 This panel, panel two, is the role of health care costs in the income inequality debate, which, as you know, has been a very prominent feature of political discourse in this country and really throughout the world where health care and income issues are prominent. We have three excellent people to give us commentary today. We'll structure this panel, as indeed Chuck structured his. Each panelist will give about 15 minutes of presentation. They'll be a little bit on the screen, so be attentive to that, after which we will have an opportunity for questions and hopefully answers. Sometimes there are questions without answers. I'm always ready for that. Let me introduce each of the panelists now, and then I'll turn to them separately as we go forward. My colleague, Mark Warshowski, will lead this panel. He'll be the first person to speak. Mark is the Senior Research Fellow at Mercatus, where he specializes in just a number of topics gifted in a host of areas, including pension, retirement, and health care policy. He's a prolific writer with over 150 scholarly articles and several books. I met Mark when he was served in 2004 through 2006 as the Assistant Secretary for Economic Policy in the Treasury, and that's where he led the fight for the Pension Protection Act of 2006. He was a member of the Social Security Advisory Board from 2006 to 2012 and was Vice Chairman of the Federal Commission on Long-Term Care in 2013. He has a BA from Northwestern and a PhD from Harvard University. Dr. Fetter, Judith Fetter is our second presenter today, a long-term acquaintance of mine, and I think of everybody in this room. Professor of Public Policy, and from 1999 to 2008, served in the McCourt School. I wonder why I have trouble. Served as the dean. I have trouble with just saying the word dean. I don't know why. Must be. A lot of academics have that. Must be. I just saw the word, and I froze. I don't know why. Served as a dean in what is now the McCourt School of Public Policy at Georgetown University, specializes in health care and health insurance industry. Her research in this policy area began at Brookings, continued at the Urban Institute, and since 1984 has been pursued at Georgetown University. She served in the Clinton administration, has been a senior fellow at the Center for American Progress, and now is an Institute fellow at the Urban Institute. Dr. Fetter has degrees from Brandeis and Harvard University. Not a Harvard man. Richard Berkhouser is the Sarah Gibson-Blanding Professor of Public Policy Analysis at Cornell University. He specializes in how public policies affect vulnerable populations. I served with Richard for many years on the academic advisory panel, the Pew Charitable Trust, and their Economic Mobility Project. He joined the Cornell's Department of Policy Analysis and Management in 1998. In 2012, he began a joint appointment as a professorial research fellow at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, which is in Australia. And he divides his time now between there and Cornell. Dr. Berkhouser has degrees from St. Vincent's College, Rutgers University, and a doctorate from the University of Chicago. And with that, Mark, it's all yours. Thank you. I wanted to today go over a paper that I've written looking at the connection. And it's a very intimate one between earnings inequality and rapidly rising cost of employer-provided health insurance. This is one of the measures of economic well-being, which our prior panel actually did not mention. They mentioned many others. And they're all very relevant. But this is one that they did not mention. And it is the research that I've done and the empirical analysis that I've done has shown that there is a very close connection. We have heard and read about very many studies that have looked and have documented an increase in measured inequality, whether measured by earnings or income, measured from tax data, from Social Security earnings records, other measures. They all have problems, perhaps some flaws, particularly the tax data. Has its unique characteristics. And I think maybe Richard will discuss some of those a little more. But let's just take those facts as given that there has been an increase in, I will say, we'll focus on earnings, earnings inequality. But is that the end of the story? Because people don't just get paid earnings, they get paid benefits. They get paid compensation, which includes pensions, retirement benefits, and most prominently and most significantly health insurance. And at the same time that we've seen this increase in measured inequality, we've also seen there's a very rapid increase in the cost of health care and cost of health insurance. And the employer pays for that. And it's been very rapid. And we'll discuss at the end what more recent data shows about those trends. But looking at, let's say, the last 20 to 30, 40 years, I think there's no question that it has been a very rapid increase. And the question is, is there a relationship? And just a moment's thought, a little, almost simple arithmetic, would indicate that there would be a very important connection. And that's as follows. And we're going to see this basically again and again. Your paid compensation, your employer pays you. He pays your earnings, and he pays you your benefits. Health insurance, by its nature, is sort of, it doesn't matter whether your, to a first degree approximation, doesn't matter whether you're rich or poor. Your employer pays the same amount, whether you're a high income worker or a low income worker. In fact, by law, by the tax code, within the same employer, they're not allowed to discriminate between different earnings workers. They have to provide the same insurance package, and the same health insurance package. But as a proportion of compensation for the low earning worker, that health insurance is going to be a much higher percentage of compensation than for the high income worker. Therefore, if health insurance costs increase, it's going to have a bigger impact on the low income worker than on the high income worker. Because the employer, after all, pays the marginal product for the workers. The high income worker, presumably, is