 I want to welcome you to this important discussion of the effect of rising health care costs on economic mobility and economic well-being. My name is Bill Beach. I'm the Vice President for Policy Research at Mercatus, and on behalf of the scholars and the staff, again, welcome to this great event. It is not unfair to our times to suggest that we live in the era of health care policy. There's little else that I've heard about in the past 20 years. Health care policy seems like every time I turn around, there's health care policy, which is fine. It's a fascinating issue, and in fact, few issues have dominated the past 25 years quite like this national health care policy debate that we've been having, and that is clearly true of the past eight years. This policy debate largely has centered on coverage issues, and that concern continues to appear in the national health care discussion as evidenced by what is happening in the presidential contest right now. At this time, the post-ACA world analysts are focusing anew on unintended effects, from restructuring of insurance marketplaces to the economic effects of rising health care costs. This last topic is the subject of our program today. Have the growth in health care costs affected the economic welfare of insured and uninsured Americans? Is this increase in costs offset by the benefits of newly extended coverage? Has the rising cost of health care insurance affected the distribution of earnings in the United States? These will be the questions, among many others, that we will be discussing in two panels here later this morning. To get us going, we are extremely pleased to have with us a person who has been commenting on health care and economic policy in this town for a long time, and I refer of course to Robert Samuelson, a gentleman who probably doesn't need much of an introduction and encouraged me to only say one sentence about him this morning, but I'll say three. As all of you know, Robert Samuelson writes for the Washington Post primarily on business and economic issues, and has been associated with the post since 1977. He began work at the newspaper in 69 as a reporter left came back. He has become known for insightful, frank, and powerful commentary on economic and fiscal issues, as well as general economic commentary. Robert Samuelson received a bachelor's degree in 67 from Harvard University. He has written several books, and now please join me in welcoming Robert Samuelson to the podium. Thank you, Bill. I appreciate the short introduction, and I will just, I hope you won't hold my Harvard background against me. A friend of mine, Rich Thomas, the former chief economics correspondent for Newsweek, where I work for a number of years, coined a law, which I call Thomas's Law. He says, all bad ideas start at Harvard. Before I start, let me clear up a couple of other common misconceptions. Although I write about economics, I am not an economist. I'm basically a newspaper reporter who is booted upstairs to write a column. Second, although I have a famous name in economics, Samuelson, I am no relation that I know of to Paul Samuelson, Nobel Prize winner and one of the great and leading economists of the last half of the 20th century. I am told, however, that he did have a son named Robert J. Samuelson. If so, it's not me. Now let me get down to business. The subject of today's conference is actually quite simple. It's a question. Can we govern the healthcare sector, or can it govern itself? The answer is not at all clear. Everything means making choices, usually unpleasant choices. If everyone agreed on everything, we wouldn't need politics or legislative bodies. We could run the country with a computer because there would be no disagreements to mediate. But of course, we do have disagreements and differences. Economists have devised a convenient framework to explain how most material choices get made. They have divided most goods and services into two broad categories, public goods and private goods. Private goods are regulated by the market. People vote with their feet and their pocketbooks. If people don't like old-fashioned newspapers, prefer to get their news from their tablets or smartphones or not to get their news at all, then newspaper circulation will decline and perhaps one day disappear. I may not necessarily like the result, indeed I don't, but it's the verdict of the market. Most choices are dictated by consumer preferences and incomes. If you can't afford a Mercedes, maybe you buy a Chevrolet or a bicycle. Most choices are made this way because most goods and services are private goods. But not all. We also have public goods and services that are provided by government. Defense most obviously, but also much research and development and various types of regulation. Regulation of the environment, financial markets, workplace safety and pharmaceuticals to name just a few obvious examples. How we decide how much, how little and what kind of public goods we want is what political choice, elections and legislative action. If you think government is not spending enough on this or that public good or is overtaxing to spend too much on unneeded public goods, you can try to change the outcome by voting for a new set of public leaders. This is obviously a very messy, inexact and often contradictory process, not nearly as decisive as the marketplace, but it is a process. So we have two well-defined methods of making most spending choices, the private market and government. The trouble is that healthcare belongs to neither of these two groups, though it shares some characteristics of both. About half our healthcare is supplied by the government or more accurately is paid for by the government. The best example is our Medicare and Medicaid. In this sense, medical care resembles a public good. On the other hand, it also resembles a private good in that upper middle class families are routinely described as having access to more and better medical care than poor people. This suggests that healthcare is a private good. But it resembles neither in one crucial sense. There is no obvious way of limiting it. People regard medical care as a right to be supplied to anyone who needs it when they need it. This attitude stretches back for decades. A Gallup poll in 1938 asks respondents whether the government should be responsible for the medical care of people who couldn't afford it. The response was 81 percent of the public said yes. Rights are almost by definition open-ended. I have a slightly different way of describing our situation, though it may just be another label for the word right. In any case, I call healthcare an ethical good. It is something that, in the view of most people and as a moral matter, must be provided for those who are sick, injured, or worried that they might become so. To withhold care is immoral. Unlike private goods, care should not be distributed according to income and preference. Unlike public goods, we should not artificially put a ceiling on healthcare spending. People should get what they need when they need it to survive and enjoy life. No one should be told on an operating table that the procedure has to stop because the hospital has run out of money or is about to appear some budget ceiling or won't be reimbursed by an insurance company. Healthcare is not that sort of public good. It is, as I said, an ethical good. This may seem a defensible and desirable approach for any individual, but it's less defensible and desirable for the society as a whole. It has led almost inevitably to a rapid escalation in costs that arguably represents a fair amount of waste because there is no effective discipline on spending and arguably crowds out other important private and public spending. More of total compensation is devoted to healthcare squeezing wages and salaries. Other government programs or taxes and or deficits are raised to satisfy the demands of higher healthcare spending. The original question I posed, can we govern the healthcare sector, is even more complicated than this implies. Americans want three things from their healthcare system. First, they want universal coverage along the lines of healthcare as a right or as an ethical good. People shouldn't be deprived of healthcare simply because they can't pay for it. Next, they want total autonomy for doctors and patients. Doctors want to be able to prescribe whatever treatments of drugs and other therapies they think desirable without being second guessed by insurance companies or government bureaucrats. Likewise, patients want to be able to pick the doctors and hospitals of their choice. They don't want to be dictated to. And finally, Americans want health costs controlled. They don't want ever rising health spending to reduce their standard of living, especially since most health spending goes to a very small proportion of the very sick people. The top 10% of health spending cases account for 67% of the costs, roughly two-thirds. The health spending of the healthiest 50% of the population accounts for 3% of costs. The trouble is that we can only have two of the desired outcomes at any one time. If you have universal coverage, costs will almost certainly go higher. If we give doctors and patients totally free choice, costs will again almost certainly be higher because there will be no reason to withhold treatment, diagnostics, or medications that might do some good. But if we withhold some of these treatments to control costs, the restrictions risk triggering a public backlash that essential care is being denied. The same is again true if we fail to provide universal coverage, which despite the gains of Obamacare is what we've done. Modern medicine has compounded all these difficulties in two ways. Technological advances in medical care are often more expensive than the treatment they replace or the fact that there were no previous treatments. And the specialization of medicine, which often reflect these technological gains, means that no one is truly in charge of a patient's treatment because he or she suffers from a multitude of ailments and has as a result a multitude of doctors. I don't mean to imply, although it probably seems that I mean to imply, and my wife has often told me that I have never seen a glass half full, I don't mean to imply that the efforts to control the health care system are inevitably futile. There are compromises to all three goals that can be made in the name of the greater good. Our medical industrial complex is strewn with complicated institution rules and practices that represent efforts to straddle the systems underlying contradictions. Or the conflicts between goals can be obscured because they are complex and not obvious. Or the conflicts can be justified because they only limit waste, whatever that is, and don't compromise the quality of care. Still, the job is inherently difficult because whatever health care providers, government regulators or insurance company bureaucrats suggest is logically bound to threaten one of the three goals that Americans passionately hold. It has been a very frustrating process, perhaps not futile, but certainly difficult, as I expect this morning's session will confirm. Thank you very