Reinhardt: Gruber's Simulations Better than Private Sector Ones

After I learned that Jonathan Gruber–one of the biggest pitchmen for the Administration’s health care reform–had also gotten a significant sole source contract from HHS, I wanted to get a sense of how sound the justification for the sole source on it was. I asked Dr. Uwe Reinhardt about the contract. Reinhardt, a professor at Princeton, has himself testified on health care financing to Congress. And he has been critical of the whole hocus pocus that lies at the heart of the excise tax proposal.

“The consumer-directed-health-care crowd argues that with high cost-sharing, patients will do the only legitimate . . . cost-benefit calculus — but that surely is nonsense,” said Princeton economist Uwe Reinhardt. “None of these proponents has ever shown that patients are even capable of evaluating the clinical merits” of treatment options.

That said, Reinhardt does vouch for the quality of Gruber’s simulations. When I asked him whether he could have applied for this contract (given that he, like Gruber, is an acknowledged expert in the financing of health care), he said,

If I had constructed as a sophistiated a simulation model for health reform as has Jon Gruber, I certainly would have been in the running for a competitive bid. But there are not many sophisticated models of this sort around.

Gruber is one of the brightest young health economists (and public-finance specialists) in the field. He thinks and writes twice as fast as most of his peers (although David Cutler at Harvard comes to mind as well). So I am sure that, too, weighed in his favor with this contract. Just have a look at his textbook in Public Finance to get a feel for the man.

All simulation models suffer from the fact that their predictions are a function of a series of assumptions that must be fed into the models. I certainly would trust one of Gruber’s simulations more than those produced for much higher fees for trade associations.

Mind you, that doesn’t excuse Gruber’s disclosure lapses, nor does it recommend having the top pitchman for a policy also be the guy running simulations to see how it’ll turn out. But at least according to Reinhardt, we’re not going to get better simulations than we’re getting from Gruber.

  1. BoxTurtle says:

    And if he’s got a valid model, the amount of money involved would be about right.

    And assuming Reinhardt has no conflicts of interest you forgot to ask him about, that means his conclusions are at least reasonable.

    I think Gruber should be asked about his input assumptions. The way to get a model to lie is to lie to the model.

    Marcy, did you ask Reinhardt anything about any of the few other models he said were floating around?

    Boxturtle (Congress should be the ones to ask about the assumptions)

  2. scribe says:

    So, to summarize Dr. Reinhardt, then, Gruber’s simulations will provide accurate, complete and highest-quality garbage out, when given garbage in.

    Like the high-quality shits one gets after eating too much foie gras and Dom Perignon, I guess.

    And who, exactly, was the idiot who decided that employers would just take the money they might have saved on cheaper premiums and just give that to their employees, rather than pocket it themselves? These simulations all suffer, it would seem, from an excessive reliance on fantasy and a decided lack of real-world realism.

    Kinda like that bit from one of the older Simpsons, IIRC, where a bunch of TV/movie writers are sitting around the writers’ room and one of them says “I wrote my thesis at Harvard on life experience.”, this being a goof on the Simpsons’ writers who were Harvard grads.

    • earlofhuntingdon says:

      The assumption that today’s employers pass on their cost savings to employees via higher wages is so far from reality as to be beyond laughable. It borders on the fraudulent.

      • qweryous says:

        I’m having this vision of health care reform meetings all across the country.

        People from Washington D.C. and other centers of great thoughts are traveling to tell the populace that:

        ‘This plan will work great.’

        ‘No cost controls will make your insurance cost less.’

        ‘Insurance companies will help you out better in the future because…’

        ‘Any savings on the cost of health care that your employer sees will be passed on to you!’

        Gruber could earn his money out among the people that can predict what will happen better than his model can.

      • SparklestheIguana says:

        The assumption that today’s employers pass on their cost savings to employees via higher wages is so far from reality as to be beyond laughable.

        Unless the employer is Goldman Sachs or AIG.

  3. BayStateLibrul says:

    Good clarification.

    I’ve never seen a debate with such twists and turns, emotion, fear, in-fighting and intensity.

    Health Care is complex and that is why I’m glad that at least Massachusetts tried to solve some problems. If it fails, it fails, but

    everyone seems to be “setting the place on fire to roast his own eggs.”

    The truth is out there somewhere, but one “never knows”

    It’s all healthy debate, but we do need closure at some point.

  4. orionATL says:

    what a great bit of research and reporting, ew,

    i thought of reinhardt when i first ran across your set of articles on gruber this morning.

    i recall paul krugman saying (writing?) that when he had questions about whether his own ideas on health care were sound or not he asked reinhardt for discussion and advice.

    still, none of this vouchsafing touches the central question/assumption regarding gruber’s work on the obama plan:

    can health insurance be said to be affordable to a society when some members will not be able to deploy their insurance.

    • letsgetitdone says:

      That’s true.

      It’s also true, however, there’s still a problem with Marcy’s conclusion that “we’re not going to get better simulations than we’re getting from Gruber.” First, based on Marcy’s quotes from Reinhardt, apart from complimenting Gruber on his writing productivity and his “brightness,” he says:

      “All simulation models suffer from the fact that their predictions are a function of a series of assumptions that must be fed into the models. I certainly would trust one of Gruber’s simulations more than those produced for much higher fees for trade associations”

      Which, for me doesn’t translate to:

      “we’re not going to get better simulations than we’re getting from Gruber.”