higher marginal product. The low income worker is lower marginal product. The money has to come from somewhere. And if it's going into the cost of health insurance, it's not going to go into earnings. And so therefore, the earnings growth for the low income worker will be slower than for the high income worker. And lo and behold, this is, as I say, a simple math. But let's sort of try to find it in the data. I looked for 1999 to 2006 using a unique data source for the Bureau of Labor Statistics, which is superior to many other data sources in this area. Because it's not a survey of workers, which sometimes has a lot of errors in it. It's not a compilation of different data sources matched up, which is almost like assuming the results. This is a consistent data set. It comes from surveys of employers. It's done by the government in a very, very careful way. And lo and behold, looking at the data from 1999 to 2006, it was exactly confirmed that the increase in inequality, measuring inequality of earnings was entirely due to the increase in the cost of health insurance. The employer provided health insurance. Now, the key assumption is that the share of health insurance in compensation of the lower paid is larger than for the higher paid. Again, it's sort of an obvious point, but it's sort of the key thing. So here is a chart. This is looking at more recent data from 1999 through 2016. And it sort of shows this point without looking at different percentiles of income or earnings. It looks overall. So basically, what you see is the point that the increase in the cost of health insurance has a share of earnings of compensation increased from 6.1% to 8.4%. All other benefits, no change. That led directly to a decline in the share of earnings, what the take-home pay, what the worker actually sees, from 81% to 78%. So that's sort of at the macro level. And now let's look at it, looking at it at the micro level in terms of different percentiles of workers. I look at between the 30th percentile and the 99th percentile. In other words, the top 1%. The 30th percentile represents basically around the minimum wage. A full-time worker is in that range of 30th percentile. And this is looking at data from 96,2008. And the reason why I chose these years was because a Birking study, which was on a similar subject, using entirely different data, looked at these years. And I also wanted to sort of match up that study. And again, it just sort of reads exactly according to the simple math explanation, the simple economic explanation that I've laid out. So in fact, let's look at the bottom of this chart, the growth of earnings and compensation so that for over this period, the lower income worker, their earnings increased by 45%. For the highest income worker, 52%. So that's the Piketty. That's the concern about inequality. That's what everyone is talking about. When you look at compensation, which includes the value of benefits, in particular, the value of health insurance, their compensation was pretty much grew at the same rate, so that there was an entire crowdout of the increase in earnings for the low income worker by the increased cost of health insurance. But for the high income worker, because of course, this represents a much smaller percent of his or her pay, it was a much smaller crowdout. So you might say, well, this is the end of the story, but let's continue to look at other time periods and other ways of looking at the data. Here I expand the time period of the analysis to looking from March 92 to March 2010. And I chose these years because they were similar year points in the business cycle. Clearly, the recessions and unemployment have a big impact on earnings. And so you want to control for that. So the easiest way of doing that is looking at the same points in the business cycle. So this is just after the recessions, when pretty much the bottom of the recession and just coming out of the recession, so both in 92 and 2010, it's a longer period of time. So you wouldn't expect to see as a nice fit. But basically, I think the story is still held. And so again, let's look at the bottom of the panel that earnings growth for the low income worker over this period was 60%. For the top 1%, it was 78%. Looking at compensation for the low income worker was about 70%. And for the top income worker, the top percent, it was 82%. Again, not entirely explained by the increase in health insurance because you have a longer period, there's more going on. But at least half of the relative hold back of the low income worker in terms of their earnings growth is, again, explained by the rapid increase in the cost of health insurance provided by the employer. I did a simple regression. I won't go through the details, it's in the paper. But it's a simple regression, so it tries to control for a couple of factors, particularly the business cycle. It's a nice result. It's pretty robust. And here too, again, it shows the finding that for the same increase in the cost of health care, the negative impact on the low wage worker is negative 66%, 0.66% annually compared to for the high income worker of 0.3%. So again, it demonstrates the point the cause of the earnings inequality problem is largely because of the increase in the cost of health insurance. So I think many, there's a debate as to how significant this policy point should be about income inequality and earnings inequality, but I think we all agree that there's something there and that there's something to be concerned about. But then the question is, how do you deal with it? Do you deal with it through redistribution policy, tax policy, other government policies, or why not deal with it directly? Deal with the cause, which is the increase in the cost of health care. And in fact, this was one of the initial stated goals of Obamacare. It has not been mentioned much, but it was to quote unquote bend the curve, which was to control the cost of health care for everybody. And that would have had a good impact on this inequality issue. And here I want to make a point, which is basically in disagreement with some of the prior panels, particularly Jason Furman. If you look at government