00:39:13.362 align:middle line:84% There was a bill that would have done that. 00:39:13.362 --> 00:39:16.030 align:middle line:84% And the estimates were that if you did that, the Congressional 00:39:16.030 --> 00:39:18.110 align:middle line:84% Budget estimated-- pretty heroically, but as 00:39:18.110 --> 00:39:19.710 align:middle line:84% good an estimate as anyone could-- 00:39:19.710 --> 00:39:23.350 align:middle line:84% that if you did that, the lower price would cost 10 fewer drugs 00:39:23.350 --> 00:39:25.750 align:middle line:90% to be invented every decade. 00:39:25.750 --> 00:39:27.370 align:middle line:90% OK, so that's bad. 00:39:27.370 --> 00:39:28.650 align:middle line:90% Now, once again, how bad? 00:39:28.650 --> 00:39:31.950 align:middle line:84% Depends on what drugs, but clearly bad. 00:39:31.950 --> 00:39:34.990 align:middle line:84% However, if you took one quarter of that savings 00:39:34.990 --> 00:39:38.190 align:middle line:84% and gave it to the NIH, by estimates 00:39:38.190 --> 00:39:40.070 align:middle line:84% based on economists here at MIT, you 00:39:40.070 --> 00:39:43.380 align:middle line:90% would get 80 new drugs a decade. 00:39:43.380 --> 00:39:44.900 align:middle line:84% So basically, you have to remember, 00:39:44.900 --> 00:39:47.420 align:middle line:84% we're not just regulating drugs and burning that money. 00:39:47.420 --> 00:39:48.900 align:middle line:84% We're doing stuff with that money. 00:39:48.900 --> 00:39:50.900 align:middle line:84% And that other stuff may have value. 00:39:50.900 --> 00:39:53.860 align:middle line:84% So the proper analysis of a government intervention 00:39:53.860 --> 00:39:56.460 align:middle line:84% is a full analysis of both the impact 00:39:56.460 --> 00:39:59.300 align:middle line:84% of where you get the money and the impact of where 00:39:59.300 --> 00:40:00.740 align:middle line:90% you spend the money. 00:40:00.740 --> 00:40:02.660 align:middle line:90% And I think that's missed. 00:40:02.660 --> 00:40:05.497 align:middle line:84% There's this tendency in health care-- 00:40:05.497 --> 00:40:07.080 align:middle line:84% in everything, but particularly health 00:40:07.080 --> 00:40:08.680 align:middle line:84% care-- to think in very black and white terms. 00:40:08.680 --> 00:40:09.930 align:middle line:90% We can't regulate drug prices. 00:40:09.930 --> 00:40:11.180 align:middle line:90% There'll be less innovation. 00:40:11.180 --> 00:40:12.540 align:middle line:90% That's not right. 00:40:12.540 --> 00:40:15.740 align:middle line:84% There's a trade-off between how much we lower the price 00:40:15.740 --> 00:40:17.140 align:middle line:84% and how much innovation there is. 00:40:17.140 --> 00:40:20.100 align:middle line:84% And that depends on what else we do with the money. 00:40:20.100 --> 00:40:21.820 align:middle line:84% And let's say we didn't put the money in. 00:40:21.820 --> 00:40:25.292 align:middle line:84% Let's say we gave the money to very poor people. 00:40:25.292 --> 00:40:27.500 align:middle line:84% Maybe that would do a lot more for US life expectancy 00:40:27.500 --> 00:40:29.380 align:middle line:90% than a few new cancer drugs. 00:40:29.380 --> 00:40:31.420 align:middle line:84% Maybe that's a better thing to do, I don't know. 00:40:31.420 --> 00:40:33.660 align:middle line:84% But the point is, we have to constantly evaluate 00:40:33.660 --> 00:40:34.963 align:middle line:90% that trade-off. 00:40:34.963 --> 00:40:37.380 align:middle line:84% The other thing is-- let me make one other point while I'm 00:40:37.380 --> 00:40:39.140 align:middle line:90% on my soapbox on this. 00:40:39.140 --> 00:40:42.050 align:middle line:84% The other point is, most of health care spending 00:40:42.050 --> 00:40:43.650 align:middle line:90% is not in pharmaceuticals. 00:40:43.650 --> 00:40:45.650 align:middle line:90% It's on doctors and hospitals. 00:40:45.650 --> 00:40:47.210 align:middle line:84% In that case, it's not quite clear 00:40:47.210 --> 00:40:49.690 align:middle line:84% how much innovation we're getting. 00:40:49.690 --> 00:40:52.210 align:middle line:84% Clearly pharmaceuticals, it's one 00:40:52.210 --> 00:40:53.873 align:middle line:84% of the most amazing, miraculous sectors 00:40:53.873 --> 00:40:56.290 align:middle line:84% on Earth, US pharmaceuticals, in terms of what's invented. 00:40:56.290 --> 00:40:59.410 align:middle line:84% Doctors and hospitals, they do cool stuff, 00:40:59.410 --> 00:41:02.550 align:middle line:84% but kind of because they want to learn and do cool stuff, 00:41:02.550 --> 00:41:04.570 align:middle line:84% not because it's making them a lot of-- 00:41:04.570 --> 00:41:07.452 align:middle line:90% 00:41:07.452 --> 00:41:09.410 align:middle line:84% it's not obvious that paying them higher prices 00:41:09.410 --> 00:41:11.230 align:middle line:84% is causing a lot of productive innovation. 00:41:11.230 --> 00:41:12.730 align:middle line:84% And that's where most of the savings 00:41:12.730 --> 00:41:13.850 align:middle line:90% would come from regulating. 00:41:13.850 --> 00:41:14.767 align:middle line:90% Might be causing some. 00:41:14.767 --> 00:41:17.250 align:middle line:84% But once again, we need to learn that and understand that 00:41:17.250 --> 00:41:18.630 align:middle line:90% and evaluate the trade-off. 00:41:18.630 --> 00:41:19.265 align:middle line:90% Yeah. 00:41:19.265 --> 00:41:20.890 align:middle line:84% AUDIENCE: Public R&D seems to be a more 00:41:20.890 --> 00:41:26.308 align:middle line:84% cost efficient engine for innovation than private R&D. 00:41:26.308 --> 00:41:27.850 align:middle line:84% That's not a bigger part [INAUDIBLE]? 00:41:27.850 --> 00:41:29.808 align:middle line:84% JON GRUBER: Well, it's not more cost efficient. 00:41:29.808 --> 00:41:32.633 align:middle line:84% It's that basically, they complement each other-- 00:41:32.633 --> 00:41:35.050 align:middle line:84% that the reason that spending NIH would cause so much more 00:41:35.050 --> 00:41:36.690 align:middle line:84% R&D is because then it would be picked up 00:41:36.690 --> 00:41:38.190 align:middle line:84% by private companies that would then 00:41:38.190 --> 00:41:40.920 align:middle line:84% invest themselves and create the drugs. 00:41:40.920 --> 00:41:44.320 align:middle line:84% But you're asking a question, why don't we have more of it? 00:41:44.320 --> 00:41:46.200 align:middle line:90% Chapter 9. 00:41:46.200 --> 00:41:50.357 align:middle line:90% Basically, we had 2% of GDP. 00:41:50.357 --> 00:41:50.940 align:middle line:90% What happened? 00:41:50.940 --> 00:41:52.040 align:middle line:90% Three things happened. 00:41:52.040 --> 00:41:55.680 align:middle line:84% The first is the scientists got too big for their britches. 00:41:55.680 --> 00:41:59.100 align:middle line:84% In 1960, the Time Magazine man of the year-- 00:41:59.100 --> 00:42:00.840 align:middle line:90% it was only men back then-- 00:42:00.840 --> 00:42:03.700 align:middle line:84% Time Magazine man of the year was the scientist. 00:42:03.700 --> 00:42:06.360 align:middle line:90% Can you imagine that today? 00:42:06.360 --> 00:42:09.120 align:middle line:84% Scientists were like fucking studs. 00:42:09.120 --> 00:42:11.520 align:middle line:84% And they got a little bit too full of themselves. 00:42:11.520 --> 00:42:13.960 align:middle line:84% So when people would say, gee, shouldn't we 00:42:13.960 --> 00:42:15.600 align:middle line:84% worry this nuclear energy thing might 00:42:15.600 --> 00:42:17.180 align:middle line:90% have some bad effects on us? 00:42:17.180 --> 00:42:19.138 align:middle line:84% They're like, no, no, no, don't worry about it. 00:42:19.138 --> 00:42:21.720 align:middle line:84% They tried to invent a nuclear pen. 00:42:21.720 --> 00:42:24.080 align:middle line:84% So scientists kind of became a little too big 00:42:24.080 --> 00:42:25.780 align:middle line:84% for their britches, was problem one. 00:42:25.780 --> 00:42:29.680 align:middle line:84% Problem two was that basically, scientists and politicians 00:42:29.680 --> 00:42:31.280 align:middle line:90% started disagreeing. 00:42:31.280 --> 00:42:34.040 align:middle line:84% The whole reason this consensus grew 00:42:34.040 --> 00:42:35.380 align:middle line:90% was a bipartisan consensus-- 00:42:35.380 --> 00:42:37.630 align:middle line:84% Republican, Democrat-- for R&D was 00:42:37.630 --> 00:42:41.450 align:middle line:84% because we're all trying to win World War II, get to the moon, 00:42:41.450 --> 00:42:42.788 align:middle line:90% do common things. 00:42:42.788 --> 00:42:44.830 align:middle line:84% Then the Vietnam War happened, and the scientists 00:42:44.830 --> 00:42:47.230 align:middle line:84% didn't necessarily like what the government was doing. 00:42:47.230 --> 00:42:48.563 align:middle line:90% And they got mad about it. 00:42:48.563 --> 00:42:50.730 align:middle line:84% And as the saying goes, if you speak truth to power, 00:42:50.730 --> 00:42:52.590 align:middle line:90% power will cut your funding. 00:42:52.590 --> 00:42:54.485 align:middle line:90% And so that was another problem. 00:42:54.485 --> 00:42:56.110 align:middle line:84% The third problem was the US government 00:42:56.110 --> 00:42:58.110 align:middle line:84% started spending money on a lot of other stuff-- 00:42:58.110 --> 00:42:58.790 align:middle line:90% the Vietnam War. 00:42:58.790 --> 00:43:01.510 align:middle line:84% And in particular, programs like Medicare and Medicaid 00:43:01.510 --> 00:43:02.690 align:middle line:90% grew rapidly. 00:43:02.690 --> 00:43:04.670 align:middle line:84% And it put pressure on the budget. 00:43:04.670 --> 00:43:06.910 align:middle line:84% And as we learned in chapter 4, there's 00:43:06.910 --> 00:43:08.930 align:middle line:84% two types of budgetary categories. 00:43:08.930 --> 00:43:11.590 align:middle line:84% There's mandatory spending and discretionary spending. 00:43:11.590 --> 00:43:13.970 align:middle line:84% Mandatory spending is stuff you have to spend every year. 00:43:13.970 --> 00:43:14.990 align:middle line:84% So if someone's on Medicare, you got 00:43:14.990 --> 00:43:16.630 align:middle line:90% to pay their bills every year. 00:43:16.630 --> 00:43:18.870 align:middle line:84% Discretionary is other stuff, including 00:43:18.870 --> 00:43:21.330 align:middle line:84% R&D. Wherever you have to appropriate it, 00:43:21.330 --> 00:43:23.510 align:middle line:84% you have to decide how much you're going to spend. 00:43:23.510 --> 00:43:25.843 align:middle line:84% So what happens when there's fights over the government? 00:43:25.843 --> 00:43:27.968 align:middle line:84% No one wants to touch Social Security and Medicare. 00:43:27.968 --> 00:43:28.930 align:middle line:90% We can't touch that. 00:43:28.930 --> 00:43:30.590 align:middle line:84% So what's left is this relatively small share 00:43:30.590 --> 00:43:32.423 align:middle line:84% of government spending called discretionary, 00:43:32.423 --> 00:43:34.740 align:middle line:90% which includes public R&D. 00:43:34.740 --> 00:43:37.920 align:middle line:84% Now, President Biden did pass the CHIPS plus Science Act. 00:43:37.920 --> 00:43:39.640 align:middle line:90% I helped work on that act. 00:43:39.640 --> 00:43:41.780 align:middle line:84% And that did put a lot of new money allocated 00:43:41.780 --> 00:43:42.613 align:middle line:90% for science funding. 00:43:42.613 --> 00:43:44.155 align:middle line:84% Unfortunately, that money has not yet 00:43:44.155 --> 00:43:46.820 align:middle line:84% been appropriated, because these same kind of budget fights. 00:43:46.820 --> 00:43:48.692 align:middle line:90% Yeah. 00:43:48.692 --> 00:43:50.900 align:middle line:84% AUDIENCE: These proposals by certain [INAUDIBLE] like 00:43:50.900 --> 00:43:53.803 align:middle line:84% Medicare for All, how do those fit into the-- 00:43:53.803 --> 00:43:55.220 align:middle line:84% JON GRUBER: Well, Medicare for All 00:43:55.220 --> 00:43:57.580 align:middle line:84% is literally just a version of a single payer. 