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JONATHAN GRUBER: So
today, we're going

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to have sort of a
different kind of class

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since it's the last class.

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Today, I'm going to talk
about essentially how

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we bring to bear the set of
issues we've talked about

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this semester to a
real-world topic,

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and actually, how it plays
out in policy and practice.

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And I'll draw on some
of my own experience,

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having applied the kind
of tools we learned

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in 14.01 to the field of health
care economics for 25 years,

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and how that has led
me to be able to help

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in the development of health
care policy in the US,

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and talk about sort of where
health care policy stands

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at this point.

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So let's get a little
bit of background

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about health care in the US.

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Basically, when we're talking
about health care in the US,

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we have to recognize that
the US spends, by far,

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the most money on health
care of any developed

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nation in the world.

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We spend about 17 and 1/2%
of our gross domestic product

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on health care.

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That amounts to almost $10,000
per man, woman, and child--

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every man, woman,
and child in America.

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That dwarfs the
rest of the world.

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The typical European nation
spends about 2/3 as much

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as a percent of
GDP on health care.

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England spends less than
half as much on health care.

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So basically, we spend
a lot on health care

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as a share of our economy.

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And what do we get for it?

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Well, the evidence here--

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the first fact is clear.

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The evidence that we get for
it is a little bit mixed.

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So if you look at the
typical thing on the web,

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you know, US health
care is terrible.

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Our money's wasted.

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You'll see that on things
like infant mortality,

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we rate, like,
20th in the world.

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Or life expectancy, we're,
like, 20th in the world.

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So by those metrics,
we don't do very well.

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But in fact, those metrics
are misleading because we also

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have--

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we have the most unequal health
care system in the world.

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So the right way
to think about it

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is to think about the
haves and the have-nots.

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The haves, which is us and
most people in America,

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people who are
well-insured in the system,

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actually get probably
the best health care

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in the world, Now that might
be disputed by many people.

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But I think about
this like an economist

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would think about it,
which is, how would you

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decide whether you would prefer
product A versus product B,

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whether they buy product
A versus product B?

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Every year, one million
people come to the US

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to get treated for their
health care problems.

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No one leaves.

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No one's going to
England for surgery.

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No one's flying from the
US to England for surgery.

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They're coming here.

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If you're in the system, we
have the best health care

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in the world.

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Unfortunately, if you're
out of the system,

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we have some of the worst
health care in the world.

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So a white baby born
in America today,

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there's roughly a slightly
more than 0.5% chance

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the baby will die
in their first year.

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That's comparable
to northern Europe.

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If you look at a black
baby born in the US,

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the odds they die
in the first year

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are about twice that, which
is worse than Barbados.

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So the problem in the US is
not that our outcomes are bad.

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The problem is
they're very unequal--

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that we're spending
all this money.

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We're delivering good,
but not exceptional,

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outcomes for people
in the system

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and bad outcomes for
people out of the system.

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So clearly, we're not
getting a lot of value--

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it's not like we deliver
exceptionally good outcomes

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to people in the system.

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We're slightly better,
despite spending a lot more,

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and we're worse for
many Americans who

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are left out of the system.

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So that's sort of the setup of
where we are, which is really,

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you have two
fundamental problems

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in health care in the US.

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Our spending is too high, and
our access is too unequal.

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Now so I want to focus today's
lecture on those two aspects

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and think about how can we
bring the kind of lessons

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we've learned in this course
to thinking about addressing

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those problems.

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So I'm going to focus on the
access problem and the cost

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problem.

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Let's start with
the access problem.

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Now in America, before 2010,
we had about-- or before 2014,

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we had about 50 million
uninsured Americans.

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50 million people
who did not have

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health insurance in the US.

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We're the only
nation in the world--

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only developed
nation in the world

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with a significant
uninsured population.

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Now the fact that 50 million
people are uninsured,

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is that a problem?

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On its face, if I just
said here's a fact.

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50 million people in America
don't have health insurance.

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Based on that fact
alone, can you

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tell me whether there's
a problem or not?

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You shook your head no.

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Why not?

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AUDIENCE: Because it might be
better for you not to have--

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JONATHAN GRUBER: Yeah.

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You know, many more people than
that don't have flat-screen TVs

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and don't own homes.

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Why do we think
that we should care

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if people don't have something?

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The answer would be, we
would only care if what?

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Under what condition?

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When do we-- yeah--

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AUDIENCE: [INAUDIBLE]

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JONATHAN GRUBER:
If-- well, they'd

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be better off if
they did have it.

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Now they could be better off
because they could be richer,

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but that's not our problem.

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Given their budget,
they're not buying it.

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What-- under what condition
is the market not--

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under what type of conditions
would the market not

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deliver the best outcome?

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AUDIENCE: If there's
a failure, like--

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JONATHAN GRUBER: If
there's a market failure.

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So the fact that
people aren't insured

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doesn't matter except A, if
there's a market failure, or B,

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for redistribution purposes.

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Remember, that's
the two reasons we

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want the government involved.

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So if health insurance markets
were perfectly functioning

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and people who were
uninsured were roughly

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equally distributed in
income as everyone else,

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there'd be no cause for worry.

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But in fact, that's not true.

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We've talked in
this class about why

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markets like health insurance
won't function well,

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which is a problem
of adverse selection.

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The problem is
information failures

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which will lead health insurance
markets not to function well.

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And the people who
are uninsured tend

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to be much poorer than the
people who are insured.

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It's also
redistributional concern.

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So the reason we care
about the uninsured

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are both because
of market failures

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and for redistribution, that
they tend to be lower-income.

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What's interesting
is the uninsured

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don't tend to be the
poorest in society.

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They tend to be the near poor.

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So here's the way sort of
health insurance coverage

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works in the US.

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For the vast majority
of Americans--

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60% of American--

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60% of Americans
have what's called

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employer- sponsored insurance.

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So like your most
of your parents,

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like me, they get health
insurance from their employer.

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The typical upper-income
American gets health insurance

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from their employer.

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The typical average-income
American does.

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About 60% of Americans.

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Then-- and I'm going to
do this sort of pre-ACA.

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So before 2014,
before the big change

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that was put in place by
the Affordable Care Act,

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you had about another,
maybe, 6% that

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bought into what we call
individual or non-group health

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insurance.

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That is, they went out on
their own and bought insurance.

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But that's a tiny
market compared to ESI.

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And the reason is because of
exactly the adverse selection

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problem we talked about.

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Think about yourself
as an insurer.

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And you're worried about
yourself as an insurer.

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And think about
what your goal is.

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Your goal as an insurer
is to essentially absorb

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risk in a way that allows
you to make a profit.

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So what you want is
you want to live off

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the law of large numbers.

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You know that with a
large enough group,

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you could be able to predict
what their costs will be.

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And therefore, you can
just make a profit on top.

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So insurers love-- when
MIT comes to an insurer,

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they're delighted.

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They're like, look, you got--
between MIT and Lincoln Labs,

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you've got about
10,000 employees.

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I, with great
certainty, can predict

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what the costs will be next
year for a group of 10,000

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employees.

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And so I, as an
insurer, can know

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I can just charge that, plus
X percent, and I'm golden.

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But when Jon Gruber
walks in the door,

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they're like, why are you
coming to me, individual?

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Maybe because you know
you're sick, maybe

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because you love skydiving.

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I don't know.

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But I'm wary of you, so I'm
to charge you a lot of money

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to get health insurance.

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As a result, most-- very few
people bought health insurance

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on their own.

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And in particular, the
reason they didn't is

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because insurers would not
offer health insurance to people

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if they were at all sick.

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They would do things
like having what

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we call pre-existing
conditions exclusions.

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These were features of insurance
contracts which said, look,

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you walked in the door, Jon,
and you want health insurance.

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But I know, in the past, you've
had cancer or asthma or knee

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surgery.

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I'm going to tell you,
I'm going to insure you,

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but not for any expenses that
might arise from recurrence

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of those past injuries.

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So you had cancer in the past.

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Anything that comes up in the
future because you had cancer,

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I'm not going to cover.

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Anything that comes
up in the future

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because you had knee surgery,
I'm not going to cover.

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Anything that comes up in the
future because you had asthma,

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I'm not going to cover it.

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So I'm going to give you,
essentially, partial insurance.

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So it's going to be
a market failure.

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I'm going to insure you, but
only for part of what you need.

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Alternatively, they could
use pre-existing condition

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solutions-- they could
use what is called

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medical underwriting,
which was basically saying,

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OK, Jon, come in.

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I'm going to give you an
exam, and if you look sick,

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I'm going to deny you insurance.

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Or if you look sick, I'm going
to charge you 100 times more

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than someone else.

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So these were not
illegal or even immoral.

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These were just ways
insurers came up with

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to try to deal with the
adverse selection problem.

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As a result, this
was a market that

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did not function very well.

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Question about that?

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AUDIENCE: [INAUDIBLE]

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JONATHAN GRUBER: No, totally
legal in every state--

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virtually every state,
totally legal and not immoral.

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I mean, this is just they're
maximizing their profits.

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It's what companies do.

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And the point is that when
they did this, what this meant

249
00:09:58,360 --> 00:10:00,562
was if you didn't have
employer-sponsored insurance

250
00:10:00,562 --> 00:10:02,395
or insurance from the
government, which I'll

251
00:10:02,395 --> 00:10:05,290
come to next, then you
were subject to the fact

252
00:10:05,290 --> 00:10:07,178
that if you got
sick, you might not

253
00:10:07,178 --> 00:10:09,220
be able to get insurance,
which is sort of weird.

254
00:10:09,220 --> 00:10:11,020
Insurance is supposed
to cover if you're sick.

255
00:10:11,020 --> 00:10:12,437
But in fact, if
you were sick, you

256
00:10:12,437 --> 00:10:14,440
might not be able to get it.

257
00:10:14,440 --> 00:10:16,690
So that was the fundamental
market failure we had here

258
00:10:16,690 --> 00:10:19,290
through adverse selection.

259
00:10:19,290 --> 00:10:22,650
Now we also-- that was
employer-sponsored insurance,

260
00:10:22,650 --> 00:10:26,280
so that was about 2/3
of the population.

261
00:10:26,280 --> 00:10:32,160
You also had on the order
of 15% of the population had

262
00:10:32,160 --> 00:10:33,900
government-sponsored insurance--

263
00:10:37,500 --> 00:10:39,622
probably more like 20%.

264
00:10:39,622 --> 00:10:41,580
20% of the population
had government-sponsored.

265
00:10:41,580 --> 00:10:43,340
Insurance.

266
00:10:43,340 --> 00:10:51,770
The two big programs here are
called Medicare and Medicaid.

267
00:10:51,770 --> 00:10:54,920
Now if you ever
take my 1441 class,

268
00:10:54,920 --> 00:10:56,930
I will only hold you
responsible for one thing

269
00:10:56,930 --> 00:10:58,700
if I ever meet you
10 years later, which

270
00:10:58,700 --> 00:11:01,640
is remember the difference
between these two programs.

271
00:11:01,640 --> 00:11:05,000
Medicare is health
insurance for the elderly.

272
00:11:05,000 --> 00:11:07,830
Medicaid is health
insurance for the poor.