data from the Health and Human Services Department, basically the health expenditure accounts, I think you had a somewhat different story than what he presented. And this is the latest data. The more recent data is not available. In 2014, US health care spending increased 5.3% following growth of 2.9% in 2013 to reach $3 trillion or $9,500 per person. So in fact, we have seen an increase. This lull in the increase in the cost of health care was very temporary. It was just 2013 for whatever reasons I think it's not well understood. But basically, we're back at the rapid increase in health care costs. And so what to do about it? So like many on the panel, I think tax policy is an important consideration. And I'm in the school of cutting back on the favorable tax treatment of health insurance provision by employers. I think there needs to be strict enforcement of antitrust laws in the health care sector. And I think we do need more scope for consumer sensitivity to cost in the design of the health insurance programs, both public and private. Thank you. Thank you. Thank you very much. Outstanding. Dr. Federer. Thank you. Mark, I'm glad that you brought back this dimension of the challenge of the relationship between health costs and inequality. We can look at big picture and focus too much on budgets or focus only on budgets or not a small problem, productivity, other issues. But I think you're talking about human consequences in terms of well-being. And it's a real problem that we have actually known for a long time that health cost growth is contributing to diminished incomes, essentially eating up wages. And that's what you very nicely demonstrate straight. And indeed, our health financing system is a major problem. Jason called it a vexing problem in social science where you often call that a wicked problem. And to fix that wicked problem, you get to solutions, I want to dissect the issue a little bit more than what you're looking at, both by going back to the bigger picture of health financing that we discussed this morning and also making some finer distinctions in the relationship between health insurance and inequality lest in trying to fix this problem, we actually make matters worse. I want to start by reminding us that insurance, independent of the way we choose to finance it, and those are two different things, is, as Matt Fiedler reminded us this morning, protection against risk, and that protection mitigates inequality if it protects people at the lower, as well as the higher ends of the income spectrum. The fact is that prior to enactment of the Affordable Care Act, the nation's health financing system systematically excluded low wage workers, along with non-workers, many non-workers, from that protection. And that was not an accident. It was a function of policy and market decisions made over decades. Nor was the Affordable Care Act's approach to addressing that problem an accident, as I'll get to. But first, let's talk about the emergence of employer-sponsored insurance as the core of our health insurance system. That approach, different from any other advanced industrial country's approach to providing health insurance to its citizens, emerged in the 1940s as health insurers discovered that by marketing to large employer groups, they could beat the challenge of risk selection, because large employers essentially constitute what we might think of as natural risk pools, that employers then, in that period, increased fringe benefits because of wage controls during World War II. And employer-sponsored insurance premiums received favorable tax treatment, which was codified in law in the 1950s, and that now exceeds a cost to the treasury of more than $200 billion a year, and that labor turned from looking for government to provide national health insurance to the bargaining table to gain benefits alongside wages for their members. The dramatic growth of employer-sponsored insurance in the 1940s and 1950s led advocates for government-sponsored national health insurance to alter their political strategy, laying the foundation or actually creating what became the necessity for the Affordable Care Act. Rather than challenge employer-sponsored insurance, which by the mid-'50s and in the 1960s had grown dramatically, advocates for universal health insurance targeted their efforts to expand insurance for the population that employer-sponsored insurance wouldn't cover, largely, predominantly, the elderly. It was easy for them to argue that employer-sponsored insurance would never reach that population, and the government had to do the job. And though it wasn't at all easy to enact, Medicare was born, along with Medicaid, to cover what we might call, what were considered, the deserving poor, people in our historic welfare categories, predominantly kids, pregnant women, and people with disabilities. The premise on which proponents sold Medicare was that employer-sponsored insurance would cover the working population. That was working, they argued, while government would take care of people not expected to work. It was that was clear for the elderly, and Congress added the deserving poor to wall off future expansion of Medicare. Advocates of government-based national health insurance, though aware this was a risky strategy, because they still had their eye on getting everywhere, they figured they'd overcome that risk and later extend Medicare to kids and then to the rest of the population. But their action firmly entrenched employer-sponsored insurance as the primary source of health insurance coverage for the working population, despite the fact that millions of low-wage workers never got it. And I just would remind us that two-thirds of the uninsured population, pre-Affordable Care Act, were in working families. Now, low-wage workers were doubly harmed. They were excluded, they were not getting employer-sponsored insurance through their jobs, low-wage jobs were not high-benefit jobs, they were lousy jobs, and they were too rich and not in a deserving poor category for public protection through Medicaid. And given the nature of the non-group market plagued by the risks of adverse selection, that arrangement