00:43:57.580 --> 00:44:01.220 align:middle line:84% It's just trying to tap into-- what that answer is doing 00:44:01.220 --> 00:44:02.602 align:middle line:90% is trying to solve problem two. 00:44:02.602 --> 00:44:03.560 align:middle line:90% There's three problems. 00:44:03.560 --> 00:44:07.248 align:middle line:84% There's the hidden explicit tax problem was one, 00:44:07.248 --> 00:44:09.040 align:middle line:84% three was the powerful insurance companies. 00:44:09.040 --> 00:44:10.140 align:middle line:84% Problem two was people not wanting 00:44:10.140 --> 00:44:11.460 align:middle line:90% to give up something they like. 00:44:11.460 --> 00:44:13.360 align:middle line:84% The reason Medicare for all is attractive is like, don't worry, 00:44:13.360 --> 00:44:14.160 align:middle line:84% you're giving it up for Medicare. 00:44:14.160 --> 00:44:15.380 align:middle line:90% Everybody likes Medicare. 00:44:15.380 --> 00:44:17.660 align:middle line:84% That's an effort to solve problem two is 00:44:17.660 --> 00:44:20.540 align:middle line:90% by calling it Medicare for all. 00:44:20.540 --> 00:44:21.180 align:middle line:90% Yeah. 00:44:21.180 --> 00:44:24.020 align:middle line:84% AUDIENCE: And then how is this government approach trying 00:44:24.020 --> 00:44:27.420 align:middle line:84% to reimburse the super ultra rare diseases like gene 00:44:27.420 --> 00:44:28.012 align:middle line:90% therapies? 00:44:28.012 --> 00:44:29.720 align:middle line:84% JON GRUBER: Great, great, great question. 00:44:29.720 --> 00:44:31.000 align:middle line:90% Something I'm also working on. 00:44:31.000 --> 00:44:32.690 align:middle line:90% It's an enormous challenge. 00:44:32.690 --> 00:44:36.970 align:middle line:84% So basically, here's what's very challenging. 00:44:36.970 --> 00:44:42.370 align:middle line:84% We know in theory how to regulate health care prices. 00:44:42.370 --> 00:44:45.270 align:middle line:84% We calculate what an intervention is worth. 00:44:45.270 --> 00:44:47.250 align:middle line:84% And we say we won't pay more than that. 00:44:47.250 --> 00:44:50.930 align:middle line:84% So there's something you can calculate called QALYs-- 00:44:50.930 --> 00:44:52.470 align:middle line:90% Quality-Adjusted Life Years. 00:44:52.470 --> 00:44:54.970 align:middle line:90% This goes back to chapter 8. 00:44:54.970 --> 00:44:58.330 align:middle line:84% Quality-adjusted life years are literally a measure of, 00:44:58.330 --> 00:44:59.470 align:middle line:90% take this given drug. 00:44:59.470 --> 00:45:01.970 align:middle line:84% How many years of life does it save 00:45:01.970 --> 00:45:05.250 align:middle line:84% adjusted for the quality of those years of life? 00:45:05.250 --> 00:45:07.942 align:middle line:84% So if it saves life and you're comatose, 00:45:07.942 --> 00:45:09.650 align:middle line:84% that's worth less than it saves your life 00:45:09.650 --> 00:45:12.130 align:middle line:90% and you're robustly healthy. 00:45:12.130 --> 00:45:15.590 align:middle line:84% So we can calculate for every intervention, 00:45:15.590 --> 00:45:18.450 align:middle line:84% like a drug, what its QALY benefit is. 00:45:18.450 --> 00:45:20.472 align:middle line:84% We have a number, based on chapter 8, 00:45:20.472 --> 00:45:22.430 align:middle line:84% of what a year of life is worth in full health. 00:45:22.430 --> 00:45:25.010 align:middle line:84% It's about $150,000, our best estimate. 00:45:25.010 --> 00:45:31.330 align:middle line:84% So we can say for every QALY of 1, the drug is worth $150,000. 00:45:31.330 --> 00:45:32.810 align:middle line:84% That's what the world does in terms 00:45:32.810 --> 00:45:34.230 align:middle line:90% of regulating its drug prices. 00:45:34.230 --> 00:45:35.590 align:middle line:84% And that's why they're much lower than us, 00:45:35.590 --> 00:45:37.930 align:middle line:84% because we pay way more than what drugs are actually 00:45:37.930 --> 00:45:40.290 align:middle line:90% worth in terms of their value. 00:45:40.290 --> 00:45:43.170 align:middle line:84% So that's the easy part of drug price regulation, 00:45:43.170 --> 00:45:46.170 align:middle line:84% which is you calculate QALYs and you pay up to that amount. 00:45:46.170 --> 00:45:47.050 align:middle line:90% Done. 00:45:47.050 --> 00:45:49.610 align:middle line:84% The problem is, that doesn't help 00:45:49.610 --> 00:45:53.290 align:middle line:84% when you have a new drug that's miraculous and miraculously 00:45:53.290 --> 00:45:57.290 align:middle line:84% expensive, which is these new cell and gene therapies. 00:45:57.290 --> 00:46:00.670 align:middle line:84% So there's a disease called spinal muscular atrophy. 00:46:00.670 --> 00:46:02.957 align:middle line:84% Horrible disease, birth defect disease. 00:46:02.957 --> 00:46:03.790 align:middle line:90% You're born with it. 00:46:03.790 --> 00:46:04.590 align:middle line:90% You live a horrible life. 00:46:04.590 --> 00:46:05.350 align:middle line:90% You're dead by age two. 00:46:05.350 --> 00:46:07.475 align:middle line:84% I mean, nothing worse as a parent, you can imagine. 00:46:07.475 --> 00:46:09.108 align:middle line:90% OK, they've cured it. 00:46:09.108 --> 00:46:10.150 align:middle line:90% They invented this thing. 00:46:10.150 --> 00:46:11.590 align:middle line:84% They inject in a virus in your body. 00:46:11.590 --> 00:46:13.030 align:middle line:84% It replaces your cells, and they've cured. 00:46:13.030 --> 00:46:13.988 align:middle line:90% I mean, it's a miracle. 00:46:13.988 --> 00:46:15.830 align:middle line:84% Literally, it's the definition of miracle. 00:46:15.830 --> 00:46:17.987 align:middle line:90% And it's $2.1 million. 00:46:17.987 --> 00:46:20.070 align:middle line:84% Now, if you look at our estimate of value of life, 00:46:20.070 --> 00:46:22.610 align:middle line:84% that's almost certainly worth it. 00:46:22.610 --> 00:46:26.110 align:middle line:84% And indeed, when they brought that drug to England, 00:46:26.110 --> 00:46:28.480 align:middle line:84% it became the first ever US expensive drug where 00:46:28.480 --> 00:46:31.240 align:middle line:84% they allowed it the same price in England they did in the US, 00:46:31.240 --> 00:46:33.280 align:middle line:84% because they said yeah, it's worth it. 00:46:33.280 --> 00:46:35.468 align:middle line:84% So all of a sudden now, our regulatory framework-- 00:46:35.468 --> 00:46:37.760 align:middle line:84% it's hard enough to regulate when you have a QALY, when 00:46:37.760 --> 00:46:39.140 align:middle line:90% you have a basis for doing it. 00:46:39.140 --> 00:46:41.440 align:middle line:84% What do you do when, in fact, it's worth it? 00:46:41.440 --> 00:46:43.080 align:middle line:84% And what do you do when we start inventing these things-- right 00:46:43.080 --> 00:46:45.280 align:middle line:84% now we only get these drugs for very rare diseases-- 00:46:45.280 --> 00:46:47.740 align:middle line:84% as they start to get for more and more common diseases. 00:46:47.740 --> 00:46:50.960 align:middle line:84% So this is really where ethics meets economics, 00:46:50.960 --> 00:46:53.480 align:middle line:84% which is if in 10 years, one of you 00:46:53.480 --> 00:46:56.720 align:middle line:84% guys invents a therapy that can literally 00:46:56.720 --> 00:47:02.000 align:middle line:84% cure OK, that therapy will be worth millions of dollars 00:47:02.000 --> 00:47:02.740 align:middle line:90% a shot. 00:47:02.740 --> 00:47:05.840 align:middle line:84% But the US would go bankrupt paying for it. 00:47:05.840 --> 00:47:08.820 align:middle line:84% This is a, in some sense, much bigger version-- 00:47:08.820 --> 00:47:11.500 align:middle line:84% we're seeing a modest version of this with these GLP-1s 00:47:11.500 --> 00:47:16.720 align:middle line:84% like Ozempic, which are miraculous drugs that 00:47:16.720 --> 00:47:18.980 align:middle line:84% are doing incredible things for people's health, 00:47:18.980 --> 00:47:20.360 align:middle line:90% but are expensive. 00:47:20.360 --> 00:47:23.075 align:middle line:84% And we can't afford to pay for everybody. 00:47:23.075 --> 00:47:23.700 align:middle line:90% What do you do? 00:47:23.700 --> 00:47:25.242 align:middle line:84% What governments do now is they limit 00:47:25.242 --> 00:47:28.430 align:middle line:84% who can get them-- limit them to probably many fewer 00:47:28.430 --> 00:47:30.870 align:middle line:84% people than who could actually benefit from them. 00:47:30.870 --> 00:47:34.070 align:middle line:84% So we're limiting them too much because we just can't afford it. 00:47:34.070 --> 00:47:38.190 align:middle line:84% So that becomes an enormous challenge going forward. 00:47:38.190 --> 00:47:44.990 align:middle line:84% So that's the lay of the land early 2000s. 00:47:44.990 --> 00:47:47.790 align:middle line:84% Then enters the hero of our story, Mitt Romney. 00:47:47.790 --> 00:47:51.310 align:middle line:84% Mitt Romney was the governor of Massachusetts. 00:47:51.310 --> 00:47:55.537 align:middle line:84% Mitt Romney said, look, we've got this problem. 00:47:55.537 --> 00:47:57.870 align:middle line:84% We've got this classic free rider problem in health care 00:47:57.870 --> 00:48:01.110 align:middle line:84% in Massachusetts, which is that healthy people don't 00:48:01.110 --> 00:48:02.252 align:middle line:90% buy insurance. 00:48:02.252 --> 00:48:04.210 align:middle line:84% When they get sick, when they get hit by a car, 00:48:04.210 --> 00:48:05.970 align:middle line:84% they go to the hospital and we all pay their costs. 00:48:05.970 --> 00:48:07.430 align:middle line:84% Indeed, in Massachusetts-- remember 00:48:07.430 --> 00:48:09.047 align:middle line:84% I talked about uncompensated care. 00:48:09.047 --> 00:48:11.630 align:middle line:84% Massachusetts literally had what we call an uncompensated care 00:48:11.630 --> 00:48:12.590 align:middle line:90% pool. 00:48:12.590 --> 00:48:15.687 align:middle line:84% What that was was every hospital paid a little tax into a pool. 00:48:15.687 --> 00:48:18.270 align:middle line:84% And that pool was used to pay for the cost of uninsured people 00:48:18.270 --> 00:48:19.907 align:middle line:90% that got treated. 00:48:19.907 --> 00:48:22.490 align:middle line:84% So he's like, look, we've got this classic free rider problem. 00:48:22.490 --> 00:48:24.450 align:middle line:84% I'm sort of an upstanding, moral Mormon guy. 00:48:24.450 --> 00:48:26.140 align:middle line:90% I don't think that's right. 00:48:26.140 --> 00:48:29.700 align:middle line:84% I think we ought to make people get health insurance. 00:48:29.700 --> 00:48:35.740 align:middle line:84% And indeed, the previous round of health care reform 00:48:35.740 --> 00:48:39.820 align:middle line:84% in the 1990s under Bill and Hillary Clinton, 00:48:39.820 --> 00:48:42.900 align:middle line:84% the centerpiece of that round of health care reform is what was 00:48:42.900 --> 00:48:45.540 align:middle line:84% called the employer mandate-- mandating employers provide 00:48:45.540 --> 00:48:46.900 align:middle line:90% health insurance. 00:48:46.900 --> 00:48:48.342 align:middle line:90% Conservatives didn't like that. 00:48:48.342 --> 00:48:49.800 align:middle line:84% So they said, we shouldn't do that. 00:48:49.800 --> 00:48:52.180 align:middle line:84% We should have instead an individual mandate. 00:48:52.180 --> 00:48:54.580 align:middle line:84% We should mandate individuals buy health insurance. 00:48:54.580 --> 00:48:57.780 align:middle line:84% Mitt Romney said, look, that would be great. 00:48:57.780 --> 00:49:00.660 align:middle line:84% Why don't we mandate people buy health insurance? 00:49:00.660 --> 00:49:03.780 align:middle line:84% And then that way, we can make sure we solve the free rider 00:49:03.780 --> 00:49:05.340 align:middle line:90% problem. 