um foreign planter good morning sorry good afternoon and welcome to the political american debate we're going to talk about obamacare a topic which is extremely debated in the united states and it is the most appropriate topic for the festival in trento this year talking with professor gruber who is one of the most renowned experts in this topic we can get an idea of the political significance of this topic in the united states today professor jonathan gruber who is a professor at the mit boston is an expert in health economics professor gruber is one of the architects of the main health care reforms in the united states starting with the state of massachusetts with mitt romney the republican who was then defeated by obama in the 2012 elections the obama care and the health care reform at the vermont state which was cancelled i believe was the most advanced one of all three professor gruber from the very beginning has been focusing on health economics a study he carried out several years ago together with another well-known economist of indian origin wellington came to a very curious conclusion which is taxing cigarettes is a good thing because it relieves smokers from some guilty feelings at least this is what i understood from that study anyway being the inspirator and the developer of the healthcare reform professor gruber has been at the core of polemics in the united states three years ago at a mating of academics professor gruber expressed his opinion um describing the political means president obama had to use to allow for the obamacare to be passed of course uh this had to be off the records but it was reported by the media and this is why um the conflict went on i mean italians maybe do not even imagine how significant this debate is in the united states i've realized this because professor gruber has written not only academic texts but also a graphic novel that illustrates obamacare professor gruber has provided the texts to the graphics who have made this very interesting book which can be bought on amazon and i've read the comments and one person even said i threw it in the fireplace and i was so glad when it turned into flames i mean the issue of the health care reform in the united states truly triggers of amazing reactions passionate reactions some people even claim that a previous act so one of the reasons why spending is going to happen in this case apparently is the law that requires that if you need help you have to be taken care of at the first aid station at the emergency room before checking whether you got a credit card or not in your purse i mean for us this is absolutely normal but there are people in the united states who believe that this is not acceptable so professor gruber as often interviewed on tv he writes articles in newspapers and magazines approximately one month ago he published a text in the washington post and it is very important to listen to what he's got to tell us because as you all know very well president trump is now trying to abrogate obamacare he has had an act approved of by the chamber that will leave about 20 million people deprived of health care trump's team has complained with the congressional budget office for stating the truth which is that of doing away with care for 20 million individuals it is not clear what is going to happen at the senate but this is for sure a very hot topic also because according to a political interpretation trump president trump realizes that this is an unpopular measure but president trump might try to proceed in this way nevertheless to pay a price to the right republicans for other acts to be passed so i'm now going to listen with a lot of interest to what professor gruber has to tell us about this very debated topic thank you very much for that very nice introduction and i'm greatly honored to be invited here as a speaker at this year's festival of economics i'm particularly excited that my children are here because when i told them i was speaking at a festival of economics they thought it was a bad joke my children think that economics is like broccoli it's a terrible tasting thing you eat because your parents force you to and sadly this is not so different how than how most americans feel about economics these days indeed in america we now find ourselves in what we call a post-fact world where truth is consistently defeated by falsehood this is very depressing to those of us who produce facts for a living and while there's much that upsets me about the current state of american politics perhaps the most distressing thing is the shrinking respect for expertise experts are increasingly viewed not as a source of learning but as an object of ridicule and so it is very refreshing to come to a place where they appreciate the role that expert economics can play in helping us think about the world so today i'd like to talk about health care reform in the us now i could talk for hours and hours about this topic but i only have a limited amount of time so in a talk like this to remind myself to not go on too long i like to start with a story from my family which is the time um uh my sister came running into the house and saw my father and said dad dad where's mom i need her and my father said mom's not here can i help you and my sister said no you can't help me and start to walk away now my father was surprised because he has a phd in finance and he was surprised she didn't want his help with math so he said well can't i help you and she said no i don't want to know that much about it so today i don't want to tell you more than you want to know about health care reform i'd like to talk about three things and i'd like to hear your questions and hear what's on your mind and learn from you about italy's perspective on this very important problem so i want to start by talking about why we needed health care reform in the us i then will talk about how the affordable care act also called obamacare was the best possible solution to our problems and then i will talk about where health care reform goes next in the united states let's start with some background on the u.s healthcare system for most americans the u.s healthcare system is not that different from italy now that may sound strange to you after all in america we have a system of mostly private insurance while in italy you have a system of publicly provided health care but really both systems are just trying to