Architect of Obamacare: Health Care Is Still a Mess

0:01Late night bites with friends already hard to beat. That first too hot bite of fries you couldn't wait for, followed by ice cold Pepsi. Now that hits different. Suddenly, the energy kicks back in. The night goes longer and the laughs don't stop because Pepsi brings out more flavor, more fun and more of the moment. Food deserves Pepsi. Grab a Pepsi Zero Sugar today. Logging off. Rebuilding our attention spans. Trading in smartphones for dumb phones. Why are people trying to get off their screens? And what are they really after? I'm Natalie Brennan, a producer at The Atlantic. And I'm Julie Beck, a staff writer at The Atlantic.

0:41This season, we're exploring the often fraught, always changing relationship people have with technology. And examining the ways our devices affect our connection with one another. New episodes of How to Touch Grass come out every Monday. Subscribe wherever you get your podcasts.

1:08Hello, and welcome to The David Frum Show. I'm David Frum, a staff writer at The Atlantic. My guest today will be Jonathan Gruber, professor of healthcare policy at the Massachusetts Institute of Technology and one of the principal architects of the Affordable Care Act, Obamacare. In the final segment of the show, I will discuss the book, They Thought They Were Free by Milton Mayer, a 1955 study of a small German community where people had to come to terms with the terrible things that were done by them, by their neighbors, and by their government during the Third Reich. It's a book full of historical interest, but also with implications for any society trying to come to terms with its past to build a better and more honorable future.

1:49Before the dialogue and before the book discussion of the week, some preliminary thoughts. In November, the United States adopted as its own a diplomatic document that imposed Russian terms on the independent country of Ukraine. Document imposed terms of territorial surrender, compromise of Ukrainian sovereignty, limits on the Ukrainian armed forces. All of them Russian wish lists in return for nothing more from Russia than a temporary cessation of violence against Ukraine. It was a shocking surrender document. And the question that bothered a lot of people is as bad as the Trump administration has been on Ukraine, as far as they've gone toward the Russian point of view, nothing like this, this is beyond anything ever seen before.

2:31How could it have happened? Well, on November 28th, the Wall Street Journal produced a report that explained how it could have happened. It turns out that at the same time as the Trump team was negotiating with the Russians over Ukrainian surrender, connected insiders were working with their Russian counterparts on a series of business deals who enriched themselves after the end of conflict, but with deals on energy, rare earth, highly favorable, and highly favorable terms to the Americans. The Russians, it looks very much like, were simply paying Trump insiders to gain clout, to put pressure on Ukraine to surrender to Russian terms.

3:04Now, this story, highly detailed, would have been one of the most shocking stories of the Trump administration so far if it hadn't been juxtaposed by another terrible story that very same day, where President Trump announced his intention to pardon the former president of Honduras, Juan Orlando Hernandez, convicted as one of the biggest cocaine dealers in American history, sending tons of cocaine into the United States, arranging for bribes and murders, and convicted and sentenced to 45 years in an American prison. And Trump announced his intention to pardon this tremendously sinister drug figure.

3:40at the same time as he's sending little boats to the bottom of the Caribbean with their small-scale drug dealers still aboard. Some of them apparently or reportedly killed in cold blood. How does this make sense? Well, Hernandez is, of course, wired and connected to all kinds of people. He had influential friends. And it's just one of a pattern of strange commutations and pardons from the Trump administration. Here's another. President Trump commuted the sentence of David Gentile, a private equity guy convicted of defrauding hundreds of investors of a more than a billion dollars. The cavalcade, the onslaught of corruption stories just never stops.

4:16It seems like there's one a week. Some of them are so familiar that we've stopped even mentioning them. Like in October, the Senate voted down, the Republican majority in the Senate voted down a Democratic proposal not to finance the Qatari jet. Remember that? That the Pentagon accepted on Trump's behalf and that the taxpayer is now spending hundreds of millions of dollars to outfit for Trump and that, according to the terms of the gift, are to be taken with Donald Trump to his so-called presidential library, but for his use after he ceases to be president. That is no longer a big story, but it still continues.