00:49:05.340 --> 00:49:08.380 align:middle line:84% Now, that's when he brought me in. 00:49:08.380 --> 00:49:12.100 align:middle line:84% And I worked to help him understand what that would cost 00:49:12.100 --> 00:49:14.140 align:middle line:90% the state and what it would do. 00:49:14.140 --> 00:49:17.540 align:middle line:84% And what I pointed out is that, in fact, this 00:49:17.540 --> 00:49:22.450 align:middle line:84% would have other benefits that he wasn't appreciating, 00:49:22.450 --> 00:49:30.330 align:middle line:84% because Massachusetts was one of six states that had actually 00:49:30.330 --> 00:49:34.252 align:middle line:84% tried to ban discrimination in insurance markets. 00:49:34.252 --> 00:49:35.710 align:middle line:84% He probably appreciated this point, 00:49:35.710 --> 00:49:37.370 align:middle line:84% but I helped him put numbers on it. 00:49:37.370 --> 00:49:38.550 align:middle line:90% What does that mean? 00:49:38.550 --> 00:49:40.800 align:middle line:84% In other words, Massachusetts passed a law which said, 00:49:40.800 --> 00:49:43.258 align:middle line:84% in the non-group insurance market, you cannot discriminate. 00:49:43.258 --> 00:49:45.300 align:middle line:84% You cannot charge the sick more than the healthy. 00:49:45.300 --> 00:49:47.650 align:middle line:84% You have to impose what's called community rating, which 00:49:47.650 --> 00:49:50.170 align:middle line:84% is everyone at the same age in the same location pays 00:49:50.170 --> 00:49:53.250 align:middle line:84% the same price, regardless of how sick or healthy they are, 00:49:53.250 --> 00:49:54.950 align:middle line:84% or their gender and things like that. 00:49:54.950 --> 00:49:57.250 align:middle line:84% Same age, same location, same price. 00:49:57.250 --> 00:50:01.490 align:middle line:84% Well, what do you think happened in these seven states 00:50:01.490 --> 00:50:04.530 align:middle line:84% when they put in a law saying insurers couldn't discriminate? 00:50:04.530 --> 00:50:05.383 align:middle line:90% Yeah. 00:50:05.383 --> 00:50:06.550 align:middle line:90% AUDIENCE: Adverse selection. 00:50:06.550 --> 00:50:08.390 align:middle line:84% JON GRUBER: Yeah, the insurers all left. 00:50:08.390 --> 00:50:09.510 align:middle line:90% They're like, screw that. 00:50:09.510 --> 00:50:10.913 align:middle line:90% We're making money by selecting. 00:50:10.913 --> 00:50:12.330 align:middle line:84% You tell us we can't select, we're 00:50:12.330 --> 00:50:13.190 align:middle line:90% not going to make any money. 00:50:13.190 --> 00:50:15.910 align:middle line:84% We're worried that Jon Gruber is going to walk in sick as a dog. 00:50:15.910 --> 00:50:17.010 align:middle line:84% And we're going to have to give him health insurance. 00:50:17.010 --> 00:50:19.010 align:middle line:84% At the average price, we're going to lose money. 00:50:19.010 --> 00:50:21.560 align:middle line:90% Classic Akerlof lemons problem. 00:50:21.560 --> 00:50:24.260 align:middle line:84% And the insurance markets collapsed in all seven states, 00:50:24.260 --> 00:50:26.720 align:middle line:90% including Massachusetts. 00:50:26.720 --> 00:50:29.440 align:middle line:84% So by having the mandate, the other benefit 00:50:29.440 --> 00:50:31.520 align:middle line:84% of the mandate in Massachusetts was 00:50:31.520 --> 00:50:33.920 align:middle line:84% that we could bring healthy people into the pool 00:50:33.920 --> 00:50:37.320 align:middle line:84% and bring the price down and essentially strike a deal. 00:50:37.320 --> 00:50:39.400 align:middle line:84% We said to insurers, look, you're 00:50:39.400 --> 00:50:41.175 align:middle line:84% going to charge the average fair price. 00:50:41.175 --> 00:50:43.800 align:middle line:84% But we're going to promise you there won't be adverse selection 00:50:43.800 --> 00:50:46.640 align:middle line:90% because everyone will buy. 00:50:46.640 --> 00:50:50.600 align:middle line:84% And so basically the idea was, we already 00:50:50.600 --> 00:50:52.060 align:middle line:90% got rid of discrimination. 00:50:52.060 --> 00:50:54.333 align:middle line:84% Let's have a mandate so we can solve that. 00:50:54.333 --> 00:50:56.500 align:middle line:84% But we'll bring premiums down and solve the problem, 00:50:56.500 --> 00:50:57.800 align:middle line:90% bring people in. 00:50:57.800 --> 00:50:59.980 align:middle line:84% But then we had another problem, which 00:50:59.980 --> 00:51:01.480 align:middle line:84% is that basically, you can't mandate 00:51:01.480 --> 00:51:03.880 align:middle line:90% something people can't afford. 00:51:03.880 --> 00:51:07.280 align:middle line:84% At this time in Massachusetts, a family living at the poverty 00:51:07.280 --> 00:51:10.240 align:middle line:84% line had an income of about $20,000. 00:51:10.240 --> 00:51:13.800 align:middle line:84% The typical family insurance plan at that point cost $12,000. 00:51:13.800 --> 00:51:16.360 align:middle line:84% You couldn't mandate they spend 60% of their income on health 00:51:16.360 --> 00:51:16.860 align:middle line:90% insurance. 00:51:16.860 --> 00:51:19.950 align:middle line:84% That wasn't going to work, morally and politically. 00:51:19.950 --> 00:51:24.030 align:middle line:84% So that's why we need to also subsidize the cost of insurance. 00:51:24.030 --> 00:51:26.470 align:middle line:84% So what we did is we set up a new program 00:51:26.470 --> 00:51:30.510 align:middle line:84% where for people who were below average income, 00:51:30.510 --> 00:51:32.710 align:middle line:84% we would help offset the cost of their insurance 00:51:32.710 --> 00:51:35.370 align:middle line:84% so they could afford to meet this mandate. 00:51:35.370 --> 00:51:37.690 align:middle line:84% It was a sliding scale, where if you were very poor, 00:51:37.690 --> 00:51:40.110 align:middle line:84% you paid nothing, all the way up to paying-- 00:51:40.110 --> 00:51:43.170 align:middle line:84% I forget what it was, 6% or 7% of your income. 00:51:43.170 --> 00:51:45.950 align:middle line:84% It's a sliding scale based on your income. 00:51:45.950 --> 00:51:50.030 align:middle line:84% So basically what we did-- so what we did is we created-- 00:51:50.030 --> 00:51:53.030 align:middle line:84% so I wrote a comic book to try to explain 00:51:53.030 --> 00:51:54.990 align:middle line:84% how-- it's a graphic novel to try 00:51:54.990 --> 00:51:57.270 align:middle line:90% to explain health care reform. 00:51:57.270 --> 00:52:02.510 align:middle line:84% And in that comic book, I label this a three-legged stool. 00:52:02.510 --> 00:52:06.390 align:middle line:84% The idea is, you want to end discrimination, 00:52:06.390 --> 00:52:07.910 align:middle line:90% so you ban discrimination. 00:52:07.910 --> 00:52:09.270 align:middle line:84% The problem if you end discrimination is insurers 00:52:09.270 --> 00:52:09.978 align:middle line:90% leave the states. 00:52:09.978 --> 00:52:12.410 align:middle line:84% You put in the mandate so they don't go out of business. 00:52:12.410 --> 00:52:13.850 align:middle line:84% But you can't do that, because people can't afford it. 00:52:13.850 --> 00:52:15.230 align:middle line:90% So you put in the subsidies. 00:52:15.230 --> 00:52:18.822 align:middle line:84% And the three things together hold up the stool. 00:52:18.822 --> 00:52:20.280 align:middle line:84% Funny story with the graphic novel, 00:52:20.280 --> 00:52:21.905 align:middle line:84% they called me up to ask me to do this, 00:52:21.905 --> 00:52:23.420 align:middle line:90% and I said thanks and hung up. 00:52:23.420 --> 00:52:25.240 align:middle line:84% And then they called me back and said, 00:52:25.240 --> 00:52:26.782 align:middle line:84% no, wait, this is a really good idea, 00:52:26.782 --> 00:52:29.777 align:middle line:84% because actually people learn very well from cartoon imagery. 00:52:29.777 --> 00:52:32.360 align:middle line:84% They said look, if you're on a plane, you're about to go down, 00:52:32.360 --> 00:52:33.560 align:middle line:84% they don't give you three paragraphs to read. 00:52:33.560 --> 00:52:34.620 align:middle line:90% They give you a cartoon. 00:52:34.620 --> 00:52:35.480 align:middle line:90% People learn very well that way. 00:52:35.480 --> 00:52:37.460 align:middle line:84% I said, that's really interesting and hung up. 00:52:37.460 --> 00:52:39.560 align:middle line:84% And then my kids were like, no, no, you got to do this. 00:52:39.560 --> 00:52:40.102 align:middle line:90% This is cool. 00:52:40.102 --> 00:52:41.480 align:middle line:90% So I said I'd do it. 00:52:41.480 --> 00:52:45.100 align:middle line:84% And they said, we want you to be like the avatar in the book, so 00:52:45.100 --> 00:52:46.833 align:middle line:90% like the guide through the book. 00:52:46.833 --> 00:52:48.500 align:middle line:84% And I said, that's great, as long as you 00:52:48.500 --> 00:52:50.300 align:middle line:90% make me look like Brad Pitt. 00:52:50.300 --> 00:52:51.820 align:middle line:84% And they said, funny story, which 00:52:51.820 --> 00:52:54.520 align:middle line:84% is that they had the-- and remember, 00:52:54.520 --> 00:52:57.140 align:middle line:84% this is 2011 when you hear this story. 00:52:57.140 --> 00:53:01.020 align:middle line:84% They had the contract for the movie Inglourious Basterds 00:53:01.020 --> 00:53:03.220 align:middle line:84% to do a graphic novel, which Brad Pitt was in. 00:53:03.220 --> 00:53:05.760 align:middle line:84% And Brad Pitt's agent killed it-- and remember, 00:53:05.760 --> 00:53:08.260 align:middle line:84% this is 2011, not today-- because he said they 00:53:08.260 --> 00:53:10.820 align:middle line:90% made Brad Pitt look too gay. 00:53:10.820 --> 00:53:15.473 align:middle line:84% Now, I said, I will take gay Brad Pitt any minute over me. 00:53:15.473 --> 00:53:16.390 align:middle line:90% But they didn't do it. 00:53:16.390 --> 00:53:18.370 align:middle line:84% So they put me in as the guide through the book. 00:53:18.370 --> 00:53:19.828 align:middle line:84% So we did the book, and it was fun. 00:53:19.828 --> 00:53:21.330 align:middle line:90% It was a fun thing to do. 00:53:21.330 --> 00:53:23.180 align:middle line:84% Anyway, so a bunch of graphic images. 00:53:23.180 --> 00:53:24.430 align:middle line:90% I like to think in that sense. 00:53:24.430 --> 00:53:26.570 align:middle line:84% Anyway, we set up this three-legged stool 00:53:26.570 --> 00:53:27.930 align:middle line:90% in Massachusetts. 00:53:27.930 --> 00:53:30.690 align:middle line:84% We'd already banned insurance discrimination. 00:53:30.690 --> 00:53:32.430 align:middle line:84% We mandated people buy health insurance. 00:53:32.430 --> 00:53:34.810 align:middle line:84% Now, if you start to get into the details, what does 00:53:34.810 --> 00:53:35.630 align:middle line:90% a mandate mean? 00:53:35.630 --> 00:53:36.690 align:middle line:84% Are you going to throw them in jail 00:53:36.690 --> 00:53:37.670 align:middle line:90% if they don't have insurance? 00:53:37.670 --> 00:53:38.570 align:middle line:84% Are you going to cut off their arm? 00:53:38.570 --> 00:53:40.450 align:middle line:84% That would sort of defeat the purpose? 00:53:40.450 --> 00:53:43.288 align:middle line:84% OK, so what we did is we put a large penalty on people. 00:53:43.288 --> 00:53:44.830 align:middle line:84% If they didn't have health insurance, 00:53:44.830 --> 00:53:47.130 align:middle line:90% we put in place a large penalty. 00:53:47.130 --> 00:53:49.610 align:middle line:84% And then we set up a system where 00:53:49.610 --> 00:53:51.890 align:middle line:84% we made health insurance affordable for low income 00:53:51.890 --> 00:53:52.690 align:middle line:90% people. 00:53:52.690 --> 00:53:54.330 align:middle line:90% We put them together. 00:53:54.330 --> 00:53:58.930 align:middle line:84% It passed almost unanimously in the Massachusetts legislature 00:53:58.930 --> 00:54:00.630 align:middle line:90% and was incredibly popular. 00:54:00.630 --> 00:54:03.710 align:middle line:84% It never had less than about 60% popular support, 00:54:03.710 --> 00:54:05.730 align:middle line:84% and it was as high as 80% popular support 00:54:05.730 --> 00:54:07.090 align:middle line:90% in Massachusetts. 