Economics Research Paper! "This is only for Quality", the best writer.

Gruber and Goodman –

Dichotomies in Health

Care Economic

Ideologies

2017

DAVID WAGNER - AUTHOR

ECON 6370 – COMPARATIVE PAPER ASSIGNMENT - DR. NEIL MEREDITH

David Wagner ECON 6370 Dr. Meredith

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INTRODUCTION – Book Summaries

Currently a debate rages over the best manner to implement, manage, finance and

distribute healthcare services in the United States. European countries have already grappled

with this question some time ago with many solid working examples that are fully operational to

date. Many of these systems are examples of “socialized medicine” meaning that the state is

responsible for administrating the healthcare apparatus in their respective nations in the holistic

sense (Du & Lu, 2017). In today’s current health care climate in the U.S., pundits on both sides

of the debate (universal or single payer vs. free market) are striving to put their respective views

forward as the “cure all’ of what ails our current healthcare system (NPR, 2017). In the midst of

the very polarized health care debate, two distinct figures surface to offer their published views

on how to remedy the seemingly broken current system; Jonathan Gruber, who generally

espouses a Keynesian, government centric approach to the health care system, is a MIT

economics professor known for being the chief architect of the Patient Protection Affordable

Care Act (a.k.a. PPACA, ACA or “Obamacare”) and John C. Goodman, who is a supply side

champion of physician and patient centered health care and endorses a free market approach to

health care.

Gruber’s book, “Health care reform: what it is, why it's necessary, how it works “ ,

espouses a government centric approach or quasi-socialized medicine. The reason it is “quasi-

socialized” is because his solution incorporates a piecemeal working together of the existing

health care system architecture. The ACA is not truly the socialized ideal in terms of its

implementation and the fact that much of pre-ACA health care remains in place and is utilized in

the management and distribution health care services. Gruber utilizes a “graphic novel” to

explain the complexities of ACA in simplistic terms in an effort to reach out to a broader public

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audience. Gruber’s book uses the parallel stories of the four characters who each have a heart

attack and other traumas to illustrate how each fare under their pre-ACA respective facets of the

health care system. Betty, who has Medicare, pays out comparatively little for her out of pocket

costs. Carlos, who is in the individual/small group market, gets slammed with a $2500 out of

pocket bill and finds out that his insurer is either going to raise his premium or deny him

coverage altogether. Anthony, who has a large company group insurance, certainly fares better

than Carlos but finds himself in a similar bind as Carlos when he loses his job. Dinah, who has

no coverage at all, finds herself in a fight to stay solvent. Amid the parallel stories of the four

scenario characters, the main character, John Gruber himself as the narrator, goes on to explain

the fate of the four characters to exemplify the pre-ACA state of uneven care offered to various

groups. John Gruber, in the book, narrates and describes the state of pre-ACA health care as a

two-headed monster of rising costs and the rising number of under and uninsured people. Gruber

explains that the ACA act is the optimal solution to all of what ails the U.S. healthcare system by

eliminating refusal of coverage for those with pre-existing conditions. He further asserts that

alone would not curb rising costs for coverage and that healthy people need to enter risk pool to

help defray and spread these rising costs. This is known as the individual mandate. Gruber, via

his character, makes him out to be the cheerleader-in-chief for ACA and he uses illustrations of

Dracula, Frankenstein and assorted boogey-men to characterize the opponents of ACA. All in all,

he brings explanations of complex health care issues in an easier to understand format but one

cannot ignore the propagandistic nature of the book. One also should remember that the book

was published before the ACA was enacted (Gruber, 2009).

John Goodman wrote his book, “Priceless: Curing the Health Care Crisis”, in 2012 after

the ACA became law but just before the Supreme Court made a ruling on the individual

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mandate. Goodman’s book is somewhat leveraged on a previous publication, “Patient Power”

where advocates consumer choice in a free market health care economy and the use of Health

Savings Accounts or HSAs. Goodman is deemed the “father” of the HSA (Ferrera, 2012). The

book was written partially as a response to the government centric ideas espoused by the ACA

and partially to critique much of the existing framework that was left in place after the enactment

of the ACA. Goodman begins by describing what he deems the perverse incentives within health

care system itself. He points to payments by 3rd party insurers as one of the main reasons

because they insulate patients from the actual costs and dissuade innovation by providers who

are more focused on gaming the 3rd party insurer than creating ways to lower costs or improve

quality. Goodman’s book examines a variety of topics that include quality and access issues with

the health care systems; the dysfunction of Obamacare; malpractice insurance reform as well as

reforms for Medicare and Medicaid. Goodman refers to the current system being rife with moral

hazard on the premise that the consumers and providers are cut out the free market dynamic by a

middle man. Goodman maintains in his book that if patients paid directly for services they would

be more inclined to shop around for the best price and service. Providers would likewise be

incented to compete in more free market health care system. Ultimately, Goodman’s book

advocates health care behaving as any other good or service in a competitive free market

economy with consumers making a free choice in a free market and providers competing to

supply what consumers want and need (Goodman, 2012).

