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What Jon Gruber's Quotes Really Tell Us About Obamacare—and American Politics

Bill Greene/The Boston Globe via Getty Images

The controversy over Jonathan Gruber, the MIT economist and Obamacare "architect" who talked about the "stupidity of American voters," seems to be losing a bit of energy. I’m not sure how much I can add to what other policy writers have already said about his recently publicized comments and how they will affect perceptions of the Affordable Care Act—which, despite signs that it is achieving its basic goals, remains broadly unpopular.

Like my counterparts, I have relied heavily on Gruber’s expertise over the years and have come to know him very well. He’s served as an explainer of basic economic concepts, he’s delivered data at my request, and he’s even published articles here at the New Republic. My feelings about Gruber, in other words, are not that of a distant observer. They are, for better or worse, the views of somebody who holds him and his work in high esteem.

But that familiarity—along with my knowledge of how the Affordable Care Act came to become law—also gives me some perspective on the two key questions his statements have raised. Do Gruber’s comments about the “stupidity of the American voter” reflect the thinking that went into the Affordable Care Act? Do Gruber’s comments about lack of “transparency” and “contorted” policy construction validate long-held conservative beliefs that Obamacare is illegitimate—that its architects defied the conventions of politics and promoted the law based on false pretenses?

I believe the answers to both set of questions are no, although I also think those of us who write and think about health policy have something to learn from this whole episode.

Let’s start with the question of whether Gruber was, as he himself sometimes says, an “architect” of Obamacare. He was, but not in the sense that most people are using the word.

Following the collapse of the Clinton health care plan in 1994, health reform advocates began a long period of introspection and debate, trying to figure out how to match up policy and politics—that is, how to construct a program that would achieve universal coverage, hold down costs, satisfy the public, and make it past the political opposition that had killed Clinton’s plan. Gruber, then a young-ish economist who’d done original and widely respected research on the effects of past insurance expansions, joined those conversations.

Years later, Gruber would become an advocate for what became known as the three-legged stool model—requiring insurers to provide coverage to all people regardless of preexisting condition; requiring the people buy coverage, through some kind of "individual mandate"; and providing people with the financial assistance necessary to pay for that coverage. His preference reflected the familiar economist’s predilection for competition among private plans over government-run substitutes, though he was hardly the only expert on the center-left who felt this way. The same basic idea undergirded the Clinton health plan of 1994, although that ill-fated scheme had important differences with what would become the Affordable Care Act.

In the late 1990s, Gruber did something else: He built a simulation model for projecting how different policy changes would work out in the real world. As Karen Tumulty explained some years ago, while she was writing for Time, the idea originally came from Chris Jennings, who had been a health care advisor in the Clinton White House and continued to advise Democrats in the Bush era. Typically officials who had to make such calculations had to rely on the Congressional Budget Office or Office of Management and Budget, who could take days or weeks to deliver results. Gruber’s model produced them much more quickly.

When Mitt Romney, then the Republican governor of Massachusetts, needed to act in order to hold onto federal Medicaid funds, his advisers asked Gruber to provide projections of different policy options. The results of those calculations were one reason that Romney, along with the state legislature, decided to create what became the Massachusetts health reforms. Gruber’s role in that enterprise—the first successful state effort at near-universal coverage—is one reason he became so prominent.

Faithful readers of the New Republic may remember Gruber’s role in what became a significant, if ultimately ironic, moment of the 2008 campaign. It’s easy to forget now, but when Obama first ran for president he rejected the idea of an individual mandate. John Edwards, who had included a mandate in his plan, and Hillary Clinton, who planned to include one in hers, attacked Obama for this—and cited a rough calculation that reform without a mandate would mean an additional 15 million people without health insurance. The figure had come from an article I wrote at the time. My source for the figure was a back-of-the-envelope extrapolation by Gruber.

Obama campaign staff were not pleased. But after Obama won the election, and decided upon health care as a priority, his advisers tapped Gruber to provide calculations. The Department of Health and Human Services hired him as a contractor and paid very good money for his services—nearly $400,000, fees that are, health care experts tell me, roughly in line with what private consulting firms charge for similar work. In that capacity, Gruber provided the White House and sometimes its congressional allies with data—predictably similar to what CBO official projections would ultimately show—that they could use to devise policies or to defend their positions in public. 

It’s possible that Gruber offered informal advice along the way, particularly when it came to positions he held strongly—like his well-known and sometimes controversial preference for a strong individual mandate. Paul Starr, the Princeton sociologist and highly regarded policy expert, once called the mandate Gruber's "baby." He didn't mean it charitably. But lots of outside advisors were offering the Administration opinions. On only one occasion, to my knowledge, did Gruber meet directly with President Obama in an advisory role. In that instance, he was part of a delegation of outside economists urging Obama to adopt reforms that would help restrain the cost of care. Otherwise, Gruber’s role was primarily to provide numbers.