solve the same problem who pays for the sick it's a basic fact in economies like america and italy that 80 percent of the health care spending is done by the 20 percent of people who are sickest what that means is we need somehow to share the risk we can't count on the sick to pay their own bills that risk has to be shared somehow now in italy that risk is shared by the taxpayer you all pay taxes and in return everyone gets to use free health care in america that risk is shared by insurers who charge the healthy more than they would need to pay in order to have extra money to cover the sick now for most americans this system works very well about 60 percent of americans have health insurance through their employer and the employer pays most of the cost of their insurance another 20 percent of americans get health insurance from the government directly from the government uh and in that case it's either free or a very small cost the big place where we differ from italy and every other developed country is the last 20 these are people who suffer from a uniquely american broken system and this is a system where insurers could discriminate against the sick in three ways if you were sick insurers could deny you insurance coverage if you'd been sick in the past insurers could refuse to cover your past illnesses something we call pre-existing conditions exclusions you might have heard of that with that base it's basically fancy language for we won't cover your past illnesses and then finally if you were sick you could be charged many many many times more than the healthy pay with no limit a hundred thousand dollars a month a million dollars a month no limit on what insurers could charge if you were sick as a result for these twenty percent of americans there was not meaningful insurance there was no way to protect themselves against illness and as a result most of them were uninsured what that meant was if they got sick they did not get the care they needed estimates suggest that more than 40 000 americans every year died from lack of health insurance millions of more americans were unable to pay their medical bills leading to constant financial stress and personal bankruptcies this was a terrible and unfair system that led to incredible stress on low-income families who weren't offered insurance by their employer or the government now a sensible person might ask why couldn't the u.s just switch to a system of public health provision like italy why not just switch to that system the answer is that while that while that might have been possible many years ago it's politically impossible right now in the u.s for three reasons the first is that most americans have belonged to a well-functioning system of private insurance through their employer most americans would not be willing to give up insurance they know for some unknown promise from the government that wouldn't work second we have built up an 800 billion a year private health insurance industry that will not go away without a huge fight and that's a fight they will win so that's the second reason finally to move to a system like italy's would require an enormous tax increase and most americans will not support that right now the state of california has proposed a system like italy's it would cost 400 billion dollars a year which is about the entire budget of the state it's just not going to happen it's just politically too difficult so for more than a hundred years we've tried different approaches to reform our healthcare system in the us and it never really worked leading to an increasingly broken system with more and more people becoming uninsured then in 2005 the republican governor of massachusetts mitt romney had a very interesting idea he said what if instead of trying to fix the whole system we just focus on the part that's broken we'll leave people who are happy alone and let's fix the part that is broken and he did so by building what i call a three-legged stool okay the first leg was ending discrimination and insurance telling insurers that they had to private provide insurance to anyone who asked for the same price as the healthy so they couldn't deny insurance they couldn't deny coverage for past illness and they couldn't charge the sick more than the healthy this is obviously a terrific outcome because it ensures that every citizen can get insurance for a fair price the problem is that if you do this by itself it doesn't work and here's why if you tell everybody they can buy insurance at the same price if they're sick or healthy then what will the healthy do they'll wait till they're sick and then they'll buy insurance why should you buy when you're healthy if you can get it at the same price once you're sick but remember what we talked about before how does insurance work insurance works by the healthy paying extra to cover the sick so if the healthy don't join and with a sick join the insurers can't break even they will lose money and they'll leave the business in fact we saw this in america in five states in america they tried doing this and in every state it destroyed the insurance market because insurers said we're too afraid we will only get sick people we don't want to be in this environment that's why romney realized we needed the second leg of the stool the individual mandate or a requirement that individuals purchase insurance by mandating that all individuals have insurance we ensured that both the healthy and the sick buy insurance so that insurers can provide insurance to all at a fair price but the problem with the mandate is you can't mandate something that people can't afford health insurance is very expensive for a typical family in massachusetts in 2005 it cost 12 000 a year that was unaffordable for low-income families that's why you need the third leg of the stool subsidies to make health insurance affordable so we set up this system where we had fair insurance pricing we required everyone to buy insurance and we set in place a subsidy system so that low-income people could infor could afford the insurance they had to buy and this system worked very well within three years we've reduced the uninsurance rate in massachusetts to three percent only three percent of people were without insurance for comparison a place like the netherlands has a two percent on insurance rate so that's very good outcome and it was very popular about two-thirds of people in massachusetts