Jonathan Cohn and Avik Roy: How To Reform the U.S. Health System

>> I'm Shobita Parthasarathy, Associate Professor of Public Policy here at the Gerald R. Ford School of Public Policy.  It's really wonderful to see such a large crowd today.  The policy talks program would not have been possible without the generous support through the Gilbert S. Omenn and Martha Darling Health Policy Fund.  On behalf of the Ford school, I would like to recognize Martha Darling who's here today.  Thank you so much.
^M00:00:25
[ Applause ]
^M00:00:31
I'd also like to thank our MPP student and David Bennett Fellow [assumed spelling], Adrianna McIntyre [assumed spelling].  Adrianna's connection to Avik and John helped us bring them to the Ford school.  Like our speakers, Adrianna writes extensively on health policy.  We're grateful for her hard work.
^M00:00:49
[ Applause ]
^M00:00:53
Today's program brings together two of the country's top commentators on an issue that interest not only us but affects many of us in this room.  Health policy, please join me in welcoming Avik Roy and Jonathan Cohn.
^M00:01:10
[ Applause ]
^M00:01:14
Avik Roy studied Molecular Biology at MIT and is a graduate of the Yale University School of Medicine.  In addition to his role as opinion editor at Forbes, Avik is a senior fellow at the Manhattan Institute for Policy Research, a conservative think tank.  He was part of Republican Presidential candidate Mitt Romney's health care policy advisory group during the 2012 national campaign.  Avik is also a columnist for the National Review Online popular blog, the Apothecary, which has been recognized for its critique of Obamacare as one of the best takes up from Conservatives on Health Care Reform.  John Cohn is an alumnus of Harvard University where he was President of the Harvard Crimson.  John has written extensively on health policy.  His 2007 book "Sick: The Untold Story of America's Health Care Crisis and the People Who Pay the Price," advocated a federal universal health insurance programs for Americans.  He is currently a senior editor at the New Republic, a magazine known for its liberal commentary on American policy since 1914.  Both Avik and John have discussed their views on health policy and Obamacare and particular in writings for a variety of publications and on numerous television and radio shows.  But today, we're looking forward to hearing their perspectives but also their engagements with one another.  Given their backgrounds, it promises to be an insightful and lively debate.  Before I ask our speakers to begin, a brief word regarding today's format.  We'll start with Avik and John laying out their positions at the podium respectively.  Next, both Avik and John will be seated for some back and forth.  We'll save approximately half an hour for questions from the audience.  I'd like to remind our audience, that if you have a question for Avik or John, please write it on one of the cards that were passed out at the entrance.  Ford School volunteers will begin collecting those questions cards at around 3:15 PM.  Our students, Adrianna McIntire and Ruth McDonald [assumed spelling] will ask those questions.  And if you're watching online, you can submit by your question via Twitter using the hashtag policy talks.  Avik, John, the floor is yours.
^M00:03:37
[ Applause ]
^M00:03:41
[ Pause ]
^M00:03:49
>> Thank you for the introduction.  I'm sorry, I didn't bring my PowerPoint.  I stored it on a network, it turns out it was the same people who run HealthCare.gov.  So, I had a little trouble accessing it, so I'm here without slides.  I want to thank the University of Michigan.  I want to thank the Ford School for setting this up.  One of the things that Avik and I discovered in our many exchanges on Twitters that we share the love to the University of Michigan and its sports teams.  So, as I'm particularly honored to both of us to be here.  And I want to thank Avik for being part of this.  You know, today, there was an announcement that the House of Leadership of the Republican--of the Republican House Leadership was planning on unveiling a new health care plan but at least based on the initial reports and they could be wrong.  There's not really much to it and that's been the tender of debate in Washington.  There are those who favor the Affordable Care Act.  There are those who want to get rid of the Affordable Care Act and those who want to give rid of it don't really spend a lot of time talking about what they would do instead.  But there has been a group of people, conservative intellectuals on the right who have been thinking about it, have been writing about that.  Avik is one of them.  He's done a lot of work and I think that conversation despite the many differences I think you will see between our approaches is a constructive conversation and one that belongs to the university but also eventually in the rest of the country.  And hopefully, what we do here today can be the beginning of that.  So, I thank him, I thank the university and the topic are--we are supposed to be here to discuss as beyond Obamacare and the future of Health Care Reform in the United States.  And I hope we will get a lot of time to talk about the future in our different visions for where we should go from here.  But I don't believe we can talk about future without talking about the past.  You know, for me, health care, I have been writing about health care for what is disturbingly close now to two decades.  And I spent a lot of that time speaking with people who have been victims of the American Health Care System sitting in their living rooms, listening to their stories.  And there was a recurring pattern of stories.  There were people who I remember meeting, someone who works for a defense contractor in Upstate New York who lost his job and was hired back.  And the new job was a contract job.  It didn't have health care benefits.  He was not able to get health insurance for him and his family.  And when his wife fought cancer and eventually passed away, he was left with so many bills that he had to declare bankruptcy.  And there was a realtor, a woman in Central Florida who worked very hard in her business but her levering insurance lacks because she couldn't afford it.  When she tried to get back on coverage, she had diabetes.  She was not able to get coverage and she was eventually taken by a fraudulent insuring left with five digits in medical bills.  And there were stories like this over and over again.  You've heard all of these stories.  And they're familiar, although today, when your rights watch the news, you hear a different set of stories about victims of the Affordable Care Act.  And so, what I would like to do is remind everybody about where we came from.  And we had a system with 45 million people who were uninsured.  We had a system where millions more couldn't pay for their insurance without making other very serious sacrifice.  So, we had a system where millions of people were walking around with health insurance that didn't cover their needs.  And they might not know it because after all, you don't know if your insurance is adequate until you actually get sick.  But then they did and they discovered they had crushing medical bills.  And even the people who were in the situation always lived under a cloud of insecurity because after all, you were always just a lost job or an illness away from losing your health coverage.  And as all this was going and we had the system that didn't cover enough people.  We were imposing a huge economic cost on the country, on its businesses, on its taxpayers, a system that did not have a way to control cost.  We were paying more than any other country in the world and yet we weren't getting healthcare or healthcare access that was better in any other countries in the world.  So, that's where we were.  That's where we were a few years ago.  I will be honest, if you would ask me five, 10 years ago, "Jonathan Cohn, how would you fix the nation's health care system?"  I would have been ready with an answer.  I would have told you to do a single payer health care system.  I spent a wise time setting systems abroad and I'm very impressed with what they do in France and what they do in Taiwan.  I think those systems are great.  But you didn't ask me, you elected the guy with the big ears.  And they had to deal with the Democrats and the Republicans in Congress and all the special interest.  And what they got was the Affordable Care Act which was a compromised plan and a plan designed to take some ideas from what Conservatives had once championed and blend them into a liberal approach for universal coverage.  And it as a compromised plan that they had more compromises built onto it as it went through Congress.  And what came out on the other side didn't really look that right.  And so, I'm sort of in a strained position here because if we're talking about how to reform the Health Care System, I am really not here to tell you that the Affordable Care Act is the perfect plan or even the near to perfect plan.  It is not an ideal plan.  All I want to do is convince you and I'm just going to take a few minutes because we're going to go back and forth about this, convince you that it makes the system better, and puts us on a trajectory to make it better still.  Now, you guys, you look like a pretty informed audience.  You're sitting here at the Ford School.  I'm not going to bother to go through the details of the plan, you know, the one thing I will stress, the people always seem to forget is that, you know, the basic promise, the Affordable Care Act, you hear how complex it was, was to actually be a little simple, not to mess with too much.  The basis say, "Look, there's lots of people get insurance from Medicare, let them keep getting in for Medicare."  And there's lots of people who have employer insurance, let's for the most part, let's let them keep it.  And there's a program for low-income people that's called Medicaid.  Let's let them keep it.  We'll expand that to include more low-income people and then we'll create this new market with the subsidies and the regulations and the mandate for everybody else.  You know, it wasn't basically was built on what we have.  Again, not the way I would have done it but, you know, not an unreasonable approach.  And it's an approach that, you know, promised to make insurance available to anybody who wanted it regardless of preexisting condition, an approach that offered financial assistance for people who needed it, an approach that would have guaranteed that everyone with insurance will have a comprehensive set of benefits.