4:48We continue to remark the novelty news of the glitzy, crazy White House ballroom, now enlarged to hold 1 ,350 people. There are all kinds of problems with the asbestos and the wiring and the windows, and it's financed by hundreds of millions, hundreds of millions of dollars in gifts from corporations with interest before the Trump administration. It's just one thing after another like this. You know, the first Trump administration was beset by many, many scandals. But there was still, despite the scandals or along with the scandals, an administration there. There was some sense of policy, some things they wanted to do.

5:21This administration seems like a series of scandals masquerading as an administration. Even the seeming policies, like the tariff policy, turn out to be mechanisms and vehicles for scandal politics. The value of a tariff is not that it's going to do anything for American industry. Industrial employment, manufacturing employment is trending down under Donald Trump. But it is a thing that you can do to an industry, you can afflict upon an industry that some industries will pay you to have relief from. And it's precisely this ability to buy and sell relief from tariffs that makes the tariff policy so extraordinarily interesting to the Trump administration.

5:59When this all ends, and I am confident it will end and that the end is coming and maybe pretty soon, we're going to need more than to treat this episode as a chapter in American history. The bygones will be bygones approach taken by the Biden administration seems not adequate to the needs of the moment, seems not adequate to what has happened and been done in this first year of Trump. There's going to need to be a serious investigation to get to the bottom of things. There's going to need to be serious publicity. There's going to need to be accountability and consequences to the limits of the law.

6:31And where the law does not provide for consequences, where Trump and the people around him have invented some new way of being corrupt that no one ever wrote a law to prohibit, as no one ever imagined a president would do such a terrible thing, well, then we're going to need some new laws, some serious reforms, things that were generally not done during the Biden years, but that need to be done now. It's not just a chapter of history. It's a warning to the future. It's a challenge to Americans to do better, to make sure that such things never happen again. And while we can't restore the lives of those who were wrongfully killed by the Trump administration in the Caribbean Sea, we can ensure that the kind of disregard for law that enabled those killings, that that at least comes to an end.

7:12That's at least the hope. That's at least the conviction. Maybe that's a promise we need to make to ourselves. And now my dialogue with Jonathan Gruber. But first, a quick break.

7:31The Perfect Lunch Combo. That first bite of your favorite sub, followed by ice-cold Pepsi. Add a couple of friends, and now that's next level. Suddenly, the laughs get louder, the stories keep flowing, and the food tastes better. Because Pepsi brings out more flavor, more fun, and more of the moment. Food deserves Pepsi. Grab a Pepsi Zero Sugar today. Logging off. Rebuilding our attention spans. Trading in smartphones for dumb phones. Why are people trying to get off their screens? And what are they really after? I'm Natalie Brennan, a producer at The Atlantic. And I'm Julie Beck, a staff writer at The Atlantic.

8:09This season, we're exploring the often fraught, always changing relationship people have with technology. And examining the ways our devices affect our connection with one another. New episodes of How to Touch Grass come out every Monday. Subscribe wherever you get your podcasts.

8:52Glenn Beck's program on Fox News, or listen to Rush Limbaugh on the radio, Jonathan Gruber ranked with Hitler and Stalin among history's greatest monsters. I don't mean that as a figure of speech either. On a November 2013 program, Limbaugh literally accused Gruber of believing in eugenics of the kind that directly led to the Holocaust. Gruber's offense was his leading role in the design of the Affordable Care Act, nicknamed Obamacare. A professor at the Massachusetts Institute of Technology, Gruber is a career scholar of the American healthcare system. The fight over the Affordable Care Act has not ended.

9:25In fact, the longest shutdown in government history was just fought over the issue of subsidies to the Affordable Care Act program. But while the fight has continued, the issues behind the program has never really been resolved. The Trump administration, meanwhile, is advancing a health agenda of its own that rejects vaccines and even such basic science as the germ theory of disease. So I thought it might be a good moment to reconnect with Jonathan Gruber about the future of the American healthcare system, the opportunities, the hopes, and the fears. Professor Gruber, thanks for joining the program today.