much. Thank you very much, Bob. That was a great way of starting the morning. Appreciate that. Now I'm going to call to the podium my colleague, dear friend Chuck Blauhaus, who is the Senior Research Fellow and Program Director at Mercatus of a program, a research program that specializes in the domestic policy economic portfolio and in health care. He also has major responsibilities for a number of other issues at the foundation. I don't know what we would do without him. He frequently appears on radio and television. You probably have seen him. He's an expert on baseball history and that commentary is welcome this morning. Chuck was a public trustee of Social Security and Medicare from 2010 to 2015 and served prior to that in several economic policy capacities in the George W. Bush administration and received a BA from Princeton University and a PhD in computational quantum chemistry from the University of California at Berkeley. Please join me in welcoming Chuck Blauhaus to the podium. We are very fortunate this morning to have the opportunity to hear Dr. Jason Furman's insights on health care policy and its relationship to the economic experiences of individual Americans. It's my pleasure to introduce Dr. Furman today to you. As many of you probably already know, Dr. Furman serves as the 28th Chairman of the President's Council of Economic Advisors. He has been with President Obama since the very beginning of his administration, previously holding the position of Principal Deputy Director of the National Economic Council. That is a very important and wonderful position I can personally attest. It is held only by the most brilliant of people. Dr. Furman, prior to that, has held a variety of posts in public policy and research before coming on with President Obama. He's done work at the World Bank. He has been a senior fellow at the Brookings Institution and the Center on Budget and Policy Priorities. He has had various stints in academia, including a visiting position at NYU's Wagner Graduate School of Public Policy. Dr. Furman's research covers an extremely wide range of areas, including fiscal policy, tax policy, health economics, social security, and domestic and international macroeconomics. He is the editor of two books on economic policy and holds a PhD in economics from Harvard University. Now some of you may already know, and others might be amused to know, that Dr. Furman is also an accomplished juggler and not only in the professional and intellectual senses, but also in the very literal sense of the word. This has a special meaning for me because a couple of years ago, my own wife gifted me with some juggling balls along with an instructional booklet and some research indicating that juggling was an excellent way to sharpen one's mind. You can draw your own inferences about what was implied there. Virtually every day since then, my morning routine, including this one as a matter of fact, has featured attempts to teach myself new juggling tricks, and virtually every morning has resulted in very humbling failures. So I think of this as my own personal daily morning reminder that Dr. Furman is smarter than me. And with that, please help me welcome Dr. Jason Furman to address us. Thank you. I'm not going to hold myself up against a quantum chemist. But thank you so much, Chuck, for that introduction. Thanks for organizing this discussion today. And I thought I'd start with something really simple because when we talk about healthcare, often our vocabulary slips around, and I want to talk about the difference between cost and spending. Cost is how much it costs to buy something, how much it costs to buy a shirt or a candy bar or a meal at a restaurant. And in those contexts, we rarely get the word wrong. Spending is how much it costs for something multiplied by how much of it we do, how much we spend in total on shirts, how much we tend in total on candy, or how much we spend in total on restaurants. And that depends on both the price and the quantity. When it comes to healthcare, these two have somewhat different evaluations. As a general rule, any time we can slow the growth of costs, that is the growth of prices. In this case, the price of an aspirin or the price of a treatment for a heart attack, is probably presumptively a good thing and something that we should be happy about. When it comes to spending, price times quantity, it's a little bit more ambiguous. In particular, it depends very much on the circumstances. There's been a lot of research on how much we get out of our health spending. I think the answer to the question is it depends, and it's all over the map. Some economists have talked about us being on the flat of the curve, that for each additional dollar we spend on healthcare, we're getting an extra screening, which at best doesn't do anything to diagnose a problem. And at worst, may even lead us to undertake some form of costly surgery that leaves us worse off because of the side effects associated with it. In that world, it's possible to reduce health spending by reducing the quantities without making us worse off and possibly even making us better off. But there's also substantial evidence that, for example, people who don't have health insurance are spending too little on healthcare. They're unable to get preventive care, they're unable to get the type of treatment they need, and for them, additional spending on healthcare would be a positive, not a negative. And so we have a healthcare system that, in some respects, is doing too little, maybe too little prevention, too little for the people who are uninsured. And then in other cases is providing treatments that may be wasteful, unnecessary, and in some cases, harmful. So a lot of the trick is both how to improve the efficiency of healthcare, the growth of prices, and then also look at spending and how to have more of the good healthcare and less of the healthcare that's causing a problem. If you look at the record of the last couple of years, what we've seen since the Affordable Care Act was passed in March 2010 is that healthcare prices, as measured by something called the Personal Consumption Expenditures Deflator, have risen at a 1.6% annual rate. That's the slowest rate of growth of healthcare prices since the, in over 50 years for a comparable period of time. And that is unambiguously good news that the price that we have to pay for all the different things we want in healthcare is growing at about the same rate as overall prices, at least overall prices, excluding the volatile categories like oil, which is something that historically hadn't been the case. Historically, we thought of health prices increasing faster than every other price. When we look at total spending, that's grown faster than prices have grown, and premiums have grown faster than prices have grown, because the quantity has grown and has grown in two senses. One is we all get better treatments today than we did five, 10, 20, 30 years ago. But second of all, more people are covered, in fact millions more people, 20 million people have gotten health insurance since the Affordable Care Act passed. Notwithstanding all of that, what's really remarkable is that health spending itself has come in well below what was expected. If you look at the nonpartisan actuaries that estimate health spending in January 2010 before the Affordable Care Act was passed, they projected that this year we'd be spending $3.7 trillion on health care. Instead, the latest estimate is that we're spending about $3.35 trillion this year. That's 9% less than what was expected, and that's despite those 20 million people that have gotten health insurance in the wake of the Affordable Care Act. So understanding the causes of the slowdown in both health costs and surprise on the downside for health spending, what could be done to help it continue, and its economic consequences I think are really important, and there'll be a whole panel here that can help discuss and debate that. In terms of the causes, I think there's a variety. Originally people were dismissive and thought this was something temporarily caused by the recession. As we get further and further away from the recession, I think that explanation becomes less and less tenable, and it's more likely that's something in our health system. I think a lot of things are going on. You see innovation in the private sector. We saw a slowdown in health costs going in the years prior to 2010, but you've seen that slowdown accelerate since 2010, and I think in particular the way in which we reimburse and Medicare has played a role, the way in which we've done delivery system reforms that are paying less for fragmented and often duplicative care without regard to quality, but instead are paying on a more integrated basis that encourages providers to both save money and improve quality, something that we're now doing for 30% of payments in Medicare with a goal of 50% eventually, and the way in which the private sector has mimicked and adopted a number of these practices that we've seen in the public sector, I think has played an important role. I think it's notable that the Affordable Care Act is certainly a divisive topic, and there's all sorts of really heated views on the question of the Affordable Care Act. I certainly think it's one of the most important laws that we've passed in this country in a very long time. Others would disagree. But a lot of these delivery system reforms that were in it, ways that let you, for example, design experiments about how to reimburse in Medicare, for example, bundling payments for a given treatment or creating accountable care organizations that reimburse on the basis of how care is better integrated and better quality, a lot of those ideas are really bipartisan and were supported by both political parties, and we saw a lot of those ideas incorporated into a reform of how we pay doctors within Medicare that passed Congress on a bipartisan basis last year and gives us a number of these same delivery system reform tools to use in the reimbursement of physicians that we already had in other parts of Medicare. None of this happens automatically. A lot of what we have now are not a specific game plan of what we're going to do each and every year in health reimbursement for the rest of time. Instead, what we have is the ability to conduct pilots, to experiment with different ways of reimbursement, and when those are successful in either improving quality without hurting costs or improving costs without hurting quality, scale them up in Medicare, and a lot of that, what you're doing in Medicare, then can be taken advantage of and built on by the private sector and vice versa. So it's not self-executing and it's something that will require, certainly this administration has put our efforts into it, but will require the next administration and after to continue to take advantage of these tools to try to figure out how to better provide care and do it in a more efficient manner. This all matters quite a lot for the economy, which is the topic of today's discussion. And in particular, I can think of four reasons why it matters. First of all, it matters just because a large fraction of what we