00:54:07.090 --> 00:54:12.490 align:middle line:84% Incredibly popular law and successful, in the sense 00:54:12.490 --> 00:54:13.780 align:middle line:90% of what it accomplished. 00:54:13.780 --> 00:54:16.320 align:middle line:84% First of all, insurance premiums came way down 00:54:16.320 --> 00:54:18.640 align:middle line:84% because we brought healthy people into the pool. 00:54:18.640 --> 00:54:20.680 align:middle line:84% So insurance premiums came way down. 00:54:20.680 --> 00:54:23.680 align:middle line:84% Second of all, we covered 2/3 of the uninsured in Massachusetts, 00:54:23.680 --> 00:54:26.060 align:middle line:84% getting our uninsurance rate down to about 3%, 00:54:26.060 --> 00:54:28.440 align:middle line:84% which is comparable to many European nations. 00:54:28.440 --> 00:54:31.200 align:middle line:84% And third of all, we did it with broad public support. 00:54:31.200 --> 00:54:33.330 align:middle line:84% In fact, it was so successful that other states 00:54:33.330 --> 00:54:35.080 align:middle line:84% wanted to do it, in particular states that 00:54:35.080 --> 00:54:38.320 align:middle line:84% were governed by moderate Republicans like Arnold 00:54:38.320 --> 00:54:39.578 align:middle line:90% Schwarzenegger. 00:54:39.578 --> 00:54:41.120 align:middle line:84% So one of the highlights of my career 00:54:41.120 --> 00:54:42.800 align:middle line:84% was I got to fly out and meet with Schwarzenegger 00:54:42.800 --> 00:54:44.020 align:middle line:90% to talk about this plan. 00:54:44.020 --> 00:54:46.960 align:middle line:84% Now, it's not as meaningful to you as to me because I'm a child 00:54:46.960 --> 00:54:48.123 align:middle line:90% of the '80s action movies. 00:54:48.123 --> 00:54:50.540 align:middle line:84% Actually, in the ante room before you meet Schwarzenegger, 00:54:50.540 --> 00:54:52.860 align:middle line:84% you can actually hold the sword from Conan the Barbarian, 00:54:52.860 --> 00:54:53.500 align:middle line:90% which was really cool. 00:54:53.500 --> 00:54:54.660 align:middle line:84% I got a picture holding the sword. 00:54:54.660 --> 00:54:55.380 align:middle line:90% That was cool. 00:54:55.380 --> 00:54:56.380 align:middle line:90% And I met with Schwarzenegger. 00:54:56.380 --> 00:54:58.100 align:middle line:84% And it really is like-- he's like a cartoon character. 00:54:58.100 --> 00:54:58.560 align:middle line:84% He was like, (MIMICKING SCHWARZENEGGER) 00:54:58.560 --> 00:54:59.760 align:middle line:84% we will cover everyone in California 00:54:59.760 --> 00:55:00.677 align:middle line:90% with health insurance. 00:55:00.677 --> 00:55:02.600 align:middle line:90% It really was like, OK. 00:55:02.600 --> 00:55:04.318 align:middle line:84% But the problem was-- and it wasn't just 00:55:04.318 --> 00:55:05.860 align:middle line:84% him, it a number of states were like, 00:55:05.860 --> 00:55:07.260 align:middle line:84% we want to copy this Massachusetts model. 00:55:07.260 --> 00:55:08.960 align:middle line:84% And they brought me in to help them. 00:55:08.960 --> 00:55:10.463 align:middle line:84% The problem was over and over again, 00:55:10.463 --> 00:55:12.630 align:middle line:84% we ran into the same problem, which is Massachusetts 00:55:12.630 --> 00:55:15.150 align:middle line:90% had a unique set of advantages. 00:55:15.150 --> 00:55:18.890 align:middle line:84% Advantage one was we had a very low baseline uninsurance rate. 00:55:18.890 --> 00:55:21.870 align:middle line:84% While the country was at 20%, we were at 10%. 00:55:21.870 --> 00:55:23.230 align:middle line:90% So it was a lot cheaper to do. 00:55:23.230 --> 00:55:26.548 align:middle line:84% Advantage two was we already had this uncompensated care pool. 00:55:26.548 --> 00:55:28.590 align:middle line:84% So we were already collecting essentially a bunch 00:55:28.590 --> 00:55:30.550 align:middle line:84% of tax revenues that we'd just rededicate 00:55:30.550 --> 00:55:31.910 align:middle line:90% to finance the program. 00:55:31.910 --> 00:55:33.870 align:middle line:90% Other states didn't have that. 00:55:33.870 --> 00:55:35.610 align:middle line:84% So in California, I literally worked-- 00:55:35.610 --> 00:55:38.630 align:middle line:84% we had the entire legislature and the governor 00:55:38.630 --> 00:55:40.490 align:middle line:84% on board for a plan until the cost came out. 00:55:40.490 --> 00:55:42.090 align:middle line:84% And they said, we can't afford this, and killed it. 00:55:42.090 --> 00:55:43.530 align:middle line:90% And state after state said that. 00:55:43.530 --> 00:55:46.590 align:middle line:84% And that's why it became a big issue in the 2008 election. 00:55:46.590 --> 00:55:48.990 align:middle line:84% President Obama actually initially campaigned 00:55:48.990 --> 00:55:50.490 align:middle line:90% against the Massachusetts plan. 00:55:50.490 --> 00:55:52.570 align:middle line:84% Hillary Clinton was for the Massachusetts plan. 00:55:52.570 --> 00:55:53.950 align:middle line:90% Obama was not. 00:55:53.950 --> 00:55:56.523 align:middle line:84% But then once he got elected, he realized, to his credit, 00:55:56.523 --> 00:55:58.190 align:middle line:84% this was a plan that was really working, 00:55:58.190 --> 00:55:59.456 align:middle line:84% and decided he'd try to influence it 00:55:59.456 --> 00:56:00.590 align:middle line:84% at the national level, and brought me down 00:56:00.590 --> 00:56:02.630 align:middle line:84% to help work on it, which was super fun, 00:56:02.630 --> 00:56:05.110 align:middle line:84% and helped figure out how we could do this 00:56:05.110 --> 00:56:06.910 align:middle line:90% at the national level. 00:56:06.910 --> 00:56:09.380 align:middle line:84% And after a lot of fighting back and forth 00:56:09.380 --> 00:56:12.780 align:middle line:84% and scars and other things that we can talk about some time, 00:56:12.780 --> 00:56:16.698 align:middle line:84% we ended up in 2010 passing the Affordable Care Act. 00:56:16.698 --> 00:56:18.240 align:middle line:84% Now, what is the Affordable Care Act? 00:56:18.240 --> 00:56:20.800 align:middle line:84% The Affordable Care Act is basically, at its core, 00:56:20.800 --> 00:56:24.100 align:middle line:84% the Massachusetts act plus three zeros. 00:56:24.100 --> 00:56:26.500 align:middle line:84% It's basically the same three-legged stool. 00:56:26.500 --> 00:56:28.900 align:middle line:84% First leg, banning insurer discrimination. 00:56:28.900 --> 00:56:34.358 align:middle line:84% I'll pause there because this is fundamental to the law. 00:56:34.358 --> 00:56:35.900 align:middle line:84% We were the only country in the world 00:56:35.900 --> 00:56:37.358 align:middle line:84% where literally insurers could tell 00:56:37.358 --> 00:56:38.780 align:middle line:90% sick people to go take a hike. 00:56:38.780 --> 00:56:40.080 align:middle line:90% They couldn't do that anymore. 00:56:40.080 --> 00:56:42.140 align:middle line:84% That was a fundamental accomplishment. 00:56:42.140 --> 00:56:44.740 align:middle line:84% The second was the individual mandate with a penalty 00:56:44.740 --> 00:56:47.100 align:middle line:84% if you didn't buy health insurance. 00:56:47.100 --> 00:56:49.540 align:middle line:84% And the third was making health insurance cheaper 00:56:49.540 --> 00:56:51.000 align:middle line:90% through two mechanisms. 00:56:51.000 --> 00:56:52.680 align:middle line:84% One was expanding the Medicaid program-- 00:56:52.680 --> 00:56:54.180 align:middle line:84% we've talked about that already-- 00:56:54.180 --> 00:56:57.460 align:middle line:90% to 133% of the poverty line. 00:56:57.460 --> 00:56:59.180 align:middle line:84% The second was setting up a bunch 00:56:59.180 --> 00:57:01.780 align:middle line:84% of what's called state exchanges, which 00:57:01.780 --> 00:57:05.020 align:middle line:84% were marketplaces to go buy health insurance, where you 00:57:05.020 --> 00:57:07.570 align:middle line:84% could get a tax credit to offset the cost of your health 00:57:07.570 --> 00:57:09.970 align:middle line:84% insurance if you're below average income. 00:57:09.970 --> 00:57:12.190 align:middle line:84% So it was below 133% of poverty-- 00:57:12.190 --> 00:57:15.330 align:middle line:84% so think about that's about $30,000 for a family-- 00:57:15.330 --> 00:57:16.730 align:middle line:90% insurance was free. 00:57:16.730 --> 00:57:21.690 align:middle line:84% From 133% to three times poverty-- 00:57:21.690 --> 00:57:24.870 align:middle line:84% no, 133% to four times poverty, you got subsidies. 00:57:24.870 --> 00:57:27.530 align:middle line:84% So that's up to about median income. 00:57:27.530 --> 00:57:29.195 align:middle line:84% So from very poor to median income, 00:57:29.195 --> 00:57:30.570 align:middle line:84% the government gave you subsidies 00:57:30.570 --> 00:57:32.445 align:middle line:84% to offset the cost of your private insurance. 00:57:32.445 --> 00:57:33.670 align:middle line:90% You bought private insurance. 00:57:33.670 --> 00:57:34.950 align:middle line:90% The government offset that. 00:57:34.950 --> 00:57:37.410 align:middle line:84% And then above median income, you were on your own. 00:57:37.410 --> 00:57:42.353 align:middle line:84% So that was the third leg of the stool. 00:57:42.353 --> 00:57:44.270 align:middle line:84% And so the same three-legged stool structure-- 00:57:44.270 --> 00:57:47.290 align:middle line:84% ban insurance discrimination, individual mandate, 00:57:47.290 --> 00:57:49.410 align:middle line:90% subsidies-- was set up. 00:57:49.410 --> 00:57:52.390 align:middle line:84% Same three-legged stool was set up and put in place. 00:57:52.390 --> 00:57:56.570 align:middle line:84% The law passed in 2010 and was enacted in 2014. 00:57:56.570 --> 00:57:58.230 align:middle line:84% Now the question is, did it work? 00:57:58.230 --> 00:57:59.730 align:middle line:84% Well, the answer did it work depends 00:57:59.730 --> 00:58:01.050 align:middle line:90% on what your perspective is. 00:58:01.050 --> 00:58:03.630 align:middle line:84% If your perspective is 14.41, that is policy, 00:58:03.630 --> 00:58:04.930 align:middle line:90% then yes, it did work. 00:58:04.930 --> 00:58:07.820 align:middle line:84% If your perspective is 14.40 absent chapter 9, then yes, 00:58:07.820 --> 00:58:09.480 align:middle line:90% it did work. 00:58:09.480 --> 00:58:13.050 align:middle line:84% Which is that we covered almost half the uninsured within two 00:58:13.050 --> 00:58:14.300 align:middle line:90% years of it being implemented. 00:58:14.300 --> 00:58:17.520 align:middle line:84% By 2016, we covered about half the uninsured in America 00:58:17.520 --> 00:58:19.440 align:middle line:90% with insurance coverage. 00:58:19.440 --> 00:58:21.960 align:middle line:84% We'd done so actually below government budget estimates-- 00:58:21.960 --> 00:58:23.660 align:middle line:84% at a cost that was below estimates. 00:58:23.660 --> 00:58:26.720 align:middle line:84% And we fixed this broken non-group insurance market. 00:58:26.720 --> 00:58:28.200 align:middle line:90% That was the good news. 00:58:28.200 --> 00:58:29.680 align:middle line:84% If your answer is chapter 9, it was 00:58:29.680 --> 00:58:32.880 align:middle line:84% bad news, which is the law was incredibly unpopular-- 00:58:32.880 --> 00:58:36.080 align:middle line:84% deeply unpopular, well below 50% support. 00:58:36.080 --> 00:58:40.080 align:middle line:84% Now, many words have been spilled on why this is. 00:58:40.080 --> 00:58:41.620 align:middle line:90% And there's lots of theories. 00:58:41.620 --> 00:58:46.300 align:middle line:84% I will give you my two leading contenders for what happened. 00:58:46.300 --> 00:58:47.300 align:middle line:90% And they're interactive. 00:58:47.300 --> 00:58:50.640 align:middle line:84% The first thing is the law was passed in 2010, 00:58:50.640 --> 00:58:54.400 align:middle line:84% but did not take place until 2014. 