Analysis and Critique of the Respective Writers

Regarding Gruber’s work, “Health Care Reform”, Bryan Caplan of the Library of

Economics and liberty stipulates the argument the book makes was crafted more as a sales pitch

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rather than an expository written by an Ivy League economics professor. Along the way, Gruber

manages to omit a litany of critical points while espousing a populist view that all is right with

Obamacare. Gruber neglects to mention the relationship of the rising cost of health care and

government intervention. Medicare and Medicaid greatly increases the demand for health care

for instance. Caplan also asserts in his critique that the impact of regulation on the cost of health

care is ignored. Moral hazard is not even mentioned. The litany of omissions is Gruber’s work

include the unemployment effect of fining employers who do not cover their employees, praising

Romneycare in Massachusetts while ignoring the many virtues of the health system in Singapore

which Caplan believes to the best health care system in the world, and the ignoring of waste

inherent in the exist health care framework under Obamacare among too many others to mention

(Caplan, 2012). On the other hand, Cornelia Dean of the New York Times blithely extols

Gruber’s work as a medium written for the masses stripping away the complexity of health care

reform and thereby making it more digestible for the otherwise uninitiated reader or layman. She

also notes in her article written around the time of the Supreme Court decision on the ACA that

we will have to see what works and what does not (Dean, 2012). It would seem that Gruber

might have done himself more justice in the longer run by being more forthcoming of pros and

especially cons in his argument.

Goodman’s work, “Priceless”, has been reviewed by several pundits on health care.

David Hogberg of Investors Business Daily mentions that Goodman has followed the health

care market dynamic for decades and that he is the president of the National Center for Policy

Analysis indicating that he carries the similar high credentials as Gruber. Hogberg notes that

Goodman’s work focuses on the following: the inefficiencies of government intervention and

regulation with 3rd parties insurers, the bias that government interference lends to 3rd party

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insurers in terms of tax treatment, the interference of 3rd party insurers in the doctor/patient

relationship, and the moral hazard created by this interference. These factors all contribute to the

dysfunctional health care system encountered by the consumer. Hogberg believes that

Goodman’s cure for the crisis would likely work but only if the government is much less

integrated into the economic dynamic meaning that if healthcare were allowed to behave as any

other normal economic good or service on the free market. Peter Ferrara from the American

Spectator shares similar views with Goodman’s take on the existing problem. He also points to

Goodman’s healthcare safety net as being a big part of the solution by giving block grants back

to the respective states for Medicaid and allow each state to administer its own program. Ferrera

espouses his agreement with Goodman by ending his article by quoting Goodman, “Liberated

from the confinement of legal impediments and suffocating bureaucracies, doctors, patients,

hospital personnel and profit seeking entrepreneurs are perfectly capable of solving our most

serious health policy problems. All they need is the freedom to able to do so.” (Goodman, 2012;

Ferrera, 2012). Goodman’s scenario seems fit to measure in our diverse system and population

as America’s natural entrepreneurial attitude toward commerce is part of our genetic makeup, but

it will definitely not be a painless transition and would probably have the usual allotment of

“winners” and “losers” associated with any major transition.

Comparison and Contrast of the 2 authors

In comparing the two authors, they share a number of differences and similarities from an

economic and ideological point of view. Regarding the differences, Gruber stands out as an

economist with a strong Keynesian bent while Goodman’s Libertarian outlook brands him as

more of a true free market supply sider (Hogberg, 2012). Gruber’s take on solving the ails of

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U.S. health care taps the government to step in and run the show. However while Gruber’s

approach seems well put together and orchestrated as put forth in his propagandistic work, the

actual health care reform that was put in place resembles more the Frankenstein monster depicted

in the book because of the ACA’s shoddy, piecemeal implementation and administration than the

political detractor the monster was meant to represent (Frean et al, 2016; Gruber, 2012; Readhed

& Kinzer, 2015). Goodman’s concept of free market health care discussed in his work,

“Priceless”, takes on a more objective and academic approach than Gruber’s “Health Care

Reform” and there are working examples of his concept in action in the health care market place

albeit few. The examples of the plastic/bariatric surgery and Lasik eye surgery illustrate

Goodman’s notion of how free market economics can affect the health care marketplace

(Goodman, 2012).

Where the two authors share similarities is they both provide for a heath care safety net

for those with economic or general health impediments even if the approaches by each author

differ. Gruber and Goodman both agree on the disheveled state of the pre-ACA health care

system and the need to make vast improvements even if the approaches come from two very

different directions. Gruber and Goodman also seem to agree that everyone should be in the risk

pool to achieve a proper distribution of actuarial risk. The question that comes forth is; “Should

we use Gruber’s or Goodman’s concept in its entirety or should there be a merger of the two?”.