^M00:10:04 They won't go to the doctor, go the hospital and discover that, "Oh, my gosh, I needed the services is not even on my insurance plan."  Now, the truth of all public policy, liberal, conservative, everything in between is that there are tradeoffs.  Affordable Care Act has costs.  Cost taxes or higher taxes on the wealthy.  There are fees to industry.  There are cuts to Medicare.  You took money out of the Medicare system.  Hopefully, I would argue in ways that make it more efficient but we did take money out of the Medicare system and we took that money and are using it to help people who can't afford to buy insurance, help them to buy insurance.  So, that's a cost.  We set a standard for what insurance must cover.  You know what?  A lot of people had coverage that wasn't up to that standard.  And one way or another, you have to get those people up to that standard.  And there are a lot of people who have those old policies.  And those policies, they like them.  They taught they were great.  And now, they're discovering they have to pay more for their insurance.  So, these are real costs.  These are real tradeoffs and they don't even take them into account, the batched implementation of the website and all of that.  That is the way public policy works.  It is complicated.  It is real.  But you have to weigh those cost against the benefits.  And here's what we know.  We do know that people are signing up for health insurance and we won't know for a while but I am firmly convinced that when this is done, we will find that were will be fewer uninsured Americans than they were last year.  And then over time, that number will grow.  We will find and we know that when people get health insurance, they are more financially secure.  And it will reduce poverty.  It will reduce inequality.  We will discover that thorough deficit comes down as Congressional Budget Office has continued to predict year after year when it has assessed this plan.  And we will discover that fewer people are in those situations where they find they lost their coverage, where their coverage doesn't cover what they need.  It won't be perfect, lots of the problems that we had before are still going to be there, lots of people without health insurance will still not have health insurance, but we will be in a better place.  Now, we will talk and I'm going to finish up in a minute.  And I hope all people talk about his ideas throughout the reform.  And like I said, I think these are real and serious ideas and then it's a great thing.  And we will talk about what I think is good and bad about those plans.  He'll talk about what he thinks are good and bad, we'll go back and forth and ask you to keep two things in mind as you think about these plans.  Number one, what are the tradeoffs?  There are always tradeoffs that, if something sounds really good, make sure you ask yourself, "What am I losing?"  And if something sounds really bad, make sure you ask yourself what you're gaining.  And number two, don't compare to the old way, the old status quo.  'Cause I got a secret for you, the old status quo was going away.  One reason that everybody who is experiencing trouble in the health care system now, people don't like the Affordable Care Act is they don't like what they lost.  And I totally get that.  I totally understand that.  But the truth is there was no keeping what everybody had.  The old system was deteriorating, slowing but surely.  Something was going to change.  Now, whether the change that, the Obama administration brought us was a change for the better or worse or whether or Avik's plans or another conservative plan is a change for the better or worse.  These are very serious reasonable questions that we can all debate together.  But don't try to just look back to the way things were.  Don't say, "Hey, I like it that way better.  Let's just go back."  Because that was never an option in the first place, and that's why we did reform and why I think this law for all of its works which I'd be happy to talk about is still worthwhile.
^M00:13:35
[ Applause ]
^M00:13:41
>> Let me echo John's comments in thanking the University of Michigan for hosting us today.  I grew up in Oakland County, born and raised there, watching the Bo Schembechler stopped down the sidelines in Michigan Stadium.  So, it's always a pleasure to be here in Ann Arbor on a day that is not a game day so not to deal with the traffic.  My mom often will--kind of friends will call her and say, "Hey, you know, I saw your son on TV.  Why is he such a Republican?"  Mom says, "I don't know how I raised such a Republican."  And the great thing about today is that Adrianna who is here who helped to organize this event was a kindergarten student of my mom's not so long ago.  So, if my mom was to know what could have been if she had not raised a Republican, she could have--she can switch her allegiances this afternoon. And I also want to thank John for being here because he and I--again, we--and out of us went here with what they called a Walmart [phonetic] Wolverines because [inaudible] of us went to the school but we both love the team and we're sorry about what happened yesterday.  But I want to touch on something that is relevant to the ACA which is, you know, we Conservatives are not supposed to call it Obamacare because that's considered impolite.  A more accurate name for the law we're told is the Affordable Care Act.  So, let's examine what the Affordable Care Act does to make health insurance more affordable.  And I think what I'm going to contend here today is that well, certainly, for some people who lost, spends a lot of money to subsidize the cost of health insurance. The law actually drives up, not down the underlying cost of health insurance.  And everyone agrees that the biggest problem with our Health Care System is that it's too expensive.  So, one of the things you heard a lot in the roundup of the ACA is that well, we've got to have--we got to expand coverage because otherwise, people are going to get all this free care in the emergency room.  And it turns out that actually only about 1.74 percent of national health expenditures is uncompensated emergency room care which only a fraction or actually people who are low-income and insure.  So, it's not why health insurance is so expensive in America.  Health Insurance is not expensive in America because some people are going to the emergency room and not paying for their health care.  The reason why there are so many people who are uninsured in America is because health insurance is too expensive, right?  If health insurance cost nothing, then more people would have it.  It's because it's so expensive that people have it.  It used to be that health insurance cost about 11 percent of wages in 1996.  Now, we're at about 19 percent.  This is of course 2010 data.  It's gone up somewhat since then.  Health insurance is too expensive and that is why a lot of people go without it.  Who tends to go without health insurance?  Young people.  Why is that?  Because young people tend to have less health problems.  So, if you're generally healthy and health insurance is really expensive and you don't go to the doctor that often, why would you spend 200--300 dollars a month on something that you barely use, right?  So, you know, there's been this kind of perception out there in the world that the only reason young people don't have insurance is 'cause they're slackers.  They're irresponsible slackers who are just--they love to ride on motorcycles and do wheelies and do flips and, you know, on mountains off piece and they're just crazy people who are reckless and if they were just responsible like the rest of us, they would spend 3,000--4,000 a year on health insurance.  No.  If your average consumption of health care, this is for all 27-year-old to 25-year-olds in America is a thousand bucks a year.  Why would you spend 4,000 bucks on health insurance?  It doesn't make a lot of sense.  And so that problem--that problem is precisely the problem with the uninsured.  If you notice on this chart, a majority of the Americans who are uninsured, this is according to census are under the age of 35.  72 percent are under the age of 45.  The reasons why people are uninsured in America is because health insurance is too expensive and they don't make enough money to afford these expensive products.  What does the ACA do to address this problem?  A big part of what it does is it sets off these exchanges where it drives up the cost of health insurance, for healthy and young people.  It uses a tool called "community rating" and the point of community rating is to say, healthy people and young people, because young people tend to be healthier should pay a lot more for their health insurance so that older and sicker people pay less.  And what that leads to in a conventional market is so the tip, the way the statistics work, the way the math works is in a free market jungle let's call it.  In the free market jungle which is a fully underwritten health insurance market, the average 18-year-old spends about 800 dollars a year on health care in America.  And the average 64-year-old spends 4,800 dollars a year, about six times as much.  What the ACA does is it narrows that band to three to one.  So, insurance can only charge three times as much their oldest customers as to they do to their cheapest customers.  That dramatically increases the cost of insurance for young people.  And if half of those young people drop out because they think that's a raw deal for them, the irony is that the cost of health insurance still goes up for the elderly because those young people aren't there to cross-subsidize them.  And that's one of the things the ACA does.  The ACA because of all the regulations and mandates that it imposes on insurance and you might or some people might agree and John would agree that a lot of these things that the ACA does to regulate the insurance market are good.  The fact that it requires insurance to cover all sorts of things that insures and have to cover for, the fact that it has caps on lifetime limits.  All those things you might think are good, but they drive up the cost of health insurance and it depends on the state.  The reason--One of the reasons why there's a lot of variation among the states is because some states already have those regulations to begin with.  Others did not.  And so, the markets in each of these states are going up in different rates.  But most states, according to a study that I did with some colleagues, the Manhattan student, the average state is we're going to see a 41 percent increase in the cost of health insurance and that's taking into account the fact, that's adjusting those premiums to four preexisting conditions.  If you don't take that into account, the increase is actually much higher.