consume is health care. It's nearly a fifth of our nation's GDP. And right now, in a number of respects, we're consuming it inefficiently, and that may be, as Mercatus would probably emphasize, due to distortions that come from public policy, whether it's the tax system in health care or public programs. It may be as some Democrats would, or some more progressive side would emphasize failures in the market for health care, whether due to information asymmetries or others. And it may just be the fact that in any area of the economy, additional research and development is a public good that has a spillover, so no one insurance company has the resources and has the incentives to figure out the full set of innovations. But the federal government does have that scale and can help contribute in effect to that R&D that can help expand the production possibility frontier in health care. So if you're talking about something that's nearly 20% of the economy, figuring out how to spend that 20, your money within that 20% more wisely will basically mean you can potentially get more for your dollars and be better off. So that would be the first economic importance is just inherently important. Second is it plays a really important role in the labor market. And in the short run, the evidence is when health costs slow, that employers don't pass all of those savings onto employees right away. It lowers the cost of compensation and it allows employers to hire more people and results in more jobs. The converse is also true when health costs rise quickly, that can cost us jobs. The third economic point would be in the long run, I think the savings, I think health costs pass through from employers to employees. It may seem as if the employer is paying part of the premium, but they're paying you a lower wage and so really it's all coming out of your pocket. So if you slow the growth of health costs, that helps increase the pace of growth of wages and raises income growth, which is one of the challenges we've had as a country for many decades. And then the fourth and final way that health cost and health spending matters a lot is it's a substantial and growing part of the federal budget. And the federal budget, while the deficit has come down a lot over the last six years, that deficit is projected to rise again in the future and we have going forward spending that exceeds revenue. To the degree that you're able to bring down the growth and the cost of health spending, you can help better align those two and have fiscal sustainability. And that's part of what the Affordable Care Act did a down payment on, lowering the deficit over time by trillions of dollars over the coming decades, but a lot more work remains to be done, both on the health side and in our judgment in a balanced fashion with additional revenue to deal with our budget problems as well. So I think it's sort of no accident that healthcare has been a major focus of some of the brightest minds in economic policy and public policy for the last many decades. It's a really vexing and complicated issue. It's a really important issue to the overall economy, to the job market, and to our fiscal situation, but I think it's one where we can make progress and we can make progress really drawing on ideas from across the political spectrum to reform our delivery system, to give the private sector more of an incentive to adopt those reforms and to get more of the good spending, less of the wasteful and unnecessary spending and slow the growth of prices. In your next panel, you're going to hear from four of those brightest minds who are helping figure all of that out. Thank you. Well, thank you very much to Dr. Furman for getting our first panel off to such a good start and for posing some very interesting questions that we will now have the opportunity to discuss. I'd like to ask our four panelists to come and join me on the stage and we'll get going. Well, we have a very interesting first panel for you. It's my privilege to act as moderator. I'll try to be as unobtrusive as possible and to allow our brighter minds lead the conversation. As we have talked about, we want to discuss the various ways in which national health care policy influences fundamental aspects of Americans' individual economic well-being. Each of our experts up here is going to start by giving brief remarks on the order of 10 minutes or so, and then we'll open it up for questions and unleash what I believe will be a very interesting and informative conversation. Let me first introduce our panelists. Sitting directly to my left is Dr. Douglas Holtz-Akin, President of the American Action Forum. He'll be our first panelist. He's probably best known to most of you for having served in 2003 through 2005 as the sixth director of the Congressional Budget Office. Prior to that time, he served as Chief Economist at the President's Council of Economic Advisers, where I had the pleasure of working with him, and also where he had previously worked from 1989 to 1990 as Senior Staff Economist. Dr. Holtz-Akin has built an international reputation as a scholar doing research in areas of applied economic policy, econometric methods, and entrepreneurship. He began his career at Columbia University in 1985 and moved to Syracuse, where he stayed from 1990 to 2001. At Syracuse, he became the trustee Professor of Economics at the Maxwell School, Chairman of their Department of Economics, and Associate Director of the Center for Policy Research. Long before that, Dr. Holtz-Akin came up through the ranks of the Richland Township Public School System in Gibsonia, Pennsylvania, which happens to be right next to my own high school where his mother taught. Our second panelist, Dr. Jared Bernstein, he is a senior fellow with the Center on Budget and Policy Priorities, where he has been since May 2011. He served from 2009 to 2011 as the Chief Economist and Economic Advisor to Vice President Joe Biden. He is well known to many of you as having served as the Executive Director of the White House Task Force on the Middle Class. His areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, and the analysis of financial and housing markets. He's the author or co-author of numerous books for both popular and academic audiences, including his latest book, The Reconnection Agenda, Reuniting Growth and Prosperity. He's a frequent on-air commentator on various cable stations and hosts his own blog, JaredBirdsteinBlog.com, and holds a PhD in social welfare from Columbia University. Our third panelist, Jim Capreda, is a resident fellow at the American Enterprise Institute where he holds the Milton Freeman Chair. There he studies healthcare entitlements and U.S. budgetary policy, as well as global trends in aging, health, and retirement programs. Before coming to AEI, he had many, many years in public service. He served as Associate Director at the White House's Office of Management and Budget from 2001 to 2004. Again, I had the pleasure of working with Mr. Capreda there. He was responsible for the portfolio that covered healthcare, social security, welfare, labor, and education issues. Prior to that time, he was the Senior Health Policy Analyst at the U.S. Senate Budget Committee and the House Committee on Ways and Means. He was more recently a Senior Fellow at the Ethics and Public Policy Center. He has an MA in Public Policy Studies from Duke University and before that a BA in Government from Notre Dame. Continuing with our CEA theme, we have Matt Fiedler with us who is currently Chief Economist at the Council of Economic Advisors. He specializes to a large degree in healthcare economics. Before entering his current position, he served at CEA as Senior Economist. He has a PhD in Economics also from Harvard University. Before that, received a BA from Swarthmore College. Previously, he worked at the Center on Budget and Policy Priorities and as Chief Economist at CEA, his expertise informs not only healthcare policy, of course, but every aspect of administration, budgetary, and economic policy. And with that, I'd like to turn it over for other remarks of our first panelist, Dr. Holtzaken. Thank you, Chef. Thanks for the chance to be here today and I'll just remind Chuck that if this panel goes poorly, I have his prom picture. That is true. That is true. That was the 70s, so. Oh, it was a real low point for everyone, yes. This is clearly a really important topic and I think what's really interesting is that we have these sort of two very important and interrelated problems in the US, one of which is poor economic growth and the second is the budgetary outlook. On the economic growth front, just to remind everyone, from the end of World War II to 2007, we grew at 3.2% a year. But probably the important thing is that even with population growth, the baby boom and so forth, the economy grew fast enough that GDP per capita, rough metric of the standard of living, doubled roughly every 35 years. So in one person's working lifetime, you could imagine seeing the standard of living double and that was the route to the American dream, whether that was college or a vacation or whatever it might be for each family. The projections now are that the US economy is gonna grow at about 2% a year if you fold in projected population growth. The standard of living doesn't double until roughly 70, 75 years. So the American dream is now disappearing over the horizon and it's a very pressing issue that we have to deal with. At the same time, we've got a budget outlook which is really quite daunting despite all the improvements that have been layered into the projections. It's still true that whoever wins the 2016 presidential election will inherit a budgetary outlook in which if left on autopilot, the federal budget will reach 2024, the end of the second term, with the deficit of a trillion dollars, well over 3% of GDP, the sort of safe line that most people look at and about 60% of that deficit will be interest on previous borrowing. So we're heading into mechanically a debt spiral which is simply unacceptable for the nation. And healthcare lies at the heart of both of these two troubling phenomena. On the growth front, it's an enormous fraction of the economy. It's the fifth of the economy. Long-term growth is in the end driven by population demographics. How many workers do you have? And more importantly, how much does each worker produce? That's productivity. And the healthcare sector's a notoriously low productivity sector. We, as Jason Furman mentioned, we have a healthcare sector that's characterized by spending where we spend too much on some things, too little on other things, and just really misuse a lot of spending as well. So that leads to a very low productivity sector. And as an economist, you really want to try to focus over the long term on getting better productivity growth. That should be a fundamental challenge to the health sector and one of the most important things we can do. It's also true that if you've got a 2% growth rate and roughly 2% inflation, sort of the resources in dollar terms that are growing at about 4% a year. And that's roughly what revenue is projected to grow at over the next decade or so, about 4% a year. If