00:58:54.400 --> 00:58:57.143 align:middle line:84% That gave four years for opponents of the law 00:58:57.143 --> 00:58:58.560 align:middle line:84% to beat up on it, while supporters 00:58:58.560 --> 00:59:00.240 align:middle line:90% had nothing to show for it. 00:59:00.240 --> 00:59:03.520 align:middle line:84% That's a long time to have bad press and opponents beating up 00:59:03.520 --> 00:59:05.280 align:middle line:90% on it with nothing to show. 00:59:05.280 --> 00:59:07.113 align:middle line:84% Moreover-- and this is important for MIT-- 00:59:07.113 --> 00:59:09.280 align:middle line:84% the first thing that people interacted with this law 00:59:09.280 --> 00:59:12.360 align:middle line:84% was the website, which blew up and didn't 00:59:12.360 --> 00:59:13.740 align:middle line:90% work when it first started. 00:59:13.740 --> 00:59:16.240 align:middle line:84% Now, it got fixed within four weeks, but that didn't matter. 00:59:16.240 --> 00:59:17.280 align:middle line:90% It was too late. 00:59:17.280 --> 00:59:18.400 align:middle line:84% For four years, opponents are saying 00:59:18.400 --> 00:59:19.380 align:middle line:84% this law is going to be a disaster. 00:59:19.380 --> 00:59:21.080 align:middle line:84% The first thing that happens is the website blows up and no one 00:59:21.080 --> 00:59:21.860 align:middle line:90% can get on it. 00:59:21.860 --> 00:59:22.610 align:middle line:90% They're like, see? 00:59:22.610 --> 00:59:23.880 align:middle line:90% We told you. 00:59:23.880 --> 00:59:24.977 align:middle line:90% Yeah. 00:59:24.977 --> 00:59:27.060 align:middle line:84% AUDIENCE: When people were saying it's a disaster, 00:59:27.060 --> 00:59:29.080 align:middle line:84% they were just saying the projected budget? 00:59:29.080 --> 00:59:30.640 align:middle line:84% JON GRUBER: Well, that is the second piece. 00:59:30.640 --> 00:59:32.015 align:middle line:84% AUDIENCE: It hadn't happened yet. 00:59:32.015 --> 00:59:34.120 align:middle line:84% JON GRUBER: That's the second piece. 00:59:34.120 --> 00:59:38.560 align:middle line:84% So the whole idea of health care reform before Romney 00:59:38.560 --> 00:59:42.640 align:middle line:84% and then Obama was, let's rip up the system and start over. 00:59:42.640 --> 00:59:44.506 align:middle line:84% Romney's brilliant insight was, you 00:59:44.506 --> 00:59:47.140 align:middle line:84% know what, the system is working for 80% of people, 00:59:47.140 --> 00:59:48.760 align:middle line:90% 90% in Massachusetts. 00:59:48.760 --> 00:59:50.320 align:middle line:90% Let's leave them alone. 00:59:50.320 --> 00:59:52.580 align:middle line:84% Let's just fix it for whomever it's not working. 00:59:52.580 --> 00:59:54.240 align:middle line:84% So the three-legged stool was designed 00:59:54.240 --> 00:59:56.560 align:middle line:84% to leave 80% of the people alone. 00:59:56.560 --> 00:59:59.040 align:middle line:84% It was designed to say, look, let's fix 00:59:59.040 --> 01:00:00.912 align:middle line:84% what's wrong for this uninsured market. 01:00:00.912 --> 01:00:02.370 align:middle line:84% But if you have employer insurance, 01:00:02.370 --> 01:00:03.550 align:middle line:90% we're not touching it. 01:00:03.550 --> 01:00:04.470 align:middle line:84% If you have government insurance, 01:00:04.470 --> 01:00:05.050 align:middle line:90% we're not touching it. 01:00:05.050 --> 01:00:06.430 align:middle line:90% We're just making it bigger. 01:00:06.430 --> 01:00:08.550 align:middle line:84% The idea was, then people won't oppose it, 01:00:08.550 --> 01:00:12.150 align:middle line:84% because they won't be worried about losing their insurance. 01:00:12.150 --> 01:00:15.110 align:middle line:90% What did this miss? 01:00:15.110 --> 01:00:18.910 align:middle line:84% This politically missed an important point, 01:00:18.910 --> 01:00:23.670 align:middle line:84% which is that that did not make the 80% of people automatically 01:00:23.670 --> 01:00:26.170 align:middle line:84% opposed, but it also did not make them automatic supporters. 01:00:26.170 --> 01:00:27.587 align:middle line:90% It made them wary. 01:00:27.587 --> 01:00:28.670 align:middle line:90% So you've passed this law. 01:00:28.670 --> 01:00:30.030 align:middle line:90% They hear all about Obamacare. 01:00:30.030 --> 01:00:31.250 align:middle line:90% And what's happening? 01:00:31.250 --> 01:00:32.830 align:middle line:90% Health care costs are going up. 01:00:32.830 --> 01:00:34.110 align:middle line:84% Now, it turns out, health care costs were actually 01:00:34.110 --> 01:00:36.735 align:middle line:84% going up at the slowest rate in measured history, but still up. 01:00:36.735 --> 01:00:38.943 align:middle line:84% There's only two things that are always true in life. 01:00:38.943 --> 01:00:40.630 align:middle line:84% It's baseball games take too long 01:00:40.630 --> 01:00:42.427 align:middle line:90% and health care costs go up. 01:00:42.427 --> 01:00:44.010 align:middle line:84% Health care costs were still going up. 01:00:44.010 --> 01:00:46.310 align:middle line:84% So all the opponents said, see, this Obamacare's fault. 01:00:46.310 --> 01:00:48.530 align:middle line:84% And I could go on TV and say, look, actually, 01:00:48.530 --> 01:00:50.030 align:middle line:84% they're growing up at a slower rate. 01:00:50.030 --> 01:00:51.710 align:middle line:90% Boom, shut me down. 01:00:51.710 --> 01:00:54.455 align:middle line:84% Basically, it didn't matter that actually, we actually-- 01:00:54.455 --> 01:00:56.330 align:middle line:84% I'll talk about cost control in a little bit. 01:00:56.330 --> 01:00:57.970 align:middle line:84% We'd actually done very good things on cost control. 01:00:57.970 --> 01:00:58.590 align:middle line:90% Didn't matter. 01:00:58.590 --> 01:01:00.797 align:middle line:84% So suddenly, everything-- I went to a meeting 01:01:00.797 --> 01:01:02.380 align:middle line:84% at the White House and Obama's advisor 01:01:02.380 --> 01:01:04.422 align:middle line:84% said, we now own the whole US health care system. 01:01:04.422 --> 01:01:05.715 align:middle line:90% Whatever happens is our fault. 01:01:05.715 --> 01:01:08.340 align:middle line:84% And the health care costs kept going up because they always do. 01:01:08.340 --> 01:01:10.020 align:middle line:84% And so there was a lot of reason-- 01:01:10.020 --> 01:01:11.460 align:middle line:90% plus misinformation, et cetera. 01:01:11.460 --> 01:01:12.780 align:middle line:90% We live in that world. 01:01:12.780 --> 01:01:15.420 align:middle line:84% So there's a lot of reasons people were wary of this. 01:01:15.420 --> 01:01:18.340 align:middle line:84% And so in some sense, think about-- basically 01:01:18.340 --> 01:01:20.860 align:middle line:84% what the law did is it made about 80% of people 01:01:20.860 --> 01:01:21.960 align:middle line:90% were unaffected. 01:01:21.960 --> 01:01:25.020 align:middle line:84% About 17% were winners, about 3% were losers. 01:01:25.020 --> 01:01:26.080 align:middle line:90% Who were the losers? 01:01:26.080 --> 01:01:28.100 align:middle line:84% Well, there were two groups of losers. 01:01:28.100 --> 01:01:30.420 align:middle line:84% There were people who were benefiting 01:01:30.420 --> 01:01:33.140 align:middle line:84% from the discriminatory insurance system. 01:01:33.140 --> 01:01:35.640 align:middle line:84% After all, if insurers can kick out sick people, 01:01:35.640 --> 01:01:37.860 align:middle line:84% they can offer a really good deal to healthy people. 01:01:37.860 --> 01:01:39.318 align:middle line:84% In California, if you were healthy, 01:01:39.318 --> 01:01:41.140 align:middle line:84% you'd get insurance for $100 a month. 01:01:41.140 --> 01:01:42.380 align:middle line:90% Well, that went away. 01:01:42.380 --> 01:01:45.060 align:middle line:84% It was now like $300 a month because now we 01:01:45.060 --> 01:01:48.660 align:middle line:84% weren't allowing insurers to discriminate anymore. 01:01:48.660 --> 01:01:50.800 align:middle line:84% I mean, it's kind of-- basically, 01:01:50.800 --> 01:01:53.903 align:middle line:84% I'm sure that, racist or not, white people who 01:01:53.903 --> 01:01:55.820 align:middle line:84% got to have the front of the bus to themselves 01:01:55.820 --> 01:01:57.400 align:middle line:84% were upset when they had to share it. 01:01:57.400 --> 01:01:58.830 align:middle line:90% Well, fuck them, that's life. 01:01:58.830 --> 01:02:00.210 align:middle line:90% You share the front of the bus. 01:02:00.210 --> 01:02:02.730 align:middle line:84% Likewise, the idea is basically we 01:02:02.730 --> 01:02:05.150 align:middle line:84% as a society feel like insurance should be fair. 01:02:05.150 --> 01:02:08.230 align:middle line:84% And basically, everyone should have a fair access to insurance. 01:02:08.230 --> 01:02:09.730 align:middle line:84% The problem is, that did raise costs 01:02:09.730 --> 01:02:10.855 align:middle line:90% for several million people. 01:02:10.855 --> 01:02:12.250 align:middle line:90% They were mad. 01:02:12.250 --> 01:02:13.910 align:middle line:84% There was also the group, as I said, 01:02:13.910 --> 01:02:15.118 align:middle line:90% that had to give up policies. 01:02:15.118 --> 01:02:16.770 align:middle line:84% Even though they weren't real policies, 01:02:16.770 --> 01:02:19.230 align:middle line:84% they had to give them up, and they were upset. 01:02:19.230 --> 01:02:21.210 align:middle line:84% And then finally, there was one big difference 01:02:21.210 --> 01:02:23.163 align:middle line:84% from Massachusetts, which is i Massachusetts, 01:02:23.163 --> 01:02:25.330 align:middle line:84% we didn't have to pay for it, because we already had 01:02:25.330 --> 01:02:26.870 align:middle line:90% this uncompensated care pool. 01:02:26.870 --> 01:02:28.150 align:middle line:84% At the federal level, you had to pay for it. 01:02:28.150 --> 01:02:29.900 align:middle line:84% And one way we paid for it was a large tax 01:02:29.900 --> 01:02:30.970 align:middle line:90% increase on the wealthy. 01:02:30.970 --> 01:02:32.810 align:middle line:84% Indeed, probably the largest tax increase on the wealthy 01:02:32.810 --> 01:02:33.910 align:middle line:90% we'd seen in decades. 01:02:33.910 --> 01:02:36.390 align:middle line:84% And they were mad, because they didn't get anything for it. 01:02:36.390 --> 01:02:38.490 align:middle line:90% That group really, truly lost. 01:02:38.490 --> 01:02:41.530 align:middle line:84% They already had good insurance, and we're taxing them more. 01:02:41.530 --> 01:02:43.530 align:middle line:84% So for that reason, you had about-- 01:02:43.530 --> 01:02:47.750 align:middle line:84% and the problem was, the 80% were like wary on the fence. 01:02:47.750 --> 01:02:49.310 align:middle line:90% The 17% were like, this is good. 01:02:49.310 --> 01:02:50.643 align:middle line:90% I guess I have health insurance. 01:02:50.643 --> 01:02:53.430 align:middle line:84% The 3% were irate and they drove the conversation. 01:02:53.430 --> 01:02:56.820 align:middle line:84% So you combine that with normal political opposition, 01:02:56.820 --> 01:02:58.460 align:middle line:84% you end up with the situation we're in. 01:02:58.460 --> 01:02:58.960 align:middle line:90% Yeah. 01:02:58.960 --> 01:03:02.160 align:middle line:84% AUDIENCE: Why [INAUDIBLE] consider a health care 01:03:02.160 --> 01:03:04.560 align:middle line:90% or hospital tax? 01:03:04.560 --> 01:03:07.240 align:middle line:84% JON GRUBER: Oh, once again, that's 01:03:07.240 --> 01:03:08.540 align:middle line:90% a classic political economy. 01:03:08.540 --> 01:03:09.740 align:middle line:84% That's a big government intervention. 01:03:09.740 --> 01:03:11.020 align:middle line:84% Other states didn't want to do it. 01:03:11.020 --> 01:03:12.395 align:middle line:84% Massachusetts is a liberal state. 01:03:12.395 --> 01:03:13.920 align:middle line:90% They were able to do it. 01:03:13.920 --> 01:03:14.860 align:middle line:90% Yeah. 01:03:14.860 --> 01:03:17.168 align:middle line:90% AUDIENCE: Why four years? 01:03:17.168 --> 01:03:18.460 align:middle line:90% JON GRUBER: Someone asked this. 01:03:18.460 --> 01:03:20.918 align:middle line:84% I want to come back-- someone asked this question last time 01:03:20.918 --> 01:03:23.400 align:middle line:84% about why something took a while. 