left everyone, not just low-wage workers, at risk if they got sick, lost a job, got divorced. We all know the litany of problems with the non-group market. But with 85% of the population-insured pre-Affordable Care Act, that risk was not terribly salient, especially to the majority of the population who relies on employer-sponsored insurance. Opponents of expanded government protection raised what they perceived as an even greater risk to this population, that if we expanded coverage to get to everybody, it would disrupt the coverage that people who counted on employer-sponsored insurance already had and had come to count on. Hence, the political strategy behind and the design of the Affordable Care Act. Again, just as in the 1960s, public policy left employer-sponsored insurance intact. I mean, what the president really meant when he said, if you like your policy, health insurance policy, you can keep it, he was talking about employer-sponsored insurance. And the law built a new marketplace outside and around it, and but for the Supreme Court decision, created a Medicaid floor of protection, not just for people that we have historically treated as deserving poor, but everybody below, with incomes below a specific threshold. Those actions fundamentally mitigate inequality, extending insurance protection to low-income people and benefiting people of all incomes, not only by providing health insurance, but by reducing what's often referred to as job lock. You don't hear that much anymore. Facilitating economic mobility and entrepreneurship for people who were previously tied to their jobs to keep their health insurance. It's no surprise then that the ACA does not mitigate the inequality promoted by tech-supported employers, employer-sponsored insurance, that is at the heart of our nation's health financing system. But as you know, and the discussion in general has indicated, the heart of that problem is cost escalation, not insurance. Just as our policy choices left millions uninsured over the course of the 1900s, it left us without a public policy mechanism to constrain what our insurers pay providers, the fundamental driver of health care costs. Only after two decades of basically paying providers whatever their costs were or their charges were, just like private insurers, did Medicare rein in its payments with greater vigor and success than private payers. The ACA goes further in that regard as we talked about this morning, aiming to develop new payment systems for use in both the public and the private sectors. Cost growth has slowed dramatically. Yes, it's gone up, but briefed after several years of very, of historically unnever foreseen low rates of growth, but it's true that the jury is still out on the innovations in payment and the cost problems that underlie the inequity of our employer-sponsored insurance financing system remains with us. So what do we do about it? It's easy to focus on, as has been much of the discussion this morning, on the upside-down nature from the perspective of inequality of the tax breaks for employer-sponsored insurance. But lest we think this problem is easily solved, some would say eliminate it, though I noted that was not said this morning. The discussion was to happen. I want to remind us, as we think about that, of the natural risk pools that employer-sponsored coverage provides. What are we gonna do without them? Are we gonna regulate the whole market? How much? And with what impact on the role of insurance in pooling risk and in that way, mitigating inequality? And lest we think that eliminating that tax subsidy and pursue a grading price sensitivity would solve the problem of health costs escalation, I wanna remind us that cost sharing in employer-sponsored insurance is already growing rapidly, perhaps stimulated by the tax on high-cost plans. And given evidence that out-of-pocket spending leads to reduction of necessary as well as unnecessary service use, it behooves us to worry about under more than over insurance. Indeed, if we're to have insurance that mitigates income inequality by protecting consumers of all incomes adequately against risk, cost containment can't come from less insurance. It has to come from focusing on how and how much public and private insurers pay providers. So when I had a note to remind myself, the focus this morning was all on reducing unnecessary use of services, but we have just as much a problem with price of services, which is a much harder problem to tackle, paying too much for the service. So what to do to promote health insurance and greater equality? Politics aside, which is a little like asking Mrs. Lincoln otherwise how did she enjoy the play? I just would note that if we moved to a single payer system supported by a progressive tax, promoting equity through risk pooling and financing and cost containment could be accomplished. That would be a trifecta. But that's not what I'm here to advocate today because I've been in politics too long. Back to our political history and that investment we've made in employer sponsored insurance, I don't see that in the cards. So where am I? I'm with the architects of Medicare, Medicaid and the Affordable Care Act. We're kind of stuck with a fragmented public-private system, but it has to be one that assures meaningful insurance protection and more equitable financing. And I would say that the path to that is to enhance the ACA's subsidy for low and modest income people, progressively financed and tackling the wicked problem of healthcare costs by better managing provider payments in the public and private sectors alike. Thanks. Thank you very much, that was terrific. Dr. Burkasser. So Bill asked me to summarize a 12-year debate about the change in income inequality and how it's measured in 15 minutes and eight slides. So since I am from the University of Chicago and not Harvard, I think I can do that. So I think that all of you have heard of Piketty. Some of you have bought his books, few of you have read it. But if you did look at it or you looked at the works of Piketty and Seyes, you would see this U-shaped curve. And what this curve says is that the share of income held by the top 