J. Gruber on rationing and national health insurance
America’s Health Insurance Plans
2006 National Policy Forum
3/7/2006
Prospects and Implications of Tax Policy for the Health Care Industry Jonathan Gruber, Ph.D., professor of economics, Massachusetts Institute of Technology; co-editor, Journal of Health Economics; and associate editor, Journal of Public Economics
Carlton Dennis: Just a follow-up question, a different question on rationing. You mentioned that, and earlier speakers talked about universal health care. What’s your view on that? I know at the end of your talk you mentioned that we probably would have to go to some type of rationing.
Jonathan Gruber, Ph.D.: There are two questions there. Let me start with the second one, which is: do we need to do rationing? I don’t actually believe we do. Basically, I think what health economists have really concluded is two things which at first seem contradictory but in fact aren’t, which is: first of all - and this conclusion is most associated with the work of my colleague David Cutler at Harvard - first of all, over time, our health care dollars have been effective spent on average. That is, no one wants to have 1950s health care at 1950s prices. The health care we’re buying today is much better than it used to be. And if you use typical values of quality of life years and things like that, on net, we’re better off now than we were, even though we’re spending more. At the same time, I could, today, look back and say, “Of the 15 percent of GDP we spend on health care, I bet we could knock five percent of it out and people would be no less healthy.”
Now, how are those two things consistent? They’re consistent because it’s easy to look backwards. It’s hard to look forward. So it’s consistent because looking backwards, we can say, “Gee, a lot of this stuff we do is wasteful. Let’s get rid of it.” But we don’t know, of the new innovations, which are going to be wasteful and which aren’t. Rationing, putting a cap on, is just as likely to cut out the positive innovations as it is the negative innovations. And that’s the problem. In other words, if we rationed in 1950 and said, “Health care should not be more than five percent of GDP,” we would be much worse off as a country today. Likewise, if we today said, “Health care should not be more than 15 percent of GDP,” I predict we’d be much worse off as a country in 2100. I think we need to find another solution, other ways to try to get at this than rationing because I think rationing is just too blunt an instrument, given the overall positive advances.
Now, that said, universal national health insurance, there are two components to that. One is universal coverage. Universal coverage can be done making all of you happy. You can have universal coverage for the private health insurance industry. That’s what we’re proposing in Massachusetts. There would be a central pool through which private insurers would offer policies. But, we would mandate that everyone in the state be covered. Okay? So that’s universal coverage with the private insurance sector.
National health insurance means wiping you all out. I just personally don’t see that as even worth discussing, for political reasons. As well, I think there are some real economic arguments. At least I think there are economic cases to be made on either side. But the truth is, I just don’t think, politically, we’re just ever going to be in a place where we can seriously consider national health insurance, Canadian-style health insurance. I just don’t think it’s worth our brain cells worrying about it.
Dan Leonard: Thank you for that, by the way.
Jonathan Gruber, Ph.D.: Well, I’ve made enough enemies today.
Dan Leonard: Yeah, right.
Jonathan Gruber, Ph.D.: I figured I’d make a few friends. [Laughter]
Dan Leonard: Redeeming yourself.
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030706_ahip_taxpolicy_transcript.pdf
Comment: By Don McCanne, M.D.
On rationing:
In yesterday’s Quote of the Day, Marmor and Mashaw stated, “…social insurance programs have been and can be adjusted over time to meet fiscal, demographic, and technological challenges. They are not dinosaurs from another age, but evolving programs whose core principles can be expressed through a number of adaptations.”
Gruber stated, “I think we need to find another solution, other ways to try to get at this than rationing because I think rationing is just too blunt an instrument, given the overall positive advances.”
In the single payer model, the global budget for health care is adjusted for inflation, demographic changes, and the introduction of reasonable, beneficial technological innovations. One of the more important reasons that we want to continue to support technological innovation is that new technology theoretically promises higher quality at a lower cost, often replacing out-dated and more expensive technology. A major problem is that some of the technology is new, and, instead of replacing old technology, it expands the range of diagnostic and therapeutic possibilities.
This is precisely why we need a monopsonistic, single-payer purchaser of health care. We would be in a position to demand value for new technology. If it increases the health care budget, then we would want to be certain that it is worth the increased spending. Another reason is that a monopsonistic purchaser would be in a position to finally address the “Wennberg variations,” by reducing allocations for non-beneficial excesses in technological services that have been well documented.
In framing the debate on reform, we should walk away from arguments over the “blunt instrument of rationing,” and begin to discuss how we can better spend our health care dollars.
On the politics of national health insurance:
Professor Gruber was certainly an audience pleaser at this national meeting of the private insurance industry. He reassured them that they will continue to thrive, using the stale political-feasibility argument. He may be protecting the insurers’ brain cells by telling them not to worry about it, but we can assure them that they have plenty to worry about. The Quote of the Day two days ago on medical-loss ratios led to this conclusion: “You would think that anyone with a modicum of business sense would believe that keeping (the private insurance industry) in charge is no longer feasible.”
For those interested, previous Quote of the Day messages are posted at http://www.pnhp.org/news/quote_of_the_day.php