supported the law uh supported the law it is for that reason that when president obama got elected he decided to try a national version of the same law now remember this was a plan developed by republican governor but president obama was enough a pragmatist to realize that if it worked we should do it so he was willing to do it even though it was really originally republican idea and that's what the affordable care act is it's the same three-legged stool just at the national level okay just to review first of all most importantly as of january 2014 america no longer allows insurers to discriminate against the sick this is one of the most important victories for social justice in american history i still get shivers when i think about it this was an amazing accomplishment america finally was a country like all other developed countries where people would no longer go bankrupt just because they had the bad wrong jeans or because they got in a bad traffic accident this was an incredible victory for social justice second to make this possible we have an individual mandate to purchase insurance and third we have government subsidies to make insurance affordable so the same three-legged stool and the results have actually been very positive okay now i'm biased okay uh i have a strong view on this i helped write the law but i'm only going to cite objective facts here the fact is that we have cut the uninsurance rate in america almost by half with more than 20 million americans gaining health insurance and we have a stabilized insurance market where everyone can get insurance at a fair price now you might ask well that sounds great john but if that's so great why is it so unpopular indeed before trump got elected more americans disliked obamacare than liked it so why is that if it's so great well the answer i'm afraid is that since the day this law is passed it's faced an unprecedented political attack which has been highly successful opponents have provided fake news and misinformation that have caused americans to not be able to understand what the law actually does now to be clear this is a complicated law i totally accept that and by design it didn't benefit most americans remember eighty percent of americans were doing okay and romney's original idea was let's leave them alone and focus on the 20 percent that need help and that's what obama did policy wise that was a great idea politically not so much because that meant that 80 percent of americans said hey what's in it for me this law does nothing for me and then when republicans came out and said this law is terrible they said well maybe it is it hasn't done anything for me and so basically we left 80 percent of people able to be swayed by political arguments so what was a good policy idea turned out to have a fundamental political weakness as a result most americans don't understand this law so for example if you ask americans has insurance coverage gone up or down since obamacare we know the right answer it's gone up by 20 million people almost as many americans think it's gone down i think it's gone up or more famously if you ask americans if they like the affordable care act or if they like obamacare they say they like the affordable care act but hate obamacare the famous example of course they're the same thing now this does not mean that this is that americans aren't thinking about it it's complicated and the problem is when you do a complicated law it allows an opportunity for exploiting it for making it sound like it's not doing it really is so in the end obamacare was a policy success but in large part of political failure um in fact one of the main reasons the republicans took over the government was opposition to obamacare it hurts me to admit that but it's true but here's the problem any changes that republicans make to obamacare just make things worse for example the individual mandate now this is the least popular part of the law people do not like the individual mandate okay once again they don't understand it if you ask people do you like the individual mandate two-thirds say no i don't like it if you then say do you realize that if you already have health insurance the individual mandate doesn't affect you then two-thirds support it so once again people don't understand this but they don't like it so republicans have said well great we'll get rid of the individual mandate but i hope you can see the problem with that if you get rid of the individual mandate healthy people leave the insurance pool only the sick are left and insurance prices go through the roof they get very very high and insurers can't make money and they leave the market this is not once again pure economic theory we have plenty of that at this conference okay this is real evidence five states tried this and every time it failed if you're going to require individuals not discriminate you have to have the individual mandate so another example is the actual regulations that end discrimination republicans could just say fine we'll get rid of the individual mandate and we'll also allow insurers to discriminate the problem is that's very unpopular people like the world where insurers cannot discriminate they find it very unfair that insurers could discriminate and no one wants to go but very few people want to go back to the days where insurers could charge you more just because you were sick as a result the current republican alternative to obamacare causes 23 million people to lose health insurance okay and to cause the poor and the sick to pay up to 10 times more for health insurance than they pay under obamacare now here's some good news in this debate those facts have mattered okay as i said earlier i was worried that after this election we would be in a world where facts no longer mattered where politicians could do whatever they wanted after all trump lied all the time and got away with it i thought politicians could just do whatever they wanted and get away with it here's the exciting news which is when these numbers come out they've affected public opinion this republican proposal is now incredibly unpopular only one in 10 americans supports the republican alternative in addition obamacare has become popular for the first time more than half of americans support obamacare for americans i think obamacare is like the girlfriend you leave for someone better and then you realize maybe you shouldn't have left