273
00:11:07,830 --> 00:11:10,835
And those are our two big
public insurance programs.

274
00:11:13,132 --> 00:11:15,090
And about 20-- and if
you're in those programs,

275
00:11:15,090 --> 00:11:16,267
you're also set.

276
00:11:16,267 --> 00:11:17,850
They don't have any
of these features.

277
00:11:17,850 --> 00:11:20,650
If you're in, you're
covered for everything.

278
00:11:20,650 --> 00:11:23,050
So about 20% of
people are there.

279
00:11:23,050 --> 00:11:25,690
And then finally, if you add up
the numbers, we had about 15--

280
00:11:25,690 --> 00:11:28,600
the numbers don't quite add
up, but you had about 15%

281
00:11:28,600 --> 00:11:30,130
of the population was uninsured.

282
00:11:33,260 --> 00:11:34,250
15% uninsured.

283
00:11:34,250 --> 00:11:37,340
So you had about 2/3 private,
about one fifth public,

284
00:11:37,340 --> 00:11:39,276
and about one sixth uninsured.

285
00:11:41,960 --> 00:11:44,270
And those are individuals
who typically were not

286
00:11:44,270 --> 00:11:47,500
the poorest because the
poorest people got Medicaid.

287
00:11:47,500 --> 00:11:49,210
The typical uninsured
person is, like,

288
00:11:49,210 --> 00:11:51,983
what we call the working
poor, someone who's got a job,

289
00:11:51,983 --> 00:11:54,400
but it's a crappy job that
doesn't offer health insurance.

290
00:11:54,400 --> 00:11:55,900
But they make enough
money that they

291
00:11:55,900 --> 00:11:58,660
can't qualify for being
in the low-income program.

292
00:11:58,660 --> 00:12:02,952
So your family is struggling at,
like, $40,000, $50,000 a year,

293
00:12:02,952 --> 00:12:04,410
high enough income
that they're not

294
00:12:04,410 --> 00:12:06,910
qualifying for Medicaid but not
in a good enough job they're

295
00:12:06,910 --> 00:12:07,998
getting health insurance.

296
00:12:07,998 --> 00:12:09,540
That's your typical
uninsured family.

297
00:12:09,540 --> 00:12:12,360
2/3 of the uninsured
are in families

298
00:12:12,360 --> 00:12:15,450
that are headed by a
full-time, full-year worker.

299
00:12:15,450 --> 00:12:17,760
They're not typically the
unemployed down-on-their luck

300
00:12:17,760 --> 00:12:18,340
people.

301
00:12:18,340 --> 00:12:19,715
They typically
are the people who

302
00:12:19,715 --> 00:12:22,470
are trying to play by the
rules, as they say in politics,

303
00:12:22,470 --> 00:12:25,710
but typically can't get a
job with health insurance.

304
00:12:25,710 --> 00:12:27,780
So that's your basic landscape.

305
00:12:27,780 --> 00:12:29,460
And what we know
from that landscape

306
00:12:29,460 --> 00:12:31,980
is that a lot of
the access problems

307
00:12:31,980 --> 00:12:34,110
were because of this
group and this group

308
00:12:34,110 --> 00:12:36,960
because the people who couldn't
get in this market, and as

309
00:12:36,960 --> 00:12:39,140
a result, were often uninsured.

310
00:12:39,140 --> 00:12:42,670
That was a lot of what
drove the access problems.

311
00:12:42,670 --> 00:12:45,250
So that was sort of the first--

312
00:12:45,250 --> 00:12:48,680
one of the two big problems
that faced our system.

313
00:12:48,680 --> 00:12:51,770
And for many, many years,
we knew we had that problem.

314
00:12:51,770 --> 00:12:54,920
And for about 100
years, we've tried

315
00:12:54,920 --> 00:12:57,620
to reform health care in
the US to deal that problem.

316
00:12:57,620 --> 00:12:59,270
And probably about
every 17 years,

317
00:12:59,270 --> 00:13:01,687
on average, there was a big
attempt to reform health care,

318
00:13:01,687 --> 00:13:02,960
and they always failed.

319
00:13:02,960 --> 00:13:05,180
And they always
failed because they

320
00:13:05,180 --> 00:13:07,935
failed between two extremes.

321
00:13:07,935 --> 00:13:10,060
There were two extreme
views that could never quite

322
00:13:10,060 --> 00:13:11,332
meet in the middle ground.

323
00:13:11,332 --> 00:13:13,540
And they come to what I
talked about last time, which

324
00:13:13,540 --> 00:13:16,840
is how do we solve the
problem of market failures

325
00:13:16,840 --> 00:13:18,730
in insurance markets?

326
00:13:18,730 --> 00:13:21,760
Well, one version of
solving that, I described,

327
00:13:21,760 --> 00:13:23,020
was subsidization.

328
00:13:26,430 --> 00:13:28,180
You could-- remember,
with my MIT program,

329
00:13:28,180 --> 00:13:31,230
if I paid the healthy guys
$500, they'd all buy two,

330
00:13:31,230 --> 00:13:33,120
and I'd solve the problem.

331
00:13:33,120 --> 00:13:34,570
So one version
was subsidization.

332
00:13:34,570 --> 00:13:39,280
The problem is
subsidization only works

333
00:13:39,280 --> 00:13:41,890
if it's big enough to
overcome these problems.

334
00:13:41,890 --> 00:13:43,960
And no one ever proposed
subsidization big enough

335
00:13:43,960 --> 00:13:45,270
to overcome these problems.

336
00:13:45,270 --> 00:13:46,510
In my MIT example,
I was going to give

337
00:13:46,510 --> 00:13:48,210
$400 to every
healthy-- first of all,

338
00:13:48,210 --> 00:13:49,510
it means giving money
to healthy people, which

339
00:13:49,510 --> 00:13:50,650
is sort of
politically difficult.

340
00:13:50,650 --> 00:13:53,050
Like, hey, the healthier you
are, the more money you get.

341
00:13:53,050 --> 00:13:54,340
It seems a bit weird.

342
00:13:54,340 --> 00:13:56,200
Also, it's just hard
to solve these problems

343
00:13:56,200 --> 00:13:57,585
by just subsidizing people.

344
00:13:57,585 --> 00:13:58,960
Insurance companies
are still too

345
00:13:58,960 --> 00:14:01,045
good at trying to get
rid of the sick people.

346
00:14:01,045 --> 00:14:02,920
And even if you subsidize
people who come in,

347
00:14:02,920 --> 00:14:04,990
insurance companies will
always have an incentive.

348
00:14:04,990 --> 00:14:06,430
They'll say, great, healthy
people come, we'll subsidize.

349
00:14:06,430 --> 00:14:08,038
They'll still want
to avoid the sick.

350
00:14:08,038 --> 00:14:10,330
So it doesn't solve the
problem in insurance companies.

351
00:14:10,330 --> 00:14:11,320
I didn't talk about
this last time,

352
00:14:11,320 --> 00:14:12,790
but as MIT's
insurance company, I

353
00:14:12,790 --> 00:14:14,770
should try to shed
the sick people.

354
00:14:14,770 --> 00:14:18,290
And that problem still
existed under this solution.

355
00:14:18,290 --> 00:14:22,900
The other extreme, which is
sort of back in style again,

356
00:14:22,900 --> 00:14:28,018
is the single-payer model,
which is saying, look,

357
00:14:28,018 --> 00:14:30,310
let's just have the government
provide health insurance

358
00:14:30,310 --> 00:14:31,460
to everyone.

359
00:14:31,460 --> 00:14:33,940
We have the government provide
Social Security to everyone.

360
00:14:33,940 --> 00:14:34,990
The government provides
health insurers

361
00:14:34,990 --> 00:14:37,210
to every elderly in
America through Medicare.

362
00:14:37,210 --> 00:14:38,980
Everyone over 65
in America, boom,

363
00:14:38,980 --> 00:14:40,900
gets government-provided
health insurance.

364
00:14:40,900 --> 00:14:43,010
Talk about socialism.

365
00:14:43,010 --> 00:14:44,500
Every American gets that.

366
00:14:44,500 --> 00:14:47,710
In Canada, everybody gets
government-provided health

367
00:14:47,710 --> 00:14:48,580
insurance.

368
00:14:48,580 --> 00:14:50,170
Why not just do it here?

369
00:14:50,170 --> 00:14:52,420
Let's get rid of all the
crap with insurance companies

370
00:14:52,420 --> 00:14:53,170
we don't like.

371
00:14:53,170 --> 00:14:56,050
After all, insurance
company administrative costs

372
00:14:56,050 --> 00:14:59,080
are about 15% of
medical spending.

373
00:14:59,080 --> 00:15:02,350
So, boom, we could lower
15% of medical spending.

374
00:15:02,350 --> 00:15:06,190
That is, you know, that's
like $500 billion a year.

375
00:15:06,190 --> 00:15:08,170
Boom, it's gone.

376
00:15:08,170 --> 00:15:10,702
So basically, why not-- so
single payer is something

377
00:15:10,702 --> 00:15:12,160
a lot of people
have advocated for.

378
00:15:12,160 --> 00:15:14,327
Let's just have one giant
universal health insurance

379
00:15:14,327 --> 00:15:15,770
program.

380
00:15:15,770 --> 00:15:17,960
Now the problem with this--

381
00:15:17,960 --> 00:15:20,060
the problem with the
single-payer approach is

382
00:15:20,060 --> 00:15:20,720
largely--

383
00:15:20,720 --> 00:15:23,600
there's pros and cons to
the economics perspective.

384
00:15:23,600 --> 00:15:27,040
But the problems here
are largely political,

385
00:15:27,040 --> 00:15:29,820
which is that to make
single payer happen,

386
00:15:29,820 --> 00:15:32,572
you have three enormous
political barriers,

387
00:15:32,572 --> 00:15:33,780
which come back to economics.

388
00:15:33,780 --> 00:15:35,820
Everything comes
back to economics,

389
00:15:35,820 --> 00:15:39,570
but they play their way out
in the political system.

390
00:15:39,570 --> 00:15:44,260
The first problem
is paying for it--

391
00:15:44,260 --> 00:15:50,262
paying for it, which
is that single payer--

392
00:15:50,262 --> 00:15:52,470
to have the government give
everyone health insurance

393
00:15:52,470 --> 00:15:54,553
means a massive expansion
in the government, which

394
00:15:54,553 --> 00:15:56,550
means a big increase in taxes.

395
00:15:56,550 --> 00:15:58,380
And we know taxes
have deadweight loss.

396
00:15:58,380 --> 00:16:01,180
We know taxes are
politically unpopular.

397
00:16:01,180 --> 00:16:03,832
Now here's what's
misleading about that.

398
00:16:03,832 --> 00:16:05,040
Here's the fundamental thing.

399
00:16:05,040 --> 00:16:06,717
So I worked for the
state of Vermont.

400
00:16:06,717 --> 00:16:09,300
The state of Vermont wanted to
do their own single-payer plan.

401
00:16:09,300 --> 00:16:10,842
If any place can do
it, it's Vermont.

402
00:16:10,842 --> 00:16:12,040
They're, like, super lefty.

403
00:16:12,040 --> 00:16:13,873
They essentially have
one insurance carrier,

404
00:16:13,873 --> 00:16:15,460
which is Blue Cross anyway.