you look across the array of federal health spending programs, you see growth rates that are well north of that, 5.2, 5.9 in Medicaid and Medicare, much faster than that in the Affordable Care Act. So we've got federal health spending programs that are outstripping the resources available to finance them. They are driving in large part the increasing budget deficits and so getting both better productivity and making sure that we get growth rates that are sustainable are key challenges in the health sector. The final piece is that the private sector is contributing to this as well. And we have a disguised entitlement known as the exclusion of employer-sponsored health insurance from taxation. If you get $100 in cash, you pay taxes. If you get $100 of health insurance, you do not. And that asymmetry drives compensation packages that have too much healthcare compared to cash wages. That's been a problem, can continue to be a problem. But more importantly, it constitutes essentially a large open-ended subsidy to the healthcare sector and it's a subsidy that's very poorly targeted. If you get a non-taxation, if you're more affluent and have higher tax rate, it's more valuable to you. So we've got a large open-ended subsidy that's poorly targeted and doesn't hit those who need the most help. That's something that really is a troubling phenomenon and needs to be dealt with as well. So all of the entitlements, whether they're officially on the books of spending or as this tax exclusion need to be part of fixing the productivity in the healthcare sector. I'll close by just pointing to Medicare as probably the best single place to focus attempts to change the delivery system and improve outcomes at the same cost or improve the value proposition in the healthcare sector. Medicare pays an enormous fraction of the country's bills. How you pay in Medicare matters. So bipartisan consensus that fee for service is a bad idea and that paying doctors to do more to people is very different than paying for good outcomes. We've now decided to collectively stop doing the misguided payment policy. We don't really know where to go on the improving the payment policies. What's interesting to me is that I think there's a consensus whether they realize they're not across the spectrum on what the future looks like. On one side of the aisle, the future is put Medicare on a budget. It's called the independent payment advisory board and it says if Medicare gets too big, you have to step in and stop it from growing. You should bundle things. And so they've got CMMI bundling operation after operation. We do HIPs in a bundle. We're gonna do all sorts of things in different bundles and they're just gonna build bundle by bundle to better care. And then pay for quality and outcomes. So measure outcomes, be serious about it. So budgets, bundling and quality outcomes. Same's true on the other side of the aisle. They just think about it differently. The budget is you go to premium support and you say, this is how much you get for this senior with a health status and income. And then you have a bundle. It's called everything. When you give them an insurance package and you cover everything and you have a quality metric, the sort of nascent quality metric is the Medicare Advantage Stars program. But you pay for quality outcomes in exactly the same vision as the Democrats have. So I'm optimistic that we can, with these sort of two competing visions up for exactly the same kinds of reform, we can make a lot of progress in the years to come in having a health sector with higher value and better productivity. Terrific, thank you. Dr. Bernstein. I'm gonna speak from the podium because I have some quick slides. So this is a very different quick little talk here because I wanna focus, I just wanna bite off one little piece of this which is the Affordable Care Act and jobs. And here, if my presentation to you over the next 10 minutes is a success and while I do have a few slides, I'm gonna buzz through them because I think they're pretty intuitive. Next time you hear somebody say, the ACA is a job killer, you'll walk away and disgust because it's not. And there's no evidence to support that. And so that's what I'd like to take you through in the next couple of minutes. I wrote a longer piece on this a while ago called something like the ACA and jobs, they're just not that into each other. And my motivation there was partly driven by the fact that when we were working on this, I can tell you that the many people involved never thought of the ACA as a job's program. So the idea that we would defend the ACA in terms of it's a job creator is certainly not what was intended at the time and it's not what I think has been achieved. So I wanna be very clear that I'm not saying the ACA is a job's creator. Outside the healthcare sector, if you're going to newly cover 20 million people, that's going to mean some more demand and some more employment in the healthcare sector. That's actually pretty obvious. But the reason why I've always thought that the ACA didn't have much of a case for this accusation of job killer is because the employer mandate actually affects very few employers. About 30% of workers are in firms that have less than 50 full-time equivalents so they don't face the mandate and of the 70% that are above 50 FTEs and so would face the mandate and a potential employment disincentive. 95% of them are already offered coverage and most of them take it up. And in fact, if you look at the percent of workers who are right on the margin of that 30 hours per week under which the mandate would not be applied, it's a fraction of a percent. So simply looking at the magnitudes of those who would be affected by, whose employment would be affected by at least the employer mandate, you wouldn't expect much traction there. Well, then you have to ask yourself about the impact of subsidies on the supply side of the equation. Subsidies fade as income rises so that's a negative impact in terms of the supply elasticity. But on the other hand, the very high marginal tax rate on Medicaid which would lead folks to want to work less in order to make sure they stay on Medicaid pre-ACA, that disincentive has been very much diminished in states that have taken the increase. So long story short, it's really an empirical question. So in the next five minutes, I'll show you the slides that look at the empirics. So on the left-hand side there, all you see is each dot is a state. And on the x-axis, we have a measure of Obamacare's penetration, which is the increase in insurance, the increase in the share of people in the state with insurance that's plotted against employment growth. If you expect that greater traction from Obamacare, greater penetration from Obamacare was a job killer, you'd expect that a correlation to be a negative one. And in fact, it's a positive one. Now again, there are a lot of things going on here, a lot of moving parts. And one of the things that's happening is that this is a period of significant job growth. And lots of people with jobs have employer-sponsored insurance. So in some sense, a positive correlation is kind of baked in the cake. So let Ben Spielberg, who's here, my assistant and I took out the employer-sponsored insurance from each dot, from each state. So now we're looking at insurance coverage in the right-side plot that wasn't ESI. And there, the slope is flatter, but it's still a positive slope. And again, I think that what you're kind of looking for here is, is there a negative correlation? So far, the answer is no. Well, another little test of this is to ask yourself, where's job growth been? What's the comparison of job growth in states that took the Medicaid expansion and states that didn't? And you can do this two ways. You can either just take each state as an experiment and say, what happened in, that's the left set of bars, what happened in one state versus another state? The states that took the expansion, that's their growth rate in 2014 and 2015. By the way, year choices don't matter here as long as you're starting when the ACA came into the system. And there you see the bars are essentially of equal height. Any differences there are statistically insignificant. Now, you might say, well, I don't wanna treat every state as a single experiment. I wanna wait by individuals. And so you wanna say, essentially, I'm kind of doing this experiment in the first case by one of the probability scholars always say, you're reaching into an urn and picking out somebody. So in the first case, you're reaching into an urn and picking out a state. And you're saying based on whether you expanded, took the Medicaid expansion or not, has your employment growth rate been different from states that didn't take the expansion? The answer is no, they're the same. In the second case, you're reaching in the urn and pulling out a person. That's actually person weighted. And in that case, that doesn't make any difference. So for all my rhetoric there, the results are all the same. Now, where there's really an incentive here, as I argued earlier, where you could certainly see an incentive on the books, is the idea that you have an incentive as an employer to shift people from full-time to part-time work so that you avoid the mandate, take somebody who's at that margin of around 30 hours per week, take them under 30 hours per week. And therefore what we should see is an increase in involuntary part-time work. We should see an increase in involuntary part-time work if employers are responding to this incentive. And so some people have given up saying, okay, it's not a job killer, but it's at least moving people from full-time to part-time work, not so. What you see here is the blue line is the actual share of involuntary part-time workers in total employment. And that's been falling since the expansion got underway. Well, of course it has. It's a very cyclical variable. So you have to ask yourself, is it falling more slowly than it would were the ACA not in the picture? So I built a statistical model that predicts the involuntary share and I measured the model up to before the ACA began and then I just forecasted it forward and you see it's the same. So based on a counterfactual, at least in this simple statistical exercise, and I'm not claiming it's the last word, but you do need a counterfactual here, based on this exercise, the part-time involuntary share is falling like it always does in a downturn. Okay, final point. This is a really interesting, but very dense slide and so don't try to read all the words on this. My friends at the Kaiser Family Foundation make some great slides, but it takes like sometimes 10 minutes to figure out what's going on. I just want you to look at the circled part which asks employers themselves for an employer survey that was just completed, so this is 2016. If you look at firms that are either large firms or with 200 or more workers or all firms, which is 50 or more FTEs, the part I circled, the top part shows what share of these surveyed employers change job classifications from part-time to full-time so that their workers could be covered and in fact, that was 10% for large firms and 7% for smaller