9:57My pleasure. Good to be here, David. So let's do a little tour of the horizon of how things stand in American healthcare. The American healthcare system is unbelievably expensive. According to the Kaiser Family Foundation, healthcare spending of all kinds, public and private, will add up soon to about$5 trillion annually. To put that in context, that's a little less than the GDP of Germany, the world's third largest economy, and larger than the GDP of Japan, the world's fourth largest economy. For this$5 trillion, the outcomes are not great. The United States is one of the very few highly developed countries with an average life expectancy below 80, slightly higher than 80 for women, but well below 80 for men.

10:38And child mortality numbers are not so great. Meanwhile, it's still true that about 8 % of the population is uninsured. So how should we understand all of this? Where are we going? How satisfied or dissatisfied should Americans be with what they get for their money? Well, David, that's a big question. So let me try to break it down to a few parts. Let's start with what I think is the most important, which is sort of value for our dollar. It's useful to put this in terms of GDP. The dollars can be confusing. So we spent about 18 percent of GDP on health care. In 1950, we spent four percent of GDP on health care.

11:13Guess what? Health care sucked in 1950. OK, infants were four times as likely to die before the first birthday. Those who had a heart attack were four times likely to die in the first year afterwards. Health care has gotten a lot better and a lot more expensive. It's important to put in context the facts you have about life expectancy and things. David, for people like you and I, the life expectancy in the U.S. is as good as anywhere else in the world. The difference in the U.S. to the rest of the world is our disparities. A white baby born in the U.S. today has the same infant mortality rate as one born in Scandinavia.

11:47A black baby born in the U.S. today has a worse infant mortality rate than one born in Barbados. So the issue in the U.S. is there are the haves and the have-nots. The haves get comparable health care to the rest of the world at a much higher price. The have-nots get worse health care at a much higher price. So there's really two fundamental challenges in U.S. health care. There's disparities and there's costs. Are the disparities health care problems or are they connected to things that are much bigger than the health care system? I mean, I sometimes wonder if the healthcare wishing well gave you a magic wish and you could have any healthcare innovation at all, or you could simply say 100 % rate of wearing helmets among motorcycle drivers, which would make the bigger impact.

12:33I think you're absolutely right, David. It's embarrassing and health economists are a little humbling to think that really healthcare is third in our list of things that determine our health. First and second are our genes and our behaviors. Healthcare is third. that doesn't mean healthcare can't play a huge role. That, for example, the estimates are that the expansions of Medicaid under the Affordable Care Act save tens of thousands of lives. Healthcare can play a big role. It's just not the biggest role. So those disparities that we talked about, they're more driven by socioeconomic conditions and by other differences.

13:07But healthcare disparities play a large role in adding to that gap. And when you say a healthcare disparity, what does that mean practically? If you're poor and black, if you're non-poor and non-black, what do you encounter that's different? That's a great question. Here's how to think about it, which is, first of all, you're much more likely to be uninsured. What does being uninsured mean? It doesn't mean that if you get hit by the car, you won't go to the hospital. America has a law called the EMTALA law, which says every hospital emergency room has to treat you regardless of your health insurance coverage.

13:42What it does mean is you won't get preventive care. You won't get maintenance for your chronic diseases. You won't get the things that besides accidents are crucial determinants of health. And that is the major disparity. There's other disparities in terms of access to health care providers, which are also important. But the fundamental disparity is people who are uninsured don't get the care they need to maintain their health. Americans don't like comparing their way of doing things to anybody else. And when they do compare, the comparison they typically will most often make is to my native Canada, which partly because it's next door and speaks English, and partly because it's a system as different from the United States just about as there is in the developed world.