At the same time this was happening, reporters like me were constantly seeking interpretation of the policy process and different proposals in circulation. Gruber was among the experts we would interview. Although he sometimes disclosed that he was working with the Administration, he did not tell the editors of the New York Times, when he wrote an op-ed, and when the blogger Marcy Wheeler reported on his relationship the Times ran a stinging correction. (I knew he was working with the Administration and had assumed, wrongly, that most other journalists did too. That was my fault.) One reason reporters, myself included, kept turning to him is that he was truly an independent voice who spoke his mind, and was willing to deviate from the White House party line even though he broadly supported the Administration's efforts.

The most memorable instance of this was a set of statements that the Affordable Care Act would not do much to control costs. Gruber’s view, which many other economists shared, was that the law’s payment reforms might not do much to change the underlying dynamics in medical care that led to ever-higher spending. Mostly this was because Gruber thought most of the ideas under discussion were promising but, at that time, unproven. As it happens, the data so far suggest that Gruber may have been a bit too skeptical. Health care inflation has been low and there’s a respectable, if still unproven, argument that the law is changing how medical care is administered, just as some other economists—notably Harvard’s David Cutler, another highly respected peer of Gruber's who has taken different views on these matters—had promised.

Those comments may sound familiar because a similar version, from March 2010, were among those that researchers plucked from video archives in the last few days. Conservatives have presented these comments as a revelation—a shocking, after-the-fact admission of a ruse by the administration, which touted the Affordable Care Act as reducing costs. Nothing could be farther from the truth. Gruber was quite open about his opinion at the time. As he liked to say, he was a “known as a skeptic” on these matters. The Administration, with backing of other economists, was more optimistic. And the general topic—whether or not the law would truly reduce costs—was the subject of extensive debate, in the media and in Congress. 

The same is true for virtually every Gruber statement that the media has discovered in the last few days. In one of the videotaped comments, Gruber speaks about how the Administration designed its bill so that private insurance payments to insurers would not count as taxes. This was not a secret. The CBO’s decision to count similar payments as taxes during the Clinton health care fight had caused all sorts of controversy in the 1990s. In 2009, CBO issued a very public memorandum on what it considered a private payment and what it considered a tax. The debate of what’s a tax and what isn’t a tax is largely a semantic one, on which people can have legitimately different views, as Jonathan Chait has noted. The CBO's guidance and Administration's reaction to it was reported by major outlets and discussed widely at the time.

The same goes for Gruber’s discussion of the law’s so-called Cadillac tax, which is slapped upon insurance companies anytime they sell a high-priced policy. In one newly discovered video, Gruber notes that the tax sounds at first blush like a tax on insurers, when in fact the charges are eventually passed along to employers and individuals. The whole point of the tax, he notes, is to limit the tax deductibility of group health insurance—something that virtually all economists believe makes health care more expensive. But clawing back a tax break for individuals sounds bad while slapping a tax on insurers sounds good, so the Administration and its allies decided to do the latter.

The quote would be incredibly shocking, except that this whole strategy—of taxing insurers to get at the employer insurance tax break—was widely understood and discussed at the time it was inserted into the law. One of the clearest explanations came in a blog item by Ezra Klein, who was at the time writing a widely, compulsively read blog at the Washington Post:

The excise tax was not the first choice for most policymakers. Health economists think the primary distortion in the health insurance market is that insurance provided by employers is tax deductible. That means a dollar paid in health benefits is worth more to a worker than a dollar paid in wages. Originally, Sen. Max Baucus sought to fund health-care reform by capping the employer deduction. But unions and employers howled, and the Senate Finance Committee quickly backed off.

The excise tax was a compromise thought up in Sen. John Kerry's office. Actually, "thought up" isn't quite the right term: It was unearthed by a clever staffer combing old ideas from the 1994 reform effort. 

The appeal of the proposal is that it has the same effect as capping the deduction, but with very different politics: It taxes "insurers" rather than "employers," which sounds a lot better.

And which sources did Klein cite in his analysis? Two well-known health care economists, one of whom was Jon Gruber. 

Taxing benefits rather than removing (or capping) the existing tax break for benefits is inefficient. This was the point Gruber was making in the video when he said policymaking was not as transparent as it could be. It's a point on which virtually every economist, and every serious of student of public policy, would agree. But economists and political scientists don’t make public policy. Elected officials do. And elected officials always struggle to make policy and politics match. That necessarily involves a level of salesmanship.