1% of tax units was very high in the 1920s. It declined throughout the period and then it began to rise again in the 1980s and now it's at historic highs close to what it was in 1928. So what I wanna say to you is that's both true and irrelevant to how resources are actually allocated to people in the United States. And just as an aside, part of the increase in the numbers here are for a particular period, 1986, 1988, and this is one of the useful things about being alive in the 1980s. How could the share of the top income increase so dramatically between just two years, 1968 and 1968, yeah, 19, excuse me, 19, where do I have it there? Yeah, excuse me, 86 and eight, very good. Okay, how can that happen? Well, it happens because President Reagan made a deal with the Democratic Congress to dramatically lower the marginal tax rates on high income people for the first time below the corporate tax rate. That allowed people to actually pay less in taxes on personal income than on corporate income that they got through being doctors and lawyers and other things and getting it that way. So what we saw was a rapid increase in the taxable market income of people and that explains a good deal of this change. But that aside, if you now go and think about this for a second, what did Picketing say is actually measured? They measured taxable income, which in the United States is market income, income from wages, rents, dividends, that sort of thing. It does not take into account government taxes that redistribute income and it most especially doesn't include government transfers, either in cash transfers or in kind transfers. And here's where the health business comes into play. What we've had since the 1960s is a dramatic increase in the two major sources of resources for Americans. That is the government transfers and that is the old age survivors and disability system which provides cash to older people and people with disabilities and that's increased from about 180 billion in 1966 to over 700 billion and that's in real terms, 2012 terms and in what Judy just talked about, the creation and expansion of Medicare Medicaid which in 1966, the first year it went into play was 20 billion and is now greater than OASDI at 751 billion in 2012 dollars and it's still, it's higher today. So none of this is captured in market income as measured by Piketty and Saez. Okay, so I've written four papers on this which you're welcome to read. I'm gonna just assert things but if you don't believe me, read those papers. Let's look at the most common measure used by the Census Bureau in their use of survey data. And in one of those papers, I show that you can get the numbers of Piketty and Saez get with a tax-based data with the survey data. But what the Census does is look at median income and what you see is a median income has increased substantially since the track in 1967 is where we go. The shaded areas are recessions so what you see is median income going up and down through the business cycle but fairly substantial progress in median income between 67 and 2007. What you see since 2007 which is in red is the great recession and the decline in median income that has only just started to turn around in the last years data from 2015 that the Census showed two weeks ago where median income is up substantially but still way below what it was in 2007. Okay, so what's going on here? How do you relate tax income, market income to what's going on with the median income of people more broadly measuring income? So you can think of five measures of income. The first is market income and I should say Mark's work is even before market income. He's looking at the wage income of individuals. What Piketty and Saez are looking at is the market income, not only wages but income, rents and dividends and looking at tax units which can be single people or families. So the first measure I'm gonna talk about is market income of tax units. The second I'm gonna talk about is the income pre-tax, a post-in cash transfers of households. The third I'm gonna show you is the way that most researchers do it, where they take into account that there are different numbers of people in each household and I'm gonna use the individual as a unit of analysis but look at household income divided by the number of people in the household to power to adjust for returns to scale in consumption. The fourth, I'm going to do what the Europeans do and subtract taxes off that income because people can't spend taxes, that's what the government takes away from you to spend stuff for you. And then finally I'm gonna show how all this changes when you include something that's not included in most numbers and that's the market value of employer provided health insurance which is what Mark talked about and I'm gonna add the insurance value of Medicare and Medicaid. And this is not how much you as an individual get if you have a health condition. It's really the insurance value that protects you from all of those conditions if you have access to Medicare or Medicaid. Okay, so what I'm gonna show is these five things and I'm gonna show you that if I can just move over here. If you focus solely on market income then you get a very dismal picture of what's been happening in the world. The rich have been getting substantially richer between and I'm gonna show this between 1979 which is a business cycle peak and 2007 which is a business cycle peak. I'll later talk about expanding that back to 1959 and up to 2012. You see the top 5% gets 37.9%. The rich are getting richer. Here's the amazing number. The bottom 20% of the income distributions income fell by 33% in real terms between 1979 and 2007. A disaster and the middle of the distribution their income only increased by 2.2% over the entire 30 year period. Stagnation, the rich got richer, the poor got poorer and the middle class is stagnated. Have you heard that statement made? Okay, so now let's move this across and nothing up my sleeve here. I'm just gonna shift from tax units to households. This is the measure I showed you that the census does. This changes a bit because we have in cash transfers to individual households and so that minus 33 