14:27So you get a very extreme compare and contrast, very different from what you would do if you compared it to, say, Switzerland or Germany. But how do other countries approach these things? What do they do right that Americans could learn from if Americans were ever minded to learn from anybody? I think fundamentally they do two different things. And this comes to really debate over single payer. Let's step back and talk about Bernie and single payer. OK, what is single payer health care? It really is three different pieces. The first piece, the one we talk about the most and that's the least important, is having one single payer.

14:58The second piece is universal coverage. That's something other countries do right. right. Most countries in the world do right. And that's something we should do. The third piece, which we don't talk about nearly enough, is regulating healthcare prices. We're the only developed country in the world which lets the free market determine the prices we pay for healthcare. Healthcare is a broken market. The free market should not be determining the prices. There should be government regulation to help determine the prices. Every other country in the world has learned that lesson. We have not. Well, it's not quite a free market because the whole structure of the market, you know, those little codes that we all get when we get a doctor's bill, you see that you've got this set of codes for each step of the process.

15:39Those are decreed by the Medicare system. And since most of the doctoring that is done in this country is done for Medicare patients, doctors don't maintain two separate ways of doing business, one for Medicare and one for everybody else. The Medicare system drives it. And Medicare sets prices and not only sets prices, but sets ways of charging that create the market that we create is an artifact of the way government regulates the market. So let's remind the listeners, Medicare is universal coverage for those over 65 in America. It's also the name of the universal coverage plan in Canada. So it can be a confusing term.

16:12Medicare is a regulated program that applies to a large share of health care spending in the U.S., but it does not apply to the majority of health care spending in the U.S. The code you're referring to, those are medical codes not determined by Medicare. Those are ICD-9 codes and procedure codes that are not regulated by Medicare. Medicare does dictate what we pay for those on Medicare, and often it can drive what the private sector pays. But the key thing is if you look at what we pay for drugs, what we pay for medical devices, what we pay doctors and hospitals outside the Medicare program, there is no regulatory mechanism that drives the vast majority of the spending in the U.S.

16:52today. So what do you make of the claim that you sometimes hear that one of the reasons that American health care costs so much more than health care in Switzerland or Germany or Norway is that everybody in the American health care system, except for the people at the very bottom, like the health care attendants at the very bottom, but everyone else from the executives, doctors, even the nurses are all paid much more than their counterparts in other countries. That's not quite right. So let's work from the bottom up. The very bottom, I recently wrote a book, David, that compares long-term care in the U.S.

17:23to other countries. What you see at the very bottom, the healthcare aides, they're paid about half as well as they are in other countries. Our nurses are paid about as well as they are in other countries. Our primary care doctors are paid about as well as they are in other countries. It's our specialists, our executives, and in particular, the vast array of healthcare middlemen that we have that are only paid more but don't exist in other countries. That's a big driver of the costs. And when you say a middleman, what does that middleman do? Great. So let's talk about how we price drugs in the U.S.

17:56versus other countries. In other countries, there's a regulatory body which says the drug shall cost as much. So everybody buys the drug at that price. In the U.S., there's a negotiation between every single payer and every single drug company. That negotiation is complicated. So we've introduced a middleman called the pharmacy benefit manager, a PBM, that helps with that negotiation. There's an ongoing debate to which we don't know the answer of whether PBMs lower or raise costs for consumers. We do know the PBMs themselves earn billions and billions of dollars. They just wouldn't exist if we regulated the prices.

18:30We wouldn't have a need for this middleman. Maybe what we're seeing here is the triumph of American lobbying. It's not that America is worse at health care than other countries. It's just much, much better at lobbying than other countries. I think what we're seeing here is the triumph of what we're seeing here is America not learning the lesson that was determined in 1963, the very first article on health economics by the Nobel Prize winning economist Kenneth Arrow talked about how you could not have a more broken market than healthcare. What I teach my students in introductory microeconomics, David, is that the market works, government should stay out.