405
00:16:15,460 --> 00:16:16,420
They're a small state.

406
00:16:16,420 --> 00:16:17,200
It seemed like if anyone
was going to do it,

407
00:16:17,200 --> 00:16:17,930
Vermont was going to do it.

408
00:16:17,930 --> 00:16:19,630
So I worked with them to
put the numbers together,

409
00:16:19,630 --> 00:16:20,630
what it would cost them.

410
00:16:20,630 --> 00:16:22,840
And I had good
news and bad news.

411
00:16:22,840 --> 00:16:25,350
The good news was,
I said to Vermont,

412
00:16:25,350 --> 00:16:27,930
if you do single payer you will
lower the cost of health care

413
00:16:27,930 --> 00:16:31,330
in Vermont total by at
least 10%, at least.

414
00:16:31,330 --> 00:16:33,400
That was conservative.

415
00:16:33,400 --> 00:16:35,085
The bad news is to
pay for it, you're

416
00:16:35,085 --> 00:16:37,210
going to have to more than
double the entire amount

417
00:16:37,210 --> 00:16:40,040
of taxes collected
in state of Vermont.

418
00:16:40,040 --> 00:16:43,960
And that second sentence
just killed everything.

419
00:16:43,960 --> 00:16:45,260
What's the problem?

420
00:16:45,260 --> 00:16:49,210
The problem is that right now
health insurance in America

421
00:16:49,210 --> 00:16:53,340
is paid for by
essentially a hidden tax.

422
00:16:53,340 --> 00:16:54,652
What's the hidden tax?

423
00:16:54,652 --> 00:16:56,610
It's the fact that when
your employer gives you

424
00:16:56,610 --> 00:17:00,410
health insurance, they pay
you less wages as a result.

425
00:17:00,410 --> 00:17:03,480
Remember our tax
incidence discussion.

426
00:17:03,480 --> 00:17:06,060
And we said that essentially
taxing the employer

427
00:17:06,060 --> 00:17:07,829
falls on the
employer-employee depending

428
00:17:07,829 --> 00:17:10,500
on basically elasticities.

429
00:17:10,500 --> 00:17:12,843
Well, you can think of health
insurance the same way.

430
00:17:12,843 --> 00:17:14,760
When your employer gives
you health insurance,

431
00:17:14,760 --> 00:17:16,680
he doesn't just
eat the whole cost.

432
00:17:16,680 --> 00:17:19,283
He says, look, I'm paying you
a total set of compensation,

433
00:17:19,283 --> 00:17:20,700
part of which is
health insurance.

434
00:17:20,700 --> 00:17:22,950
So I'm going to pass the
cost of that health insurance

435
00:17:22,950 --> 00:17:25,500
on at least partially
to your wages.

436
00:17:25,500 --> 00:17:27,000
That's essentially a hidden tax.

437
00:17:27,000 --> 00:17:30,260
So at MIT-- right now, I
have a health insurance plan

438
00:17:30,260 --> 00:17:34,610
through MIT, which costs about
$18,000 a year for my family.

439
00:17:34,610 --> 00:17:36,830
I pay about $6,000 a
year out of my paycheck.

440
00:17:36,830 --> 00:17:38,960
MIT pays $12,000.

441
00:17:38,960 --> 00:17:41,895
But the truth is, MIT
pays me $12,000 less.

442
00:17:41,895 --> 00:17:43,770
They don't just give me
that health insurance

443
00:17:43,770 --> 00:17:45,640
out the goodness of their heart.

444
00:17:45,640 --> 00:17:47,650
They take it out of
my wages, or least

445
00:17:47,650 --> 00:17:50,180
partially out of my wages.

446
00:17:50,180 --> 00:17:53,300
That's essentially a hidden tax
that Americans pay every year

447
00:17:53,300 --> 00:17:55,070
to finance health insurance.

448
00:17:55,070 --> 00:17:58,190
If we went to single payer,
that hidden tax would go away.

449
00:17:58,190 --> 00:18:00,860
I would get a $12,000 raise.

450
00:18:00,860 --> 00:18:01,640
That's great.

451
00:18:01,640 --> 00:18:04,190
But I'd also face
a high new taxation

452
00:18:04,190 --> 00:18:07,085
to pay for the
government-sponsored plan.

453
00:18:07,085 --> 00:18:08,960
Now given that the total
cost would fall-- we

454
00:18:08,960 --> 00:18:12,220
should be able to net this out
in a way that most people win.

455
00:18:12,220 --> 00:18:14,280
The problem then
becomes the politics,

456
00:18:14,280 --> 00:18:17,900
which is you're tracing a hidden
tax with a non-hidden tax.

457
00:18:17,900 --> 00:18:20,073
And that's very
ugly politically.

458
00:18:20,073 --> 00:18:22,490
So people don't believe their
employers will pay them more

459
00:18:22,490 --> 00:18:24,110
if you don't make the employers
provide health insurers, like,

460
00:18:24,110 --> 00:18:25,693
oh, the employers
will just pocket it.

461
00:18:25,693 --> 00:18:28,260
And I could teach them tax
incidence till my face is blue,

462
00:18:28,260 --> 00:18:29,570
but they just won't believe it.

463
00:18:29,570 --> 00:18:31,460
They'll say employers
will just pocket it.

464
00:18:31,460 --> 00:18:33,550
But I have to pay this
new tax for single payer.

465
00:18:33,550 --> 00:18:35,630
So that's the first
problem single payer faces

466
00:18:35,630 --> 00:18:37,213
is that people don't
really understand

467
00:18:37,213 --> 00:18:39,620
that trade-off between
getting rid of the hidden tax

468
00:18:39,620 --> 00:18:41,900
and adding a new non-hidden tax.

469
00:18:41,900 --> 00:18:44,530
That's problem one.

470
00:18:44,530 --> 00:18:48,490
Problem two is the problem
we talked a little bit

471
00:18:48,490 --> 00:18:51,080
about, behavioral economics,
and about loss aversion.

472
00:18:51,080 --> 00:18:53,800
There's a general feature,
what we call status quo

473
00:18:53,800 --> 00:18:56,950
bias in human thinking.

474
00:18:56,950 --> 00:19:01,512
Status quo bias, which
is, essentially, it

475
00:19:01,512 --> 00:19:03,220
is harder for me to
give up what I'm used

476
00:19:03,220 --> 00:19:06,392
to than to grab something new.

477
00:19:06,392 --> 00:19:07,725
We talked about the mug example.

478
00:19:07,725 --> 00:19:08,975
Remember, I talked about mugs.

479
00:19:08,975 --> 00:19:10,643
So basically, you
had to pay me more

480
00:19:10,643 --> 00:19:13,310
to get the mug away from me than
I was willing to pay to buy it.

481
00:19:13,310 --> 00:19:15,500
That once you have something,
you value it more than

482
00:19:15,500 --> 00:19:16,760
if you didn't have it yet.

483
00:19:16,760 --> 00:19:18,800
Well, right now,
60% of Americans

484
00:19:18,800 --> 00:19:21,310
have employer-sponsored
insurance.

485
00:19:21,310 --> 00:19:25,620
And if we say to them, give
that up for Berniecare,

486
00:19:25,620 --> 00:19:27,510
they're going to be,
like, eh, I don't know.

487
00:19:27,510 --> 00:19:28,860
I kind of like my
employer-sponsored insurance.

488
00:19:28,860 --> 00:19:30,150
You know, yeah,
you might tell me

489
00:19:30,150 --> 00:19:31,380
Berniecare is
going to be better,

490
00:19:31,380 --> 00:19:32,280
but that's just you talking.

491
00:19:32,280 --> 00:19:33,400
I know what I have
right now, which I have

492
00:19:33,400 --> 00:19:34,740
employer-sponsored insurance.

493
00:19:34,740 --> 00:19:37,170
I don't want to move away
from that status quo.

494
00:19:37,170 --> 00:19:39,330
So status quo bias makes
it hard, in general,

495
00:19:39,330 --> 00:19:41,470
to do radical changes
on an economic system.

496
00:19:41,470 --> 00:19:42,720
And this is a perfect example.

497
00:19:42,720 --> 00:19:44,400
It's going to be hard
to get people to give up

498
00:19:44,400 --> 00:19:46,680
what they have for something
that they don't really

499
00:19:46,680 --> 00:19:48,994
know about yet.

500
00:19:48,994 --> 00:19:50,490
That's the second problem.

501
00:19:50,490 --> 00:19:52,460
The third problem is,
once again about money,

502
00:19:52,460 --> 00:19:55,040
but really beyond the
scope of this course, which

503
00:19:55,040 --> 00:20:04,920
is the problem of the insurance
companies and lobbying, which

504
00:20:04,920 --> 00:20:08,370
is that the insurance business
is big business in America.

505
00:20:08,370 --> 00:20:13,630
Health insurance companies
make about $900 billion a year.

506
00:20:13,630 --> 00:20:15,850
If you said to them, hey,
health insurance companies,

507
00:20:15,850 --> 00:20:18,820
would you guys mind just
giving up your $900 billion

508
00:20:18,820 --> 00:20:20,320
to begin a single-payer
health care,

509
00:20:20,320 --> 00:20:22,320
they'd actually say, yeah,
it's been a good run.

510
00:20:22,320 --> 00:20:23,350
Go for it.

511
00:20:23,350 --> 00:20:23,860
No.

512
00:20:23,860 --> 00:20:25,943
They're going to lobby and
fight that because they

513
00:20:25,943 --> 00:20:27,130
want to keep their business.

514
00:20:27,130 --> 00:20:29,422
And that's going to be a
pretty hard force to overcome.

515
00:20:29,422 --> 00:20:31,773
So single payer has
always struggled

516
00:20:31,773 --> 00:20:33,940
with dealing with these
kinds of political problems.

517
00:20:33,940 --> 00:20:35,890
And that's why we've been stuck.

518
00:20:35,890 --> 00:20:38,012
We've been stuck between
one alternative, which

519
00:20:38,012 --> 00:20:40,095
is subsidization, and the
other alternative, which

520
00:20:40,095 --> 00:20:41,770
is single payer.

521
00:20:41,770 --> 00:20:44,410
And that's where
economists have come in--

522
00:20:44,410 --> 00:20:47,700
came in the 2000s,
folks like myself,

523
00:20:47,700 --> 00:20:49,270
to talk about a
new alternative way

524
00:20:49,270 --> 00:20:53,110
to do it, which was
essentially to try

525
00:20:53,110 --> 00:20:55,720
to bring in some of the
best features of these two

526
00:20:55,720 --> 00:20:58,230
approaches.

527
00:20:58,230 --> 00:21:00,685
And the solution we proposed--

528
00:21:00,685 --> 00:21:02,310
so if you want to
read more about this,

529
00:21:02,310 --> 00:21:04,470
I've actually written a
comic book to explain it.

530
00:21:04,470 --> 00:21:06,808
It's a graphic
novel, technically.

531
00:21:06,808 --> 00:21:08,100
It's called Health Care Reform.

532
00:21:08,100 --> 00:21:09,970
It's, like, $9 on Amazon.

533
00:21:09,970 --> 00:21:12,303
And so I like to think of
everything in terms of images.