01:03:23.400 --> 01:03:25.240 align:middle line:84% This is a fascinating issue, which I did not 01:03:25.240 --> 01:03:26.180 align:middle line:90% appreciate at the time. 01:03:26.180 --> 01:03:28.347 align:middle line:84% I don't think many people did, which is a trade-off. 01:03:28.347 --> 01:03:30.840 align:middle line:84% You want to take long enough to get it right, but not 01:03:30.840 --> 01:03:33.477 align:middle line:84% so long that you allow a bad narrative to be built up. 01:03:33.477 --> 01:03:35.560 align:middle line:84% The idea was, this is going to be a radical change 01:03:35.560 --> 01:03:36.820 align:middle line:90% to our health care system. 01:03:36.820 --> 01:03:38.620 align:middle line:84% We wanted to leave time to figure it out. 01:03:38.620 --> 01:03:42.665 align:middle line:84% Now obviously, it didn't matter, because the IT system blew up 01:03:42.665 --> 01:03:43.540 align:middle line:90% the first day anyway. 01:03:43.540 --> 01:03:46.320 align:middle line:84% So four years clearly wasn't enough probably. 01:03:46.320 --> 01:03:49.060 align:middle line:84% In Massachusetts, we did it very differently. 01:03:49.060 --> 01:03:52.440 align:middle line:84% We passed the law in March or April. 01:03:52.440 --> 01:03:55.510 align:middle line:84% We had to have open enrollment by October that same year. 01:03:55.510 --> 01:03:57.830 align:middle line:84% And the team doing it was the director 01:03:57.830 --> 01:04:03.310 align:middle line:84% of this board I was on-- me, one other person, at a halftime RA. 01:04:03.310 --> 01:04:05.790 align:middle line:84% And we had to have a system up and running by October. 01:04:05.790 --> 01:04:09.230 align:middle line:84% Now, it worked out pretty well, but life 01:04:09.230 --> 01:04:11.470 align:middle line:84% would have been a lot better if we had a year or two. 01:04:11.470 --> 01:04:13.053 align:middle line:84% But there's a trade-off, which is then 01:04:13.053 --> 01:04:16.325 align:middle line:84% that's room for bad vibes to get in the conversation. 01:04:16.325 --> 01:04:18.950 align:middle line:84% And so I think that's a really interesting trade-off of, how do 01:04:18.950 --> 01:04:20.550 align:middle line:90% you-- because the truth is, if 01:04:20.550 --> 01:04:23.453 align:middle line:84% Obama had rushed it and the IT had blown up, 01:04:23.453 --> 01:04:25.870 align:middle line:84% it would have been like, oh my god, he rushed it too much. 01:04:25.870 --> 01:04:27.430 align:middle line:90% He should have waited. 01:04:27.430 --> 01:04:30.090 align:middle line:84% So you could see the obvious trade-off. 01:04:30.090 --> 01:04:30.590 align:middle line:90% Yeah. 01:04:30.590 --> 01:04:32.750 align:middle line:84% AUDIENCE: You have 10 states that opted out 01:04:32.750 --> 01:04:35.550 align:middle line:90% of the Medicaid expansion. 01:04:35.550 --> 01:04:37.430 align:middle line:84% The uninsured rates are high there. 01:04:37.430 --> 01:04:40.152 align:middle line:84% What are ways that you could convince these 10 states? 01:04:40.152 --> 01:04:41.610 align:middle line:84% JON GRUBER: So this is fascinating. 01:04:41.610 --> 01:04:44.310 align:middle line:84% So what happened was there was a lawsuit 01:04:44.310 --> 01:04:46.410 align:middle line:84% claiming the mandate was unconstitutional. 01:04:46.410 --> 01:04:49.350 align:middle line:90% 01:04:49.350 --> 01:04:50.010 align:middle line:90% Let's be clear. 01:04:50.010 --> 01:04:51.030 align:middle line:90% This is the other-- 01:04:51.030 --> 01:04:52.460 align:middle line:84% I would say there's a third reason 01:04:52.460 --> 01:04:54.460 align:middle line:84% for the political difficulties of the law that's 01:04:54.460 --> 01:04:58.360 align:middle line:84% important to recognize, which is that it was very complicated. 01:04:58.360 --> 01:05:01.860 align:middle line:84% I mean, super complicated, the law, the Affordable Care Act. 01:05:01.860 --> 01:05:04.220 align:middle line:84% And the mandate was not popular, because who 01:05:04.220 --> 01:05:05.552 align:middle line:90% likes to be told what to do? 01:05:05.552 --> 01:05:07.260 align:middle line:84% In my comic book, I described the mandate 01:05:07.260 --> 01:05:09.927 align:middle line:84% as a spinach you had to get the dessert, which is fair insurance 01:05:09.927 --> 01:05:10.580 align:middle line:90% pricing. 01:05:10.580 --> 01:05:12.500 align:middle line:90% But people don't like spinach. 01:05:12.500 --> 01:05:16.380 align:middle line:84% So people started attacking the mandate as a piece of it, 01:05:16.380 --> 01:05:17.970 align:middle line:84% and saying, look, this law is terrible 01:05:17.970 --> 01:05:19.720 align:middle line:84% because it's this mandate, without saying, 01:05:19.720 --> 01:05:22.340 align:middle line:84% oh, but you need mandate, it's a three-legged stool, blah blah 01:05:22.340 --> 01:05:22.460 align:middle line:90% blah. 01:05:22.460 --> 01:05:24.460 align:middle line:84% So basically, the problem was the mandate 01:05:24.460 --> 01:05:27.600 align:middle line:84% was very unpopular for that reason. 01:05:27.600 --> 01:05:31.700 align:middle line:84% Now, the other thing was-- so the mandate was unpopular. 01:05:31.700 --> 01:05:33.280 align:middle line:84% There was a lawsuit to get rid of it. 01:05:33.280 --> 01:05:34.480 align:middle line:90% The lawsuit failed. 01:05:34.480 --> 01:05:38.020 align:middle line:84% But as part of that lawsuit, the Supreme Court said, by the way, 01:05:38.020 --> 01:05:39.580 align:middle line:84% the original Affordable Care Act told 01:05:39.580 --> 01:05:43.260 align:middle line:84% states they had to expand Medicaid to 133% of poverty 01:05:43.260 --> 01:05:46.020 align:middle line:84% with the federal government paying 100% for three 01:05:46.020 --> 01:05:48.700 align:middle line:90% years and 90% thereafter. 01:05:48.700 --> 01:05:50.470 align:middle line:84% The Supreme Court said, you can't do that. 01:05:50.470 --> 01:05:52.970 align:middle line:84% You just have to offer states the deal that they can. 01:05:52.970 --> 01:05:55.150 align:middle line:84% Now, I remember the morning that decision came down, 01:05:55.150 --> 01:05:56.808 align:middle line:90% I was like, well, BFD. 01:05:56.808 --> 01:05:58.350 align:middle line:84% What state would turn down this deal? 01:05:58.350 --> 01:05:59.490 align:middle line:90% It's an incredible deal. 01:05:59.490 --> 01:06:03.210 align:middle line:84% Turned out 25 states did, now down to about 11 states. 01:06:03.210 --> 01:06:04.270 align:middle line:90% Now, let's be clear. 01:06:04.270 --> 01:06:05.810 align:middle line:84% This is true political malpractice. 01:06:05.810 --> 01:06:07.810 align:middle line:84% I mean, this is as close to a Pareto improvement 01:06:07.810 --> 01:06:09.250 align:middle line:90% as you can get as a state. 01:06:09.250 --> 01:06:11.750 align:middle line:84% Because basically, what the federal government is saying is, 01:06:11.750 --> 01:06:14.050 align:middle line:84% we will cover your low income citizens, 01:06:14.050 --> 01:06:16.210 align:middle line:84% and we will pay for it, injecting massive dollars 01:06:16.210 --> 01:06:17.577 align:middle line:90% into your economy. 01:06:17.577 --> 01:06:19.410 align:middle line:84% Indeed, most estimates are, even with states 01:06:19.410 --> 01:06:21.930 align:middle line:84% paying 10% of the cost, they'd be way better off 01:06:21.930 --> 01:06:25.010 align:middle line:84% because the multiplier effect of having 90% of those costs 01:06:25.010 --> 01:06:26.970 align:middle line:84% being paid by the federal government. 01:06:26.970 --> 01:06:31.305 align:middle line:84% So it's really just political malpractice, 01:06:31.305 --> 01:06:32.930 align:middle line:84% but it's a fascinating thing about what 01:06:32.930 --> 01:06:36.010 align:middle line:84% do you do when politicians don't serve their voters' interests? 01:06:36.010 --> 01:06:38.270 align:middle line:90% And here clearly they were not. 01:06:38.270 --> 01:06:42.930 align:middle line:84% And the reasons were just partisanship. 01:06:42.930 --> 01:06:44.590 align:middle line:84% Now, that's gotten better over time. 01:06:44.590 --> 01:06:46.715 align:middle line:84% States have realized their self-interest over time. 01:06:46.715 --> 01:06:48.720 align:middle line:84% But there's still about 11 states that 01:06:48.720 --> 01:06:49.922 align:middle line:90% don't have these expansions. 01:06:49.922 --> 01:06:51.380 align:middle line:84% And it's not clear what you can do. 01:06:51.380 --> 01:06:52.920 align:middle line:84% I mean, you've already said we're 01:06:52.920 --> 01:06:54.358 align:middle line:90% going to pay the whole cost. 01:06:54.358 --> 01:06:56.900 align:middle line:84% You're not going to pay them 110% like the Medicare Advantage 01:06:56.900 --> 01:06:57.435 align:middle line:90% plans. 01:06:57.435 --> 01:06:59.060 align:middle line:84% That doesn't really seem very sensible. 01:06:59.060 --> 01:07:01.620 align:middle line:84% So it's not clear what we can do. 01:07:01.620 --> 01:07:02.120 align:middle line:90% Yeah. 01:07:02.120 --> 01:07:08.920 align:middle line:84% AUDIENCE: Why was it only 3% for [INAUDIBLE]? 01:07:08.920 --> 01:07:09.765 align:middle line:90% JON GRUBER: 3% what? 01:07:09.765 --> 01:07:10.640 align:middle line:90% AUDIENCE: [INAUDIBLE] 01:07:10.640 --> 01:07:13.720 align:middle line:84% JON GRUBER: Yeah, so 3% because that's the only share-- and once 01:07:13.720 --> 01:07:15.300 align:middle line:90% again that's 3%, 4%. 01:07:15.300 --> 01:07:16.600 align:middle line:90% It's a small share. 01:07:16.600 --> 01:07:20.420 align:middle line:84% That's because most people were left alone. 01:07:20.420 --> 01:07:21.420 align:middle line:90% That gets 80% out. 01:07:21.420 --> 01:07:22.680 align:middle line:90% So you got the remaining 20%. 01:07:22.680 --> 01:07:24.760 align:middle line:84% Of the remaining 20%, people either 01:07:24.760 --> 01:07:26.760 align:middle line:84% were uninsured so they're getting new insurance, 01:07:26.760 --> 01:07:29.052 align:middle line:84% or they were low income so they were getting subsidies. 01:07:29.052 --> 01:07:31.392 align:middle line:84% The only people who were hurt were high income people. 01:07:31.392 --> 01:07:33.600 align:middle line:84% The only people who were hurt were high income people 01:07:33.600 --> 01:07:37.120 align:middle line:84% who were benefiting from a discriminatory insurance market. 01:07:37.120 --> 01:07:39.280 align:middle line:84% Those folks got hurt, because right now they 01:07:39.280 --> 01:07:40.212 align:middle line:90% got cheap insurance. 01:07:40.212 --> 01:07:41.920 align:middle line:84% We replaced that with expensive insurance 01:07:41.920 --> 01:07:43.080 align:middle line:84% and didn't give them subsidies because they 01:07:43.080 --> 01:07:44.760 align:middle line:90% were above average income. 01:07:44.760 --> 01:07:47.493 align:middle line:84% That's a pretty small share of the pie. 01:07:47.493 --> 01:07:49.410 align:middle line:84% AUDIENCE: Does it not affect the other percent 01:07:49.410 --> 01:07:50.723 align:middle line:90% of people who are also healthy? 01:07:50.723 --> 01:07:52.890 align:middle line:84% JON GRUBER: No, because they get employer insurance. 01:07:52.890 --> 01:07:54.430 align:middle line:84% We didn't touch employer insurance. 01:07:54.430 --> 01:07:55.370 align:middle line:90% They get government insurance. 01:07:55.370 --> 01:07:55.890 align:middle line:90% We didn't touch that. 01:07:55.890 --> 01:07:56.973 align:middle line:90% It was just the non group. 01:07:56.973 --> 01:07:59.695 align:middle line:84% That was the idea, was to basically say, let's leave-- 01:07:59.695 --> 01:08:02.070 align:middle line:84% that mass of people is what's killed previous health care 01:08:02.070 --> 01:08:02.770 align:middle line:90% reform efforts. 