19:01But when the market doesn't work, government needs to be in. And the rest of the world's on that lesson we haven't. Now, the problem is, having done that, we've now set up a class of groups that lobby and have power so it's hard to get rid of them. And that is the fundamental challenge going forward as we think about controlling healthcare costs. In the days before the big right of center argument about healthcare became that we don't need vaccines or that vaccines are bad, the four times, the main right of center argument about healthcare was that if you made the consumer feel costs more, the consumer would make better choices and that would result in important economies to the system.

19:39What do you think of that argument? Any merit to it? There is merit to it, absolutely. I think that there's a lot of evidence. Think about two ways you can make people feel cost. One way is how much care they use. The other is where they go for that care. Both, do they go to the doctor more than they need to and also do they choose the cheapest doctors? Along both those dimensions, there is some evidence that putting consumer skin in the game matters, but it is not a prime driver of costs. So it is absolutely right that a proper system should have consumer skin in the game, particularly for what we call low value care, things like back surgeries, things like knee replacements.

20:18These are things which consumers need, but which can be delivered. It's not low value, but things which can be delivered at equally good at lower cost options and where consumers often spend more than they have to. So there is a room for consumer skin in the game. But it's not, but where the right is wrong is it's not, where the right is incorrect is it's not the primary driver of spending. Most spending is not places that are consumer price sensitive. The journalist and publisher Stephen Brill had a project some years ago where he tried to find out what did things cost in the United States? How much did a knee replacement cost at different hospitals?

20:54And he published a big article, I believe in Time Magazine, comparing and contrasting these costs. And then he wanted to have some kind of long-term project, which I think he gave up just because it was too difficult to find out the answers of what things cost, where, why. When you talk about a knee replacement, how does the consumer know the knee replacement will cost so much at one hospital and a different price at another hospital? This is why it is the consumer shopping is not the answer. It's not, there's a role for consumers getting the game. I agree, but it's not going to solve our problems because it's hard to shop when you don't know the prices.

21:25Once again, in a regulated system, the prices would all be public and we'd know them. The problem is the price you pay, there's great work by Zach Cooper at Yale, Marty Gaynor at Carnegie Mellon and others showing that even within a market, even in Boston, the price of a knee replacement varies widely across hospitals in unknown ways. And we need to address that before we're ever going to have a consistent role of consumer shopping as an important determinant of our healthcare system. You said early on that our genes and our behaviors are more important than our healthcare or as important in determining what our outcomes are.

22:01There's not a lot we can do about our genes once we're already born, but our behaviors are variable. And at different moments, the United States has tried to bring home to consumers the cost of behaviors. It was successfully able to impose taxes on cigarettes, for example. It's been less successful at imposing taxes on alcohol. There's been a complete breakdown in the attempt to control drugs, a very contentious issue, sugars, and we control driving behaviors by a random system of tickets for speeding and sometimes not wearing seat belts, sometimes not wearing motorcycle helmets. I think in many states, I'm going to forget the figures on how many of the states, but a considerable number of the states' helmets are not required of motorcycle drivers.

22:44So how do we bring those costs home to anybody in a way that makes the consumer the center of the story? it's uh it's a great question we can look to the success of of smoking uh remember we've known smoking is bad for you since 1954 it was scientifically clear 1954 but smoking rates were rising in the u.s until about the mid-1980s so it took 30 years to even get reversal on that what caused it was just a concerted campaign that brought home the costs not just to the smoker but to society uh the cost of excess medical care the cost of fire started by smokers the cost of all what the smokers are imposing on society.

23:22We need a campaign. In particular, we have a crisis of overuse of alcohol in this country. We need a campaign to recognize the enormous cost imposed. But let's be clear, David, this is hard. With smoking, it's kind of easy, which is every cigarette's bad for you. Drinking's harder because the first few drinks aren't bad for you. We used to think they're good for you. Now we know they're not. But they certainly aren't bad for you. It's only when you drink a lot or get behind the wheel, it's bad for you. If you take sugars, sugars aren't bad for you except in excess. So it becomes a much more challenging public health issue, which we're going to need to figure out how to develop a consensus on how we address those external costs.