and now i think they want to come back so i'm hopeful that we'll keep obamacare or at least change it in only small ways but in the end neither obamacare nor the republican alternative fully addresses the most important fiscal problem facing the united states which is the rapid rise in health care costs health care costs in the us have risen from from only four percent of our gross domestic product in 1950 to over 17 percent today if nothing is done they will rise to over 40 percent of gdp by 2100 okay now in italy meanwhile costs are one half as high nine percent of gdp now you might ask why is that if you look at health outcomes italian health outcomes are no worse than american health outcomes now to be fair american health health outcomes also aren't worse if you look at statistics and they say well americans have the highest infant mortality rate that's actually not a fair comparison for people like myself and my children us healthcare is the best in the world a white baby born in the u.s today has the same infant mortality rate as a baby born in scandinavia a black baby born in the us today has a higher infant mortality rate than one born in barbados okay the problem with our system is not the health care is good enough it's that people don't have access to it that's what obamacare is trying to fix but once people get access our health care is good it's just not that much better and it costs twice as much so what's going on well there's a couple of things going on here a minor part is the way we treat patients we treat patients much more intensively when they get in the hospital but the truth is most of the difference is simply unit prices prices for a doctor especially a specialist like an orthopedist or a dermatologist or some other specialist prices for the hospital prices for medical devices like a new hip or a new knee and prices for drugs those prices are all much much higher in the us than anywhere else in the world and that is the primary driver of the higher health care costs in the us now why is that you might say well that's great here's the answer we just lower those prices in the us and the problem's over well the difference is quite simple in the rest of the world like in italy you are willing to regulate your prices in the us we are not so in italy the prices you pay for all your medical goods are regulated through a negotiation between the medical providers and the government in the u.s we don't regulate those prices we leave it to the private market to set our medical prices but the problem is that this is a market that suffers from many failures and as a result prices have grown rapidly in many markets hospitals and specialists are monopolies with no real competition and we know from economic theory a monopoly will not charge the welfare maximizing price a monopolist will charge a price that's too high that's why economic theory suggests that monopolists need to be regulated okay even in big markets like boston with many hospitals consumers still cannot shop i mean think about it if you're in the back of an ambulance with a heart attack you're not going to say well take me to that other hospital i want to see if they're cheaper okay that's just we can't shop for healthcare as a result even in big markets certain hospitals set very high prices and get away with it okay so basically this is a situation where really there's a clear market failure there's a clear market failure and basically we need to figure out how to deal with these rapidly rising prices now one solution of course would be price regulation we could we could regulate the prices but the problem is that price regulation is politically incredibly challenging in the u.s i hate to i'm sorry i keep blaming everything on politics but it's true okay economics is not the problem here okay it's the politics price regulation is very very tricky okay not surprisingly health care providers like their high prices okay they like the fact that they get paid extra money and so they will fight hard against government interference so let me give you one recent example to illustrate the problem in the us for senior citizens we have a public program called medicare medicare is free public insurance for the elderly and medicare reimburses doctors and hospitals just like your government reimburses doctors and hospitals and in particular if you're in a hospital and you need to get an injectable drug like for some kind of injectable drug then the way medicare pays is the doctor gets paid seven and a half percent of the price of that drug okay so if i'm a regular doctor and i give stefano a hundred dollar shot i get 750. if i'm an oncologist treating cancer and i give him a thousand dollar shot same effort right all i did was this i get paid 75 dollars for the same thing now that makes no sense right we're at festival economics we understand that's a terrible way to pay for things so what happened was 20 senators wrote a letter to president obama and said this is a broken system we need to change the way doctors are paid and president obama responded he proposed a new system where doctors got paid a flat amount plus two and a half percent now there shouldn't be any percent that part should go away entirely but he understood politics a little bit and he said fine we'll give a flat amount plus two and a half percent budget neutral same amount of spending overall just a better system well i think you can all see what happened 80 senators including the original 20 wrote him a letter saying how dare you propose such a radical revision of the american health care system this is awful you can't do this why did they write that letter because the oncologist lobbied them the doctors liked giving their 75 shots and they didn't want to go away and as a result the obama proposal failed so now we still this broken horrible system of paying doctors for the same effort 10 or 20 times as much okay so basically the question becomes in the u.s can we control prices without regulation now once again there is some good news here the good news is since obamacare passed health care costs in the us have grown by the slowest on record the slowest growth in our in our history since world war ii since we started measuring health care costs has been over the last seven years okay relative to gdp relative to our economy it's the slowest it's grown why is that it's because private employers and insurers have