October 14, 2009

Catch of the Day: Dems’ Go-To Health Care Economist Acknowledges Private Plan Crowd-Out by Govt.

Yesterday, the New York Times’s Prescriptions blog cited a claim by MIT professor Jon Gruber that a PricewaterhouseCoopers study predicting steep increases in health insurance premiums as a result of the BaucusCare iteration of ObamaCare ignored the supposed fact that administrative costs would come way down under care managed by government exchanges.

The problem for Gruber, who the Washington Post cited as the Democratic Party’s most influential health care expert, is that, as the Heritage Foundation has shown that when all admin costs are accounted for, the government has not demonstrated any previous ability to keep admin costs low. Heritage found the government’s fully-loaded cost per beneficiary of administering Medicare is higher than that of private sector health insurance carriers, even though you might expect Medicare’s admin costs to be significantly lower because of potential economies of scale.

Of course, the NYT blog didn’t cite Gruber’s Democratic pedigree, or the fact that he gave $2,000 to John Kerry’s presidential campaign in 2004.

Bruce Kesler at Maggie’s Farm  found something else yesterday that the Times and the rest of the media have missed. In 2007, Gruber, with Kosali Simon, co-authored a study supporting a core, common-sense claim made by those who oppose statist expansions of health care. That study found that past government efforts to ensure wider health care coverage have instead largely crowded out private sector plans.

The study found that 60% of new enrollees in government plans, most through S-CHIP and other Medicaid expansions, previously had employer-provided coverage. A disproportionate percentage of the defectors to government plans previously had family (as opposed to individual) coverage.

That’s an interesting finding, given the fact that ObamaCare/BaucusCare advocates still bitterly cling to the notion that private plans won’t be materially affected by a so-called government option, or by the implementation of government insurance exchanges. The track record cited by the study Gruber co-authored says they will, bigtime.

From the study’s conclusions, it seems that Gruber and Simon believe that government officials want to do something to prevent crowding out, thereby ensuring that only people who really need it get enrolled in government-funded health care expansions:

The highest priority should clearly be to explore further the issues raised in Section IV about how the design of public insurance expansions affects take-up and crowd-out. More generally, as states experiment more broadly with alternatives such as private purchasing pools, understanding the degree of substitutability between private and publicly subsidized insurance, and how that features with the nature of the publicly-subsidized insurance, becomes a critical area for future research.

Geez, not only is this guy from all appearances a political hack for hire, he’s also unbelievably naive. Statists don’t consider crowd-out a bug; they think it’s a great feature, an intermediate step towards their ultimate goal of controlling the entire system.

I’m not claiming that. I’m quoting it:


UPDATE: Oh and by the way, Gruber also seems to have a bit of an ego problem. In the study cited, he claims, along with a different co-author of a previous work, to have been the first to employ the term “crowd-out” in a health insurance context:

The notion that public insurance expansions simply erode private insurance coverage, rather than providing coverage to those otherwise uninsured, is known as “crowd-out”. This term was first used by Cutler and Gruber (1996) ten years ago, and they proceeded to suggest that crowd-out was sizeable for public insurance expansions over the late 1980s and early 1990s.

My response, after seeing this Google News Archive result is “horse manure” (search was on “crowd-out health insurance private,” input without quotes from 1980 to 1995).

Here’s one such listing in the Google Archive results, the seventh on the first page:

Pay-Per-View – Crain’s Cleveland Business – HighBeam Research – Apr 20, 1992
EBRI Suggests CHIP Programs May Crowd Out Private Insurers. … Private insurers may have to…members pay for health insurance of their …

Gruber’s only wiggle room is that he is taking credit for hyphenating the term. Are you kidding me?


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