firms, so that was part-time to full-time, exactly the opposite of the predicted dynamic. And in fact, there were a smaller share, 3% and 2% that went the other way, so you could argue that they were responding to the incentive, but the magnitudes there are far smaller, so in conclusion, simply no evidence that the ACA is a job killer and very little evidence that it's shifting anyone from a full-time to involuntary part-time work. Thank you. Thank you, Dr. Bernstein. Jim Capreda. Well, thank you, Chuck. Glad to be here this morning for this very important event. I do think it's an interesting way to frame up this question and talk about it. It's an avenue into a lot of different aspects of the interaction between this very large health sector and the larger economy, and so that it's an interesting way to look at the problem and of course, I think probably the most important way to look at it, which is we don't want a health system that in some ways makes our economic prospects worse off. It should be working in tandem to improve our prospects. So the question is, how are we doing and what are the problems and what could be maybe done as a remedy? Let me just start by saying that the obvious point, which is that an additional use of resources on health is not necessarily a bad thing. If the opportunity presents itself and one has earned an additional dollar and the choice is then made to expend some portion of that additional dollar on more health services for oneself or one's family, that's probably more or less a good thing we would think in most circumstances. So when one looks at the United States and the United States is spending well above our peer countries in terms of use of health resources on use of resources on health care, it's often observed that we're wasting a lot of money and I'll get to that in a second, but that's not obvious on its face. That turns out that the richer the country, the more that is spent on health care. That's observable across all the advanced economies. There is a correlation there. And so one would expect the richest country to spend a little bit more on health care and so that's not necessarily a bad thing. Let me just start with that. The second aspect, of course, is that we wouldn't really question this if we knew and felt and understood that the use of the resources was taking place inside a functioning marketplace. To the extent that people in a free market that is working well are using additional resources on health, we would say good. That means that they found that that use of resources is better than an alternative use and we wouldn't question it much. But of course, for a lot of different reasons that we've already tiptoed up to here today, there's plenty of reason to believe that the United States doesn't have a functioning marketplace for health services. The United States government subsidizes health insurance enrollment through Medicare and Medicaid, plus as Doug mentioned, through the tax preference for employer paid premiums. You start off with the fact that the vast majority of the country is in and of course in the affordable care because it's done it for people outside the employer setting as well. Therefore, the vast majority of people in the United States are enrolled in health insurance in large part because of a large subsidy associated with that enrollment. The price of the insurance has been reduced substantially through governmental policy. The second thing that's going on, of course, is that the government has gotten very involved in regulating the terms of the use of services and also the prices that are paid in many different circumstances, through the federal government, through the Medicare program, and through state governments, through the Medicaid program. So a large portion of the use of services by patients is governed by a regulatory structure that has put in place, in some cases, very arbitrary limits on what the prices that are paid for services. So we don't have free-floating prices in a normal way in the health system by a long shot. So the result is that, for a lot of different reasons, one can look at the system of health service purchasing in the United States and say it's not a, of course, a functioning marketplace in the normal sense. As Robert Samuelson indicated, it's neither government nor private market. It's sort of some mixture of the two, but in some ways a dysfunctional mix of the two, which is why many observers of the health system come to the conclusion after looking at all of this to say, yes, we wouldn't normally object to someone spending some additional resources on health if we thought it was a good use of money, but when we look at what's going on, it seems like there's an awful lot of waste just by objective observation, that if someone was actually spending their own money for some of these things and they were told, you know what, if you spend that $500 on that additional utilization of health services, it's more likely to make you worse off than better off. I think most people would say, why would I spend $500 on something that's gonna make me worse off rather than better off? But believe it or not, there's a lot of studies that show resources are being spent on things that tend to push people, on average, toward worse health rather than better health. So it's a complicated situation because of the entanglement of governmental policy with the normal aspects of deciding whether something is being spent in a good way or not. Now, what are the effects of this on people? Well, obviously, when health spending is distorted and elevated and low-value services are purchased by consumers or indirectly through the insurance plans paying for them, premiums are artificially higher than they should be. Therefore, people are spending their own resources indirectly on the premiums for the insurance, but they're spending them nonetheless, and that means that they have those less resources to spend on actually things they would have valued more than low-value healthcare. The second thing is that we have a major distortion in our fiscal situation. That if there is this much waste going on in the health system, then our fiscal situation is a lot worse off for not very good reasons because the United States government threw now four avenues, again, the tax exclusion, the Affordable Care Act subsidies, Medicare and Medicaid, is basically subsidizing most people in the United States now into health insurance. And if there's a lot of waste in that spending, it's putting our fiscal policy into a much-worth position than it needs to be. Taxes are therefore higher than they need to be. Deficit spending is higher than it needs to be. People are internalizing the future fiscal disaster Doug alluded to to some degree in their current purchasing assumptions, which distorts how the rest of the economy is operating as well. So there's lots of reasons to worry about the distortions that are associated with poor allocation of resources in the health system. Now, often the United States debates on healthcare are almost always boiled down to no matter where it starts. You can kind of figure out what's going on. You have a contentious debate, but they can kind of figure out what's going on by trying to understand is the policy that's being proposed to sort of correct and move things in a certain direction, does it pull more toward the government deciding how to fix this allocation of resource problem, or does it pull more toward trying to have the market function a little better with consumers making some better decision-making about the use of resources? And Washington and policy makers and the health community is divided on that question. So a lot of folks believe it's a hopeless cause, going back to a lot of research and a lot of theoretical thinking about this. It's a hopeless cause to have a functioning marketplace in healthcare, but then by definition, the government's gonna have to get involved in the allocation of resources and do the best it can to weed out low-value care, which is why you have any Affordable Care Act and many other measures have been enacted by both parties over 40 years. Lots of interventions where the government is trying to decide, is this gonna be a good use of resources? Should the price be higher or lower? Okay, so the government is knee-deep into this because a lot of decision-making has been made to say, yeah, it is kind of hopeless to get toward a functioning marketplace. Let's have the government regulate it and decide. On the other hand, there would be people like myself who say, it's true that it's going to be difficult to have a functioning marketplace in the health sector, but we better try because the alternative is lots of misallocation by government regulation rather than by the marketplace itself. So if you look at what the government is doing in the health sector, there's not a lot of good evidence, in fact, there's lots of evidence to the contrary, that it gets the answer right, that it gets the prices right in Medicare regulatory policy, that it gets the decision-making about how to steer physicians and hospitals to organize themselves as they're trying to do through delivery system reforms and other mechanisms. There's not a lot of evidence that the government actually knows the right answer either. It's a complicated thing to deliver a health service to a patient. And so this is the conundrum we face. I will conclude just by saying that there's a famous paper in economics on the many reasons why the health system does have problems functioning in a totally free marketplace. I agree with much of what's in that kind of assessment. On the other hand, there's also lots of empirical studies that show that people behave in the health system kind of like you'd think they behave when presented with choices. That they tend to like lower-cost, high-value healthcare as opposed to high-cost, low-value healthcare when they can figure it out. And that when they're spending their own money, they're much more judicious with it than when they're spending someone else's money. And so some of the normal rules of a market economy actually do apply in the health system. And I think we'd be better off trying as much as possible to move more in that direction as opposed to relying entirely on the government. Thank you. Thank you. Dr. Fieler. Thank you for having me. So I wanna spend the second half of my remarks sort of circling back on the main thread that I think has run through Jason and Doug's and Jim's remarks about sort of how do we solve this sort of fundamental question of how we're getting value for our healthcare dollars. But before I do that, wanna touch on one item that hasn't come up so far. We sort of focused a lot on the level of healthcare costs. But I think what we, one other sort of important way in which healthcare costs impact families' economic lives is their sort of risk of sort of large catastrophic expenses on the corresponding effects on financial security. So I think it came up in the opening remarks and most people in this room probably know that healthcare spending is highly concentrated. So in any given year, about 5% of the population will account for about