started to say no they've started to say to expensive hospitals no we will not pay for people to go to you they set up what we call narrow networks where people can only go to certain hospitals that are less expensive and not the most expensive ones we've also started charging people a lot more for their healthcare in the u.s 15 years ago whenever you went to the doctor was just ten dollars now most americans have a deductible where you can pay one thousand or two thousand even five thousand dollars for health care now once again thanks to obamacare that deductible is income rated what i mean by that is if you're poor the deductible's lower so it's not for someone like myself a 5 000 deductible while it sounds like a lot that's actually pretty reasonable if you think about how much the u.s spends on health care i think it's pretty reasonable to ask someone like myself to pay that much and for those reasons we've actually begun to reduce the cost of healthcare slow it down but the question is can this continue i mean there's only so many hospitals you can cut out of the network and only so much you can ask me people to pay before the system doesn't work so can this continue and if not will the politicians finally be brave enough to regulate prices now i don't know the answer to that but i do know that when the time comes to regulate prices the first thing they'll be regulated in the us is drug prices and the reason is because people are sick of seeing the drug commercials now you don't have this in italy but in the us the drug providers like you know all prescription drugs actually advertise on tv and so let me end with a true story i swear this is true that's told to me by a pediatrician friend of mine okay a nine-year-old came into his office and said to him i'd like to ask you about cialis now if you don't know cialis is a drug for male impotence okay so my doctor friend was surprised and he said why are you asking me and the nine-year-old said well i was watching football and the tv said talk to your doctor about cialis so that's what i'm doing and i believe that this will be ultimately people are getting mad enough about this that we may at some point be ready to regulate drug prices but it's not happening soon so i think in the near term it's going to be up to the private sector in the u.s to continue to figure out ways to squeeze health care costs but in the long run it's hard to imagine how we can get our health care costs under control without more of an active government role now i could go on speaking but as my children can tell you i get very boring so i would i would rather hear your questions and have a more general discussion if there's questions to be asked i'm also eager to accept your questions i didn't introduce myself actually i write for la stamper torino a daily and italian daily actually before accepting questions i have here a list of the quality of health care in the world based on the landsat data which i believe is one of the best journals in the world in the in this respect so in the first 20 ranking countries in the world in terms of quality of health care 17 out of that number are european countries and then we have australia japan and canada and united states ranks 35th we compare with italy and you see averages were explained earlier on by professor gruber we know based on averages that some are very nicely treated and others are not but if we simply consider averages in italy we are better treated for almost all diseases we there are approximately 20 diseases in this list and only for some types of cancers uh including leukemia uh in that in those cases only in the united states treatment is better than in italy so you see what problem we have here we always complain about our health care system in italy and we also have huge problems of corruption in italy that also have to do with this and yet even though we complain about things and correctly so the quality of the health care we receive is pretty good when compared to other countries in the world and health systems of course are different many are financed by the public uh by the state but there are differences even though there is the government paying for instance in italy and many other countries professor gruber very well explained how difficult it is to change things in the united states which enjoy a special situation when compared to the rest of the world so let's accept questions now before the question um i think that's an excellent point which is that first of all there's corruption all health care systems so in the us two of our major insurers just agreed to pay the government 32 million dollars because they were cheating by saying patients were were sicker than they were so they get paid more from the by the government so this exists in all systems i think once again the the what's unique about the us is how unequal our system is and it really is just it is an excellent system for people like me okay my wife is a survivor of breast cancer she got the best possible care it was you know really uh i couldn't have asked for a better situation but what's disturbing in the us is many many americans can't benefit from that system and the truth is if you were in outer space and you didn't know if you'd be rich or poor and someone said where should you be where would you like to go you should never choose america but if someone said yes i'm sure i'll be rich america be a perfectly fine place to choose i think uh the affordable care act should i repeat that yes please were specific funds used to finance the specific care act uh so so the question is whether whether particular funds targeted to finance the affordable care act and this that's a very good point i think a very important policy stand and a very uh ultimately costly political stand is that president obama insisted that the affordable care act be budget neutral he said it must not increase the deficit so the way it was financed was half through spending cuts and half through tax increases the spending cuts were reductions in what we pay for medicare which is health insurance for our senior citizens the tax increases were mostly tax increases on the wealthy which is part of why republicans are so upset but most importantly the affordable care act actually lowered the deficit and increasingly lowered over time the estimates of the congressional budget office with the affordable care act lowered the