534
00:21:12,303 --> 00:21:13,553
Now I'm not going to draw one.

535
00:21:13,553 --> 00:21:15,210
I'm not going to try
to draw anything.

536
00:21:15,210 --> 00:21:17,585
But the way I like to think
about this is the solution we

537
00:21:17,585 --> 00:21:20,298
came up with, which we first
pioneered here in Massachusetts

538
00:21:20,298 --> 00:21:21,840
and then brought to
the whole country

539
00:21:21,840 --> 00:21:23,298
through the Affordable
Care Act, is

540
00:21:23,298 --> 00:21:28,270
what we call a
three-legged-stool approach,

541
00:21:28,270 --> 00:21:30,160
three-legged-stool approach.

542
00:21:30,160 --> 00:21:33,640
Leg one is deal
with this problem.

543
00:21:33,640 --> 00:21:36,310
Deal with the insurance
discrimination problem.

544
00:21:36,310 --> 00:21:41,121
And so leg one is ban
insurer discrimination.

545
00:21:44,560 --> 00:21:48,010
No more pre-existing conditions,
no more medical underwriting.

546
00:21:48,010 --> 00:21:51,563
That is, if I walk in the door,
and you have offered anyone--

547
00:21:51,563 --> 00:21:53,980
you have to offer me health
insurance at the average price

548
00:21:53,980 --> 00:21:54,640
for my age.

549
00:21:54,640 --> 00:21:55,960
And you have to offer it to me.

550
00:21:55,960 --> 00:21:57,940
So any 40-year-old who walks
in the door wanting insurance,

551
00:21:57,940 --> 00:21:59,410
you have to sell it to them,
and you to sell it to them

552
00:21:59,410 --> 00:22:00,905
at a fixed 40-year-old price.

553
00:22:00,905 --> 00:22:02,030
You can't say, you're sick.

554
00:22:02,030 --> 00:22:03,363
I'm not going to sell it to you.

555
00:22:05,290 --> 00:22:07,920
So the first step is to
ban insurer discrimination,

556
00:22:07,920 --> 00:22:10,290
to try to solve that problem.

557
00:22:10,290 --> 00:22:15,010
Now the problem this
raises is you have simply--

558
00:22:15,010 --> 00:22:18,420
if you do this alone, you've
created a new problem, which

559
00:22:18,420 --> 00:22:21,750
is if you tell insurers
they can't discriminate

560
00:22:21,750 --> 00:22:24,560
against the sick, you don't
solve the adverse selection

561
00:22:24,560 --> 00:22:25,060
problem.

562
00:22:25,060 --> 00:22:28,630
You're just making
insurers go bankrupt.

563
00:22:28,630 --> 00:22:30,910
Now here's the way I
like to think of it.

564
00:22:30,910 --> 00:22:33,200
I'm sure none of you
ever gambled on sports.

565
00:22:33,200 --> 00:22:35,480
But if you had
gambled on sports,

566
00:22:35,480 --> 00:22:38,080
you might know the way
sports gambling works is

567
00:22:38,080 --> 00:22:40,540
that there's a guy in the
middle, called the bookie.

568
00:22:40,540 --> 00:22:43,120
And the bookie's
goal is to not--

569
00:22:43,120 --> 00:22:46,810
is to get exactly the same
number of bets on either team.

570
00:22:46,810 --> 00:22:51,900
So they take no risk, and just
make their profits off the top.

571
00:22:51,900 --> 00:22:54,500
So what bookies do is
they set point spreads.

572
00:22:54,500 --> 00:22:57,305
So the Patriots played the
Dolphins this past weekend.

573
00:22:57,305 --> 00:22:59,515
I am-- sadly, I'm
a Dolphins fan.

574
00:22:59,515 --> 00:23:00,890
The Patriots played
the Dolphins.

575
00:23:00,890 --> 00:23:02,150
The point spread was
something like-- does

576
00:23:02,150 --> 00:23:03,470
anyone know what the spread
was in the Patriots' game?

577
00:23:03,470 --> 00:23:05,230
I think is was, like, 8 points.

578
00:23:05,230 --> 00:23:06,940
So that spread was chosen.

579
00:23:06,940 --> 00:23:08,260
The Patriots were favored by 8.

580
00:23:08,260 --> 00:23:11,230
What that meant was
your bet was either

581
00:23:11,230 --> 00:23:15,380
the Patriots win by either
more, or the Dolphins win,

582
00:23:15,380 --> 00:23:17,452
or the Patriots win by
8, or by less than 8.

583
00:23:17,452 --> 00:23:19,160
So one side is Patriots
win by 8 or more.

584
00:23:19,160 --> 00:23:22,190
One side is Patriots win by
less than 8, or Dolphins win.

585
00:23:22,190 --> 00:23:23,930
And the reason you
have that bias thing

586
00:23:23,930 --> 00:23:25,930
is because people think
the Patriots are better.

587
00:23:25,930 --> 00:23:26,710
They are better.

588
00:23:26,710 --> 00:23:28,880
And as a result,
you want to get--

589
00:23:28,880 --> 00:23:31,005
if you set an even bet,
Patriots win, Dolphins win,

590
00:23:31,005 --> 00:23:32,463
everyone would bet
on the Patriots.

591
00:23:32,463 --> 00:23:33,200
You'd lose money.

592
00:23:33,200 --> 00:23:35,225
So you want an equal
distribution of risks.

593
00:23:35,225 --> 00:23:37,100
So what you want is you
want to set the point

594
00:23:37,100 --> 00:23:38,960
spread so the distribution
of risk is equal.

595
00:23:38,960 --> 00:23:41,460
Then having done that, you just
make your money off the top.

596
00:23:41,460 --> 00:23:45,950
Now imagine I passed a law
which said all sports books have

597
00:23:45,950 --> 00:23:49,580
to reopen at halftime and make
the same bets available they

598
00:23:49,580 --> 00:23:51,343
made before the game started.

599
00:23:51,343 --> 00:23:53,510
Well, for those of you who
watched the exciting game

600
00:23:53,510 --> 00:23:54,710
this weekend, you
realized at halftime,

601
00:23:54,710 --> 00:23:55,970
it became pretty obvious
the Patriots weren't

602
00:23:55,970 --> 00:23:58,047
going to win by 8, that
it was a lot closer game

603
00:23:58,047 --> 00:23:58,880
than people thought.

604
00:23:58,880 --> 00:24:00,920
So if they reopen
that, a bunch of people

605
00:24:00,920 --> 00:24:03,353
would suddenly bet
against the Patriots.

606
00:24:03,353 --> 00:24:05,270
The Patriots ended up
losing, and the insurers

607
00:24:05,270 --> 00:24:08,980
would have gone bankrupt-- the
bookie would've gone bankrupt.

608
00:24:08,980 --> 00:24:10,960
Insurers are just bookies.

609
00:24:10,960 --> 00:24:12,160
That's all they are.

610
00:24:12,160 --> 00:24:14,285
They just want a predictable
distribution of risks.

611
00:24:14,285 --> 00:24:16,577
So if you tell them, you have
to offer health insurance

612
00:24:16,577 --> 00:24:18,730
to everyone for the
same price, but only

613
00:24:18,730 --> 00:24:22,377
the sick are going to buy,
they're going to lose money.

614
00:24:22,377 --> 00:24:24,710
So that's why we need the
second leg of the stool, which

615
00:24:24,710 --> 00:24:27,800
I talked about last time, which
was the individual mandate.

616
00:24:32,330 --> 00:24:34,430
The individual mandate,
which is to say,

617
00:24:34,430 --> 00:24:37,100
OK, insurers, if you offer
health insurance to everyone

618
00:24:37,100 --> 00:24:40,550
at a fair price, we will,
as our part of the deal,

619
00:24:40,550 --> 00:24:42,560
make sure everyone
buys health insurance.

620
00:24:42,560 --> 00:24:44,810
So when the 40-year-old walks
into your office wanting

621
00:24:44,810 --> 00:24:47,060
insurance, you can know it's
not because they're sick.

622
00:24:47,060 --> 00:24:49,440
It's just because they have to.

623
00:24:49,440 --> 00:24:51,780
So we say to insurers, you
price insurance fairly,

624
00:24:51,780 --> 00:24:53,598
and in return, we'll
make sure you get

625
00:24:53,598 --> 00:24:54,890
the fair distribution of risks.

626
00:24:54,890 --> 00:24:57,060
So you say to me--
my MIT insurance,

627
00:24:57,060 --> 00:24:58,750
you price insurance
at $1,500 and don't

628
00:24:58,750 --> 00:25:01,230
try to keep out the sick,
I'll make sure everyone buys.

629
00:25:01,230 --> 00:25:03,930
And you'll make
your $100 profit.

630
00:25:03,930 --> 00:25:06,970
So that's-- the mandate was
essentially trying to bring--

631
00:25:06,970 --> 00:25:09,860
was trying to allow--
get rid of discrimination

632
00:25:09,860 --> 00:25:11,600
by bringing in the
entire pool of people

633
00:25:11,600 --> 00:25:14,532
so insurers could fairly price.

634
00:25:14,532 --> 00:25:16,990
The problem with that is you
can't mandate something people

635
00:25:16,990 --> 00:25:19,043
can't afford.

636
00:25:19,043 --> 00:25:20,460
So in Massachusetts,
where we were

637
00:25:20,460 --> 00:25:21,940
creating this plan
in the mid 2000s,

638
00:25:21,940 --> 00:25:23,690
the typical family
health insurance policy

639
00:25:23,690 --> 00:25:25,770
was about $12,000 a year.

640
00:25:25,770 --> 00:25:28,833
The poverty line for a
family was $22,000 a year.

641
00:25:28,833 --> 00:25:30,250
We couldn't exactly
mandate people

642
00:25:30,250 --> 00:25:32,458
that they spend 55% percent
of their income on health

643
00:25:32,458 --> 00:25:33,000
insurance.

644
00:25:33,000 --> 00:25:34,830
That was not really feasible.

645
00:25:34,830 --> 00:25:37,140
So the third leg of the
stool we came up with

646
00:25:37,140 --> 00:25:41,100
is subsidies to make health
insurance affordable,

647
00:25:41,100 --> 00:25:43,710
saying, if you're
low-income, we will offset

648
00:25:43,710 --> 00:25:47,820
the cost of your insurance just
like the subsidy approach here.

649
00:25:47,820 --> 00:25:49,560
We'll offset the cost
of your insurance

650
00:25:49,560 --> 00:25:50,510
to make it more affordable.

651
00:25:50,510 --> 00:25:52,170
We'll do it on an
income-related basis,

652
00:25:52,170 --> 00:25:53,790
so it doesn't cost so much.

653
00:25:53,790 --> 00:25:54,930
So we're not going to
have to pay for everyone's

654
00:25:54,930 --> 00:25:56,240
insurance like single payer.

655
00:25:56,240 --> 00:25:58,140
Remember, single payer,
essentially taking

656
00:25:58,140 --> 00:26:01,050
someone like me, who's
happy with my insurance,

657
00:26:01,050 --> 00:26:03,040
swapping it out for new
government insurance.