Concluding remarks and possible solution paths

Can we do better? After several years, Gruber’s idea on reform in not panning out as he

might have anticipated. The piecemeal approach and implementation have demonstrated sub-par

performance in efficiency, reach and utility for most consumers (Frean et al 2016; Readhed &

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Kinzer, 2015). Premiums for nearly all types of insurance coverage have gone up to the point of

misery for many and does not seem sustainable at the current rate of premium growth along with

increasing deductibles particularly for the so called “middle class” (Caplan, 2012). Goodman’s

model has proven can work in a specific segment of the health care system pretty well but it

remains to be seen on a much larger scale (Ferrera, 2012; Goodman, 2012; Porter, 2009).

Because of parliamentarian nature of our government, there is a tendency to compromise which

is not always in the best interest of all involved. The current ACA and the recently failed “Repeal

and Replace” effort by the Trump administration demonstrate this fact vividly (NPR, 2017). If

Gruber had proposed that we go full on universal healthcare or to a slightly modified version

such as Germany, Belgium, France or several other health care systems, health care reform as he

envisioned it might have a prayer if the U.S. government was adept at bureaucracy as many

European nations (Kuijs, 2000; McCane, 2014). However, the U.S. government is notoriously

and conspicuously not (Du & Lu, 2016; Heskett, 2007; Reahead & Kinzer, 2015). Goodman’s

proposition seems best suited for our heterogenous society and government system.

Entrepreneurship is embedded in our national DNA and is a core principal of true innovation and

progress in the U.S in nearly any national endeavor. Diversity in this instance plays into our

favor due the free exchange of ideas. But implementing Goodman’s concept will involve a

tremendous amount of upfront pain in terms of allowing free market forces to push current prices

for health care down from their crippling levels. In either case, we should commit fully to one

direction or the other with Goodman’s concept as the best true fit for our diverse society (Kuijs,

2000).

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References:

Caplan, B. (Jan, 2012).Sins of Omission: What’s Wrong With Gruber’s Health Care Reform.

Library of Economics and Liberty. Retrieved April 4, 2017, from:

http://econlog.econlib.org/archives/2012/01/sins_of_omissio.html

Dean, C. (2012, February 12). A Cartoon That Cuts Through the Health Care Brambles.

Retrieved April 14, 2017, from: http://www.nytimes.com/2012/02/13/health/views/health-care-

reform-book-review-a-cartoon-to-cut-through-red-tape.html

Du, L. & Lu, W (2016). U.S. Health-Care Systems Ranks as One of the Least Efficient.

Bloomberg. Retrieved March 01, 2017 from: https://www.bloomberg.com/news/articles/2016-

09-29/u-s-health-care-system-ranks-as-one-of-the-least-efficient

Frean, M., Gruber, J., & Sommers, B. D. (2016). Disentangling the ACA’s Coverage Effects —

Lessons for Policymakers. New England Journal of Medicine,375(17), 1605-1608.

doi:10.1056/nejmp1609016

Goodman, J. (2012). Priceless: Curing the Healthcare Crisis. Oakland, CA: Independent

Institute.

Gruber, J., & Newquist, H. (2011). Health care reform: what it is, why it's necessary, how it

works. New York: Hill and Wang.

Heskett J. (2 Mar 2007). What is the Government’s Role in Healthcare. Retrieved 4 Apr 2017,

from: http://hbswk.hbs.edu/item/what-is-the-governments-role-in-u-s-healthcare

Hogberg, D. (11 Jul 2012). Book Review: Priceless. Washington Times. Retrieved 3 April 2017,

from: http://www.washingtontimes.com/news/2012/jul/11/getting-to-free-market-health-care/

Kuijs, Louis (2000). The Impact of Ethnic Heterogeneity on the Quantity and Quality of Public

Spending. IMF Working Paper – Fiscal Affairs Department. Retrieved March 01, 2017, from:

https://www.imf.org/external/pubs/ft/wp/2000/wp0049.pdf

McCane D. (13 Jun 2014). Pew Research on the Government’s Role in Health Care. Retrieved 4

Apr 2017 from web. http://pnhp.org/blog/2014/06/13/pew-research-on-the-governments-role-in-

health-care/

NPR (2017). Affordable Care Act Architect On The New Republican Plan. Retrieved April 6,

2017, from http://www.npr.org/2017/03/08/519170702/affordable-care-act-architect-on-the-new-

republican-plan

Porter, Michael (2009). A Strategy for Health Care Reform – Toward a Value-Based System. The

New England Journal of Medicine. Retrieved February 28, 2017 from:

http://www.nejm.org/doi/full/10.1056/NEJMp0904131#t=article

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Readhed, C. & Kinzer, Janet (2015) Implementing the Affordable Care Act: Delays, Extensions,

and Other Actions Taken by the Administration. Congressional Research Service. Retrieved

March 01, 2017 from: https://fas.org/sgp/crs/misc/R43474.pdf