deficit by a hundred billion dollars in the first decade and by more than one trillion dollars over the next decade now politically that was a huge mistake why because if obama instead had taken that extra money and thrown it at the other eighty percent he might have bought some more support for the law indeed we can actually see a comparison which is in 2003 george bush introduced a big new health care program providing drugs to seniors that program when it passed was also very unpopular but it quickly became popular why because he just paid for it by blowing up the deficit so it was our children's problem not our problem so unfortunately i think the the affordable care act was very fiscally responsible and that ended up being i believe a political political cost let me just mention one other thing because it's very very very important about the larger way we think about economic policy from the u.s is to talk from about the congressional budget office okay in the u.s before 1974 when the government proposed policies the government just announced what they would cost and they just made it up they just said well we think it'll cost this so for instance when lyndon johnson introduced medicare he lied he said it would cost one-tenth of what he knew it would cost and he introduced medicare and it passed okay that is a totally inappropriate way to make public policy and so in the 1970s the congress set up the congressional budget office which is a nonpartisan institution not not democrat not republican just an expert institution many of my phd students and other phd students go to work there and their job is to provide objective estimates of the effect of government policy and that job is critical because as we can see we now have an administration that has no problem with lying they would be happy to just deny the facts and and the truth is this may be a change in america this may be the beginning of a long trend in america where basically the facts are no longer part of the political conversation and the only way we keep them in is the congressional budget office this is a critical critical institution and it's very important to keep an eye on it it's getting criticized right now by trump and the past has been criticized by democrats that's great as long as it's criticized by both sides that's exactly what we want okay but we have to keep an eye and make sure this remains independent that's crucial to our democracy in the us hello thank you for explaining us the rationale behind obamacare um you mentioned the netherlands in your speech actually uh the dutch latest that's reform healthcare reform introduced an insurance system which somehow reminds me the u.s one so anyone now in the netherlands must subscribe for insurance but by doing that they kind of generated competition among hospitals that now compete on the basis of quality of care and prices to what extent is it possible to replicate such competition especially in terms of quality of care among the us hospitals yes that's a great question there are many different healthcare systems around the world italy and the uk have what's called public health provision other countries like canada have national health insurance countries like the switzerland like switzerland and the netherlands they have a system much more like what we set up in massachusetts what we call a managed competition system where there's private insurance and individuals actually the swiss mandate come in came in before the u.s mandate that's one case we studied in setting up the us mandate the swiss mandate was in 1996. and it's a private based system that basically is set up to uh provide competition among insurers but that's regulated competition all insurers um the underlying medical package costs the same insurers just compete over advertising in some small things and the prices to hospitals are largely regulated there's a little bit of competition on quality but once again all the prices are highly regulated in that situation so really there is nowhere i'm aware of that has a non-regulated solution to this problem now once again as an economist regulation is the last resort i'd prefer to have the market solve it and i'm not sure i would and in fact what's interesting is the us had a very regulated healthcare system back in the 1970s and we went away from it it had a lot of problems so i'm not necessarily saying we should go back what i'm saying is we may be maybe in the next decade we do need to go back because i just don't see the private sector solving it thanks gentlemen very fascinating speech you mentioned the difficult or impossible shift from a expensive private system to a public provided one in the case of u.s what about the opposite thinking about italy we have a publicly provided system finance through general taxation social insurance contribution but we are observing a trend towards more privatized system so from a social web perspective i think it can be wrong but the other way it also can make more resources free for this system as well that's that's a great question you have a very high tax burden in italy compared to the us if you took uh stefano's chart and did tax burden the u.s would look a lot better than than italy um i think clearly the right answer is some mix system that's what economists always say we don't have an answer right um but i think that the the aspects of the private system that would be most beneficial to italy would be more consumer engagement and choice within a regulated system so i think that competition i think that regulated moving away from regulated prices would be a mistake but you could have great quality competition within a regulated price system if individuals had more financial incentives and more to and more ability to shop across different sources of care and you could maybe even allow some small price differences to reward that so in italy your health care is free for the doctor large and it's there's small costs for specialists in hospitals that can lead to overuse of care i think there's clear economic evidence from the u s that if you charge people a small amount they use less care and they're no sicker so the number of studies dating back to the famous rand health insurance experiment in the 1970s that showed that when you charge people for health care they use less health care and they're no sicker so i believe that the place that italy would want to go if