This is the dirty little secret of politics, as the Upshot’s Neil Irwin and my colleague Danny Vinik pointed out last week. Politicians advertise the appealing parts of their proposals while ignoring the unappealing parts, using whatever techniques they can to make ideas seem more palatable to the public. It's been that way since Thomas Jefferson sought Senate ratification of the Louisiana Purchase—and downplayed the contradiction between the land grab and his supporters' belief in a less powerful federal government.

If you want a more contemporary example of political salesmanship in action, pay close attention to how Senate Republicans are now proposing to amend the Affordable Care Act. Their new rallying cry is to “restore the 40-hour work week.” In practice, that means changing Obamacare’s employer requirement, under which businesses must pay a fine if they don’t offer coverage to employees who work more than 30 hours a week. Republicans want to move that threshold to 40 hours a week. Employers will reliably manipulate hours for workers near such hourly thresholds, in order to avoid incurring penalties, and moving the threshold from 30 to 40 hours would actually affect many more workers than leaving the threshold at 30.

Basically, a lot of people now working 40 hours would suddenly start working 39, and losing employee health insurance in the process. It might or might not be a good idea, for other reasons, but, as Paul Waldman noted recently at the American Prospect, the effect would be the exact opposite of “restoring “ the 40-hour work week.

Did the Obama Administration engage in some creative salesmanship of its own? Of course it did. And in one very regrettable instance, it misled the public about how the plan would work out. Obama repeatedly told people, without qualification, that they could keep their insurance if they liked it. In fact, many people who bought insurance their own and held plans that didn’t live up to the new law’s standards would have to give them up. Most ended up learning this in the worst possible way: When a cancellation notice from an insurance company arrived in the mail last fall, and without a working Obamacare website to check out their new options. These people constituted a small number of people, relative to the whole population, and it’s still not clear how many lost plans because insurers seized the moment to drop less profitable products in the market. Had Obama merely said “most people” could keep their plans, or “if you have a good plan already, you can keep it,” he would have been fine. He didn't. 

But accusations that Obama and his allies systematically misrepresented the law in other important ways—or hid its key features from the public—don't gibe with the historical record. The official debate over its provisions lasted approximately a year, the unofficial debate stretched back even farther than that, and during that time analysts pored over details and partisans on both sides argued over virtually every aspect. All legislation has its unsavory deals and, even now, there are probably some that have yet to become public. (I'm guessing Steve Brill's book will reveal a few.) But, as Brian Beutler noted in these pages last week, “Conservatives have always said the health care law wasn’t debated, that it was rammed through, nobody read it, etc, etc. But it actually stands out for how much it was debated, and, for the most part, how transparent that debate was.”

Sometimes that debate moved quickly past issues that would later prove important. In November of 2009, for example, the CBO did a full analysis of how the law would affect premiums for people buying on their own, through the new exchanges—and concluded that many would pay less, thanks to the law’s tax credits, but some would pay more. Many of us (myself included) wrote about it at the time and suggested the trade-off was worthwhile. After all, many more people would have insurance, junk policies would wither away, and even those paying more would have the security of knowing they could never lose coverage because of pre-existing conditions. But that particular issue didn’t break through the noise, in part because critics were focusing on other, mostly false allegations of how the law would affect employer coverage. It didn't really get attention again until 2013, when Forbes' Avik Roy, among others, began analyzing projected premiums in and writing about "rate shock."

The accusation that Obama and allies deliberately gamed the budget process to hide its cost is more frustrating and more clearly wrong. Some of the best evidence refuting this charge comes from one of the stories that have gotten a lot of attention recently—that meeting in the Oval Office at which Gruber was present.

From the get-go, Obama had said he would not pass a health care bill unless it paid for itself and at least started the work of slowing down health care inflation. He was very serious about this, even though some of us would have preferred that emphasis be on guaranteeing adequate coverage. Obama and many of his advisors believed they could accomplish much of this through “payment reforms,” such as incentives to form cost-effective group practices, that would reduce the cost of care. But CBO economists didn’t think evidence proved such changes would meaningfully change the nature of medical care. If Obama really wanted to convince the CBO that reform would pay for itself and contribute to lower spending, director Doug Elmendorf had made clear, the Democrats had to swallow tougher medicine—starting with the Cadillac tax, an idea that economists almost universally believed would have an effect. 

In the end, Obama and the Democratic leaders went along with the Cadillac tax. They also passed a law that significantly reduced spending on Medicare—partly by taking away extra payments to private insurance companies and partly by reducing what the program paid for services. They also insisted a myriad of smaller revenue increases, such as a tax on device makers. Obamacare's authors had done exactly what the CBO wanted, yes, but in so doing they had also constructed a more fiscally responsible bill. The CBO ended up certifying that Obamacare was likely to reduce the deficit because, as best as the CBO could tell, it would.

