Is Jon Gruber a Hired Gun?

On January 8, 2010, Jon Walker of FireDogLake.com pointed out that Ronald Brownstein’s November 21, 2009 article in The Atlantic suggests that MIT Professor Jon Gruber has made some strange statements about the ObamaCare legislation. Given Professor Gruber’s important contributions to the health care policy literature, his words should be considered carefully. Briefly, the article quotes Professor Gruber as saying that it is

“really hard to figure out how to bend the cost curve, but I can’t think of a thing to try that they didn’t try. They really make the best effort anyone has ever made. Everything is in here…I can’t think of anything I’d do that they are not doing in the bill. You couldn’t have done better than they are doing.”

This claim, of course, is nonsense.

As all economists know, it is quite simple to bend the cost curve provided one bends it upwards. Load taxes and regulations onto an already over-regulated industry and costs increase. The microeconomic evidence from the 1970s deregulations of railroads, pipelines, and airlines, suggests that a reasonable estimate of the upward cost curve bending by the thickets of regulation venerated by central planners is in the neighborhood of 30 to 40 percent.

Both the Massachusetts plan and the Senate and House bills embrace central planning and add more taxes to an arguably already over taxed and over regulated industry.

It may be that Professor Gruber’s remarks are only an effort to keep his customers happy. He was a big supporter of the Massachusetts health plan and is now a member of the Board of the Massachusetts Commonwealth Health Insurance Connector Authority, the model for all of the health insurance exchanges that will be imposed on Americans under the ObamaCare legislation. FireDogLake.com reports that he also had a number of contracts with the Federal government in 2009.

One was a sole source contract from the Department of Health and Human Services (HHS) to use his “proprietary statistically sophisticated micro simulation model” with “the flexibility to ascertain the distribution of changes in health care spending and public and private sector health care costs due to a large variety of changes in health insurance benefit design, public program eligibility criteria, and tax policy.”

In a country with literally thousands of businesses that live and die on their understanding of how changes in health care benefit design affect the cost of enrollment in health insurance, HHS was apparently unable to unearth any other person who was a “recognized expert in health policy and economics with special expertise on the effects of changes in health benefit design on the cost of enrollment in health insurance,” who had “a proven micro-simulation model,” and possessed “the ability to seamlessly and immediately begin working with ASPE (the Assistant Secretary for Planning and Evaluation) and the Office of Health Reform.

Professor Michael Mann’s now discredited hockey stick model provides a recent case study on the dangers of relying solely on academics with “proprietary statistically sophisticated” models in policy formation.

After painstaking examination, other researchers found that the proprietary process used by Mann produced results that were invalidated by inaccurate data descriptions, data compilation errors, data handling mistakes, and questionable statistical techniques. These were missed by the author in his proprietary development process.

Even though Professor Mann’s model produced inaccurate results and created a mistaken impression of global temperature history, it rapidly became the standard against which environmental policies were measured.

Mr. Walker lists several cost control measures not included in the ObamaCare legislation. Most of them are favored only by the left. They include single payer health care, drug reimportation, direct Medicare pharmaceutical price negotiation, a robust public option, a centralized reimbursement negotiator, single standardized insurance packages, turning all insurance companies into non-profits, eliminating direct-to-consumer drug advertising, and creating a faster pathways [sic] for biosimilars.

Mr. Walker’s laudable advocacy for faster pathways assumes, of course, that there are drug companies left to create the biosimilars after the government starts setting prices, confiscating the property of insurance company stockholders, and telling everyone what kind of health care he can purchase via his single standardized government run policy.

A longer story on the part Professor Gruber and his work played in the political process has been posted on Huffington Post by Jane Hamsher, the Founder of FireDogLake.com.

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