it was thinking about a more private based system would be to get consumers more engaged charge consumers a little more for their care for their drugs differentiate across drugs more so the people are forced to use the lower cost drugs and the more expensive ones i think that introducing the market on the consumer side is a much better place to introduce it than on the producer side where i feel like private market competition just does not work you already said policy-wise you're quite happy with the uh reform you inaugurated but politically you did some mistakes i mean along the way what would you do if you have the possibility to start over again to introduce it better into the mainstream that's a great question i think actually uh i would have done a couple of things one is i wouldn't have been i mean if i was king uh i i i i wouldn't have been so fiscally responsible i think if we'd spent another 100 or 200 billion dollars we could have made this much more politically acceptable i think that would have been a small amount to pay for law that does so much good for america um in particular as i mentioned to go into a little more detail 80 percent of people were largely unaffected for the other 20 about 17 percent of them were winners but about 3 percent were losers now who were these losers they were people who benefited from the previous discrimination young and healthy people who could get insurance for cheap prices because the sick people were kicked out of the system so before obamacare in california you could get insurance for a hundred dollars a month if you're young and healthy if you were sick you couldn't get insurance when we set up this new system in california everyone could get insurance but it costs more like 300 a month so for a young healthy person they said that's unfair that's a 300 increase in what i have to pay now remember if you're low income you didn't have to pay that because obamacare came in and helped you but for a middle or higher income young person they were losers in this system they essentially had won the lottery before and now we're taking away their lottery ticket they benefited from discrimination and now they didn't anymore and they were mad and i think i must have gotten emails from every single one of them okay i got emails from so many people i had to pay this much more to pay this much more and you know the truth is i didn't have a good answer except i'm sorry but quite frankly you should be happy for how little you paid for so many years because basically you benefited from discrimination that answer didn't work so well um what we should have done is we we could have created no losers by simply taking a hundred billion dollars and giving it to insurers and saying don't raise the prices on the healthy we could have done that it would have cost less than 100 billion dollars because it was a very small share of people them would have created no losers and would have been that would have greatly reduced even though it's a small number of people that had a large megaphone a large they had fox news okay so these small number of people had a great voice and i think if we'd said nobody loses which it would have been pretty cheap to say the law would have been a lot more successful now to be fair the other thing to realize is part of the reason law wasn't successful is because the law was never actually implemented so for example in the law the law recognized that insurers might struggle to make money so the law set up something called a risk corridor like a hallway a risk corridor or something where we said to insurers if you lose money we will help you for the first few years but if you make money we're going to take some of that back so with reinsurance of the insurers which is a very smart thing to do when you set up a new insurance market indeed under president bush's medicare part d that's exactly what they did this is a republican idea so obamacare we set up this risk quarter the problem was in 2010 the republicans gained the congress and they refused to pay the money so insurers were supposed to get eight billion dollars that they never got and that's part of why some of them went out of business and have left the exchange so to be fair part of the problem with obamacare is it never got a fair chance so i think what i would have done is i would have implemented the laws that was written i would have put some more money into it to create no losers and i would have recognized that we need a much more aggressive public relation campaign because this was very unusual remembered america i don't know how it is in italy but in america usually you fight fight fight over a law then it passes then you move on to the next law that didn't happen here the fight never ended and i think we weren't ready for that we weren't ready for the fact that the fight continued indeed three years after obamacare passed many americans still thought it hadn't passed yet why because there was so much fighting over it okay so i think the uh democratic party and supporters the law weren't prepared for that and i think i would have been more prepared for that one quick question and a more complex one do you think that part of the challenge is to make accept the obamacare was the fact that it was commonly called obamacare putting the focus on the president rather than on the action and the content second consideration is as a subject matter expert how do you see the role of innovation in healthcare system in italy well us is an example of innovation in this area with a strong research investment both from the industry and the hospitals and in italy we see that especially in the hospital and the service management there is very little innovation and very little efficiency seeking we decided to control the healthcare spend to focus most on the pharmaceutical spend because it was easier and more politically acceptable in a way it doesn't it didn't involve jobs and unions huge negotiations so innovation now in italy personally i see it demanded to the private hospital providers that are the only ones that are being able so far to reinvent the service and bring the efficiencies that shall benefit the whole system i'm curious to see your point okay those are those are really good questions so first of all on obamacare you're absolutely right a lot of the opposition to obamacare was opposition to obama as witness by my point about people