half of healthcare costs, which means that again, in any given year, a small number of families are potentially facing extremely large healthcare burdens. So in thinking about economic consequences, that of course is something that if families don't have effective protection through insurance coverage, that's gonna have very large economic consequences for them. They're either gonna need to go forgo various types of high value consumption. That could be medical care itself or it could be other sort of value goods and services. And another thing that sort of recent research has emphasized is that in some cases, they are gonna get that medical care, but they're not gonna be able to pay those bills. Those things are going to be passed through to collection agencies and it's gonna impair families' access to credit in the future to buy a home or buy a car. So this is one area where we know that policy has a sort of very direct and effective rule in ensuring that families are well protected against catastrophic costs. Discussions in this area sort of often focus on expanding insurance coverage and there's good reason for that. We have good evidence that insurance coverage is a good way of protecting people against catastrophic expenses, whether it's from the creation of Medicare, the Oregon Health Insurance Experiment, Massachusetts Health Reform or we're starting to get sort of early evidence that yes, it's working the same way under the Affordable Care Act. But I think one thing we should also be thinking about is how to make sure that families that already have coverage also have protection against catastrophic costs. Just take one example. You only have to go back as far as 2010 that about one in six workers in employer coverage had no limit on their annual lot of pocket spending. It's very hard to believe, given that sort of a fundamental purpose of insurance is to protect people against those sort of tail risks, those catastrophic outcomes, that that was an optimal market outcome. And indeed, there are good reasons to think that this is an area where market outcomes might not be efficient. An out-of-pocket maximum is a contract feature that is very likely to appeal to sicker individuals relative to healthier ones. And so the sort of adverse selection pressures on that type of, on an out-of-pocket maximum are likely to lead to it to be under provided in a private market. We also know that thinking about low probability events sort of from behavioral economics is a place where consumers often struggle. And again, if we're talking about something, these catastrophic events that are gonna affect a small fraction of the population each year, it is plausible that this is a type of contract feature that might end up being under provided relative to at least what an economist might think is optimal. So it's sort of another example where where sort of policy has a role. The Affordable Care Act required that all private insurance policies, regulatory intervention of the type that was talked about, but a targeted regulatory intervention at a place where we think this is a market failure, ACA required all individual, all private insurance policies to include an out-of-pocket maximum, something that had previously only been required for HSA compliant health savings account compliant policies. And the spread of out-of-pocket maximums in employer coverage since 2010 means that there's an additional 20 million people now enrolled in policies that have out-of-pocket maxes. So I say that just mainly to emphasize, obviously can't require out-of-pocket maximums again, but that an important dimension of how we think about healthcare policy is how we're protecting people against tail outcomes and that doing that is more than just expanding coverage. Switching gears, I wanna sort of agree with what's been said that the sort of most important way in which the healthcare sector affects the broader economy is by consuming resources that could be used for other purposes. And, you know, as Jim said, I think very well, that's not necessarily a bad thing. The important thing is that we're getting value for those incremental dollars. And so the question is how we can do that. I think as Jason alluded to in his opening remarks, it does seem like there's been hopeful indicators that we're making progress on that front in both sort of private and the public sectors. Growth and healthcare costs per beneficiary have been quite a bit slower over the last several years and the years that preceded that. And we've also seen sort of encouraging signs of improvements in quality in terms of things like reductions in readmissions rates, reductions in hospital acquired condition rates and other things. But there's clearly a lot more to do. I think the interesting thing is in some ways the list of sort of the two items at the top of my list and I think the administration's list for further progress actually has more overlap than I think one might have thought with the list that Doug went through, which is I think the sort of top of the list is continuing the progress on payment reform in Medicare. I think it's the sort of failings of traditional fee-for-service payment systems in terms of encouraging by orienting payment around offices at their hospital admissions or diagnostic tests. Not surprisingly, you get a lot of office visits at hospital admissions and diagnostic tests, some of which may be low value. I think the administration has made a decent amount of progress in deploying payment models that try to take a more holistic view on payment, whether through bundled payments around an episode of care like a hip replacement or a bypass surgery or accountable care organizations which really try to take a look at all the care patients receiving over the course of the year. I would say to providers, if you can sort of provide that overall bundle of care more efficiently, you can share in the savings and then we're gonna hold you accountable for the quality outcomes you're achieving. As of earlier this year, about 30% of traditional Medicare payments were flowing through these types of alternative models, mostly alternative care, mostly accountable care organizations. That's up from virtually none about six years ago, but we still gotta find ways to tackle that additional 70%. I do wanna say that I think that's a strategy. I agree that I think Medicare is a good place to start here in some respects in that I think it's a strategy that has a payment reform in Medicare, has implications for the system as a whole and there are few reasons for that. I think one is we now have lots of evidence that when a patient comes in, the first thing physician asked is not, is this a Medicare patient, is this private insurance patient? But they have a sort of practice style that they treat all patients. So if the Medicare payment system gets better and it's advising sort of higher value care, if you're a private patient seeing that same doctor or that same hospital, you're gonna see improvements in the type of care you're receiving as well. I think the other thing we're also getting increasing evidence of is that when Medicare changes its payment system, either the level of payment or the structure of payment, that tends to be adopted by private payers as well. So again, sort of payment reform in Medicare is a way to drive changes system-wide in the way care is incentivized and then as an economist, presumably, the way care is delivered. And then I think the final piece of this is that we know sort of a broad sweep of history, a big part of what drives changes in healthcare spending is changes in medical technology. And to the extent that Medicare is paying in a way that in places at least encourages use of low value care, that's gonna create incentives for the development for medical R&D to sort of skew towards lower value technology. So to the extent that Medicare is changing those incentives in part of the system and indirectly through the rest of the system, that can have sort of a big effect on our long-term trajectory. The other sort of policy piece that I think is really important is retaining the affordable care access tax on high-cost employer coverage or what's commonly known as the Cadillac tax. The fact that the federal government via the exclusion is kicking in 30 to 40 cents at the margin for each additional dollar of healthcare spending even for the sort of highest price, most generous healthcare policies has a wide range of perverse effects throughout the healthcare system from discouraging sort of private engagement in the payment reform efforts. Just talking about to increasing providers leverage in negotiations between doctors and hospitals to discouraging sort of sensible plan designs in order to discourage low-value utilization. So, you know, certainly an administration feels that the excess tax remains a sensible way of sort of addressing the distortions created by the exclusion focusing on the least efficient plans while retaining strong incentives for employers to continue to offer coverage. You know, there are certainly ways that the excess tax could be improved and the president's budget put forward the administration's ideas on ways to do that. But I think it's really important that policy makers find some way for the excess tax to take effect in some form. Terrific, thank you very much. What we would like to do now is open up the forum for questions. I would ask a couple of things. One, we have a couple of folks around the corners of the room with microphones. It's important that if you have a question that you wait for the microphone to reach you. Also, because we have some obstruction of sight lines, I may need the folks with microphones to wave pretty wildly at me if you have somebody. Also, please make sure that you do ask a question rather than make a long statement as I know you would be conscientious about doing anyway. While I'm waiting for the microphones to find folks, I do want to invoke the moderator's privilege and ask at least one, maybe a couple of questions of my own. It was striking to me, and listening to the comments today, we had a number of commentators talk about how we are, through various means, subsidizing people in health insurance, either through the ESI tax exclusion or other means, and that there are a number of problems that arise from this. There are inefficiencies and distortions that arise from this. We've also had a couple of speakers talk about how a very high proportion of overall health care expenses are felt by a small percentage of individuals and families. And I guess, given those two facts, should we be focusing less as a nation on expanding the raw numbers of those with comprehensive coverage of Southern government definition or design? And should we be focusing more on simply limiting the catastrophic exposure of people now currently with or without insurance? And I guess that's the first part of the question, which is a yes or a no question. And the second part of the question is, if yes, how would we go about doing that? Anyone want to take a crack? Jim? Yeah, I think you're onto something there. I do think that the public interest really is making sure that everybody