^M00:20:02 The American Academy of Actuaries is a nonpartisan society of insurance analysts and other people.  If you don't trust my numbers, they predicted just on the riskful, that means the way in which the ACA was changing the design of the insurance plans, the cost of insurance around the country will go up by an average of 32 percent.  So, in 2009, some of these concerns are raised by a PricewaterhouseCoopers.  They published a study estimating that the cost of private coverage will increase by 23 percent from 2009 to 2016 over and above private law--prior law and a senior editor at the New Republic who may or may not be in the room described this in 2009 as the insurance industry declaring war because the study was commissioned by the America's health insurance plans major insure lobby.  He described it later in the spring of 2010 as lies commissioned by the insurance lobby and described it also as political sabotage, the idea that the ACA might drive up the underlying cost of health insurance.  Now again, some people will benefit from subsidies that insulate themselves from this higher cost, low-income people in particular, sick people to some degree.  And John was not alone in describing this.  This was a widely held view on the left at that time, people scoffed at the idea that the ACA would drive up the underlying cost of health insurance.  And that has been born out by the experience that people have had.  Now again, some people are benefiting from the subsidies.  But the people who don't benefit enough from those subsidies and the people who don't qualify for those subsidies at all, a lot of those people are staying out of the market.  And that's why the number of people who have signed for the ACA has been lower than expectations.  It hasn't just been the website.  Here's another way to think about this.  So, one thing that people say as well if your income is up to 400 percent of the federal poverty level which is a for childless adult about 45--46,000 dollars, you quality for subsidy.  So, the thought was well, if you're qualified for subsidy up to that high of an income, then what's the big deal?  Most people are going to be protected among the people who are uninsured.  The problem is those subsidies are on a sliding scale.  So, if you're really poor, you'll get a big subsidy.  If you move towards the middle onto this range here, the subsidy goes down.  And so, if you increase the cost of the health insurance policy compared to what it was before, the net cost you even inclusive of subsidies for a lot of these people is still higher than it was before.  And it's again, it's a particular problem for people who are in their 20's, 30's, and 40's as opposed to much older people.  If you're in your 50's and 60's, you tend to benefit from some of the regulations we talked about before.  Here's another point I want to bring out which is that health insurance is not the same thing as health care.  One of the things the ACA does is it massively expands the Medicaid program.  And the problem with the--the Medicaid program has many problems.  I've written a book called "How Medicaid Fails the Poor."  And one of the things I highlight in this book is the fact that because of the way Medicaid is designed, it pays doctors less and less for these comparable services that other insures pay.  As a result, a lot of doctors don't take Medicaid.  So, this is a percentage of physicians based on specialty who reject patients with private insurance.  The light blue is Medicare and the orange is Medicaid.  So, because more and more doctors don't take Medicaid, you might have this card that says you have health insurance but you can't actually get a doctor's appointment when you need one.  And so, the access to care that people on Medicaid get is poor than it is for other forms of insurance.  And that's one of the reasons why studies consistently show that people on Medicaid don't perform better on health outcomes relative to those with no insurance at all.  And they perform far worse than those with private insurance.  These fees are scheduled to go down over time, particularly in the Medicare population.  So, I showed here, this middle range is Medicare.  That's going to get worse over time.  Now, Congress keeps passing these temporary fixes but generally speaking, the fees that Medicare which is the program for the elderly, Medicaid is the program for the poor.  Medicare is going to pay doctors less and less over time and that's going to lead a lot of doctors potentially to stop seeing Medicare patients as well.  And so, you pile on an expansion in Medicaid with the changes to the fees in Medicare and you're going to have this two-tiered system where the people who are on Medicaid and Medicare are going to have much tougher time having access to physicians than the people on private insurance.  The exchanges will be somewhat in the middle of that.  So, I spent a lot of time bashing the ACA here but let me point out that, you know, I'll often mention the Conservatives that just because the ACA has its problems doesn't mean that the status quo ante--before Obamacare didn't have its problems either.  This chart is--I know it's hard to read from the back.  This is comparing public health spending.  So, government health spending per capita in the advanced industrialized economies and you'll see in 2010, so prior to the enactment of the ACA, public spending in the United States on health care per capita was 3967, much--more than all the three other countries in the entire world.  Now, this statistic is often used by progressive to say, "Well, shouldn't we just have singe payer because that we would spend less money and cover more people under single payer?"  And that's true.  We would if you look at Canada here or the UK here, they do spend less than the United States and cover more people.  There are quality issues with the way health care is delivered in the UK and Canada.  But more importantly, I'd highlight these countries here at the bottom, Switzerland and Singapore which have actually systems that while they're not pure free market utopias, they are more market order than what the US does.  And they spend far less than what the US does.  So, I think what I want to emphasize here is it's definitely true and Conservatives should understand that if you had--you can cover more people and spend less money.  And I think a lot of Conservatives feel that fear that if you have a universal coverage.  That means we're going to spend more money than we do today and that's not necessarily true.  The ACA will spend more money than we do today but that is not the only way forth.  You can actually cover more people and actually make the system more affordable and less expensive.  And let me finish up with this.  I think there are a lot of people who actually aren't conscious of the degree which health care spending drives the fiscal debate.  They say, "Why can't we just focus on patients?  Why can't we just focus on covering people?  What's the big deal?"  And the big deal is this, this is the Congressional Budget Offices' analysis of how much the federal government, not state and local governments, which is an important component too but what the federal government will spend on everything the federal government spends money on over the next 70 years based on current law.  And if you go by their assessment and you know you can agree or disagree with it, but basically the blue is everything else other than health care and the red is health care.  So, as a percentage of the economy, as a percentage of GDP, what we spend on everything, the military, social security, food stamps, unemployment benefits, the NIH, whatever you want to throw in that bucket, it's all in this blue here.  And the red is health care.  So, literally, every dollar in the growth in federal spending is health care.  And that's important for Conservatives to understand because Conservatives have intellectually and politically underinvested in Health Care Reform.  For a lot of reasons, we might get into in a bit, but this--if Conservatives are serious about the issues of limited government, they should be very concerned about this.  And of course, progressives should be too and have been because this constrains their ability to truly expand coverage in the way that progressives would truly desire.  Well, I guess I kind of lied because it's not just government health spending that's increasing as a percentage of the economy, its interest on the federal debt.  So, we're never going to get to 2040 on this chart because somewhere around here when interest on the federal debt is larger than how much we actually collect in tax revenue, the US is going to encounter a major fiscal and economic crisis.  So, we can't get to here.  Somewhere along the way, these numbers have to change and they have to change on the Health Care System.  And this goes to what John was saying earlier that the status quo ante was not going to coexist or continue forever.  It was going to change in one way or the other and the question is, how best to change it?  And I think there are ways to expand access to health care in a way that is more affordable for everybody and unfortunately the ACA in my view does not do that.  And with that, I will invite John back up for our fireside chat.
^M00:28:33
[ Applause ]
^M00:28:38
So, John, was I mean to you?  Was I fair, unfair?  Tell me what I said wrong?
>> No, you were very fair.  And I was right, we agreed on a lot.  We both like University of Michigan basketball which they had one yesterday.  You know, I do think you had shown a quote of mine I believe from the Pricewaterhouse survey and I remember that very distinctly.  I remember that in the backroom in that just so people know, this was when the Senate Finance Committee was debating the final health care bill in 2009.  And there was a lot of give and take with the insurance industry.  They had--There were a lot of arguments about how the law would affect people.  If I remember correctly, the Senate Finance Committee had been, you know, they have spent all summer debating this and they were set to vote on that Tuesday.  And about Sunday night at about 8 PM, the story drops in the Washington Post with a survey.  And it was fed to a reporter, this is what you do when you're a lobbying group in Washington and left and right where everybody does that this is not innate to the insurance industry.  They dropped the study and they got a big fat headline in the Washington Post the next morning saying, "Insurance industry study, Health Care Reform will jack up your premiums XX dollars."  Now, I'm pretty my argument then was I'll have to go back and read what I wrote.
^M00:30:03 I'd certainly, I know I wrote this later or about a month later when the CBO did its projections.  It was not that that--It was not true in so far as I want.  I mean I think everybody understood and the CBO came out and said it was very clear that if you require that health insurance cover more things, it's going to be more expensive.  What had bothered me about that was that, you know, the Affordable Care Act has a bunch of different mechanism for raising and lowering prices.  Some of them work on the system wide level.  There's the Cadillac [phonetic] tax, which you know about which is a change to way our tax treatment of employer health insurance is that is designed to put pressure down on health insurance premiums.  And of course, there are subsidies that will help people buy insurance and that was not in the Pricewaterhouse report.  So, it was sort of basically, every possible thing in the Affordable Care Act that would make health insurance more expensive and it didn't take account on anything that would make it less expensive.  And I did think that was sneaky and sabotaging of them although pretty far for the course.  But it brings me to a question which is this.  You are right when you--we have an insurance--we had an insurance system before I can't say now 'cause we now have the Affordable Care Act.  We had a system where insurance companies could lock people.  They didn't have to sell it with somebody with preexisting conditions or they could charge more.  They could hold all benefits.  They can sell you a policy that had a--individual policy with a 12,000-dollar deductible or didn't include mental health or rehabilitation.  Those two things allowed them to sell some really cheap policies.  You could buy an insurance policy from a company.  They charge it 50 bucks a month, 100 bucks a month.  And if you went to the hospital, you know, you're our there--you're on the hook for 12, 15 or maybe more thousand dollars.  So, my question is, quite apart from the subsidies and into the law, who makes better offer and [inaudible], do you think it's OK to sell those policies?
>> OK.  So, first of all, let me say I don't think it's sneaky for PricewaterhouseCoopers to analyze the underlying cost of insurance.  They acknowledge in their report that they were taking account of subsidies because the purpose of the report was not to take in account subsidies.  This is to say what's the underlying increase in the cost of insurance not how much subsides will cushion that below for a certain subset of the population.  University of Michigan jacks up its tuition by 20 percent and the federal government subsidizes that tuition increase for the bottom 20 percent of the country.  Well, that's great for them.  That's not great for everybody else.  In fact, that's one of the biggest problems with higher educations is that universities have jacked up the cost of tuition and education at a rate that far exceeds the ability of the middle class afforded.  And the same problem is true in healthcare.  As to your point about--do remind me the question.  I'm sorry because now I've just gone this digression-
>> No.
>> But you want to answer it.
>> So, my question is this there are--in the old status quo, you could sell a policy with the--
>> You remember now.