All of these decisions made Obama and the Democrats politically vulnerable. Unions hate the Cadillac tax, because some of their members have generous health plans that the tax is designed to curb, and have used it as a cudgel against the Administration. Republicans have eagerly cited labor’s antipathy as proof the law is not working, even though conservatives and, during 2008, then-Republican presidential nominee John McCain have endorsed similar ideas. The device industry has crusaded to repeal its tax, winning over Republicans and, yes, quite a few Democrats, who say (without great evidence) that it stifles innovation.

Of course, no cost-cutting decision has proven as politically damaging as the cuts to Medicare, which come to more than $700 billion over ten years and which Republicans in 2010 and again in 2012 used to rile up senior voters—even though Paul Ryan’s House Republican budgets have called for virtually the same cuts.

The extent to which the Obama Administration and its allies deferred to the CBO and independent expertise, in order to build a fiscally sound law, stands as a marked contrast to the way policy is typically conducted in Washington. To glimpse an example of very different behavior, just think back to 2003, when the Bush Administration was trying to get its prescription drug plan through Congress. The plan had no offsetting revenue or cuts. It was pure deficit spending and the Bush Administration seemed not the least concerned about that, even though Bush and his advisers were constantly complaining about Democratic proclivity for uncontrolled spending.

But then Richard Foster, then chief actuary for Medicare, indicated that the Bush Administration was vastly underestimating the program’s likely cost. Getting the plan through Congress was going to be tough, Bush Administration officials knew, and projections for still-higher costs could scuttle it altogether. So did the Bush White House do what Obama did with Elmendorf—did they sit down with Foster, to figure out how they might alter the bill to satisfy his concerns? No. They insisted he keep his mouth shut and threatened to fire him if he disobeyed. That’s not political salesmanship. That’s straight-up manipulation and deceit.

The Bush Administration admittedly set a low standard for transparency and honesty in presenting policy arguments. And at least one accusation that critics have made in the wake of these Gruber quotes rings true: The Administration deference to policy experts meant that it didn’t always grasp how average Americans would perceive policy changes, even if the arguments for them were strong. Most economists, Gruber included, would look at changes to the non-group market—that is, people buying coverage on their own—and conclude that the “winners” far outnumbered the “losers.” It's an argument that I've echoed in my own writing. But the good feelings from people who benefit from such a shift are never as strong as the bad feelings from those who are worse off. It’s human nature. It’s a lesson that policymakers, and those of us who follow them, should take to heart.

Even so, the debate about the Affordable Care Act did not take place in a vacuum. Obama and his allies faced relentless opposition, almost from the start, and that opposition felt no squeamishness about twisting the truth or simply telling bald-faced lies. At various points, opponents of the Democrats’ health care legislation insisted that it would it cover undocumented immigrants (false), exempt Muslims from its provisions (false), impose a tax on real estate (false), force doctors to inquire about patients’ sex lives (false), exempt members of Congress (false), and, of course, create death panels to deprive the sick and elderly of life-sustaining care (false).

These arguments didn’t just come from the fringe or even Fox News pundits, so many of whom have been in high dudgeon over Gruber’s comments. At one time or another, some came from prominent members of the Republican Party. And that list doesn’t even include claims such as describing legislation as a “government takeover” or claiming it would raise the deficit and upend employer-sponsored insurance, which—although not the kind of factual statements one can prove or disprove—are nonetheless inconsistent with available evidence.

Gruber’s comments about the “stupidity” of the American voters were wrong and inappropriate because voters aren’t dumb. And while the average person on the street may not grasp the tradeoffs or intricacies of policy—or even recognize that "Obamacare" and the "Affordable Care Act" are one and the same—the public is supposed to have the help of analysts and journalists to translate and search for the truth. Gruber is an independent-minded professor who excels at explaining things simply and colorfully, making him both an ideal person for that job and easy mark in the era of YouTube journalism. He's also a public figure, although not a politician, and personally accountable for what he says.  

But the broader critiques that Gruber’s comments have fueled really don’t make sense. In crafting and then promoting the Affordable Care Act, the Obama Administration was, if anything, more transparent and more open about policy than both its predecessors and its opponents. It was certainly more responsible about managing the federal budget. Ironically, one small reason for that candor and fiscal rectitude is the analysis Gruber provided, privately and publicly, as he was trying to help pass a law that—oh, by the way—would provide economic security and probably better health to millions of Americans.

Intentions don't mean everything in politics, obviously. But surely they matter a little. 

Update: Jon Walker of FireDogLake quite properly takes me to task for my description of Gruber's failure, in 2009, to disclose his contract with HHS. I've rewritten that passage.