658
00:26:03,040 --> 00:26:05,373
This is saying, no, if you're
happy with your insurance,

659
00:26:05,373 --> 00:26:06,600
stick with your insurance.

660
00:26:06,600 --> 00:26:09,780
But if you're low-income and
can't access the employer

661
00:26:09,780 --> 00:26:13,260
market, this gives
you a new place to go.

662
00:26:13,260 --> 00:26:15,840
And that was the idea
that became Romneycare,

663
00:26:15,840 --> 00:26:18,360
the plan here in Massachusetts,
and eventually then became

664
00:26:18,360 --> 00:26:21,670
Obamacare, or the
Affordable Care Act.

665
00:26:21,670 --> 00:26:25,470
So this is essentially
the idea of that plan.

666
00:26:25,470 --> 00:26:27,900
Now, did it work?

667
00:26:27,900 --> 00:26:29,070
Unambiguously, yes.

668
00:26:29,070 --> 00:26:30,612
Now you won't find
anyone more biased

669
00:26:30,612 --> 00:26:31,800
than me on this question.

670
00:26:31,800 --> 00:26:33,210
But I think what--

671
00:26:33,210 --> 00:26:36,050
I think if I've tried to teach
you one thing in this class,

672
00:26:36,050 --> 00:26:39,040
it's that we need to rely on
real facts wherever possible.

673
00:26:39,040 --> 00:26:40,770
And if not, we could
turn to theory.

674
00:26:40,770 --> 00:26:44,340
But here we have a set of real
facts that we can turn to,

675
00:26:44,340 --> 00:26:46,050
which is that
essentially what we

676
00:26:46,050 --> 00:26:48,750
did in Massachusetts with this
law is we covered about 2/3

677
00:26:48,750 --> 00:26:50,970
of the uninsured population.

678
00:26:50,970 --> 00:26:54,600
At the federal level,
we covered about 45%

679
00:26:54,600 --> 00:26:56,190
of the uninsured population.

680
00:26:56,190 --> 00:26:58,500
It was a lower number because
the federal law did not

681
00:26:58,500 --> 00:27:00,313
apply to undocumented
immigrants, which

682
00:27:00,313 --> 00:27:01,855
are about a quarter
of the uninsured.

683
00:27:01,855 --> 00:27:03,313
It's not an issue
in Massachusetts,

684
00:27:03,313 --> 00:27:05,020
but a big issue in other places.

685
00:27:05,020 --> 00:27:06,090
That's about a quarter
of the uninsured

686
00:27:06,090 --> 00:27:06,960
because the federal
law did not apply

687
00:27:06,960 --> 00:27:08,570
to undocumented immigrants.

688
00:27:08,570 --> 00:27:10,320
So as a result, the
share cover was lower.

689
00:27:10,320 --> 00:27:11,737
But a large number
aren't covered.

690
00:27:11,737 --> 00:27:12,480
Yeah.

691
00:27:12,480 --> 00:27:14,930
AUDIENCE: If there was
an initial mandate, then

692
00:27:14,930 --> 00:27:16,847
how was there anyone
who was left uninsured?

693
00:27:16,847 --> 00:27:18,180
JONATHAN GRUBER: Great question.

694
00:27:18,180 --> 00:27:20,752
So there are three reasons why
people were left uninsured.

695
00:27:20,752 --> 00:27:22,710
The first reason was a
quarter of the uninsured

696
00:27:22,710 --> 00:27:24,418
were undocumented
immigrants, and the law

697
00:27:24,418 --> 00:27:26,140
didn't apply to them.

698
00:27:26,140 --> 00:27:29,220
So right now the upper bound
was 75%, just to start.

699
00:27:29,220 --> 00:27:32,370
The second reason is that the
individual mandate contained

700
00:27:32,370 --> 00:27:35,310
exemptions to make it both a
little more humane and, quite

701
00:27:35,310 --> 00:27:36,930
frankly, politically feasible.

702
00:27:36,930 --> 00:27:39,150
So if you could not
get-- if your income was

703
00:27:39,150 --> 00:27:40,650
below the poverty
line, you were not

704
00:27:40,650 --> 00:27:42,450
subject to the
individual mandate.

705
00:27:42,450 --> 00:27:45,030
And if you could not get
insurance for less than 8%

706
00:27:45,030 --> 00:27:46,530
of your income, you
were not subject

707
00:27:46,530 --> 00:27:48,000
to the individual mandate.

708
00:27:48,000 --> 00:27:49,503
So there were exemptions.

709
00:27:49,503 --> 00:27:51,420
And the third thing was
the individual mandate

710
00:27:51,420 --> 00:27:53,420
was not, like, we're going
to throw you in jail.

711
00:27:53,420 --> 00:27:54,630
It was a tax penalty.

712
00:27:54,630 --> 00:27:57,090
And many people decided they'd
rather just pay the penalty

713
00:27:57,090 --> 00:27:58,323
than buy health insurance.

714
00:27:58,323 --> 00:28:00,240
So for those three
reasons, a number of people

715
00:28:00,240 --> 00:28:02,915
did not get health insurance
under the Affordable Care Act.

716
00:28:02,915 --> 00:28:04,790
Now there's a bunch of
interesting questions,

717
00:28:04,790 --> 00:28:06,030
like should the mandate
penalty be bigger?

718
00:28:06,030 --> 00:28:06,810
How should we handle that?

719
00:28:06,810 --> 00:28:07,560
There's a lot of--

720
00:28:07,560 --> 00:28:09,030
I could go for hours on this.

721
00:28:09,030 --> 00:28:12,330
But that's basically the
structure of what we had.

722
00:28:12,330 --> 00:28:14,225
So basically, that worked.

723
00:28:14,225 --> 00:28:15,850
It didn't get us to
universal coverage.

724
00:28:15,850 --> 00:28:17,970
It wasn't as effective as
single payer would have been,

725
00:28:17,970 --> 00:28:19,710
but it was the largest
single insurance

726
00:28:19,710 --> 00:28:21,387
expansion in American history.

727
00:28:21,387 --> 00:28:22,470
And the evidence is clear.

728
00:28:22,470 --> 00:28:24,140
It brought many
people into insurance.

729
00:28:24,140 --> 00:28:25,807
It improved people's
use of health care.

730
00:28:25,807 --> 00:28:27,160
It improved health.

731
00:28:27,160 --> 00:28:32,650
So basically, that was kind
of the step forward on access.

732
00:28:32,650 --> 00:28:35,380
Now the problem with
this is it's only a step.

733
00:28:35,380 --> 00:28:37,450
There's still many
uninsured, and this

734
00:28:37,450 --> 00:28:42,250
has been politically really
challenging, because these two

735
00:28:42,250 --> 00:28:43,780
answers are quite simple.

736
00:28:43,780 --> 00:28:46,000
Just give people money or
just have single payer.

737
00:28:46,000 --> 00:28:47,260
This is super complicated.

738
00:28:47,260 --> 00:28:49,270
I can talk about these
in about 15 seconds each.

739
00:28:49,270 --> 00:28:51,812
These took five
minutes to go through.

740
00:28:51,812 --> 00:28:53,770
And people thought it
was just too complicated.

741
00:28:53,770 --> 00:28:54,675
It didn't make sense.

742
00:28:54,675 --> 00:28:56,800
Lots of reasons-- we could
talk lots reasons people

743
00:28:56,800 --> 00:28:57,645
didn't like it.

744
00:28:57,645 --> 00:28:59,770
So it's never really been
as politically successful

745
00:28:59,770 --> 00:29:01,780
as people like myself,
who helped develop it,

746
00:29:01,780 --> 00:29:02,830
would have hoped.

747
00:29:02,830 --> 00:29:04,723
And it's left a lot
of people uninsured.

748
00:29:04,723 --> 00:29:06,390
So we haven't solved
the access problem.

749
00:29:06,390 --> 00:29:09,760
We made a big step forward,
but we haven't solved it.

750
00:29:09,760 --> 00:29:13,110
And that's the ongoing debate
today we see, particularly

751
00:29:13,110 --> 00:29:14,383
in the Democratic Party.

752
00:29:14,383 --> 00:29:16,300
The Republican Party
really doesn't focus much

753
00:29:16,300 --> 00:29:17,560
on insurance coverage.

754
00:29:17,560 --> 00:29:19,250
But the Democratic Party does.

755
00:29:19,250 --> 00:29:21,970
And they're-- that's why there's
a lot of energy behind single

756
00:29:21,970 --> 00:29:25,000
payer right now is like, look,
you tried the kind of halfway

757
00:29:25,000 --> 00:29:26,050
ground.

758
00:29:26,050 --> 00:29:28,435
That kind of worked, but
didn't work all the way.

759
00:29:28,435 --> 00:29:30,310
So let's just go all
the way to single payer.

760
00:29:30,310 --> 00:29:32,110
Yeah.

761
00:29:32,110 --> 00:29:33,860
AUDIENCE: The initial
mandate, does that--

762
00:29:33,860 --> 00:29:35,318
I guess, for the
more people living

763
00:29:35,318 --> 00:29:37,763
in poverty, does that work
together with Medicaid or--

764
00:29:37,763 --> 00:29:38,680
JONATHAN GRUBER: Yeah.

765
00:29:38,680 --> 00:29:41,140
Basically, a lot-- actually,
it's quite interesting.

766
00:29:41,140 --> 00:29:42,598
It worked quite
well with Medicaid.

767
00:29:42,598 --> 00:29:44,200
A lot of people
who aren't insured,

768
00:29:44,200 --> 00:29:45,700
actually, are people
who are already

769
00:29:45,700 --> 00:29:47,260
eligible for free
Medicaid coverage

770
00:29:47,260 --> 00:29:48,970
and just don't take it.

771
00:29:48,970 --> 00:29:50,650
Now we don't quite know why.

772
00:29:50,650 --> 00:29:51,940
It could be language barriers.

773
00:29:51,940 --> 00:29:53,200
They don't understand.

774
00:29:53,200 --> 00:29:55,715
A lot of people-- a lot
of even legal immigrants

775
00:29:55,715 --> 00:29:57,340
just don't understand
they're eligible.

776
00:29:57,340 --> 00:29:59,560
It could be people just don't
want a government handout.

777
00:29:59,560 --> 00:30:01,030
They're embarrassed taking
help from the government.

778
00:30:01,030 --> 00:30:02,590
It could be people
think, I don't need it.

779
00:30:02,590 --> 00:30:03,760
I'm never going to be sick.

780
00:30:03,760 --> 00:30:04,792
We don't know why.

781
00:30:04,792 --> 00:30:06,250
So part of what
the mandate did was

782
00:30:06,250 --> 00:30:08,333
say, look, you already
have free health insurance.

783
00:30:08,333 --> 00:30:09,790
Just pay attention and take it.

784
00:30:09,790 --> 00:30:12,370
That's part of the effect it
had was bringing people in.

785
00:30:12,370 --> 00:30:14,650
So a large part of
the coverage increase

786
00:30:14,650 --> 00:30:17,233
is actually bringing in people
who were already eligible, just

787
00:30:17,233 --> 00:30:19,810
weren't taking it up before.

788
00:30:19,810 --> 00:30:21,670
So that's kind of where we are.