      Reinhardt’s statement allows for the belief that one of the other bright people doing simulations such as David Cutler might have produced a better one had they been given the contract, which goes directly to the invalidity of making this a sole source contract.

      Apart from that, however, since all simulations are based on a series of assumptions, their validity always comes down to evaluation of those basic assumptions The basic assumptions constitute the theory behind the simulations. Simulations, however, are not empirical studies and they do not provide empirical tests of their underlying theories. What they do provide is a better understanding of the consequences of their theories and a means of evaluating its plausibility by looking at simulation consequences.

      However, it is those very consequences of Gruber’s simulations and the theory behind them that are proving to be controversial. Gruber predicts that wages will rise as employers are forced to shift to lower cost, and in many cases, inferior health coverage. But in the current economic environment many people don’t find this conclusion to be plausible. Moreover, there is nothing Gruber argues about the internals of the simulation and its basic assumptions that meet the objection that wages will not rise in the sort of labor market we have now. Moreover Gruber’s assumptions resulting in the prediction of wage rises reflect the same standard free market economic assumptions that have predicted so badly for us all in the recent past. So, why should we believe them now, and why should we believe simulations based on them?

      At a minimum the Administration should have funded other simulations based on counter-assumptions to those use by Gruber to provide ‘critical” tests of Gruber’s results, if it had any interest in objectivity. But the truth is that the Administration had no interest in this. It’s interest was in backing its political case, so it hired an economist who could be counted upon to produce simulation results that would support free market perspectives. And, this, of course, Jonathan Gruber, the up and coming neo-liberal economist proceeded to do. And after he did it, he presented his results as “objective” without either spending much time talking about his assumptions, or revealing that his work was funded by an Administration looking for support for its political preferences.

      And here we come to another broken promise of the Obama Administration. Candidate Obama promised, among various other promises, to end the politicization of Science that marked the Bush 43 Administration. But here we see a flagrant politicization of economic science — specifically giving a noted economist, whose basic perspective is similar to one’s own, a substantial contract to produce supposedly “objective” simulation results to support one’s political arguments, without supporting other studies that employed alternative assumptions to provide perspective on one’s favored simulations, yet another example of the fundamental dishonesty of this “neo-liberal” Administration.

  5. emptywheel says:

    Mind you, I still do wonder why the Admin hasn’t contracted a study of all the employers who have, effectively, done what the excise tax envisions in recent years: make choices about health care in response to increases in their cost for it.

    Thousands of employers have done just that–switched from a “Gold” plan to a “Silver” plan.

    And not only haven’t we seen any increase in wages, but we also haven’t seen any “bending of the cost curve.”

    Why is any simulation more valid than all that real world data that, AFAIK, no one is bothering to collect and analyze?

    • earlofhuntingdon says:

      Thanks for putting that business jargon in quotes.

      Ambiguous phrases such as “bending the cost curve” distract from rather than enable the task at happen: Extending access to health care by way of more affordable, dependable and hence, regulated, insurance products (public or private) vs. finding the revenue needed to enact and implement those reforms.

    • MrWhy says:

      Gee, compare real data with computer models and opinion. Why would you want to do that?

      First you guess. Don’t laugh, this is the most important step.
      Then you compute the consequences. Compare the consequences to
      experience. If it disagrees with experience, the guess is wrong.
      In that simple statement is the key to science. It doesn’t matter
      how beautiful your guess is or how smart you are or what your name is.
      If it disagrees with experience, it’s wrong. That’s all there is to it. – Richard Feynman

      • behindthefall says:

        It’s the “compare the consequences to experience” part that, as EW points out, this debate seems to be trying very, very hard to avoid. BTW, 538 put up a graph a few days ago, and I thought at the time, “I think I’ll have some of whatever Japan’s having.” The other thing Feynmann probably would have recommended doing is reading the literature, in this case, going to take a look at other countries’ experience. Bunch of ostriches here: no, we’re only going to do it the ‘Murkan Way, cuz everthin’ else is evil and socialistic.

        • earlofhuntingdon says:

          Well, corporate welfare checks are A-OK. A helping hand to the little people is so far beyond the pale, the shouters are tempted to call out the National Guard.

    • SparklestheIguana says:

      Why is any simulation more valid than all that real world data that, AFAIK, no one is bothering to collect and analyze?

      Hard to imagine that it could be. Remember all our Iraq war gaming that went so well failed miserably?

  6. earlofhuntingdon says:

    Well, comparing Gruber’s supposedly independent but proprietary model to a private, industry financed model is not much of a recommendation. I think the comparison is invalid, given the industry’s gaming of the debate and the legislative process. Even if Gruber’s is the only academic game in town, sophistication does not equal accuracy, especially if you don’t have access to all his assumptions. Gruber may be brilliant, that does not divorce his work from his politics or ambitions.

    This qualified support for Gruber is welcome. It does not answer the questions about his failure to disclose his obvious conflicts or the lack of transparency Obama has once again chosen as his preferred process.

  7. orionATL says:

    Mrwhy @16

    Great quote

    From the man who showed his fellow review board members that if you
    Dropped a piece of the suspect o-ring from the space shuttle ” challenger”
    Into a glass of ice water it
    Would indeed loose it’s flexibility.


  8. MaryCh says:

    Thanks for this post, Marcy. I had Dr. R 20 years ago, and heard him speak on health policy when he came through Portland a few years later — he’s always struck me as a straight arrow and a guy with a good heart (as well as a stand-up comic in wearing a public finance economist disguise). There was more consideration of ethics in his course than in any other I took, in a public policy master’s program.