immediately changes to a positive number but still the rich are getting richer just slightly increases by the poor and the middle class a little bit better but not all that much. Now let's do it household size adjusted and also include pre-tax, post-transfer income here but not health insurance. We're gonna do household size adjusted. Excuse me, household size adjusted. This changes a little bit but not dramatically. Then we go to taxes. When you include taxes in here, actually the higher income people do better off here because the share of your income that you pay taxes on is actually decreased between 79 and 2007 for everyone but now you're seeing the other numbers increase but here's the big change. This is not measured in most evaluations of healthcare although the CBO beginning in 2012 in part because of some of the work that I did and Gary Bertlis did are now beginning to use these kinds of measures in their evaluation of where resources go. You see that the bottom 25, the bottom 20% income doubles because of the tremendous importance of Medicare and Medicaid for those folks. It also improves for people at the upper income levels because of the value of employer provided health insurance. Okay, what I now wanna show you is some new work that I've done. Going back, all work in this area really begins in 1979 because that's where the data is to get measures of the value of in-kind transfers, Medicare, Medicaid, employer provided health insurance and other kinds of in-kind transfers, food stamps, that sort of thing. What you see is if you hold income at the same level and so we can just look at trends, you get a pretty dismal picture of market income. This is the one I talked to you about if we valued at one here in 1979, by 2007 it's only gone up by about two percentage points but then you see this dramatic decline so that market income actually fell between 1979 and 2012 and if you take it back all the way it's even worse that these things have been happening. Market income actually hit its peak in 1969 and it's been going on a steady span at a flat level but what's been actually happening in terms of people's resources is that they've been going up as the importance of in-kind transfers, the redistribution of income from market income to people who have less market income has offset this steady market income trend and as a matter of fact, and this is important if you look at 2007 as the peak because of government, because of the safety net which is mainly since 2007 been through tax credits and through in-kind transfers, you see that we haven't had the kind of dramatic drop there. What we have though, and these are the glory days between 59 and 67, we have substantial increases in market income between this period and we had even better increases in government transfers. So this is the glory period where you're having market income increasing and government transfers occurring but part of that was because of the unique position the United States was in in the 1960s and the 1950s and market income has not increased since then. Okay, so final point, what does it look like if you actually take into account the last major four recessions in the United States and look at what happened between 79 and 82 which is those double digit recession of that early 80s, market income plus the value of employer provided health insurance fell by 8.11%. If you measure the great recession using this measure alone the great recession was actually worse, it fell by almost 10%. But if you will crosswalk this across as I've done before we didn't in 1979 and 1982 have the important redistribution that went through the tax system and the value of in-kind transfers and health insurance Medicare Medicaid so that the government mitigated the decline by a bit but only to 5.74%. If you look at what actually happened in the great recession all of these measures that are not calculated actually dramatically reduced the decline in market income to almost well to almost nothing 0.021. For the bottom quintile it's even better news it was 25% decline between 79 and 82 to 12% and it goes from 30% to 1.31%. So what does this say we have a very weird way of treating health insurance Medicare and Medicaid we count it as a cost to government but in our measures of it we never put it into the value of people's access to resources. Now that doesn't say that that's the best way we should spend our money or that if we were gonna give the bottom 20% resources it should be in this way of doing providing them lots of insurance against health issues. But what it says is these are real resources and you have to take those into account and if you don't count if you don't count them you get this strange notion that the United States has somehow had stagnation and the top 1% is taking all the resources that just isn't the case and doing this allows us to think a bit more about do we really want to do this sort of thing we've really done great things but do we really want to spend all that money on the health sector and on providing protection for health insurance if there are alternatives that people would prefer more of you know stop there thank you thank you very much Richard thank you very much indeed give you a chance. So as you're preparing your questions I have I'll do what Chuck didn't take the prerogative of the chair to ask one question and honestly I'm disappointed that I didn't hear this term because it's my favorite term and that's economic mobility seems to me so often times we talk about distribution of income but in an economy with healthy change between the bottom and the top with people moving up and then at the top falling down with all of that churning going on if that's healthy isn't that what we ought to be looking at mobility as opposed to any kind of static distribution now that's just my own view is we ought to be looking at that as opposed to distribution it's odd thing I'm moderating a panel on distribution but let me pose this question to the panel how has rising health care cost affected mobility any of you have a view on that? Well I'm going to answer the first part of your point and that is you know economists and government