789
00:30:21,670 --> 00:30:23,060
So where we stand
now in coverage

790
00:30:23,060 --> 00:30:25,840
is we've taken a
giant step forward.

791
00:30:25,840 --> 00:30:28,090
We've covered probably
about now, probably,

792
00:30:28,090 --> 00:30:31,780
between a third and 40% of
the uninsured in America.

793
00:30:31,780 --> 00:30:35,500
But we're sort of right now
kind of stuck at that point.

794
00:30:35,500 --> 00:30:39,280
And the question is, do we
just sort of stick there,

795
00:30:39,280 --> 00:30:40,990
or do we try something
more aggressive?

796
00:30:40,990 --> 00:30:42,740
With the political
problems, I don't know.

797
00:30:42,740 --> 00:30:45,320
But that's going to be the
challenge going forward.

798
00:30:45,320 --> 00:30:47,887
So that's-- questions
about that--

799
00:30:47,887 --> 00:30:49,970
because that's where we
are on problem number one,

800
00:30:49,970 --> 00:30:52,010
which is access in coverage.

801
00:30:52,010 --> 00:30:55,025
Now let's turn to problem
number two, which is cost.

802
00:30:58,160 --> 00:31:00,140
Cost is way harder.

803
00:31:00,140 --> 00:31:02,983
What I just did
was the easy part.

804
00:31:02,983 --> 00:31:04,900
It's way harder to get
your health care costs,

805
00:31:04,900 --> 00:31:06,560
and here's why.

806
00:31:06,560 --> 00:31:09,380
Two facts that are seemingly
contradicted if you

807
00:31:09,380 --> 00:31:10,720
think about it.

808
00:31:10,720 --> 00:31:12,400
Fact one.

809
00:31:12,400 --> 00:31:15,910
Since 1950, US
spending on health

810
00:31:15,910 --> 00:31:19,330
care as a share of our
economy has quadrupled.

811
00:31:19,330 --> 00:31:21,400
We've gone from--
more than quadrupled.

812
00:31:21,400 --> 00:31:25,740
We've gone from 4% of our GDP
being health care to over 17%.

813
00:31:25,740 --> 00:31:28,250
And it's been worth it.

814
00:31:28,250 --> 00:31:31,070
If you look at the
improvements in our health,

815
00:31:31,070 --> 00:31:33,290
and you value them in
the way economists do,

816
00:31:33,290 --> 00:31:36,105
which is we have statistical
values of life we apply,

817
00:31:36,105 --> 00:31:38,450
or statistical values in
improvement in health,

818
00:31:38,450 --> 00:31:40,220
the improvement
in our health has

819
00:31:40,220 --> 00:31:42,427
been worth the money
spent on health care.

820
00:31:42,427 --> 00:31:43,510
You guys don't realize it.

821
00:31:43,510 --> 00:31:47,210
Health care totally
sucked in 1950.

822
00:31:47,210 --> 00:31:50,090
Babies born in 1950 were
four times as likely

823
00:31:50,090 --> 00:31:52,130
to die before they reached
their first birthday.

824
00:31:52,130 --> 00:31:54,153
If you had a heart
attack in 1950,

825
00:31:54,153 --> 00:31:56,570
you were four times likelier
to die within the first year.

826
00:31:56,570 --> 00:31:59,060
To put it in terms all young
healthy people care about,

827
00:31:59,060 --> 00:32:02,890
if you hurt your knee skiing
in 1950, tore your ACL in 1950,

828
00:32:02,890 --> 00:32:05,503
or tore your cartilage, you
were in the hospital for a week.

829
00:32:05,503 --> 00:32:06,920
You were on crutches
for six weeks

830
00:32:06,920 --> 00:32:08,757
and had arthritis the
rest of your life.

831
00:32:08,757 --> 00:32:10,340
Today, you go to an
outpatient center.

832
00:32:10,340 --> 00:32:11,548
You get arthroscopic surgery.

833
00:32:11,548 --> 00:32:14,020
You're back on the slopes
a couple weeks later.

834
00:32:14,020 --> 00:32:17,390
Health care is just way better,
and our health is way better.

835
00:32:17,390 --> 00:32:22,250
America is a much better off
nation, spending 17% of GDP

836
00:32:22,250 --> 00:32:25,790
on health with how healthy
we are than we were in 1950.

837
00:32:25,790 --> 00:32:27,770
And once again, do
the economists tests.

838
00:32:27,770 --> 00:32:30,330
No one ever advertises, hey,
would you like 1950s health

839
00:32:30,330 --> 00:32:32,850
care at 1950s prices?

840
00:32:32,850 --> 00:32:36,190
No one out there is offering
that because it's worth it.

841
00:32:36,190 --> 00:32:37,800
That's fact one.

842
00:32:37,800 --> 00:32:42,070
Fact two is we waste a huge
amount of money on health care.

843
00:32:42,070 --> 00:32:44,740
By some estimates, about a third
of what we spend on health care

844
00:32:44,740 --> 00:32:49,130
is totally wasteful, does
nothing to improve our health.

845
00:32:49,130 --> 00:32:51,280
Now how can those two
facts be consistent?

846
00:32:51,280 --> 00:32:53,620
It's worth it,
but it's wasteful.

847
00:32:53,620 --> 00:32:58,560
Well, the answer is that the
other 2/3 is super awesome,

848
00:32:58,560 --> 00:33:00,915
that basically the
increase in health care,

849
00:33:00,915 --> 00:33:02,790
where it's been productive,
has been amazing.

850
00:33:02,790 --> 00:33:06,668
But we dragged along all this
unproductive spending too.

851
00:33:06,668 --> 00:33:07,960
So it's good news and bad news.

852
00:33:07,960 --> 00:33:09,970
So the good news is,
well, that's great.

853
00:33:09,970 --> 00:33:12,430
We just cut out the one
third that's unproductive,

854
00:33:12,430 --> 00:33:14,880
we've solved our problem.

855
00:33:14,880 --> 00:33:16,630
Literally, if we could
just simply cut out

856
00:33:16,630 --> 00:33:17,470
the one third
that's unproductive,

857
00:33:17,470 --> 00:33:19,845
we'd spend the same amount as
Europe does on health care.

858
00:33:19,845 --> 00:33:22,750
We'd solve our entire
long-run fiscal problem.

859
00:33:22,750 --> 00:33:25,750
The bad news is that it's
easy to look back and see

860
00:33:25,750 --> 00:33:27,580
what the one third was.

861
00:33:27,580 --> 00:33:31,110
It's hard to look forward and
say what it's going to be,

862
00:33:31,110 --> 00:33:33,740
that health care comes with
a huge amount of uncertainty

863
00:33:33,740 --> 00:33:36,850
about what's going to work and
what's going to be worth it.

864
00:33:36,850 --> 00:33:40,352
And as a result, it is
very hard to say, OK, fine.

865
00:33:40,352 --> 00:33:41,060
We'll cover this.

866
00:33:41,060 --> 00:33:42,620
We won't cover
that, because it's

867
00:33:42,620 --> 00:33:45,970
hard to know what's going
to work and what's not.

868
00:33:45,970 --> 00:33:50,410
And so, essentially, you're
in this very difficult spot.

869
00:33:50,410 --> 00:33:52,870
So what are the
kind-- that's the sort

870
00:33:52,870 --> 00:33:55,460
of fundamental
trade-off that we face.

871
00:33:55,460 --> 00:33:59,810
So what are the potential
solutions to this problem?

872
00:33:59,810 --> 00:34:04,000
So essentially, there's a
couple of different solutions

873
00:34:04,000 --> 00:34:09,159
to the problem, two different
paths we can follow.

874
00:34:09,159 --> 00:34:15,600
Path one is the regulatory
path, which is basically

875
00:34:15,600 --> 00:34:18,500
the path that Europe follows.

876
00:34:18,500 --> 00:34:21,500
What Europe does is they
just much, much more heavily

877
00:34:21,500 --> 00:34:24,969
regulate the delivery
of health care.

878
00:34:24,969 --> 00:34:26,830
And they do that in two ways.

879
00:34:26,830 --> 00:34:29,610
One is they actually have
regulations about what

880
00:34:29,610 --> 00:34:31,050
health care you can get.

881
00:34:31,050 --> 00:34:34,955
So for instance, England has
the euphemistically named NICE,

882
00:34:34,955 --> 00:34:37,600
the National Institute for
Health and Care Excellence,

883
00:34:37,600 --> 00:34:40,679
which actually tells people
they can't get some things.

884
00:34:40,679 --> 00:34:42,570
It literally rations.

885
00:34:42,570 --> 00:34:44,909
So for example, for many
years-- it's no longer true--

886
00:34:44,909 --> 00:34:47,675
in England, if you're over 75,
you could not get a transplant.

887
00:34:47,675 --> 00:34:49,842
They said, look, we got a
limited number of kidneys.

888
00:34:49,842 --> 00:34:51,300
You're going to die soon anyway.

889
00:34:51,300 --> 00:34:53,370
Let's give the kidney
to a young person.

890
00:34:53,370 --> 00:34:55,932
Actually, kind of makes sense.

891
00:34:55,932 --> 00:34:58,140
The idea is, look, we have
some limit on our kidneys.

892
00:34:58,140 --> 00:34:59,580
Why should it be determined
by some random fact,

893
00:34:59,580 --> 00:35:00,490
like when you got on line?

894
00:35:00,490 --> 00:35:01,948
It should be
determined by who gets

895
00:35:01,948 --> 00:35:03,540
the most value from the kidney.

896
00:35:03,540 --> 00:35:07,620
It's going to be someone who's
30, not someone who's 75.

897
00:35:07,620 --> 00:35:10,515
So one regular route
is to literally

898
00:35:10,515 --> 00:35:11,640
have regulations like that.

899
00:35:11,640 --> 00:35:13,860
That's actually pretty rare.

900
00:35:13,860 --> 00:35:16,717
Most countries don't actually
regulate in that way.

901
00:35:16,717 --> 00:35:19,050
Most countries kind of let
you get what your doctor says

902
00:35:19,050 --> 00:35:20,425
you should get.

903
00:35:20,425 --> 00:35:21,300
There's three routes.

904
00:35:21,300 --> 00:35:24,340
So one route is
sort of regulatory.

905
00:35:24,340 --> 00:35:28,090
The other route of regulate--
so one route is sort of what we

906
00:35:28,090 --> 00:35:32,608
call sort of
regulating, you know--

907
00:35:32,608 --> 00:35:34,150
I don't want to call
it access-- sort

908
00:35:34,150 --> 00:35:38,110
of technological regulation,
regulating which technology you

909
00:35:38,110 --> 00:35:39,070
can get.

910
00:35:39,070 --> 00:35:44,240
The second kind of regulation
in Europe is supply regulation.

911
00:35:44,240 --> 00:35:46,420
So they basically don't
let there be many doctors.

912
00:35:46,420 --> 00:35:49,400
And there are not many
doctors and hospitals.

913
00:35:49,400 --> 00:35:53,800
So there are as many
MRI machines in LA

914
00:35:53,800 --> 00:35:56,970
as there are in Canada.

915
00:35:56,970 --> 00:35:59,680
Basically, just not many place
to go get an MRI in Canada.