>> Right.  So, a couple of points, on the issue of high deductibles in particular, yes, you could buy plans in the old system that had high deductibles, not many people did though.  Many people--not many people wanted a plan with 12,000-dollar deductibles.  So, those plans didn't actually sell that well.  Plans with say a 3,000, 4,000, 5,000 dollar deductible did sell well.  Why is that?  Because actually that's the kind of insurance that a lot of Americans want.  They want a plan that has say a five, you know, we rhetorically heard from the Democrats all in 2009 and 2010 was, "Thanks to the Affordable Care Act, no one will ever go bankrupt because of high medical bills."  Well, that's what a high deductible health plan of a deductible that consumers actually want to buy actually does.  The reason why those plans were popular is because that's the kind of protection people wanted.  They didn't want the stoop to nuts, bells and whistles plan.  They've covered every single thing and had two extra premiums as a result.  And one of the plans that, you know what, I just like with my car insurance. I don't need my car insurance to pay for my gasoline or my wiper fluid.  I want my health insurance just like with my car insurance to cover me if I get hit by a bus, if I have cancer, if I have stroke.  And then if we had a system that only did that that actually genuinely did have financial protection for everybody in America, it would cost a fraction.  Not only what the Affordable Care Act cost but of what the entire healthcare system in America cost.
>> So, let me ask you, let's talk about what's exactly in this minimum health plan.  So, should mental health be part of the minimum health plan?
>> Not necessarily.
>> So, you don't think it's important.
>> Not necessarily--
>> You don't think it has to cover it.  You would be OK with health policies out there with people could buy without mental healthcare?
>> I would look at it much more simply than that.  Instead of having the health benefits say which services, you know, micromanaging which services are covered or not, just say if you spend more than 5,000 dollars in a given year, everything above 5,000 dollars will be covered if it's a legitimate health expense.  And you can include mental health in that or not but, you know, I don't have a--I don't think that, you know, that the mental health component of a high deductible plan is not important.  It's not that substantial.
>> Well, no but there's like every little piece, you know, we could through it.  But let me ask you so, 5,000 dollars.  OK, what if there were 6,000 dollars and 12,000 dollars for a family?
>> I mean again, you know, it's all about what people actually want to buy.  I don't think that you and I sitting here in our faculty lounge should decide what Americans want in terms of the financial protection or their health care system.  I think that if people actually decide as a country because that's what they're buying that 6,000 dollar deductibles were acceptable.  I don't think it's--the governments--not only is that the--not a proper role of the government but actually I think it's counterproductive for the government to say, "No.  You must buy plans with 3,000 dollar deductibles," which is what the ACA does--not so much with deductibles specifically but with the actuarial values of the plans, the financial generosity of the plans.  It does mandate a certain mix of the deductibles, copays, et cetera, and by doing so it makes these plans a lot more expensive--
>> But you had said its standard, right?  And you wouldn't let them sell any [inaudible], so you would set some standard.  There's some limit on how much you spend out.
>> I don't mind again in the Avik Roy Reform world like--
>> On the Avik Roy--
>> --if we're going to have the--if we're not going to talk about the Avik Roy plan, I don't have any problem with have--having a basic bracketing so that there's a basic sense that consumers can have OK I'm buying insurance.  It's actually insurance.  So, I think some of the things that the ACA did around that are not offensive in that regard.  But I do think the ACA went too far with the micromanaging and that's one of the reasons why the plans are much more expensive than they needed to be.
>> So, [inaudible], you should get to ask me a question 'cause I've been driving this for the last few minutes but and this drives me crazy but you're a reasonable person so maybe you can explain this to me.  So, I hear this argument all the time that, you know, I don't like the ACA because it loaded up with mandates.  It requires too much and what we really need is catastrophic insurance.  Now, if you go and look at what the ACA requires and I know this 'cause I don't like this about the ACA but it's there in the law.  The limit on what it--there it does place a limit on how much you could spend out-of-pocket.  And it's 6,000 dollars for an individual and 12,000 dollars for a family.  That's a really high deductible.  It's actually deliberately set at the level for what used to be called high deductible policies.  Now, I look at those plans, you know, I looked at the minimum that you are required to buy in the Affordable Care Act and I think oh my gosh.  I mean I don't like that.  I think if it were up to me in the Jonathan Cohn world, they would be smaller.  But, you know, again, you know, this was rather compromising, that's why [inaudible].  So, and this speaks to I think what is sort of hard for me to figure out about where Conservatives can go with this because I see that as pretty catastrophic.  There is a difference which is as your income goes down, the government basically reduces that exposure which to me makes a lot of sense.  Because if I'm making 20,000 dollars a year, you know, I can't pay 500 dollars or maybe 1,000 at most or whatever.  I don't have--there's no way I can even think about it.  So, my question is, you know, where, you know, how much lower you want to go?
>> So, you're kind of--I would call that a false choice.  So, let's take the state of California.  I read a blog post about this that was based on actually I worked with Sam Richardson on the University of Texas had done.  He compared two plans that had the exact same 6,000 dollar out-of-pocket requirement.  One was issued in 2013.  One was issued in 2014 under the ACA's regulation.  Both plans were sponsored by Kaiser, the famous health insurance provider and, you know, provider in California.  Both plans roughly covered the same level of service and yet the plan in 2013 cost 100 bucks a month and the plan in 2014 cost 200 bucks a month.  So yes, the cost sharing and the out-of-pocket requirements were the same and from your point of view maybe too high.  But the plans are the same in their basic architecture.  But the ACA version of that plan cost twice as much because of a lot of the regulations that drive up the overall cost of the way that product has to be designed.  So, I do find hide, you know, in the bronze plans in the ACA exchanges tend to have deductibles in the 5,000-dollar range or so.  And I think that's great.  I think 5,000 deductible is pretty typical in terms of what people look for in a high deductible plan.  The problem is that those 5,000-dollar deductible plans under Obamacare cost way more than they would need to under a system that was--that offered more opportunity for choice. And so, I think that's where I take issue with the way these plans are designed, how much the government, the federal government in particular restricted the ability of insurance to compete on the way they could design their benefits.
>> I'm curious about that Kaiser plan now.  So, you're saying is Kaiser is offering a new plan that cost twice as much and the benefits are basically the same?
>> Yeah and what's so--
>> And what do you think is the--what's up--I mean--
>> Yeah.
>> --Kaiser isn't just, you know, they didn't just died and they earn the competitive market.  What--tell me, I am sort of backed.
>> So, one of the things about comparing Kaiser in 2013 to Kaiser in 2014, that's useful is that what a lot of insurers have done in the ACA is it narrowed the choice of physicians in the hospitals that you can use to really contract with more lower cost providers to drive down cost that way.
^M00:40:03 Because if you can't compete on the benefits you're offering the insurance plan, what services are covered in the insurance plan, what the deductible is, what the copays are and all of that is uniformed and standardized by the government, pretty much the only thing that's left for you to compete on among the difference and different insurers is what the insurer pays the hospitals and what the insurance pays the doctors for those same services.  In the case of Kaiser, they don't have the ability to use those tools because the Kaiser network is already fixed.  And so, that's why it was actually a useful exercise because of the fact that network of hospitals and doctors was exactly the same in both Kaiser plans the 2013 and the 2014 version.  You're really isolating one of the things about Obamacare that from a regulatory standpoint are driving up the underlying cost of that insurance.  And so, what does that involve?  That involves for example the prescription drug coverage which is much more comprehensive in terms of emphasizing branded drugs over generic drugs than in a more market or any system you would have.  That complete suite of benefits that are covered under the ACA benefits.  I'm using that term in quotation mark in terms of health care service that have first dollar coverage.  And you might think from, again, from a personal standpoint, from a public health standpoint or whatever it is so great that all these things are covered.  But they do have a cost that goes through point about tradeoffs.  That every time you add a benefit, there's also a cost.  And I think there has been not enough discussion until very recently now that the plans are out there and people can shop with those plans about the tradeoff.  If you always hear Democrats say, "Well, isn't it so great that there's no lifetime limits anymore on plans?  So that's completely unlimited.  Isn't it great that all these benefits are covered at the first dollar?  Isn't it great that, you know?"  Well, it might be great if you don't have to pay for them.  But if you have to pay for them, you might not think it's so great.  You might not.  But I mean isn't it the case that in a real world unhealthy.  I might think, "Gee, a lifetime benefit, you know, what do I care if I have an annual cap on my plans because, you know, I'm not sick?"  The problem is and this is the nature of health insurance is the oldest dilemma, right?  I mean this goes back to the 1930s when we're establishing insurance systems is that you don't know you're going to need insurance till it happens to you, right?  I mean it can happen to anybody.  And then all of a sudden, that policy that's got, you know, the life, the annual limit, and all of a sudden you need it.  And, you know, I think you're right.  I mean I think there are tradeoffs and then let me very clear, I absolutely agree, I mean adding all these requirements on health insurance and maybe this the difference between left and right me and you is that I look at that and I say "You know what?  I think I want a system where no matter what happens to you, you'll be protected."  And that means that we're going to make sure everyone gets a policy that covers that for them, and I think that's OK.  And I think that includes mental health because mental health is a huge problem in this country.  And again, it's something that's easy to--people sort of laugh, oh, it's addiction services, you know, oh, it's this but, you know, people with serious psychiatric illness that's hundreds and thousands of dollars of treatment.  There are things like prescriptions, et cetera, and my point is I guess I'm willing, you know, there's a level--you and I could argue where the level should be and maybe it's--maybe you should be, you know, allowing people more out-of-pocket than I would want, maybe it's less than you but I think there should be level and I guess I am.  And maybe this is--and then you get to--you need to ask a question.  I, you know, I feel like that's appropriate and I guess I do.  I think that is right and I guess what you would say--
>> So, I'd say a couple--
>> I think actually, Avik, I would say if you could keep your answer really brief then we'll--
>> I'm sorry and I cut him.  I usually have let him, I didn't, so, you know, that's all right.