01:08:02.770 --> 01:08:06.710 align:middle line:84% Let's leave them alone so that they don't get opposed to it. 01:08:06.710 --> 01:08:07.550 align:middle line:90% Yeah. 01:08:07.550 --> 01:08:11.190 align:middle line:84% AUDIENCE: So you're saying that that 3% is in the group-- 01:08:11.190 --> 01:08:14.150 align:middle line:84% JON GRUBER: They were in the existing non-group insurance 01:08:14.150 --> 01:08:15.050 align:middle line:90% market. 01:08:15.050 --> 01:08:15.550 align:middle line:90% Yeah. 01:08:15.550 --> 01:08:18.350 align:middle line:84% AUDIENCE: And then the other thing, is how did that tax-- 01:08:18.350 --> 01:08:21.109 align:middle line:84% what was that tax change like that was charged mostly 01:08:21.109 --> 01:08:22.946 align:middle line:90% to the wealthy people? 01:08:22.946 --> 01:08:25.029 align:middle line:84% JON GRUBER: So you know we have a Medicare payroll 01:08:25.029 --> 01:08:29.729 align:middle line:84% tax, which is the Social Security FICA tax is capped. 01:08:29.729 --> 01:08:31.500 align:middle line:84% The Medicare payroll tax is uncapped. 01:08:31.500 --> 01:08:33.750 align:middle line:84% What they did is they said for families' incomes above 01:08:33.750 --> 01:08:36.670 align:middle line:84% $250,000, we're going to increase the Medicare payroll 01:08:36.670 --> 01:08:37.550 align:middle line:90% tax. 01:08:37.550 --> 01:08:41.250 align:middle line:84% And so that was a large tax increase on wealthy people. 01:08:41.250 --> 01:08:41.750 align:middle line:90% OK? 01:08:41.750 --> 01:08:42.310 align:middle line:90% Yeah. 01:08:42.310 --> 01:08:44.100 align:middle line:84% AUDIENCE: So were there any considerations 01:08:44.100 --> 01:08:46.899 align:middle line:90% about longevity of the policy? 01:08:46.899 --> 01:08:49.080 align:middle line:84% JON GRUBER: Well, I mean, this is why-- 01:08:49.080 --> 01:08:51.819 align:middle line:90% 01:08:51.819 --> 01:08:54.540 align:middle line:84% my list of reasons keeps growing for the political difficulties. 01:08:54.540 --> 01:08:56.779 align:middle line:84% The other thing is, we didn't anticipate-- 01:08:56.779 --> 01:08:58.740 align:middle line:84% the way political battles traditionally worked 01:08:58.740 --> 01:09:01.779 align:middle line:84% during my youth was you'd fight, fight, fight, 01:09:01.779 --> 01:09:04.779 align:middle line:84% one side would win, you'd move on to the next fight. 01:09:04.779 --> 01:09:07.861 align:middle line:84% What happened, I think within a year of the Affordable Care Act, 01:09:07.861 --> 01:09:09.819 align:middle line:84% something like 40% of Americans didn't actually 01:09:09.819 --> 01:09:13.615 align:middle line:84% know it had passed, because the fight hadn't changed at all. 01:09:13.615 --> 01:09:15.240 align:middle line:84% It was just as vicious after it passed. 01:09:15.240 --> 01:09:17.100 align:middle line:90% And that was unusual. 01:09:17.100 --> 01:09:20.245 align:middle line:84% And so basically, you have the situation where-- 01:09:20.245 --> 01:09:22.120 align:middle line:84% I'm sorry, I'm losing track of your question. 01:09:22.120 --> 01:09:23.330 align:middle line:90% Your question was? 01:09:23.330 --> 01:09:24.580 align:middle line:90% AUDIENCE: Political longevity. 01:09:24.580 --> 01:09:25.913 align:middle line:90% JON GRUBER: Political longevity. 01:09:25.913 --> 01:09:28.260 align:middle line:90% So why was the fight so fierce? 01:09:28.260 --> 01:09:32.300 align:middle line:84% The fight was so fierce because of what happened after 2016. 01:09:32.300 --> 01:09:32.984 align:middle line:90% What happened? 01:09:32.984 --> 01:09:34.359 align:middle line:84% The law was incredibly unpopular, 01:09:34.359 --> 01:09:37.819 align:middle line:84% and it was a major factor in the election of both President Trump 01:09:37.819 --> 01:09:40.100 align:middle line:84% and the Republican Congress, all of whom 01:09:40.100 --> 01:09:42.930 align:middle line:84% campaigned on repealing and replacing the Affordable Care 01:09:42.930 --> 01:09:43.729 align:middle line:90% Act. 01:09:43.729 --> 01:09:46.529 align:middle line:84% Now, it turned out there was no replace. 01:09:46.529 --> 01:09:47.590 align:middle line:90% Why was there no replace? 01:09:47.590 --> 01:09:49.840 align:middle line:84% Because the Affordable Care Act was a Republican plan. 01:09:49.840 --> 01:09:51.930 align:middle line:84% Remember, it came from Mitt Romney. 01:09:51.930 --> 01:09:53.069 align:middle line:90% It's an individual mandate. 01:09:53.069 --> 01:09:54.029 align:middle line:90% It's conservative. 01:09:54.029 --> 01:09:55.890 align:middle line:84% There was actually nothing you could 01:09:55.890 --> 01:09:59.505 align:middle line:84% do that could cover as many people 01:09:59.505 --> 01:10:00.630 align:middle line:90% without moving to the left. 01:10:00.630 --> 01:10:02.090 align:middle line:84% There's no way to move to the right 01:10:02.090 --> 01:10:03.770 align:middle line:84% without creating more uninsurance. 01:10:03.770 --> 01:10:07.110 align:middle line:84% So repeal and replace got revealed to just be repeal. 01:10:07.110 --> 01:10:08.990 align:middle line:84% Now, once again, Obamacare was unpopular. 01:10:08.990 --> 01:10:10.350 align:middle line:90% So big deal, you repeal it. 01:10:10.350 --> 01:10:12.010 align:middle line:84% Well, it turned out, if you repeal it 01:10:12.010 --> 01:10:13.870 align:middle line:84% by the time they have these conversations, 01:10:13.870 --> 01:10:14.910 align:middle line:84% it had been in place three years. 01:10:14.910 --> 01:10:17.010 align:middle line:84% People were like, wait a second, 24 million people 01:10:17.010 --> 01:10:17.990 align:middle line:90% are getting this insurance. 01:10:17.990 --> 01:10:18.865 align:middle line:90% They kind of like it. 01:10:18.865 --> 01:10:20.635 align:middle line:84% We're not sure we want it to go away. 01:10:20.635 --> 01:10:22.010 align:middle line:84% And so it started getting popular 01:10:22.010 --> 01:10:23.850 align:middle line:84% once it started getting threatened. 01:10:23.850 --> 01:10:28.330 align:middle line:84% And by the time that the votes came, repeal is close to 50% 01:10:28.330 --> 01:10:29.590 align:middle line:90% and it barely survived. 01:10:29.590 --> 01:10:31.570 align:middle line:90% Now the popularity is at 60%. 01:10:31.570 --> 01:10:35.950 align:middle line:84% That's why we didn't worry about longevity, 01:10:35.950 --> 01:10:38.290 align:middle line:84% because the feature of the American system 01:10:38.290 --> 01:10:40.000 align:middle line:90% is an enormous status quo bias. 01:10:40.000 --> 01:10:43.380 align:middle line:84% Once people like something, it doesn't go away. 01:10:43.380 --> 01:10:45.788 align:middle line:84% You may remember the famous-- during the debates 01:10:45.788 --> 01:10:46.580 align:middle line:90% you were too young. 01:10:46.580 --> 01:10:50.480 align:middle line:84% But during the debates over the Affordable Care Act, 01:10:50.480 --> 01:10:55.320 align:middle line:84% opponents were very worried that the Affordable Care Act would 01:10:55.320 --> 01:10:56.825 align:middle line:84% hurt the existing-- remember, we're 01:10:56.825 --> 01:10:58.700 align:middle line:84% going to leave existing insured people alone. 01:10:58.700 --> 01:11:00.260 align:middle line:84% But people were worried it would affect them. 01:11:00.260 --> 01:11:01.968 align:middle line:84% Particularly people on Medicare were told 01:11:01.968 --> 01:11:03.440 align:middle line:90% it's going to hurt Medicare. 01:11:03.440 --> 01:11:05.340 align:middle line:84% So people would carry around signs saying, 01:11:05.340 --> 01:11:08.280 align:middle line:84% keep the government's hands off my Medicare. 01:11:08.280 --> 01:11:09.520 align:middle line:90% OK? 01:11:09.520 --> 01:11:11.480 align:middle line:84% So Medicare is a government-provided, 01:11:11.480 --> 01:11:12.920 align:middle line:90% single-payer program. 01:11:12.920 --> 01:11:15.640 align:middle line:84% So basically, the point of that is 01:11:15.640 --> 01:11:18.040 align:middle line:84% even the most conservative people love Medicare. 01:11:18.040 --> 01:11:21.000 align:middle line:84% And the idea of political longevity is once it's in place, 01:11:21.000 --> 01:11:22.620 align:middle line:84% there's self-determined longevity. 01:11:22.620 --> 01:11:25.040 align:middle line:84% That's why the fighting was so fierce early on, 01:11:25.040 --> 01:11:28.060 align:middle line:84% because opponents knew that once we got to this point of 2024, 01:11:28.060 --> 01:11:31.040 align:middle line:84% it's not going away, because political longevity is-- 01:11:31.040 --> 01:11:33.267 align:middle line:84% in America, once you have a popular program in place, 01:11:33.267 --> 01:11:34.600 align:middle line:90% it's very hard to get rid of it. 01:11:34.600 --> 01:11:35.440 align:middle line:90% Yeah. 01:11:35.440 --> 01:11:39.260 align:middle line:84% AUDIENCE: What do you think are some of the policy reforms post 01:11:39.260 --> 01:11:39.760 align:middle line:90% ACA? 01:11:39.760 --> 01:11:40.300 align:middle line:90% JON GRUBER: Well, OK. 01:11:40.300 --> 01:11:41.920 align:middle line:84% So let me-- did you have a question about-- 01:11:41.920 --> 01:11:43.212 align:middle line:90% AUDIENCE: I was just wondering. 01:11:43.212 --> 01:11:46.300 align:middle line:84% So after the law had passed and been in effect for a while, 01:11:46.300 --> 01:11:48.400 align:middle line:84% its political longevity in some sense 01:11:48.400 --> 01:11:51.008 align:middle line:84% had implicitly been more or less secured. 01:11:51.008 --> 01:11:52.800 align:middle line:84% But people didn't really realize how secure 01:11:52.800 --> 01:11:54.258 align:middle line:90% it was until it was threatened. 01:11:54.258 --> 01:11:56.300 align:middle line:84% And then you saw graphically the approval rating, 01:11:56.300 --> 01:11:57.212 align:middle line:90% it just went up? 01:11:57.212 --> 01:11:57.920 align:middle line:90% JON GRUBER: Yeah. 01:11:57.920 --> 01:12:00.400 align:middle line:84% I mean, so basically what happened 01:12:00.400 --> 01:12:03.760 align:middle line:90% was approval was pretty flat. 01:12:03.760 --> 01:12:06.583 align:middle line:84% And then starting around 2016, 2017, 01:12:06.583 --> 01:12:08.000 align:middle line:84% it started going up because people 01:12:08.000 --> 01:12:08.840 align:middle line:84% who had the program for a couple years 01:12:08.840 --> 01:12:10.260 align:middle line:90% started to realize the benefits. 01:12:10.260 --> 01:12:11.740 align:middle line:84% That was during the repeal debates. 01:12:11.740 --> 01:12:13.300 align:middle line:90% Now, repeal almost happened. 01:12:13.300 --> 01:12:16.020 align:middle line:84% I mean, it was one vote that stopped it from happening. 01:12:16.020 --> 01:12:17.420 align:middle line:90% It almost happened. 01:12:17.420 --> 01:12:19.900 align:middle line:90% But it wasn't quite that close. 01:12:19.900 --> 01:12:21.977 align:middle line:84% Because remember, there were probably 01:12:21.977 --> 01:12:23.560 align:middle line:84% other people who would vote against it 01:12:23.560 --> 01:12:25.893 align:middle line:84% if they didn't know McCain was going to vote against it. 01:12:25.893 --> 01:12:27.965 align:middle line:84% It was more than one vote, but it was close. 01:12:27.965 --> 01:12:29.840 align:middle line:84% But within a year, it started to get popular, 01:12:29.840 --> 01:12:32.040 align:middle line:90% and now it's 60% approval. 01:12:32.040 --> 01:12:33.300 align:middle line:90% So what's happened since then? 01:12:33.300 --> 01:12:35.700 align:middle line:84% So Trump comes in, tries to repeal it. 01:12:35.700 --> 01:12:36.627 align:middle line:90% They can't repeal it. 01:12:36.627 --> 01:12:38.210 align:middle line:84% But they significantly weaken the law. 01:12:38.210 --> 01:12:40.630 align:middle line:84% In particular, they got rid of the individual mandate. 01:12:40.630 --> 01:12:43.790 align:middle line:84% Now, this shows the difficulty of people like me 01:12:43.790 --> 01:12:44.855 align:middle line:90% for predicting things. 