916
00:35:59,680 --> 00:36:02,610
So if you' hurt
your knee in the US,

917
00:36:02,610 --> 00:36:05,220
you go, you get an MRI,
like, the next day.

918
00:36:05,220 --> 00:36:08,382
In Canada, you get
it six weeks later.

919
00:36:08,382 --> 00:36:10,590
So the only way to control
it is to actually regulate

920
00:36:10,590 --> 00:36:12,150
the supply of medical care.

921
00:36:12,150 --> 00:36:15,970
Just give people less
stuff they can use.

922
00:36:15,970 --> 00:36:17,680
And the third way to control--

923
00:36:17,680 --> 00:36:20,830
the third regulatory mechanism,
and the most important,

924
00:36:20,830 --> 00:36:23,600
is price regulation.

925
00:36:23,600 --> 00:36:26,378
We are the only nation in
the world which essentially

926
00:36:26,378 --> 00:36:28,670
lets the free market determine
the price of health care

927
00:36:28,670 --> 00:36:30,680
services.

928
00:36:30,680 --> 00:36:33,260
Every other nation
regulates the prices

929
00:36:33,260 --> 00:36:35,970
that people pay for their
health care services.

930
00:36:35,970 --> 00:36:39,388
Now the question we
have to ask is why?

931
00:36:39,388 --> 00:36:40,430
Why does that make sense?

932
00:36:40,430 --> 00:36:42,940
Well, the answer would
be that we think--

933
00:36:42,940 --> 00:36:45,440
it would make sense if we think
there's a fundamental market

934
00:36:45,440 --> 00:36:49,480
failure in the determination
of health care prices.

935
00:36:49,480 --> 00:36:51,263
And in fact, it
turns out there are

936
00:36:51,263 --> 00:36:53,680
numbers of market failures in
determination of health care

937
00:36:53,680 --> 00:36:55,110
prices.

938
00:36:55,110 --> 00:36:57,240
So one market
failure, for example,

939
00:36:57,240 --> 00:36:59,310
is imperfect information.

940
00:36:59,310 --> 00:37:00,480
I don't know--

941
00:37:00,480 --> 00:37:01,980
I can't shop
effectively-- when I'm

942
00:37:01,980 --> 00:37:03,940
in the back of the ambulance
dying from a heart attack,

943
00:37:03,940 --> 00:37:05,880
I can't be, like, you know
that hospital looks expensive.

944
00:37:05,880 --> 00:37:06,570
Take me over there.

945
00:37:06,570 --> 00:37:07,470
I want to shop there.

946
00:37:07,470 --> 00:37:08,940
You can't really shop.

947
00:37:08,940 --> 00:37:10,240
It's a hard market to shop.

948
00:37:10,240 --> 00:37:11,970
And if you could,
prices aren't posted.

949
00:37:11,970 --> 00:37:13,440
You don't really
know what it costs

950
00:37:13,440 --> 00:37:15,648
to get your heart attack
treated in different places.

951
00:37:15,648 --> 00:37:17,330
So imperfect information.

952
00:37:17,330 --> 00:37:19,620
There's also
imperfect competition,

953
00:37:19,620 --> 00:37:22,687
which is if you have your
heart attack on Cape Cod,

954
00:37:22,687 --> 00:37:23,520
there's, like, one--

955
00:37:23,520 --> 00:37:25,520
or Nantucket, which is
an island, with no way

956
00:37:25,520 --> 00:37:27,660
off but a ferry,
there's one place to go.

957
00:37:27,660 --> 00:37:29,030
There's one hospital.

958
00:37:29,030 --> 00:37:31,762
They have a perfect monopoly.

959
00:37:31,762 --> 00:37:32,970
You can't get off the island.

960
00:37:32,970 --> 00:37:34,640
You're going to die otherwise.

961
00:37:34,640 --> 00:37:36,120
So it's imperfect competition.

962
00:37:36,120 --> 00:37:37,230
There's even
imperfect competition

963
00:37:37,230 --> 00:37:39,272
where you think the
competition might be perfect.

964
00:37:39,272 --> 00:37:40,987
So take Boston.

965
00:37:40,987 --> 00:37:42,570
There are so many
hospitals in Boston,

966
00:37:42,570 --> 00:37:46,320
you cannot literally fall down
without hitting a hospital.

967
00:37:46,320 --> 00:37:49,390
Yet there is an
enormous dispersion

968
00:37:49,390 --> 00:37:50,700
in the prices hospitals charge.

969
00:37:50,700 --> 00:37:52,980
In particular, the
very famous hospitals,

970
00:37:52,980 --> 00:37:54,930
like Mass General
Hospital, charge

971
00:37:54,930 --> 00:37:57,870
multiples of what less
famous hospitals charge,

972
00:37:57,870 --> 00:38:00,600
even though less famous
hospitals are really nearby.

973
00:38:00,600 --> 00:38:01,450
Why?

974
00:38:01,450 --> 00:38:02,908
Well, because they
have essentially

975
00:38:02,908 --> 00:38:05,366
what we call a reputational
monopoly, that even though they

976
00:38:05,366 --> 00:38:07,700
don't have an actual physical
monopoly, people are like,

977
00:38:07,700 --> 00:38:08,550
I want to go to MGH.

978
00:38:08,550 --> 00:38:10,160
They're the best, even if
they're not necessarily

979
00:38:10,160 --> 00:38:10,580
the best.

980
00:38:10,580 --> 00:38:12,310
They just have this
view of being the best.

981
00:38:12,310 --> 00:38:14,090
And they can charge
higher prices as a result,

982
00:38:14,090 --> 00:38:16,010
even if their outcomes
aren't necessarily better.

983
00:38:16,010 --> 00:38:17,810
In other markets, we
think perfect information

984
00:38:17,810 --> 00:38:20,268
would allow us to get rid of
these kinds of inefficiencies.

985
00:38:20,268 --> 00:38:22,490
It doesn't exist in health care.

986
00:38:22,490 --> 00:38:25,310
As a result, perfect
competition simply

987
00:38:25,310 --> 00:38:28,530
does not work in
health price setting.

988
00:38:28,530 --> 00:38:31,190
And as a result,
all other countries

989
00:38:31,190 --> 00:38:33,690
regulate health care prices--
and then not other countries--

990
00:38:33,690 --> 00:38:35,610
even the US can
regulate health prices.

991
00:38:35,610 --> 00:38:39,020
So the Medicare program
has regulated prices.

992
00:38:39,020 --> 00:38:40,460
That covers millions
of Americans.

993
00:38:40,460 --> 00:38:42,860
It's just for the
non-government, private health

994
00:38:42,860 --> 00:38:46,350
insurance in the US, there's
non-regulated prices.

995
00:38:46,350 --> 00:38:51,510
Now I am not, despite my tone,
saying that regulating prices

996
00:38:51,510 --> 00:38:53,160
is the answer.

997
00:38:53,160 --> 00:38:54,230
It's not clear.

998
00:38:54,230 --> 00:38:56,180
Regulating prices comes
with a huge number

999
00:38:56,180 --> 00:38:58,220
of additional problems
like we talked about.

1000
00:38:58,220 --> 00:39:00,050
We talked about
regulated monopolies,

1001
00:39:00,050 --> 00:39:03,968
which is the government may not
know the proper price to set.

1002
00:39:03,968 --> 00:39:05,510
The government may
do a terrible job.

1003
00:39:05,510 --> 00:39:06,385
They may get lobbied.

1004
00:39:06,385 --> 00:39:08,160
They may be corrupt.

1005
00:39:08,160 --> 00:39:10,650
Indeed, in the US, the
1970s, virtually every state

1006
00:39:10,650 --> 00:39:12,492
did regulate hospital prices.

1007
00:39:12,492 --> 00:39:13,950
And every state
went away from that

1008
00:39:13,950 --> 00:39:16,145
because they thought
the system was broken.

1009
00:39:16,145 --> 00:39:17,770
So it's not like
there's any-- it's not

1010
00:39:17,770 --> 00:39:20,330
like the European
solution's an easy answer.

1011
00:39:20,330 --> 00:39:23,600
That's why the other route that
people have been pushing lately

1012
00:39:23,600 --> 00:39:29,150
is a different route, which
is the incentives route, which

1013
00:39:29,150 --> 00:39:31,280
is basically to say,
look, we don't want

1014
00:39:31,280 --> 00:39:32,810
to regulate supply or prices.

1015
00:39:32,810 --> 00:39:34,352
What we're going to
do is we're going

1016
00:39:34,352 --> 00:39:37,130
to say, doctors and
hospitals, you get together

1017
00:39:37,130 --> 00:39:39,200
and form these units we
call Accountable Care

1018
00:39:39,200 --> 00:39:41,995
Organizations, ACOs.

1019
00:39:41,995 --> 00:39:44,120
This is a big innovation
of the Affordable Care Act

1020
00:39:44,120 --> 00:39:46,490
of Obamacare, set up these ACOs.

1021
00:39:46,490 --> 00:39:48,720
These are hospitals and
doctors all get together

1022
00:39:48,720 --> 00:39:50,330
to be basically,
like, soup to nuts,

1023
00:39:50,330 --> 00:39:53,210
all the health care
you need in one group.

1024
00:39:53,210 --> 00:39:56,060
And we say to them, we are
going to pay you one flat amount

1025
00:39:56,060 --> 00:39:59,740
of money to care for Jon.

1026
00:39:59,740 --> 00:40:02,110
And then within that,
you decide what he gets.

1027
00:40:02,110 --> 00:40:04,300
You decide what prices
everybody pays and makes.

1028
00:40:04,300 --> 00:40:05,490
You figure all that out.

1029
00:40:05,490 --> 00:40:07,240
But we're going to
give you a flat amount.

1030
00:40:07,240 --> 00:40:10,737
In particular, that flat amount
is not going to rise much.

1031
00:40:10,737 --> 00:40:12,820
And that's going to bring
the costs of health care

1032
00:40:12,820 --> 00:40:15,370
under control, where
basically every ACO will

1033
00:40:15,370 --> 00:40:18,470
get an amount that's
a flat amount,

1034
00:40:18,470 --> 00:40:20,827
and it just won't rise much.

1035
00:40:20,827 --> 00:40:22,410
And that's how we'll
bring health care

1036
00:40:22,410 --> 00:40:24,190
costs under control.

1037
00:40:24,190 --> 00:40:26,590
That has a number of
wonderful features.

1038
00:40:26,590 --> 00:40:28,000
First of all, it's
much less evil

1039
00:40:28,000 --> 00:40:30,250
sounding than things like
not letting [INAUDIBLE] rise

1040
00:40:30,250 --> 00:40:32,865
or regulating what prices.

1041
00:40:32,865 --> 00:40:34,990
Second of all, there's much
fewer regulatory tools.

1042
00:40:34,990 --> 00:40:37,073
We just say, here's a flat
amount we're giving you

1043
00:40:37,073 --> 00:40:40,150
per person, and we're done.

1044
00:40:40,150 --> 00:40:41,420
So that sounds great.

1045
00:40:41,420 --> 00:40:44,450
The problem is we haven't
been able to get it to work.

1046
00:40:44,450 --> 00:40:46,950
And that's because it turns out
doctors and hospitals aren't

1047
00:40:46,950 --> 00:40:49,110
very good at figuring out how
to set prices and set supplies.