analysts will often take the easiest thing that is available to them and the data I mean tax data measures market income and that's available and so they use it so it's to some extent it's almost a supply explanation of the data what is unique and what I did and Richard obviously has done much more of it is that it's harder but it can be done to look at other measures of resources and it comes up with a different story so that's maybe an explanation as to an economic mobility is even harder to measure it's nice to say it's impossible but it is very very challenging you know in terms of this your second question in terms of how this affects economic mobility I mean there was there has been discussion about job block that having health insurance locks you into your job and I think as Judy noted it sort of died down a little bit that I don't know if it's because people think that it's not as important perhaps as it was in the past but you know I think you know we have to deal with the system that we've got and the data discussion that we've got you bet but in that vein on the job lock I've not seen any analysis of the implications of the Affordable Care Act for people's mobility in that respect but the availability of health insurance outside a job outside your large employer or the ability to switch jobs the ability to move off Medicaid is altered by the Affordable Care Act so I've not seen an analysis of its implications but it ought to have positive results let me just take you back to a bigger picture of things if we're I think it is important to think about economic mobility I think economic mobility ultimately depends on the resources the human capital that you bring to the marketplace and I guess what I worry about is that I've shown you that we've done great things in terms of providing health insurance to low income people but the question is at what cost are we doing this what Doug Holtzaken talked about this morning was that we have structural deficits in this country that are really quite scary and we haven't really talked very much about them how are we going to pay for all the promises we made for Medicare and Medicaid but what I think is a problem is that when you have these automatic increases in the budget things that are not automatically in there get crowded out so I would say if we want to do something about mobility what we need to do is put more money into education less money into health but before you do that you need to understand how much money we really are putting into health how much we're already mortgaging in some sense the younger generation's opportunities by not only redistributing income from the current cohort of people who are alive to take care of the low incomes low income people currently's health care but the deficit that we're building on that on the system right now let me just probe on that point for just a second if as you point out Mark health care is one of the features which is I guess to say the term retarding income growth in the bottom half of the income or whatever portion you've been focusing on would that also be retarding their ability to develop their own human capital? Almost certainly because they I mean since so much of their compensation is sort of locked in and it's not coming in terms of earnings therefore they don't have the extra resources either for education or any training that they might want to pay for themselves to get a better job or to switch careers it's just a limited and not growing budget and so therefore it would sort of naturally have that consequence You see that? Certainly I've got no problem I don't think that you'd get any argument with anybody who has been here this morning that we are spending too much as a nation on health care where the argument comes is what you do about that and where the problem lies and how you address it and I would argue differently I believe from what Rich would argue that it is not to I argued it already so I'll just repeat my argument it is not to give people less health insurance they need that health insurance and in other countries they get that health insurance for a much lesser share of public resources so the issue is how to provide them that insurance that protection at lower cost and that focuses I would argue largely on the way in which we pay providers But there's a vicious circle there isn't there I mean if we're allocating too much for health insurance as you've argued and we have a too much for health care health care and that's a low productivity sector doesn't that sort of bake in a lower overall growth rate in the economy doesn't that rebound then to the slowness in the wage growth which gets us back to slow economic mobility well I'll let the Chicago and Harvard comments talk about that but what I as a Harvard political scientist would tell you is that I'm focused on the value remember that having access to health care and we know that without adequate insurance there is inadequate access to health care which is also a hell of a price to pay in human capital and so I believe that I would argue that is a valuable service that Americans like everybody needs and I believe we ought to focus on making it work economically not taking it away that sounds good we'll open it up now for questions if you have a question raise your hand and wait for the microphone to get to you identify yourself if you wish or if you wish to use someone else's name no one's going to know right so do whatever Richard did you have a view on this whole business of the way it kind of loops back into income growth is that one of the reasons we're seeing families merging with other families to create these affordable households as you were pointing out I certainly think that focusing on the individual is inappropriate because people live in households and households in fact do provide that kind of insurance I guess what I would say is that there are two we get back to what we were talking about this morning there's sort of two ways to approach this issue of whether healthcare is expanding whether the prices we're paying for health insurance are too great and one solution is more a single one extreme is a sort of single