>> Yeah.  Yeah.
>> Well, as a free advertisement for something about to write.  So, I'm actually working on a lengthy white paper on this subject for the Manhattan [inaudible] which would be the Avik Roy health plan, how would you reform the ACA along more market-oriented lines that will touch on a lot of these?  So, I'll just sort of put that as an asterisk.  So, if you want to get a detailed answer, wait, stay tuned for that document which will come out in a couple of months.  But I would say that the range of services that the people--the thing you have to understand about health care I guess as a way to answer your question is there are certain things that really qualify as unpredictable events that require insurance.  For example, I might have a stroke.  That's something that I can't predict.  I want to have insurance that protects me from that.  I might not want to have insurance that protects me against becoming a crack addict.  I might not.  And you might say, "Well, no.  You might--Avik, you might become a crack addict today and you really should have health insurance that protects you from that."  I might say, "You know, I don't know."  I might say that, "You know what?  I'm not a smoker, why should I have insurance that protects me against chronic obstructive pulmonary disease which is this country is almost entirely driven by chronic smokers?  Should I have to pay more for health insurance so that people with chronic obstructive pulmonary disease get unlimited subsidized health care?"  I'm not so sure about that.  So, I think that's an important--We talk about health care as this one thing that's unit and its not.  I think if we disaggregated health care and the things that actually people really want to be protected from in terms of illness and injury and the things that are more about personal responsibility, you could have a much--I think a debate where the--I think the broader public would really embrace.  Because and you say, you know, "Yeah, you know, I am willing to pay for those things 'cause I do want protection for in about being hit by a bus.  I don't necessarily want protection against being a crack addict."  And other, you--someone like you might disagree but I think I might have more public opinion on my side than you on that particular argument.  You might have more public opinion on your side about some aspects of it.  But I think that's where again the center would be is that people want to disaggregate and let the market have some role on that.  Because again, there's things that we so-called health experts might think people want as protection, but then actually, the aggregate of Americans say, "You know what?  I'm either OK with that or I'm not.  I have things that we don't think people really want protected from."  They actually do want.  So, I think if we let that sort of--would be crowd source that a bit, we'd have a much better product and a much more cost-efficient product.
>> Great.  Thank you very much.  So now, we're going to turn to questions from the audience that had been submitted on the start.  [inaudible] Adrianna, do you want to start?
>> Just to start, what do we make of the reported declining health care cost in the last few years?  Have it about the cost curve or is it just a temporary effect of the great recession?
>> So, just to be very precise.  Health cost--health expenditures in the country have not declined.  The growth in the rate of--the rate--growth rate of health--national health expenditures has slowed down to some degree.  And it is--this is a matter contention.  So, there are some people particularly in the White House who think that Obamacare is responsible for the slowdown, even though it started in 2003 when Obama wasn't even a State Senator in Illinois if I recall correctly or maybe he was a State Senator but not a US Senator, something like that.  So, but the biggest bulk of the slowdown, if you look at the data and I have slides and that which weren't in my PowerPoint, I regret to say that map this out.  And if you actually compare the US to the rest of the industrialized world, you see a very similar curve in the slowdown in growth in national health expenditures which indicates that a lot of this is driven by the global recession.  And that's to say all of it is, and a big chunk of the reason why over--it's been a really a 10-year trend more than a one-year trend or a two-year trend is because in the commercial market for health insurance, there's been a migration as health care that keeps getting more expensive to high deductible plans with health savings accounts, more cost sharing, more deductibles, more copays, and things like that.  And that in combination with the recession has been a big part of why health spending has slowed down because people are responsible for more that spending themselves and therefore being more careful about utilization.
>> Oh, do we want to--
>> So, I would say there's a fair amount of common ground on this which is that the slowdown free gated [phonetic] the Affordable Care Act and Barrack Obama's time in the Senate possibly.  The single biggest factor is the economic slowdown.  I think or one of the single biggest factors, there were changes taking place in the health insurance, health care system prior to the Affordable Care Act.  Some of these were on the insurance side, higher deductibles.  I think--look, I think I would totally agree that if you make people pay more out-of-pocket, they're going to spend less on health care and there are good parts and bad parts of that.  On the good part is that they spend less, so I think that's part of it.  I do think we were already starting to see the beginnings of a reengineering of medical care and particularly as a more forward thinking health care institutions, where I think there is an unknown and maybe we disagree some here is that I do--I think there is anecdotal and nothing more than anecdotal evidence, well, not much more than anecdotal evidence that the payment reforms of the Affordable Care Act combined with the change in the tax treatment of employer insurance which is part of the health care a lot and the cuts to Medicare have reinforced this trend and actually convinced the health care industry to double down in its efforts to find a more efficient way to provide health care.  Now, that is not something I am going to stand here and tell you I know for sure because I don't--there's conjecture about this.  I certainly hear it talking to people in health care industry, actually a lot of complaining that have pointless some of this stuff is.  So, I mean, it's a mixed bag.  I think we'll know in 10 years.  We won't know until then.  My feeling is I am reason--I'm optimistic 'cause I know as a half-class full kind of guy, but we won't really know for sure for a while.
>> Thank you.  I'm Ruth McDonald and like Adrianna, I'm a dual here with getting to Ford School MPP and School Public Health MPH.  Our next question is, please address the issues of doctor shortages and how the ACA may impact doctor shortages.
^M00:50:05
>> Great question.  So, it's a big concern, the supply of doctors is not increasing under the ACA, not--it's just not getting worse, not getting better in terms of the actual supply doctors accept for the fact that just as a baby boomers are retiring, baby boomer doctors are retiring too.  So, in that sense, the ratio of patients to doctors was already getting worse over time and of course, the ACA by increasing the number of people with coverage and therefore, the number of people who will be seeking medical services will exacerbate that demand.  And I think far, you know, again to go back to the slide I put up about Medicare versus Medicaid versus private insurance, I fear that the result will be that if you're a doctor with a busy practice and you've got all these patients coming at you, which patients are you going to see?  You're going to see the ones--some doctors will be very contentious and try to take every patient they can.  But the--just a general economic pressures of life or such that there are going to be doctors, a lot of doctors and say, "You know what?  I'm going to take the patients who pay me a dollar for the cost of care versus the ones who pay me 25 cents for the cost of care which a lot of Medicaid programs do."  So, I fear that a lot of the Medicaid enrollees are going to find that they have a tough time as a result to that.  It's not going to affect people with private insurance as much.
>> I would say we had a doctor shortage before.  We are going to have a doctor shortage afterwards.  I think logically, getting more people insurance is going to add to that.  I don't think that much but I think it is going to add to that burden.  The flipside is when we're talking about how do we control the cost of healthcare, you know, this is a big part of the story, physician salaries, apologies to any physicians in the audience and my dad if he's watching this at home but physicians make a lot of money and they're a huge source of cost growth in our economy.  I actually I'm fairly optimistic on this one 'cause I actually think what's going to happen, I think this is already starting to happen is that we are going to see health systems and innovators pop up with new ways to deliver health care.  And what we're all going to discover is by the way that having a doctor, do every thing a doctor does right now is actual waste of resources.  There is a more of a team approach to medicine that takes full advantage of all the differently trained and I think we agree a lot of this, trained professionals.  There's a face called practicing at the top of your license and anybody here who's at the UM Health System has heard this because they talk about it.  And I do think with a little help from technology and a push to find more efficient ways of health care, we will evolve to a more team approach, a team-based approach to health care and that will mean among other things that when you go to get your health care, you might see a nurse practitioner more frequently and you might see other people.  And that's actually going to be a good thing.  Because you know what?  There are some things nurse practitioners do better than physicians.  And if your problem is not that, you know, it's better to take--you want to stay healthy, the best thing you need is a really good dietician to kind of focus with you on the front end about helping you to work out your diet and I actually think in the long run, this is where we would have gone with or without the ACA, whether or not the ACA makes this problem incrementally worse.  That's where we were headed and I actually I'm--among the things I'm very optimistic about is that we will actually--that problem will get better.  Particularly, if we get young people coming up through the system, we frankly are more used to that.  You know, my dad's generation.  Now, if it's not an MD, oh my God.  And, you know, I usually see nurse practitioner and she's awesome.  So, you know, there you go.