in the United States, as much as possible, is enrolled in an insurance plan that protects them against a major medical event, where I agree some of the literature would indicate some inability of a consumer to understand the ramifications of such a huge event on their finances. Predicting, actually, it turns out that it's true that 5% use 50% of the resources, but actually it's a little bit harder than you might think to predict in advance who that 5% is gonna be. So there's a fair amount of churn there, and it's not the same 5% every year. And so a lot of people are at risk of a lot of people get cancer, and that's a major medical event. That's one of the biggest ones in that category. So I think the policy should be directed as much as possible in that direction. Also, you can do that in a way where people then have a more on the margin and incentive to buy in a catastrophic plan that is the most cost effective way of delivering care in the event. They do have a catastrophic event instead of unmanaged, open-ended care that they enroll in a catastrophic policy that says if you do have a major event, we're gonna have an organized way of providing care to you, an integrated system of some sort. That would be the best sort of public policy goal. And then below that, I think there's been an over-emphasis, frankly, on trying to design every possible permutation of preventative care, primary care, other things where the evidence is weaker that we can know in advance that an intervention is going to definitively push people toward better health over time. So I think a little bit more consumerism, market-driven approach there would do some good as well. I think I might disagree with the view that sort of the primary focus should be on solely ensuring catastrophic protection. Obviously, from my remarks, I think ensuring catastrophic protection is really important. I do think if we think that a catastrophic policy is one that has an out-of-pocket maximum of four of $7,000 or whatever, which is the sort of single policy maximum on the ACA, I think for many families, that's just gonna be too much out-of-pocket exposure, both from the perspective of purely the financial security dimension. We know economic models, you write them down, and people develop these buffer stock savings that that should be the sort of shock that they're able to bear. In practice, we know that many consumers don't have that sort of liquid wealth, and that's likely to mean that that sort of catastrophic policy is not a good fit for them, even in terms of the purely financial dimension. I think we also know that while moderate cost sharing can be a sort of good tool for discouraging over utilization, we also have a decent amount of evidence that as cost sharing becomes more significant and more excessive, the sort of care that gets cut back isn't necessarily the low value of care. A lot of it's the high value of care. And so I think there is a sensible role for cost sharing and for making sure that we're not sort of putting an emphasis on deploying excessively generous coverage, but I think going all the way to the only role of public policy is to ensure catastrophic coverage for everyone is a step too far. Yeah, I would agree with that and would underscore that point, and I know you were referencing Ken Arrows' article, I think, from the 1960s, which was extremely influential and important in this point that suggests healthcare is really a different beast when it comes to consumers being able to rationally shop for the best bargain. And I suspect many people here, myself included, have been in a situation where you have a system that's beginning to nudge you towards more skin in the game and consumer kind of shopping and you've often felt incapable of doing so and many folks in this room are pretty educated consumers. And so I think Arrows' insight was that healthcare is different in this regard. It doesn't mean that there's no room for skin in the game, but it does mean it can be pushed too far. And in fact, one of my concerns is that the increase in high deductible plans is moving in that direction. It may be one reason why costs have been growing more slowly, but in fact, according to the Kaiser Family Foundation, something like 65% of the employer-sponsored plans for firms with over 200 workers are now high deductible plans. And as Matt just suggested, that can have a downside. It doesn't just disincentive people finding useful healthcare. It doesn't just disincentive people from finding wasteful healthcare, but it's also been found to disincent them from finding useful healthcare. So I think you have to be really mindful of where the kind of edge is on that approach. I guess I'm more sympathetic to where Jim came down in this. I think the thing I'd emphasize when you think about this is, it's easy to say healthcare and somehow make the mistake of saying there's just one thing out there called healthcare. There's actually an enormous array of health services that are provided that range from very acute emergency-style care to highly-elected procedures, and they shouldn't be thought of in the same way. And one of the things that I think allowing for some catastrophic backstop, but I don't think Jim said everyone should have a catastrophic plan. You wanna make sure that there's a catastrophic backstop and some flexibility in plan design and some innovation in the private sector that gives you better choices that people can make to cover the kinds of things they face at that point in their life cycle. That, I think, is what the private sector does better than the government. The government just inherently bakes into the cake, these are the choices you're gonna have and the innovation's quite poor. So I think we really do have to worry a lot about the catastrophic backstops but take advantage of flexibility and plan design and innovation over time. Before we open it up further, I'd like to just try to pin you down on one more specific item. We've had a couple of criticisms uttered of the tax exclusion for employer-sponsored insurance and we've also had some references to the Cadillac plan tax. Is that our best available antidote to the ESI tax distortion or should we be looking at a different approach going forward? Who gets to answer that? Well, whoever wants to volunteer. Wait. Okay. So we have a Cadillac tax because when campaigning to be president, Barack Obama attacked John McCain for proposing to get rid of the exclusion. That's the only reason we have it. It's a backdoor way to get rid of the exclusion. Don't do it in a backdoor way and get rid of it. The Cadillac tax is a crazy design. Why should someone who's in a 15% tax bracket pay 40% on one part of their compensation? It doesn't add up from a tax policy point of view. So scrap the Cadillac tax. Get serious about capping the exclusion in some way. Don't have to completely eliminate it. Index that cap and get the incentives lined up better. So I would say two things in response to that. I think first, Cadillac tax is on the books. It is in law. I think one wants to be very careful about saying that we should repeal it with sort of no replacement in hand. The second thing I would say is I think the Cadillac tax is much closer to a cap on exclusion than it's often given credit for. First of all, if you look over sort of much of the income distribution, when you take payroll and income taxes together, in fact, the sort of marginal tax rate on labor income doesn't vary that much, which means the Cadillac tax is in fact gonna be pretty similar to a cap on the exclusion. I think the other thing to keep in mind is when you're thinking about that 40% rate, that's a 40% stated as a sales tax rate. So you wanna think about that 40% rate is more like a 28-6 rate stated in income tax terms. So the truth is what we have in the Cadillac tax is sort of not that different from what we would get with the cap on the exclusion. And so I think we should be cautious about saying that this alternative would be so much better when burden hand is better than two in the bush. I do think the, in the current environment, and not just current, in the environment we've lived in in the past six years, that tax on the books point is really, really strong. And I think all of us agree that the distortions in the ESI need to be dealt with. The idea that there's a tax on the books that get at least part of the way there seems important. One of the big objections to the Cadillac tax was there wasn't enough geographical variation. And I would argue, Matt, you could probably explain, you could certainly explain this better than I. I would argue that the administration's latest version of that builds in geographical variation in a way that I think is very helpful. Cost variation. I'm not gonna belabor this, but I'm looking at the hand and the bird's not in there. It got pushed back in the drafting. It got delayed in the implementation. And I will say now, you will never see the Cadillac tax actually implemented. So that argument, I don't think is... Higher probability of an ESI cap than the Cadillac tax? Yeah. At this point in time, I do. We disagree. All right. I think I cannot pass on this subject. I'm having too much fun. The subject would probably go on for half an hour on this particular one, but there's a couple of things. One is that Doug's initial point is the right one. I mean, it was designed for political reasons. It's ironic, of course, that the coalition that passed law is now the elements of that are the main ones who now wanna get rid of it. And if they do get rid of it, they'll blow a gigantic hole in the planned revenue, supposedly making this thing a deficit reduction measure. Along with three other things, by the way, that'll also be wobbly pretty soon. It's very notable that the tax is supposed to go into effect after President Obama left office. He now signed a law that delayed it for an additional two years so it won't start until the last year of the next term of a president, the likely winner of whom is also opposed to it. So it's on weak ground. Now, having said all that, I mean, you're not gonna believe this. I do agree with Matt that it's better than, I mean, I completely crazy for the Congress, especially Republicans in Congress, to get rid of it before they impose an alternative. I think they were, I think it would be completely insane to get rid of it. It is close enough to a tax cap to keep it until you can actually enact tax cap. But unfortunately, because weak defense of it, frankly, I mean, there's a lot of people that voted for the law are now saying, oh yeah, we never liked this thing in the first place. So, you know, there's enough blame to go around here. All right, let's open things up. Got one right here. Can we get that next? Wait, wait, we got one here first. Sorry, hi, Sarah Pontek with Bloomberg News. We just heard Mr. Furman say that the Affordable Care Act has brought insurance to over 20 million people. However, premiums have been going up for individuals, 25% on average in the last year. So what do you think the administration, the next administration to do in order to lower these healthcare costs for consumers? So I will jump in here for a moment. So