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The news from the Gruber hearing: it’s more than you think

Wow!  There’s a lot to say about the hearing that the House Oversight Committee just concluded.  Here are some bullet points that I will try to flesh out in the days ahead. I’m going to start not with MIT Professor Jonathan Gruber, which is important, but with something yet more important that was addressed at the hearing: the planned escape of the insurance industry in the event the Supreme Court rules in King v. Burwell that the Affordable Care Act does not permit the executive branch to provide tax subsidies to residents of the many states that have, to date, not established their own health care exchanges.

King v. Burwell and the Gruber hearing

Under questioning from Georgia Republican Doug Collins, Marilyn Tavenner, the Administrator of Medicare and Medicaid Services, also a witness at the hearing, essentially confirmed (look here at 2:10-5:55) earlier reports that insurers had negotiated a provision letting them stop provide health insurance in the Exchanges if the Supreme Court were to rule that the federal government could not provide subsidies.  The Obama administration evidently could not get insurers to participate simply by leaving the matter silent and telling the insurers they could rely on whatever protections the classical legal doctrine of impracticability  would provide for “unforseen” circumstances.

Administrator Tavenner’s admission and the antecedent concession is is evidence that the insurance industry is very worried about the outcome of the Supreme Court decision.  It is evidence that, despite its public disparagement of the lawsuit, the Obama administration understands that it represents perhaps the most serious challenge to the ACA in that it lets Justice Roberts and the Supreme Court purport to simply play umpire and leave to a theoretically functional Congress the task of fixing the statute. It is evidence of the chaos that is going to erupt when the Supreme Court rules that the Obama administration can not lawfully pay subsidies to individuals in the many states, including my home state of Texas, that have declined, to date, to establish their own exchange.

It’s also worth noting that some Republicans at the hearing focused on the absence of any appropriation by Congress for the cost sharing reductions that the ACA provides poorer purchases of Exchange plans.  This absence has been one of the focuses of the lawsuit filed by the House of Representatives against the Obama administration. Secretary Tavenner purported not to know how much had been spent on this program.  Expect this failure to appropriate to be a major wedge used by the Republicans in the continuing knife fight over Obamacare.

Gruber: Part 1

And now onto Professor Gruber.    I fear his adventures in Congress are just beginning.  He bizarrely declined to provide the Committee with the amount of money he received from federal and state sources for his work on Obamacare and its implementation, saying (1) that he didn’t know what the law required him to provide and (2) that, even apparently within $100,000, he couldn’t say how much it was. But Professor Gruber’s apparent disdain of money aside  — ask me within $100,000 to tell me what I made on a consulting contract and I think I could manage it — his response begs the question of why he would not provide the information even if it were not required. What principle is his silence about payments protecting?  Surely it is within the right of Congress to find out how much the federal treasury paid an individual, either directly or through grants to the states. It goes to whether legislative appropriations are being used properly and to the bias of the witness on other matters.  So, expect a subpoena of Professor Gruber and quite possibly a return appearance.  Also, I have a hard time understanding why Professor Gruber or his counsel thought it smart to prevaricate on this matter.  I sure hope the MIT professor reported his income and paid his taxes on the grants.

Someone needs to really audit Professor Gruber’s modeling.  If Professor Gruber believes that the ends justified the means with respect to the Affordable Care Act, that it was acceptable to articulate the plan in contorted ways and to distort its accounting in order to get it passed so that the American people would reap its benefits, why would that instrumentalism cease when it came to modeling?  As someone who does economic modeling, I know, is part science, but it is also part art. There are choices to be made.  Simply from a casual reading of the limited material Professor Gruber has released on his “GMSIM” model, it is apparent that he very much made choices. He selected various critical parameters in ways that were not approved of by other scholars.  Did he do so as part of a genuine belief that others were wrong or because he needed those parameters in order to make the results come out “correctly?”  Were there draft runs of the model in which the answers did not come out as he wished and were parameters tweaked in response.  Until we see Professor Gruber’s code, until we see his drafts, we don’t know.

Perhaps with respect to Obamacare, this is all water under the bridge and a bit of political theater from the Republicans.  After all, Obamacare, like it or not, is the law.  But there is a philosophical issue involved and that is the vulnerability of Congress to laws predicated on modeling that is not validated and that may come from people who have their own political axes to grind or who are dependent on politically motivated sources of funding.  Oh, and don’t be surprised if executive privilege is claimed to try and protect such potentially explosive documents.

The Democratic Response

The Democratic response to the hearing was particularly ironic.  Yes, they were critical of Professor Gruber because he had  — and this is surely true — handed the Republicans a PR coup gift wrapped with a ribbon.  But, essentially the Democratic response was to tout the virtues of the Affordable Care Act.  They did this throughout the hearing by reciting the many people that it had helped (although apparently not the husband of Congresswoman Lummis), by unrelenting claims of causation between the “bending of the cost curve” and Obamacare, and by putting on as their only witness an area man who, despite a pre-existing condition and likely high medical expenses from a “common medical condition,” could sincerely extoll the delights of  managing to get less expensive insurance as a result of the Affordable Care Act.  He also appears to have gotten better claims service, though it is hardly clear that this was the result of the ACA rather than the fact that his insurance policy now actually provided him with coverage for medical expenses sought to be reimbursed.

But what is the relevance of this Ari Goldman’s testimony other than to show that the ACA has helped him, in part by having someone other than the insured himself  pay for his predictable high medical expenses and that the ACA has largely converted an insurance system based on risk into one that serves as a tool for implementing federal redistributionist policies?  What is the relevance of assertions that Obamacare has slowed the growth in medical expenses — perhaps without a correlative decline in medical utilization? The only relevance is the instrumental argument that Professor Gruber made many times on the videos and recanted — but only insofar as it was articulated glibly — before Congress.  The ACA is a good thing.

Perhaps the ACA is, on balance, a good thing.  I depart from some on both sides of the political spectrum by believing that reasonable people can disagree on that issue both in the abstract and within the context of contemporary American political realities. But does that mean that it is acceptable to lie to people in order to get it past?  Does that mean it is acceptable to get it passed by exploiting the economic ignorance of the American people by disguising taxes as non-taxes, by gaming the CBO scoring system, or by including programs  such as the CLASS Act that were absolutely destined to fail but that could, thanks to the failure of the CBO to use basic principles of insurance accounting, yield a phantom $70 billion?  We should not be so hypocritical as to believe that there are not many who have succumbed, at various times and for various reasons, to this rationalization.  Professor Gruber had the poor sense to make that choice apparent and to attribute it to those in Washington.  But to  distance oneself from Professor Gruber’s statements but then defend his grilling by exclaiming the virtues of the ACA is essentially to recapitulate the very instrumentalism for which Professor Gruber was called on the carpet.

Coda

1. Best question of the day from Representative Cynthia Lummis comes in the context of Professor Gruber’s repeated claim that he was merely an economics expert, not a politican and his excuse of his prior statements by claiming that they were “glib.”

 Lummis:   “How many non-politicians know what CBO is?  How many non-politicians know what scoring is?  How many non-politicians would know that you have to get by CBO scoring in order to get the Affordable Care Act to say that it’s going to lower costs? You are a politician. Everything that has led up to your testimony today is inconsistent with your testimony today, which is to say all of your prior statements were a lie.  Is that true?  Were all of your prior statements a lie?  Or were they just glib?”

Touche.

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