>> So, this is a question from Twitter.  Medical malpractice is a big talking point in health policy and how it is that if you drive medical practice shaping up?
>> You know, I would say and I depart from some of the people in Democratic Party who often like to cite me on this stuff on other things.  I actually think medical malpractice is a problem.  I think our system is lousy.  I don't think it's--this huge driver of our cost problem.  I think it has some incremental role and I think anyone who practices medicine will attest that it's a unnecessary wasteful source of anxiety.  I also think the people who started this will tell you it's not--it's bad for the physicians and the providers.  It's bad for the patients.  You know, it's like a lottery basically.  If you're--if you have a medical error and you get the right lawyer and the right jury, you know, you can win a whole lot of money.  The vast majority of medical errors don't go compensated at all.  So, there's a really strong case.  There's a conservative case and a liberal case for moving to some other system for people who are victims of medical errors get compensated quickly and easily and you save this out of the court system and it actually--might actually help the cost.  There's been some approaches here at the University of Michigan that have been pioneered that way and, you know, the Affordable Care Act, I wish you had done more.  Who to blame for that?  That's for you to ask, you know, if you ask some people, the White House will, "We were ready to deal on that but the AMA didn't want it."  You ask the AMA, they said it would have never had a chance of getting through Congress because the Democrats in Congress would have never gone through it.  You know, whatever, there are few little pilot programs in the law designed to encourage experimentation with that and I really hope those blossom 'cause I actually think that's a promising reform that actually I would think has some conservative and liberal support.
>> I agree with mostly what John said.  I had two points.  So, the first is that one of the reason to build on something down is one reason we had a lot of medical errors in the first place is because the consumer isn't directly paying for his health care.  It's being paid by someone else.  And so, if you're a hospital or a doctor, who do you care about?  The guy who's paying you.  And that guy is an insurance company or the government or some combination there of.  It's rarely the consumer that is to say the patient.  In most other industries, it's the consumer that pays for the product and therefore people are very attuned to making mistakes, they'll offer refunds if they do something.  If you're at a restaurant and the food isn't good, often the restaurant will say, "You know, we'll take it back.  We'll get you a new plate or whatever it is."  That's because those are consumer-driven industries where if consumer doesn't want to pay you and takes his business elsewhere, you will go out of business.  That doesn't happen in health care because the consumer doesn't control those health dollars directly.  So, there isn't the same power and economic incentive for physicians and hospitals to care first and foremost about the patient in every situation.  So, I think that lack of consumerism is a big part of the problem.  Another point I would make is that--actually one of the things that's interesting is as Republicans have talked about their own health reform plans.  One of the challenges they have run into is that there's a group of hardcore constitutionalist on the right who say that federal malpractice reform is a violation of the 7th amendment, because tort law is meant to be administered at the state level.  And therefore, it's not the federal role of the federal government to limit or constrain tort contacts.  You know, tort law in that way.  So, as a result, there is--it's complex actually how you would address this problem.  You might just have to go by state by state solutions or have a tort of reforms you may tie to things like Medicare or Medicaid which are obviously federal programs where you could say, "Well, for Medicare beneficiaries, here's how we're going to handle toward malpractice issues."  So, there is some constraints there that has been sort of under the radar for a lot of people to talk about this issue.
>> Thank you.  What's your solution to the preexisting condition exclusion for insurance coverage of [inaudible]?
>> So, in my Avik Roy runs the world plan.  I don't actually change that element of the ACA.  I think, and then you could keep the preexisting condition exclusion which has been--garnered enormous amount of ink and hype and discussion even here today is actually a fairly small part of the law.  So, if you actually look, we can measure how many people actually suffer from this problem.  That is to say of being denied coverage because of a preexisting condition.  The percentage of Americans who suffer from this problem is vanishingly small, how do we know this?  So, the ACA actually had a transitional program called the preexisting conditions insurance program that was meant to cover anyone in America who could demonstrate that they've gone without insurance for six months and had a preexisting condition.  If you could prove those two things, then you would qualify for subsidized insurance under what's called the PCIP.  From the time the law was enacted in 2010 to the time all the insurance regulations kicked in the beginning of this year.  How many people signed up for that program?  Was it 5 million, was it 50 million?  No it's about 200,000.  So, that's not the problem with our health care system, the problem with our health care system is not that insurers denied coverage to people because of preexisting conditions.  Most of the time, you could get coverage.  It's just that the premiums would be really high because the insurer knew that the cover you if you already had illness, they would have to spend a lot in medical claims.  And if they were going to actually not go broke insuring you, they would have to make sure that those costs were contained within the premium of your plan.  So, the problem was not preexisting conditions in terms of having access to coverage.  It was more about the premium itself, the price of that coverage.  And that's the matter that was also a lot of other things about the law that are relevant to talk about.  So, I don't see that particular element of law is actually that important.  And I think that its importance has been overstated by pretty much everybody.
>> Can I jump in on that one?
>> Sure.
>> So, I would say two things.  First of all, I think the problem is bigger.  I think it does get exaggerated sometimes.  But I think it's important to remember that we had an employer system that protected people who were taking out the Medicare population obviously.  But the employer system provided coverage for people with preexisting conditions largely.  But one reason we--the Affordable Care Act passed was a sense of that system was starting to fall apart and it was declining slowly.  Maybe not--maybe it would take a long time but people were losing that protection.  The numbers of people who signed up for the high risk polls, the temporary high risk polls, I think it's a pretty bad measure.  I think because it was poorly advertised.  You know, it was something they stuck in at the end.  Very few people knew about it.  There have been a lot of studies about the number of people who have preexisting conditions who--that would disqualify and people have tired to apply.  And you're right, a lot of people who applied--and the problem wasn't they were turned down, it was given offers that they would never accept.
^M01:00:06 Maybe the premiums were higher or often you couldn't get coverage for your preexisting condition, right?  You have diabetes, you apply for a plan and say, "Great, we'll cover everything you want except anything related to your diabetes which is, you know, pretty much anything."  And I think there was also is a psychic effect of this.  That, you know, you knew you're insecure and this actually had a labor market effect, right?  Because if you worked for a large company, you might be afraid to go out on your own, right?  This is the job-lock phenomenon we talked about.  So, I think it was a significant problem.  And--but I'll be eager to hear and see how you deal with it in your plan.  Because in general, this is not something that most the conservative plans I've seen with you with adequately.  They often will say something like, "Well, we will cover preexisting conditions if you had fire coverage."  And that's--you sort of set us a little aside.  You know, kind of it by--we'll cover, you know, as long as you have fire coverage.  And that's kind of the big deal because what often happens in the real world is people have coverage and then they don't have money to keep their coverage.  They lose their job, they've got an illness, they pay medical bills, coverage lapses and then they're stuck.  And so, you need both some combination of subsidies to make sure they can get coverage and some kind of guarantee they can get it back.
>> Well, let me disagree with your characterization of Republican approach so which is of course, I'm saying--what I'm saying in the Avik Roy plan is--
>> Right that was not you--
>> --keep--not repeal the ACA, keep it broaden the range of choices offered on the exchanges from the strict narrow choices that are available today.  But keep this protection against issuance for a plan if you have a preexisting condition.  What Republicans in Congress have proposed is somewhat different which is to your point, you can go to a new plan and have guaranteed issue.  If you've maintained coverage up to that point but if you--if that doesn't apply to you, you would still be eligible for high-risk pools that would be funded by the federal government and by states and sponsor at the state level which would cover those individuals that would be funded at a much broader scale.  So, the idea is not to leave those people uninsured, it's to fund them through high-risk pools rather than driving them into a pool that artificially that drives up the cost of health insurance for everybody else.  So, that's a plausible approach.  It's not the approach I'm, you know, I--that is the Avik Roy plan.  But it does address the problem of preexisting conditions in a way that, you know, you won't necessarily find satisfactory but it doesn't leave them without coverage.
>> Thank you.
>> This is somewhat related point for either or both of you.  Considering a chronic disease spending comprises most of our nation's health care expenditures, how do you believe the ACA will affect our approach to treating this in the future?  For example, do you perceive that we'll see new drugs, new treatment facilities, increased emphasis on public health or primary care?
>> You know, I think this is one of the areas of the ACA where you hear a lot about that the ACA has a lot of micromanaging.  There are a lot of regulations, a lot of payments reforms to tell hospitals, "We're going to pay you this much if you do X, and we're not going to pay you if you do--you know, we're going to pay you less if you do Y."  And some of that, you know, like any bureaucracy, any set of regulations, you can look at them and say, "What are they doing?"  One of the things I like about the Affordable Care Act is, you know, over the last 10 years, there's been a lot of conversation in medical field and the public health field about how can we maintain chronic disease?  How can we do a better job with treating people?  And the nice thing what the ACA that what I like is it kind of takes a kind of throw at the wall approach.  It tries every possible approach.  It's got a sort of serious hearing.  And so, let's try this.