first of all, I think in talking about premiums, I suspect that the 25% you're referring to is marketplace premiums. I think one thing that's important to keep in mind is the vast majority of people who have private insurance have private insurance through an employer. We just got data a month ago now on sort of premium growth and employer coverage. And it was 3.4%, I believe between three and 4%. The last five years in the Kaiser Employer Premium Survey are five of the six slowest employer premium growth years we've seen in that survey. So I think it's important to be careful about where those premiums are increasing and where they're not. I think in terms of how to think about the marketplace this year, I think there are some just one-time factors affecting premium growth this year. The temporary insurance program is phasing out. It does look like insurers just set their premiums too low in the early years and they're adjusting to that on a one-time basis and some other one-time factors as well. All that said, I think the president wrote a piece, probably seen in the Journal of the American Medical Association earlier this year saying that there are clearly things that can be better in terms of how the marketplaces are working, higher financial assistance for people in order to sort of make premiums more affordable is one important step. The president's talked about introducing a public option in areas with limited competition in order to put down under pressure on premiums and prices. So there are certainly things that can be done. But I also think it's sort of important not to overstate what's happening. I just wanna make a quick amplification. I think the most important contribution the next president could make would be the public option to add the public option and very much the sense that Matt just suggested. And I want to bring in one dimension of the conversation that goes back to comments that Bob Samuelson made and I very much appreciated your comments by that you laid out things very nicely but I think one thing that you didn't speak to and we've all kind of left out is an international dimension. And here you see I think evidence that contradicts Bob's assertion that as you move towards universality you have to spend more. In fact, there are universal programs in pretty much every other advanced economy that spends much less than we do as a share of our GDP and one reason is because they almost all have some version of a public option. So that would be my strong answer, a strongly held answer to your question. So I would say three things quickly and lovingly. Forget the public option. We've run that experiment. It was called the co-ops. They were not for profits with taxpayer backing. They all failed. The only thing the public option is is infinite taxpayer backing. That's not a solution. We're not done. I'm not done. Number two, it's hard to praise the ACA because employer sponsored insurance has low premium growth. The promise of the ACA is we won't touch ESI. And so they're now claiming credit for not having screwed something up and so that's weird. And I think the exchange markets are just in the early stages of a death spiral and there is going to be little saving them. They have turned into glorified high-risk pools. They're really expensive. You can do one of two things. You can force people in with a tougher mandate or you can throw money at it but neither is gonna happen in the next Congress. Can I actually jump in on the death spiral point? I think it is extremely difficult to believe that one will have a death spiral in this market. The way the tax credits are structured are such that if premiums rise in an area, the tax credits rise to match which means the sort of fundamental economic mechanism that would lead to a death spiral in an insurance market is that premiums go up, the healthy people leave. That mechanism simply cannot function in this market. But there's a supply side problem because you're down to one choice for 20% of the population, two or fewer choices for 60% of the population, you're getting it on the supply of insurance side. They're leaving. Sir? David Grizzle. In other areas where the government has become concerned that there might be market inefficiency or market anomaly, like executive comp for example, they've imposed standard disclosure requirements in order to give visibility to market participants and enable everyone to see who is getting what from whom. Why has there not been more of that in the healthcare area to create greater transparency and to true cost, especially for planned sponsors who are the payors for most of this? Anyone want to take a crack? Well there's the beginning of it in a lot of small ways. It's a, I think our health system is so vast and so complex that sort of deciding on one rule that's going to apply across a lot of, to a lot of it is just almost impossible to do. But having said that, there are individual initiatives going on that point in the direction you're talking about. I think one that's probably the most promising is this effort toward reference-based pricing, which is pretty interesting. Basically it says, big groups of employers get together and they have a lot of planned participants and they basically say to them, we've canvassed all of the providers that are in all of our various networks and we've figured out that a hip replacement, by high value, low cost, hip replacement costs, X dollars, and therefore all of our insurance plans are only going to pay X dollars for a hip replacement. And you can get it within a 30 mile radius of all of us at this particular site or these five sites and we've organized and made sure that it's available to you. However, you can get it from any of the others that are also some in-network some out-of-network participants, but they're all required to post their price in advance so you know if you decide to get yours done at an alternative location, you pay the additional price. So this experiment's run in California for several years and it's basically, it's driven the price down immensely and in a pretty simple way. I think that kind of thing is very, very useful and they should probably apply it across the board. Frankly, imagine if you could do that in Medicare, right? It would be a revolution, all right? But it's complicated in Medicare because the politics are much worse, okay? And you have political actors as opposed to just employers doing it. But I think that's the kind of thing that can actually have a big effect. I think we have a question over there. Good morning, thank you for all of your remarks. Fascinating, my name is Diane Hasselman with the Network for Regional Healthcare Improvement. Any comments on the consolidation of the healthcare market and potential impacts that has on economic well-being? I think this is a really important point and I have felt for a while that the next round of genuine healthcare reform is probably best done at the state level where states have the most direct impact on the nature of competition and these local health and deliver these local healthcare services, the sort of scope of practice laws, the certificate of need for facilities, things like that. And as we see the consolidation, if that's accompanied with market power that just pure price increases for the same utilization, we're gonna have a big problem there. I'm worried about it. Anyone else? We have a question over here. Thank you, hi. Penny Starr with CNS News. For those who are shopping on the marketplace for insurance, before the Affordable Care Act, you could go and shop for what you wanted. If you wanted certain coverage, that would determine the cost for your policy and your deductible, et cetera. Now, because the Affordable Care Act says that policies have to cover these, everything that can possibly happen. For example, my son shopping, he said, why do I have pediatric dentistry? Why do I have maternity benefits? And how does that play a role in driving up the cost? And could that play a role in decreasing the cost? Thank you. I think that goes to him. I think one of the key things to keep in mind is that one of the goals of the Affordable Care Act was to ensure that the sort of burden of healthcare costs were shared equitably. And if you're going to have people only pay for the, and the key part of that is making sure that people could buy coverage without, even if they had preexisting conditions. If you're basically going to allow people to buy insurance policies based on the services that they're going to use through the back door, you're going to end up back in a world where the people with preexisting conditions are paying for a policy that covers the care they need and the people without the preexisting condition are not dying that care. And so I think that structure is a key part of enabling the, enabling an insurance market where people can get coverage and get care even if they have preexisting conditions. Can I? Well, I think it's really important. He began the answer at a very important point, which was it's an equity discussion. The question is whether there's a shared understanding of what's equitable. Basically, there's a socialization going on here of a lot of premium costs across parts of the population. And I think some of the difficulty with the ACA really is with people, the electorate, having a different understanding of what they think would be equitable as opposed to the law of the past. They're not quite sure that it's equitable, that's people maybe of lower means actually, subsidizing care for people of higher means, which actually can happen. And because you have people who are not going to use a certain service, paying for a premium for people that will definitely use the service and perhaps have comparable incomes, okay? So I think it's a question of what's equitable and that's a subjective question. It's not a, it's something that different people can have different points of view on. So I mean, I agree with the way Jim just teed that up. And I think it's important. However, I would add that really what you're describing is called insurance. I mean, there's just no insurance scheme that works wherein the healthy don't subsidize the sick or the people who don't burn their houses down don't subsidize the people that do. And that's the nature of insurance. And I do agree with Jim that it perhaps needed to be explained better. But I will say that what you're describing should ultimately lead to an increase in costs against the historical trend. And in fact, as Jason and Matt and others have described, and this is, I don't think a controversial point. In fact, costs are growing a lot more slowly. So it could be that some of the efficiencies that have been described today are offsetting costs of the type you mentioned. But at the end of the day, the trends are telling us that in fact, we're doing better in terms of holding down cost growth. Can we have one last question? I'm pointing across the room. I'm not sure, is that it? All right, well good. Well, I think we are done. And thank you everybody. Thanks for our wonderful panel. It was a great discussion. And we're gonna take a 15 minute break and be back at 11. Thank you.