1048
00:40:49,110 --> 00:40:50,527
They're just not--
they don't know

1049
00:40:50,527 --> 00:40:51,970
how to really figure this out.

1050
00:40:51,970 --> 00:40:54,460
And the ACOs so far have not
actually performed very well.

1051
00:40:54,460 --> 00:40:56,847
They've not saved much money.

1052
00:40:56,847 --> 00:40:58,680
So really, we're stuck
between a route which

1053
00:40:58,680 --> 00:41:00,450
seems a lot easier but we
haven't really figured out

1054
00:41:00,450 --> 00:41:01,980
how to make work,
and a route which

1055
00:41:01,980 --> 00:41:04,830
has worked all around the
world but seems politically

1056
00:41:04,830 --> 00:41:06,680
nightmarish.

1057
00:41:06,680 --> 00:41:08,660
And that's kind of
where we are right now

1058
00:41:08,660 --> 00:41:10,188
in terms of controlling costs.

1059
00:41:10,188 --> 00:41:12,230
And that difficulty is
what we find ourselves in.

1060
00:41:12,230 --> 00:41:15,680
But let me be clear.

1061
00:41:15,680 --> 00:41:18,170
This is not like, oh, that's
very interesting, Jon.

1062
00:41:18,170 --> 00:41:19,850
I'll go home and
forget about it now.

1063
00:41:19,850 --> 00:41:22,210
This is the entire future.

1064
00:41:22,210 --> 00:41:24,650
Health care costs are
the key to determine

1065
00:41:24,650 --> 00:41:26,480
the entire fiscal
future of the US.

1066
00:41:26,480 --> 00:41:30,110
As I mentioned last
lecture, the US

1067
00:41:30,110 --> 00:41:33,320
is currently estimated about
$75 trillion in deficit

1068
00:41:33,320 --> 00:41:34,980
over the long run.

1069
00:41:34,980 --> 00:41:39,070
$70 trillion of
that is health care.

1070
00:41:39,070 --> 00:41:41,050
Health care is the
single determinant

1071
00:41:41,050 --> 00:41:43,300
of the US fiscal
balance in the long run.

1072
00:41:43,300 --> 00:41:45,910
Literally, it's the single most
important government problem

1073
00:41:45,910 --> 00:41:48,160
facing-- health care cost
is the single most important

1074
00:41:48,160 --> 00:41:49,868
government problem
facing your generation

1075
00:41:49,868 --> 00:41:50,890
and the next generation.

1076
00:41:50,890 --> 00:41:52,210
I like to say that all
that matters when we think

1077
00:41:52,210 --> 00:41:53,840
about the future
is health care cost

1078
00:41:53,840 --> 00:41:57,070
and global warming because
either way we're under water.

1079
00:41:57,070 --> 00:41:58,930
Basically, those are
the two big issues

1080
00:41:58,930 --> 00:42:00,590
we have to face going forward.

1081
00:42:00,590 --> 00:42:03,220
So this is a serious issue
that your generation is going

1082
00:42:03,220 --> 00:42:04,870
to have to struggle with--

1083
00:42:04,870 --> 00:42:08,300
sorry-- as you go on.

1084
00:42:08,300 --> 00:42:11,980
So that's health care
in the US in 40 minutes.

1085
00:42:11,980 --> 00:42:14,860
So this class--
you know, there's

1086
00:42:14,860 --> 00:42:16,660
a famous skit from
Saturday Night

1087
00:42:16,660 --> 00:42:19,770
Live, which is what you remember
five years after college.

1088
00:42:19,770 --> 00:42:24,100
And it's five minutes, and 3
and 1/2 minutes of spring break.

1089
00:42:24,100 --> 00:42:26,740
I don't expect you to remember
the formula for-- if you're not

1090
00:42:26,740 --> 00:42:28,282
going on in economics,
I don't expect

1091
00:42:28,282 --> 00:42:32,730
you to remember the formula
for deriving cost function.

1092
00:42:32,730 --> 00:42:34,480
What I expect you to
get out of this class

1093
00:42:34,480 --> 00:42:35,680
is A, an interest in economics.

1094
00:42:35,680 --> 00:42:36,730
And I hope you'll go on.

1095
00:42:36,730 --> 00:42:37,660
I sincerely hope that.

1096
00:42:37,660 --> 00:42:39,230
And I'm available
to anyone who wants

1097
00:42:39,230 --> 00:42:41,620
to talk about the pros and
cons of going on in economics.

1098
00:42:41,620 --> 00:42:42,880
Obviously, I'm more pro.

1099
00:42:42,880 --> 00:42:44,770
But I'm happy to talk about it.

1100
00:42:44,770 --> 00:42:46,897
So always feel free to
reach out about that.

1101
00:42:46,897 --> 00:42:48,730
But B, even if you don't
go on in economics,

1102
00:42:48,730 --> 00:42:50,730
I want this to make you
a more educated consumer

1103
00:42:50,730 --> 00:42:52,390
of the newspaper.

1104
00:42:52,390 --> 00:42:57,400
This is-- we are in an era, as
I said in my very first lecture,

1105
00:42:57,400 --> 00:43:01,030
where truth and facts
and the scientific method

1106
00:43:01,030 --> 00:43:03,140
are, themselves, under attack.

1107
00:43:03,140 --> 00:43:07,250
And MIT is the last bastion
of fighting this war.

1108
00:43:07,250 --> 00:43:11,320
We are the place that explains
the scientific method, that

1109
00:43:11,320 --> 00:43:12,658
uses the scientific method.

1110
00:43:12,658 --> 00:43:14,200
And we need to use
the methods you've

1111
00:43:14,200 --> 00:43:15,940
learned here to
think intelligently--

1112
00:43:15,940 --> 00:43:18,490
whatever your conclusions--
but to think intelligently

1113
00:43:18,490 --> 00:43:20,770
about these economics topics.

1114
00:43:20,770 --> 00:43:24,295
And fundamentally, that
means being annoying.

1115
00:43:24,295 --> 00:43:26,420
And to illustrate that,
I'd like to end with a joke

1116
00:43:26,420 --> 00:43:28,090
that some of you may have heard.

1117
00:43:28,090 --> 00:43:29,780
Sorry, I apologize if you have.

1118
00:43:29,780 --> 00:43:35,400
So the joke is a doctor, a
priest, and an economist go

1119
00:43:35,400 --> 00:43:36,410
golfing.

1120
00:43:36,410 --> 00:43:38,070
They get on the golf course--

1121
00:43:38,070 --> 00:43:39,120
and they hit the golf
course, and they're

1122
00:43:39,120 --> 00:43:40,810
behind someone going
incredibly slowly.

1123
00:43:40,810 --> 00:43:42,810
I don't know if there are
any golfers among you,

1124
00:43:42,810 --> 00:43:44,480
but the idea is if
you're very slow,

1125
00:43:44,480 --> 00:43:46,050
you're supposed to allow
the people behind you

1126
00:43:46,050 --> 00:43:47,470
to play through and
get ahead of you.

1127
00:43:47,470 --> 00:43:49,220
This person won't let
anyone play through.

1128
00:43:49,220 --> 00:43:50,700
And he's, like, 50 shots a hole.

1129
00:43:50,700 --> 00:43:52,650
It's disgusting.

1130
00:43:52,650 --> 00:43:55,895
And there's, like, 50 people
lined up behind this guy.

1131
00:43:55,895 --> 00:43:57,270
And these folks
are so disgusted,

1132
00:43:57,270 --> 00:43:58,230
they quit after nine holes.

1133
00:43:58,230 --> 00:43:59,070
They go back to the clubhouse.

1134
00:43:59,070 --> 00:44:01,050
They're pounding their
beers like, what an asshole.

1135
00:44:01,050 --> 00:44:02,640
I can't believe he wouldn't
let us play through.

1136
00:44:02,640 --> 00:44:03,580
It ruined our day.

1137
00:44:03,580 --> 00:44:05,622
And someone comes up to
them and says, excuse me,

1138
00:44:05,622 --> 00:44:06,720
are you new to this club?

1139
00:44:06,720 --> 00:44:07,960
And they said, yes, we are.

1140
00:44:07,960 --> 00:44:09,300
He said, well, I can tell
you're new to the club

1141
00:44:09,300 --> 00:44:11,925
because if you weren't new, you
would have known the person you

1142
00:44:11,925 --> 00:44:13,205
were playing behind is blind.

1143
00:44:13,205 --> 00:44:14,830
And actually, it's
a miracle he can get

1144
00:44:14,830 --> 00:44:16,000
the ball in the hole at all.

1145
00:44:16,000 --> 00:44:18,690
And usually, it's an honor to
be on the same course as he is.

1146
00:44:18,690 --> 00:44:19,773
And the person walks away.

1147
00:44:19,773 --> 00:44:21,400
And there's, like,
a deadly silence.

1148
00:44:21,400 --> 00:44:23,440
And the people at the
table are like, wow.

1149
00:44:23,440 --> 00:44:24,490
I feel terrible.

1150
00:44:24,490 --> 00:44:25,763
And the doctor goes, I can't--

1151
00:44:25,763 --> 00:44:26,430
I feel terrible.

1152
00:44:26,430 --> 00:44:27,305
I can't believe I'm--

1153
00:44:27,305 --> 00:44:31,190
myself, a man of healing, would
be so insulting towards someone

1154
00:44:31,190 --> 00:44:31,690
who's blind.

1155
00:44:31,690 --> 00:44:34,600
I'm going to dedicate a wing
of my hospital to the blind.

1156
00:44:34,600 --> 00:44:36,057
And he turns to the priest.

1157
00:44:36,057 --> 00:44:37,890
And the priest says, I
can't believe myself,

1158
00:44:37,890 --> 00:44:39,598
a man of the cloth,
and that I'm supposed

1159
00:44:39,598 --> 00:44:43,170
to care for the less able
in society, would do this.

1160
00:44:43,170 --> 00:44:45,750
I'm going to set up a free
soup kitchen for the blind.

1161
00:44:45,750 --> 00:44:46,710
And they turn to the economist.

1162
00:44:46,710 --> 00:44:48,750
And the economist says, well, if
he's blind, why doesn't he just

1163
00:44:48,750 --> 00:44:49,333
play at night?

1164
00:44:52,030 --> 00:44:54,730
And-- makes sense, right?

1165
00:44:54,730 --> 00:44:58,540
And basically, the point is
that the job of the economist

1166
00:44:58,540 --> 00:45:00,730
is to sort of be
annoying and look

1167
00:45:00,730 --> 00:45:04,510
for the basic
flaws in arguments,

1168
00:45:04,510 --> 00:45:07,060
to understand them, to ask
the difficult questions,

1169
00:45:07,060 --> 00:45:08,553
but to have responsible answers.

1170
00:45:08,553 --> 00:45:10,720
And that's what I hope
you'll get out of this course

1171
00:45:10,720 --> 00:45:11,740
that I hope you'll
take forward with you.

1172
00:45:11,740 --> 00:45:13,600
So thank you very much
for sharing it with me.

1173
00:45:13,600 --> 00:45:14,725
And good luck on the final.

1174
00:45:14,725 --> 00:45:17,820
[APPLAUSE]