>> On the left.
>> I would disagree 'cause I would say, and this goes back to what we were discussing before, I think part of the approach is higher deductibles.  I mean the minimum as far as I'm concerned, 6,000-dollar minimum deductible, the 12,000 per family.  That's a high deductible by the standards of the American health insurance, right?  I mean that's where HSAs used to be.  I don't know like, they don't exist anymore but you know back in the day, you know, 10 years ago if I had said, "What's the conservative plan?" They would have said, "Well, we wanted, you know, we want high deductible insurance."  I would have said, "What's high deductible insurance?"  They would have said, "What do you have for an HAS?"  I'd say, "What is that, 6,000 dollars for an individual plan, 12,000 out-of-pocket for a family plan."  So, OK.  Cool, there you go.  You got it.  That's, you know, that's high deductible insurance.  To me, that is a conservative approach to controlling cost.  And I would assume to be the most important.  So, I feel like--and in addition, there's competition.  I mean again, this gets to--again, I think sort of--somewhat when people like me get a little frustrated with the conversation, we look at the ACA and this was not as I said, you know, the single-pair plan which would have been, you know, the Jonathan Cohn world, right?  You know, we would have the single-pair plan.  No.  This is a competition system and we're having people going out and shopping for insurance.  You know, it's a regulated market and I understand if you think its way too regulated.  But the fact of the matter is people are shopping for plans.  I don't know how well this is going to work out.  I've seen lot of data about Medicare Part D that says it doesn't work so well when they shop for plans but OK.  They're shopping for plans.  They have high deductible insurance, that's sounds like a conservative reform to me.  Now maybe, the terms have shifted and maybe what counts as a conservative reform today is different from what was a conservative reform 10 years ago.  But--
>> Let me stop you there 'cause you've made a lot of allegations about the conservative approach.  So, as I mentioned before, the deductibles are not the issue.  I agree that that range of deductibles is about where a lot of consumers would want a high deductible plan to be.  The problem is all the other things that the ACA does to regulate the insurance market.  So, there's stuff around the actuarial value of the plans.  There's things around all the services that have to be covered at first dollar before the deductible kicks in.  There's community rating, the fact that again young people have to pay a lot more for their coverage in that way that drives things up there all the taxes.  So, there's a premium tax.  Not the Cadillac tax, an excise tax on the premium itself.  A sales tax effectively, there' also taxes and this gets to the question about medical devices and pharmaceuticals.  Particularly, the medical device tax.  These tax is one of the dumbest taxes in the law.  Because all they do is drive up the cost of health insurance.  So, when you do, when you have a sales tax on health insurance, what does that do?  It drives up the cost of health insurance because the insurers passed on that cost to the consumer in the form of higher prices.  When you have a tax on medical devices, what happens?  The medical device manufacturers increase the price of their products to compensate for what they're losing in terms of the tax.  And it's particularly a problem for smaller early stage device companies, because the taxes administered, and this gets into wonky finance things.  The taxes administered above the line, meaning a lot of taxes, most taxes like your corporate income tax, like your income tax yourself is after you've calculated your cost.  So, a typical company will have sales.  And then you mark up, how much they spend on labor and their--the cost of their--of the supplies and things like that.  And whatever is left is what's called their operating income, their revenues minus their cost.  Their operating income then, they pay taxes on it.  That's their incorporate income tax.  And then, they have their net income which is whatever profits are left over after taxes.  The way the medical device tax works and the pharma tax and the insurance tax is that they're administered above the line.  Meaning, before you put in your costs, the tax is applied to your revenues.  And what that does is it massively magnifies the degree or the impact of those taxes on companies that are not yet profitable.  If you're a gigantic medical device company that has billions of dollars of profits, this doesn't affect you that much.  But if you're a smaller company that has yet to break even 'cause you're just getting into the market, it's a huge driver that prevents you from actually becoming a profitable company.  And why does that matter?  It matters because investors are less likely to invest in your company if it takes them a couple extra years and that much more risk to get a return on their investment.  So, what does that done?  It shrunk the appetite from venture capitalist for early stage medical device companies.  What does that done?  That means less innovative technologies get funded and it's really medical innovation which as been driven so much by the innovation in this country that has done more for public health than anything we're talking about on the health insurance side.  So, I think it's a big problem.
>> The next question comes through us from Twitter.  This is directed at both of you.  The ACA is a scheme to pay for each other's care.  Why is my health care my neighbor's responsibility?
>> So, I--again, I'll advertise some of my previous writing on this topic.  I wrote a piece.  It's actually was a speech I gave to the Yale Political Union about a year ago called health care is an individual right--the health care is a right, an individual right.  And I go into a number of these moral cases that we've talked about before.  I think that we as a country would all agree most--nearly all of us would agree that if a kid is born with Down's Syndrome, we should marshal our resource to make sure that that kid can have adequate health care.  I think this is particularly a message I give to Conservatives, "Hey, look, you know, 80 percent of fetuses that are identified as being positive for Down's Syndrome are aborted."  So, if you're pro-life, wouldn't you want a health care system to make sure that those kids can be born without an undue economic burden to the families that are going to raise those children?  Surely, that's something we can all agree on that we would do.  And I think most Americans who believe in equality of opportunity would say, "Kids who are born with genetics disorders, people who truly fall ill through no fault of their own.  We should do what we can as a community to come together to insure that those people will get adequate care."  But that's not the same thing as saying, "I should pay for a guy's health care because he smoked his whole life and eventually gets chronic obstructive pulmonary disease.  There's a degree to which again we can separate out the types of things that we should all get together for that again are part of being--a part of a community where we look out for each other when there truly has been misfortune without creating an environment where people have no incentive to keep themselves healthy because they know that if they sit in front of the TV and eat Doritos all day, their health insurance is going to cost the same as everybody else's.
^M01:10:14
>> This is a great question.  I think it really does capture the lack right, divide on this perfectly.  So, my one line answer to that question is you could be next.  It's that simple.  Every single person in this room is in accident, heart attack, some disease you don't know from having a catastrophic illness and you're--until the Affordable Care Act came along, you were a lost job or an income shock or some other catastrophe with not having a way to pay for it.  And that's my starting touch.  It's that simple and I will plead guilty to thinking that's not right.
>> But I agree with you.
>> And you agree with that.
>> So--
>> That's not an area of disagreement between us.
>> So--well, and but no.  I think there is some discrepancies [phonetic] that I also think and maybe not and maybe I misunderstood you.  I often hear Conservatives talk about this as misfortunate charity and I don't think of it that way.  I really honestly believe this is about you, every single--this is a self-interest thing.  I really believe that.  I really believe this is about recognizing that you're part of the community but that you could be the needy one.  And I think that's an important distinction.  And maybe I misunderstood you but and 'cause there were two other--the two things I wanted to say was there are complications to this.  There are two problems when you do insurance, right?  There is the problem that number one, we know that when we cover your health care cost, we've talked about this very ultimately.  You don't have incentive to be smart, right?  And why not get an extra test?  Why not go to the most expensive health care provider?  Why not sit on the couch and eat Doritos?  And then there's a second problem which is, you know what?  You know, you're--now, you're not only you sort of not shopping smartly, you're taking responsibility.  Hey, but you brought up the example of smoking, now, I don't know how many Liberals agree with this 'cause this is a little controversial.  I have no problem saying if you smoke, I don't have to pay for it.  Here's the problem, if I make you pay more for your cardiopulmonary disease, I'm not only going to punish the smoker, I'm punishing the person with a genetic cheap predisposition to that disease.  And I don't want to punish that person.
>> Not necessarily.