payer approach where the government would in fact regulate the markets and determine the prices and allocate the resources the other is to have individuals have more direct decision making in terms of how they would use their resources to purchase these kinds of products in the marketplace and that's the more notion where you subsidize individuals let them have tax free some amount of money and subsidize low income people who don't have income and then let greater market forces control the prices of healthcare if I might I wanted to recommend something which Judy said in terms of her history of health insurance and employer provided health insurance and I don't disagree with anything but I think she didn't go far enough back and that was that the creation of health insurance in this country the Blue Cross and Blue Shields were actually created by doctors and hospitals and you know later on because of the you know we'll say the accident of price controls and wage controls it sort of glommed on to the employer and then there's the question of the risk pool but originally it was designed you know by the providers and you know I think in their self-interest and so you know I would agree that we need mechanisms to you know provide the resources for people to get their healthcare but it doesn't necessarily even need to be insurance you know there could be other mechanisms and I think the you know probably the difficulty of and you know I think this was addressed by the prior panel of having the government to it it's sort of the government is by its nature cannot provide you know custom size and innovative solutions I think the private market is much better equipped to to come up with innovations in terms of I mean HMOs was an innovation it was an innovation of the private sector and there no doubt are many other innovations that could be could be tried this whole morning has been devoted to the question of the relationship between the pace of economic activity the fairness, the equity of economic activity and our healthcare system I don't exactly remember his name Judy you probably remember him from Harvard, PolySci was Robert Scott he was very famous in the early 80s mid 80s and early 90s for the proposition that inevitably countries evolve to a regime where they emphasize security more than they emphasize growth and it's a kind of a classic argument that you see in both economics and in political science is one of the implications of where we are in this debate right now that we're really debating which of two branches we want to go or is there a third branch where we have a healthcare system that can provide for a three to three and a half percent inflation of adjusted growth rate which most people would argue is the right kind of level of growth rate for an economically mobile society what do each of you think about I think it might be a good way to conclude this morning on the kind of a larger question like that I was looking right at you Judy the whole time so I'm happy to take it on you can either go first or last or maybe both I don't think that's where we are I think that we need growth and we are facing an aging of the population and a cost to the services that we're talking about that is substantial and as a nation I believe we can handle that other nations are aging faster and they're handling it we need to do it too that requires growth what is enormously hard which is why it's called a wicked problem is to tackle the healthcare the growth in the costs of services per capita what we're paying for healthcare and it is I would take issue with what innovators the private sector has been and I think you wouldn't exaggerate it either health insurance has not been a bastion of innovation it's been a bastion of avoiding risk and that's not an acceptable way to go and what we need and we are struggling with it at the moment but we are beginning to address it more than we've done in the past is working with changes in the delivery system to make it more efficient but that's also going to involve changes in the prices the rates we pay providers and that is one hell of a challenge for us as a nation has always been starting with a system that was developed you're absolutely right in provider self-interest and now everybody is invested in it doesn't want to give it up and it's a very tough challenge to achieve our objectives which I believe are quality healthcare affordable healthcare and equitably financed healthcare well it almost sounds like the last word but I'm very tempted to say does which university wants the last word Chicago or Harvard here I'm all Georgetown let me just say that what we have is a problem of scarcity of resources and it's fine to say that the prices are too high but I spend six months of my life in Australia it's much cheaper to get things done but you have to wait for them so if you have a hip replacement you don't get it next week and it's that less cheap so that dimension too do we really want to go towards a single pair system where time is also one of the things that's in the mix I just need to respond because as you will recall I said that's not where I'm going and I also think if you look at the measures and this was not a general this certainly isn't a health panel but I would tell you that if you look at the evidence on terms of quality of care including ready access to care you will not find the United States at the top of the list Mark do you have a two second list? I think we're all agreed that 17 and a half percent of GDP on health care and rising is simply not sustainable and it causes the budget deficit problem it causes inequality problem and economic mobility issues and so therefore I think it is the challenge which needs to be dealt with well I hope all of you have found a few things this morning to take back with you and to enliven your own thinking about this crucial question I want to thank you all for your attendance this morning I'm going to thank Chuck and the health care team for putting this together Ashley Adams and all of her team for facilitating this wonderful morning and would you please join me in thanking these panelists for their remarks this evening