liking the affordable care act but not liking obamacare now on that i think obamacare obama handled it exactly right which is he realized no matter what he said it was going to stick so he accepted it he said yes i do care and i'm fine with obamacare which was a smart move because it it was going to stick no matter what he said but really it just speaks to the political opposition of this law a lot of it was just political opposition to obama so here's one example under the law the federal government gave money to states to ensure their very poorest citizens under what's called the medicaid program medicare is for our senior citizens medicaid is for our poorest citizens so the government said to states if you expand the medicaid program for your poorest citizens we will pay for it all you have to do is just pass the law to do it states run this program will pay for it so this was a no-brainer right i don't know what the italian for no-brainer is a very simple decision the federal government will give you money and you'll cover your poorest citizens but as of today 19 states have still said no let me be clear take the state of florida there are 1 million uninsured people who would benefit from this law and it would deliver billions of dollars to florida every year from the rest of the country and florida's saying no i mean it's unbelievable and it's because it's obamacare okay now on your second question innovation very very important this is what i was very glib about the role of regulation i said oh we can just regulate but there's a the reason i'm wary of regulation is because it can eat into innovation our drug prices are by far the highest in the world but a lot of that money goes into research and development some of it goes into terrible advertisements but a lot of it goes into research and development and we've invented incredible drugs that have done wonderful things for our society and i wouldn't want to see that end so the question is how can we regulate those prices without eating into the innovation and the answer is we need smart regulation and what does that mean this comes a bit to the other question about moving italy towards a more private system smart regulation means saying we will allow high prices for drugs that are effective but not pay for drugs that aren't effective so for example in the last several years a new drug came along called slovalby sovaldi saved people with a disease called hepatitis c a disease of the liver that was killing many thousands of people in america it literally saved their life now it cost eighty four thousand dollars but it saved their life that's a very good deal by u.s standards on the other hand we have drugs that cost two hundred thousand dollars a year and make you live one week longer okay that's a bad deal so a smart regulation would say will allow the first one and not the second one that would provide incentives that way we could lower our spending but still have incentives for innovation that's the smart way to regulate good afternoon thanks for being here i got uh one point about sovaldi and is that one pill in us costed one thousand dollars from noronga in egypt the same pill was 11 right so we still have some questions about how should be the expense and the price for one pill let me just let me just say one thing about that because that's important it's 11 here because we did all the r d so right now you have a free rider problem where the u.s does the r d and the rest of the world pays low prices that's that's good for you bad for us and the u.s has to figure out how to deal with that no sure but all the rest of humanity has to deal with that price is right that's a it's a it's a weird balance and um i want to think about what you just said about that million people who were supposed to get the obamacare but since it was obamacare we're opposing the the reform and i'm thinking is there really a cultural chance in u.s in the way you think about public spending and the way you think about money and the healthcare system is there really a cultural chance for such a reformer i mean is really in the american minds uh a reform that make everybody spend more in order to cover for the weaker well uh it's a great question um you know uh the i could be pessimistic and say yes but i think i'm a little more optimistic because look at what's happened with obamacare it did pass and now it's popular and there's i think a very good chance it won't go anywhere now there's still a chance it could go away and that's very disturbing but i don't think donald trump was elected because people really really want their health insurance to go away he was elected for many other reasons okay and so i i think there is still room for major change in the us i think it's getting increasingly hard i think essentially the us is moving towards more of a parliamentary system where basically unless the same party controls the presidency 60 votes in the senate and the house you can't get anything passed okay so i think because even now the republicans have the senate the house and the presidency but they don't have 60 votes so they can't make major change because with 40 votes you can have a filibuster in the us senate so basically i think we're going to be a place where only when one party is totally in power can we see major change but i think in that situation we may see major change and once something happens it's hard to take away americans like their benefits and once they have them i think it's hard to take away so i don't think it's the end of major change but i think it is it's very very hard look it took us a hundred years to get something like obamacare every 17 years u.s presidents would propose major health care reform truman did it nixon did it clinton did it obama did it every 17 years was a proposal okay and it took that long to pass it so it's a hard process but i think it can still happen very well i think our time is up so i would like first of all to thank a very much a professor gruber for his wonderful contribution that was crystal clear if i may i would only like to say something about the private public partnership in italy in this case in italy we have bad incentives in that uh private businesses are incentivized to play tricks on the state in italy instead of doing something beneficial for all and we should review the situation we have in italy of course based on that thank you very much you