>> So, here's a good way to do it, ready what we could do?  We could tell smokers they have to pay more for their insurance.  Hey, there we go.  If you buy insurance, you're going to have to pay a surcharge for a tobacco and guess what?  The Affordable Care Act does that.  It has a tobacco surcharge just like that.  And it has high deductibles, that's the promise of those high deductibles say look we are not going to cover first dollar.  We're going to cover first dollar on some things on preventative services.  But, you know, in general you will be open to very high out-of-pocket and you're going to have to shop around.  So again, we get back to what I consider--I think there's a totally reasonable debate that we had between those of us, you know, again, I'm sure my idea of comprehensive coverage is much more than yours and I see that but I feel like the Affordable Care Act, you know, is kind of in the middle zone there of where I think a lot of people would agree and might have agreed recently.  So, you know, that is my question.  That's how it is that I couldn't but I feel like people may feel, don't like the Affordable Care Act but is it really that far off from the--I mean, that's the kind of baffles me.  So--
>> Yeah.  So, you know, John knows better than to be baffled by why Conservatives object to the Affordable Care Act but I appreciate the opportunity--
>> That was [inaudible] 
>> --to address the question.  As I said, there's a number of problems.  The first is what I talked about in the slides.  And the biggest problem with the health insurance system and healthcare system in America is that it's too expensive.  And the ACA does not make the healthcare system less expensive in America.  It makes it more expensive.  Now, there may be a social goal that you or John or someone else believes is worthwhile and it's OK for the health insurance system to be more expensive in order to achieve that goal of equity for everyone.  And not actually everyone because there will still be a lot of people uninsured under this system.  But that's--but that's, you know, we can--you can make that argument.  But I would make the argument that the biggest problems the Conservatives would say, "What do we need to do?"  The biggest problem in America is the fiscal crisis because we're spending too much on entitlements.  What the ACA does is add on another layer of entitlement so that spends more money without bringing in efficiencies for everyone else.  Now, would I agree that not all Republicans have been appropriate--appropriately forth right about the tradeoffs involved in those decisions?  Absolutely.  But the fundamental philosophical--conflict [phonetic] that unites Conservatives is that the ACA involves a much costlier system, a much more complex system and a system that involves unnecessarily broad government intrusion into choices that people are perfectly capable of making on their own.  There is a way to cover everyone and do so with a system that's less expensive and less intrusive than the system in America post-ACA.  And do I think that all the choices the ACA makes are terrible?  No.  I don't.  As you know from my work and from this Avik Roy health plan that we've been talking about, I think there are plenty of things about the way the exchanges are designed that I agree with.  And I've defended the exchanges from a lot of Republican attacks precisely on those grounds.  So, when the fact that the exchanges have narrow networks or physicians, because they're trying--that's the only one of the few mechanisms they have to keep cost down.  I've said that is what would happen in a free market if you had an exchange that was less regulated in a way that Conservatives would like better.  That phenomenon of narrow networks or physicians would still happen and that's a good thing.  It's totally appropriate for people to have the free choice to say, "I'm going to choose this plan that has a lower premium in exchange for having a narrow network or physicians."  That's OK.  So, you know, there are things about the way the ACA exchanges are designed that are fine.  And in fact, because what the ACA had been was to take the ACA exchange model and apply that to Medicare and Medicaid.  That is to say, to reform the old entitlements using the ACA as a model, you would have found a lot of agreement on the right.  The Paul Ryan plan for Medicare reform is actually to the left of the ACA exchanges because what Paul Ryan plan for Medicare reform actually has a public option unlike the ACA exchanges.  It has coverage for everyone who's over 65.  Unlike the ACA exchanges which are means tested on the sliding scale.  So, the thing is the conservative approach to entitlement reform of Medicare and Medicaid is not that different from where the exchanges are.  The problem is that what Obamacare does is it leaves those old systems basically unreformed in terms of their structure and adds the exchanges on top.  And to Conservatives, that was a net minus.  If instead the ACA had been, let's take the exchange--let's build these exchanges and then gradually migrate the Medicare and Medicaid populations into those exchanges, I think that's something that would have been a lot more attractive to Conservatives.  Now, I hear, you know, Democrats that will say, "Well, that wasn't on the table.  Republicans didn't offer that in 2009, et cetera."  And that's true and they should have and that's their mistake.  And I've criticized them for that as well.  But I think there are a lot of people in the left who say, "Well, these Republicans are just being insincere about what they advocated."  That's not true.  There's a reason why more than half the country thinks Obamacare is bad and why the poll is consistently show it's unpopular and why Conservatives are united on this and why I'm one of the very few people who advocate actually on the right saying, "Let's keep the law and make changes to it."  Because those--it's not opportunitistic, it clears them.  It does go to the heart of what Conservatives sincerely believe.
>> OK.  We have a number of really great questions both from this audience and from Twitter that we don't have time for.  This will be our last question.  What are your recommendations to the folks running Congress?
^M01:17:44
[ Laughter ]
^M01:17:45
>> You want this one first?
>> Well, I was cited in a Washington Post article today on this very topic which I will just not comment on, except to say that the thing that I've told--advise Republicans of is to focus on this issue of cost.  I think the conservative critique of Obamacare has been ideological.  That is to say it's been about the fact that it expands the scale and scope of government, particularly federal government that it increases spending, that it violates the constitution in various ways like the individual mandate which people have continued to be upset about.  So, that's been the general critique of the ACA from the right.  And I think what I've encouraged people on the right to do instead is say, "Look, if you actually poll the public and say what's the number one problem with the health care system in your mind?"  If you ask them what the number one problem is, only 11 percent say that's the insured.  72 percent say that health insurance is too expensive.  Most Americans are very concerned about the fact that the cost of health insurance keeps going up.  This is a big problem for social mobility for economic mobility for equality of opportunity for the middle class, all those things that we all care about.  That's the most important issue.  And what I tell Republicans every time--every chance I get is to say, "You know, yeah, I understand that the conservative base is really upset about this ideology issues but for the broad middle, the country, if you want to expand the number of people who support you and vote Republican, I think that you have better ideas of what to do with the health care system."  You think you're--the first and foremost thing that has to be in your mind is how to make health care less expensive in America.  And that involves some of the things we've been talking about, involves some of the things that we haven't talked about, such as the fact that hospitals have enormous market power in America and exploit that power such as the University of Michigan by the way to raise prices and charge insurers a lot more than they need to.  So, that's a big problem that we don't really talk about too much that I think there's a great opportunity for Republicans to talk.  So, I say to Republicans, "Talk about cost.  Talk about the solutions that you believe would make health insurance less expensive and be forth right about the tradeoffs that are involved in those policy opportunities."
>> You know, I would say since Avik gave advice to the Republicans, I'll give advice to the Democrats wherever they are.
^M01:20:04 I'm sure, there's none in this room.  You know, I would say, first of all, also acknowledge the tradeoffs forth rightly, I think we agree that politicians don't do that nearly enough.  I would encourage Democrats to engage on the issue of costs 'cause actually they don't have a pretty good story to tell.  You know, nobody ever seems to notice this but, you know, the Congressional Budget Office keeps looking at this law and keeps coming back and saying, "It's going to reduce the deficit."  In fact, the deficit reduction has to and its keep getting bigger.  That's a sign, you know, that's something people say they care about.  And on the effects of the cost of health care overall, I think the jury is very much out on whether how this affects overall health care cost.  I can make a--I am enough of a believer in the uncertainty of the future that I'm not going to sit here and say, "I know that the ACA is going to reduce cost.  But I sure don't know that's going to raise cost either 'cause there's a lot in that law that reduces what we spend in health care and not just for individuals but as a system as a whole."  And, you know, I think they can make a pretty good case that health care costs are coming down or at least the rate of growth is slowing.  And that will continue.  And finally, I'd advise Democrats, don't be afraid to talk about what's good in the plan.  And, you know, there is a very loud media message out there right now every single story of somebody's insurance that's been disrupted and--or has paying high rates is getting a ton of coverage.  A lot of the stories are real.  Some of them are not real.  But, you know, this is a law of real tradeoff but I hope Democrats are not afraid to engage those stories, explain why those tradeoff there but also remind people there a lot of good stories out there.
>> Can I ask you before we're forced to shut up?
>> Yeah, yeah, yeah.
>> This will be my on question to you.
>> OK.  Hey, you owe me a question so that's fair.
>> Why do you think that message hasn't come through?  Why is it the law persistently is unpopular just by this advice which you've been giving Democrats for four years?
>> Well, they're not listening.
^M01:21:54
[ Laughter ]
^M01:21:55
No, I would say it's a combination of several things.  I think part of it is in general and I think there's a lot of--I'm not a psychologist but I think here's a lot of evidence to back this up that people feel more strongly about what they've lost and what they've gained.  I think a lot of it was the fact that this was not explainable for, it was not understood.  It was a surprise and people were mad at the President.  I think some of it is a little bit of a hangover over batched implementation.  You know, what I would tell people like what the President [inaudible], I took a real beating because they screwed up the computers and I'm like, "You know what?  They should.  They did a bad job, right?"  I mean, that's [inaudible].  You know, and I would kind of, you know, I think that's a little part of it, you know, there is that network.  It's got three letters, ends with an X, starts with an F.  And I think there is a media machine that has been ready to pounce and has magnified the influence of those stories and I don't blame it on.  I think some democrats like oh, if it wasn't fox [phonetic] out there, I wouldn't rush [inaudible], you know, everything will be fine.  No, I mean, this is a complicated law, real tradeoffs, but I think that's a big part of it.  And, you know, that would be my answer at least.
>> All right.
>> OK.  Well, on that note, thank you very much, John and Avik.
^M01:23:08
[ Applause ]
^M01:23:14
On behalf of the Ford School, I want to thank all of you for attending the event for instigating a very lively discussion.  And for those of you whose questions weren't answered, I hope that you'll join us for the reception out in the Great Hall.  And please join me again in offering our warm thanks to John and Avik.
^M01:23:33
[ Applause ]
^M01:23:39
>> Yeah.  So, I think--
^M01:23:42
[ Inaudible Discussion ]