01:12:44.855 --> 01:12:46.230 align:middle line:84% I would have predicted that would 01:12:46.230 --> 01:12:47.980 align:middle line:84% have been a complete disaster for the law. 01:12:47.980 --> 01:12:48.910 align:middle line:90% It wasn't. 01:12:48.910 --> 01:12:49.877 align:middle line:90% It was bad. 01:12:49.877 --> 01:12:51.210 align:middle line:90% Probably got rid of the mandate. 01:12:51.210 --> 01:12:52.710 align:middle line:84% Probably about four million or five million people 01:12:52.710 --> 01:12:54.930 align:middle line:84% lost health insurance, and premiums went up a lot. 01:12:54.930 --> 01:12:56.727 align:middle line:90% But there was no death spiral. 01:12:56.727 --> 01:12:58.310 align:middle line:84% And the reason is because it turns out 01:12:58.310 --> 01:13:00.710 align:middle line:84% the subsidies were so generous, and some people 01:13:00.710 --> 01:13:03.243 align:middle line:84% were already in the system, that it didn't unravel. 01:13:03.243 --> 01:13:04.910 align:middle line:84% In some sense, the mandate may have only 01:13:04.910 --> 01:13:06.827 align:middle line:84% been needed at the start to kick start things. 01:13:06.827 --> 01:13:09.830 align:middle line:84% Maybe it needed a long run, just enough to kick start things. 01:13:09.830 --> 01:13:10.930 align:middle line:90% But it did weaken it. 01:13:10.930 --> 01:13:13.950 align:middle line:84% Trump did a lot of other things, like basically allowing people 01:13:13.950 --> 01:13:16.490 align:middle line:84% to sell sham insurance plans and things like that, 01:13:16.490 --> 01:13:17.590 align:middle line:90% and weakened the law. 01:13:17.590 --> 01:13:19.690 align:middle line:84% Biden comes in, Biden strengthens the law. 01:13:19.690 --> 01:13:22.830 align:middle line:84% In particular, what Biden did was 01:13:22.830 --> 01:13:25.930 align:middle line:84% increase the generosity of the subsidies 01:13:25.930 --> 01:13:28.630 align:middle line:84% you get to buy health insurance on the exchanges. 01:13:28.630 --> 01:13:31.590 align:middle line:84% It used to be that you got subsidies 01:13:31.590 --> 01:13:35.780 align:middle line:84% up to 400% of poverty line, which is above average income. 01:13:35.780 --> 01:13:37.460 align:middle line:84% But there were still many, many people 01:13:37.460 --> 01:13:38.940 align:middle line:90% who couldn't afford insurance. 01:13:38.940 --> 01:13:40.738 align:middle line:84% Biden got rid of that limit and said, 01:13:40.738 --> 01:13:42.780 align:middle line:84% every American who buys insurance on the exchange 01:13:42.780 --> 01:13:45.017 align:middle line:84% get health insurance for 8% of their income or less. 01:13:45.017 --> 01:13:47.100 align:middle line:84% So a guarantee that no one has to pay more than 8% 01:13:47.100 --> 01:13:48.892 align:middle line:84% of their income for health insurance, which 01:13:48.892 --> 01:13:52.740 align:middle line:84% is incredible and amazing, but expires after next year. 01:13:52.740 --> 01:13:54.140 align:middle line:90% So it's not clear. 01:13:54.140 --> 01:13:56.375 align:middle line:84% The big question-- that's the number one question. 01:13:56.375 --> 01:13:58.500 align:middle line:84% Health care has not been a big topic in this debate 01:13:58.500 --> 01:13:59.740 align:middle line:84% because Trump has basically backed 01:13:59.740 --> 01:14:01.540 align:middle line:84% off saying he's going to repeal the ACA, 01:14:01.540 --> 01:14:02.820 align:middle line:84% and Harris doesn't really have a lot 01:14:02.820 --> 01:14:05.487 align:middle line:84% of great ideas for improving it, because it's doing pretty well. 01:14:05.487 --> 01:14:08.060 align:middle line:84% I think the big part of the debate is-- 01:14:08.060 --> 01:14:10.620 align:middle line:84% the big part of the debate on the ACA part 01:14:10.620 --> 01:14:12.780 align:middle line:84% is about extending these subsidies. 01:14:12.780 --> 01:14:14.248 align:middle line:90% The debate is instead-- 01:14:14.248 --> 01:14:16.040 align:middle line:84% and unfortunately, only a few minutes left. 01:14:16.040 --> 01:14:17.748 align:middle line:84% But those are great questions, thank you. 01:14:17.748 --> 01:14:19.720 align:middle line:84% The debate has instead turned its focus-- 01:14:19.720 --> 01:14:21.303 align:middle line:84% and this is where Harris is being more 01:14:21.303 --> 01:14:22.660 align:middle line:90% innovative-- to cost control. 01:14:22.660 --> 01:14:24.680 align:middle line:84% Now, the ACA did some things for cost control. 01:14:24.680 --> 01:14:25.680 align:middle line:84% I don't have time to go through them. 01:14:25.680 --> 01:14:27.180 align:middle line:84% You can read about them in the book. 01:14:27.180 --> 01:14:29.620 align:middle line:84% The ACA did some things for cost control, 01:14:29.620 --> 01:14:32.080 align:middle line:84% and it's unclear how big an effect they had. 01:14:32.080 --> 01:14:34.150 align:middle line:84% What is true is that starting in about 2010, 01:14:34.150 --> 01:14:36.317 align:middle line:84% health care costs in the US grew at the slowest rate 01:14:36.317 --> 01:14:37.050 align:middle line:90% they ever have. 01:14:37.050 --> 01:14:39.610 align:middle line:84% How much the ACA gets credit for that is unclear. 01:14:39.610 --> 01:14:41.690 align:middle line:84% We also had a recession and other things. 01:14:41.690 --> 01:14:43.517 align:middle line:90% But the ACA did some things. 01:14:43.517 --> 01:14:45.350 align:middle line:84% The question is, what else do we need to do? 01:14:45.350 --> 01:14:47.130 align:middle line:84% And that's really the focus now, is 01:14:47.130 --> 01:14:52.043 align:middle line:84% on things like price regulation, and on things like-- 01:14:52.043 --> 01:14:54.210 align:middle line:84% the big term in the ACA, which we've gone away from, 01:14:54.210 --> 01:14:55.810 align:middle line:90% is comparative effectiveness. 01:14:55.810 --> 01:14:57.633 align:middle line:84% Which is thinking about these QALYs, 01:14:57.633 --> 01:14:59.050 align:middle line:84% thinking about how do you actually 01:14:59.050 --> 01:15:03.757 align:middle line:84% decide whether health care spending is worth it or not. 01:15:03.757 --> 01:15:05.590 align:middle line:84% And once again, I want to come back to this. 01:15:05.590 --> 01:15:07.757 align:middle line:84% I want to conclude with this because the ethics here 01:15:07.757 --> 01:15:08.610 align:middle line:90% are really tricky. 01:15:08.610 --> 01:15:11.970 align:middle line:84% Let me talk about one of the tricky issues here. 01:15:11.970 --> 01:15:15.330 align:middle line:84% QALYs say that a year of life is worth less if you're 01:15:15.330 --> 01:15:17.170 align:middle line:90% disabled than if you're not. 01:15:17.170 --> 01:15:20.970 align:middle line:90% So take two treatments. 01:15:20.970 --> 01:15:23.930 align:middle line:84% One fixes you, except you remain in a wheelchair. 01:15:23.930 --> 01:15:26.730 align:middle line:84% One fixes you and you're mobile, no wheelchair. 01:15:26.730 --> 01:15:30.360 align:middle line:84% The QALY metric would say that the second treatment is worth 01:15:30.360 --> 01:15:31.400 align:middle line:90% more. 01:15:31.400 --> 01:15:34.138 align:middle line:84% Disability advocates say that's discriminatory, 01:15:34.138 --> 01:15:35.680 align:middle line:84% because you're basically saying lives 01:15:35.680 --> 01:15:38.138 align:middle line:84% of people outside wheelchairs are worth more than the lives 01:15:38.138 --> 01:15:39.240 align:middle line:90% of people in wheelchairs. 01:15:39.240 --> 01:15:41.960 align:middle line:90% Which is true, you are. 01:15:41.960 --> 01:15:44.640 align:middle line:84% And in some sense, if we stop to think about it, 01:15:44.640 --> 01:15:46.140 align:middle line:84% it's like, wow, they've got a point. 01:15:46.140 --> 01:15:46.920 align:middle line:90% We're saying that. 01:15:46.920 --> 01:15:48.260 align:middle line:90% It's not clear we shouldn't. 01:15:48.260 --> 01:15:52.920 align:middle line:84% I mean, probably, I would guess the vast, vast majority 01:15:52.920 --> 01:15:55.586 align:middle line:84% of people would be happier without being restricted 01:15:55.586 --> 01:15:57.280 align:middle line:84% to a wheelchair than in a wheelchair. 01:15:57.280 --> 01:15:59.568 align:middle line:84% But it is true it relates to a statement 01:15:59.568 --> 01:16:01.360 align:middle line:84% that a life year of someone in a wheelchair 01:16:01.360 --> 01:16:03.600 align:middle line:84% is worth less than a life year of someone 01:16:03.600 --> 01:16:06.412 align:middle line:84% not in a wheelchair, which feels a little morally squishy. 01:16:06.412 --> 01:16:09.120 align:middle line:84% So these are the kind of really, really difficult and interesting 01:16:09.120 --> 01:16:12.800 align:middle line:84% issues that economists have not worked nearly enough on, 01:16:12.800 --> 01:16:15.240 align:middle line:84% which is, how do we think about-- 01:16:15.240 --> 01:16:18.080 align:middle line:84% as we get to-- and this can become increasingly important. 01:16:18.080 --> 01:16:21.080 align:middle line:84% Because there's this huge wave of this incredibly innovative 01:16:21.080 --> 01:16:23.600 align:middle line:84% and incredibly expensive new drugs and treatments 01:16:23.600 --> 01:16:24.680 align:middle line:90% coming along. 01:16:24.680 --> 01:16:27.320 align:middle line:84% We're going to have to tackle this issue 01:16:27.320 --> 01:16:29.600 align:middle line:84% or we'll be bankrupt as a country. 01:16:29.600 --> 01:16:31.350 align:middle line:84% I wrote an editorial in the New York Times 01:16:31.350 --> 01:16:33.590 align:middle line:84% saying that if everyone in America 01:16:33.590 --> 01:16:35.530 align:middle line:84% got Ozempic who could benefit from it, 01:16:35.530 --> 01:16:38.953 align:middle line:84% it would cost the US government $1 trillion. 01:16:38.953 --> 01:16:40.870 align:middle line:84% We're going to have to deal with these issues. 01:16:40.870 --> 01:16:42.662 align:middle line:84% We're going to have to say, how much are we 01:16:42.662 --> 01:16:44.418 align:middle line:90% willing to pay for health? 01:16:44.418 --> 01:16:46.210 align:middle line:84% How much are you willing to pay for health? 01:16:46.210 --> 01:16:48.470 align:middle line:84% You have to deal with ethical issues of what is a healthy life 01:16:48.470 --> 01:16:49.130 align:middle line:90% worth? 01:16:49.130 --> 01:16:50.310 align:middle line:84% And how do we think about things that 01:16:50.310 --> 01:16:52.227 align:middle line:84% extend life versus things that don't, and life 01:16:52.227 --> 01:16:54.030 align:middle line:90% in different circumstances? 01:16:54.030 --> 01:16:58.190 align:middle line:84% So this kind of ethical stuff is not a strength 01:16:58.190 --> 01:17:00.310 align:middle line:90% of the MIT curriculum, I think. 01:17:00.310 --> 01:17:03.890 align:middle line:84% But this is something which is really, really, 01:17:03.890 --> 01:17:05.950 align:middle line:84% really important to be thinking about, 01:17:05.950 --> 01:17:08.283 align:middle line:84% and important to be thinking about as you go out and are 01:17:08.283 --> 01:17:09.867 align:middle line:84% creating this new science and creating 01:17:09.867 --> 01:17:11.710 align:middle line:84% these new, incredible things, to be thinking 01:17:11.710 --> 01:17:13.430 align:middle line:84% about the ethical issues that they raise, 01:17:13.430 --> 01:17:15.990 align:middle line:84% and how we think about ultimately paying for them. 01:17:15.990 --> 01:17:16.810 align:middle line:90% All right? 01:17:16.810 --> 01:17:17.810 align:middle line:90% I'm going to stop there. 01:17:17.810 --> 01:17:19.727 align:middle line:84% I wish we had more time, but we will come back 01:17:19.727 --> 01:17:23.660 align:middle line:90% and start chapter 17 on Monday. 01:17:23.660 --> 01:17:28.000 align:middle line:90%