Obamacare in a glance

As one of the US foremost health economists, David M. Cutler served in the administration of Bill Clinton and as senior health care adviser to the Obama presidential campaign in 2008. While his work on health economics covers a broad range of subtopics, he is particularly notable for his work on the value of the health care system as a whole. He is Otto Eckstein Professor of Applied Economics at Harvard University and generously spared some time to talk to us on a number of healthcare issues. Here is the interview.



You are referred by some as the founder and father of the so-called Obamacare program. When did you start supporting the plan?
I do not know if I was the father of it but I certainly advised the president when he was running for presidency on healthcare and over the years, I have been working with a number of people of all sorts of different background, so it's something that I have spent a lot of time addressing.

You also served also as an economic advisor in the administration of President Clinton. Didn't you?
The first time I worked in the government was with President Clinton. I have been a professor for about close to 25 years or so and most of what I have done has been involving work on healthcare and over that time, I have spoken to a number of people about healthcare issues including in and out of government. A lot of advice that academics are giving the US, it is, what I think of it, is informal advice. So someone who is in congress or in an administrative agency is addressing some topic and they just want to hear what people who studied the issue are thinking about it. So they call and ask for a meeting and they just want around some ideas by you. So in the US, there tends to be a very good informal link between the government and academia that helps provide that advice.

Mr. Obama's health care program played a pivotal role in his presidential campaign that led to his victory in the previous election. Now almost one year and half elapsed from his second term, how do you assess the initial outcomes of the program?
Let me take that into two dimensions. Substantively, that is the program is reaching its goals. So far it is although it is fairly early to tell. The goals were to increase the number of people with insurance coverage and to reduce the extent of wasteful medical spending and by both of those criteria, it is generally successful. The second criterion is sort of public and political support. And I think they have been less successful. It is still something, that people, the opposition party, do not like, that quite a large share of the population including likely voters or not are not particularly in love with. So there are still many causes to repeal or modify it from people who are unhappy about it. Even if substantively it seems to achieve what is designed to.

What are the implications of Obamacare on different groups especially the immigrants?
It is a good question. The obamacare, the affordable character, as some people call it informally is designed to provide insurance coverage to everyone who is legally in the United States. SO anyone who is a US citizen, or has a work visa or student visa, anything like that would receive coverage. It is not designed to provide coverage to people who are in the country illegally. And as you know and as many people know, the United States has a very large illegal immigrant population. So those people are still uninsured, many of them are still uninsured and depending on the area of the country that can be a very large share of population or not.

Can we say that ObamaCare is somehow a redistributive program that takes money from the rich and give it to the poor?
Most of the people who are uninsured are in the lower middle income population and most of the higher income population is insured. So it is necessarily the case that giving people subsidy so that they can afford insurance will necessarily transfer money towards those with lower in the income scale. On the other hand, people at the lower income scale do have to spend some of their own money for coverage so it is not completely free for them. And the cost of medical care is increasing less rapidly for people at the higher income level as well. So it is not that they get nothing out of it. So I think of it less as redistribution program than social insurance program. As a rich country we believe that all people should have health insurance and this is how we are going to do it rather than as a program that is seeking to take money from high income people to give to low income people.

Why the healthcare plan was not initiated at the time when you served as an economic adviser to President Clinton? How president Obama is going to ensure that the program will continue even after completion of his term as the president in light of the possibility that other party takes over the seat?
Americans have a very uneasy relationship with the government. So on the one hand there are things they want the government to do to improve their lives. On the other hand, the Americans are very concerned about the government getting too big and too intrusive.
I think as the program gets more and more experienced either people will come to like it or not and then it won't be repealed or else, if they really decide they don't really like it then we may very well repeal. So it is much more about how the program will work than about what President Obama necessarily does to make it harder to repeal.

So you believe that's the people's feedback that determines the fate of the program than government performance in this regard?
I think generally yes. That is government probably follow what people want to do rather than saying well people really do not want this but we are going to do it anyways.

We both know that obamacare implementation leaves huge financial burden on the government. How President Obama is going to handle the pressure?
To a very great extent, the fiscal position of the US government depends on what happens to the costs of medical care because it is a very big problem, it is a very big part of what government spends money on and it has a huge position. So if the legislation succeeds people will like it and I think it will, to reduce the increases in medical spending over time, that would be a very consequential issue and it would very substantially make the US government budget much better. If it doesn't, then the US government will have a very big budget problem and it will, to a great extent, depending on what happens to the cost of medical care.

How obamacare has been funded from the beginning?
It basically is a combination of couple of things. One is some higher revenues coming from higher income people, so tax increases on higher income people. And second is reducing the cost of medical care in existing programs and using the savings in those programs to then fund the subsidies for the low and middle income people and that's partly why the reduced cost of medical care are particularly risky because if they don't continue to the kind then not only the new programs but also the existing programs will be unaffordable.

Do you think what will be the social impacts of such programs on pro-capitalist groups and parties in the US? Do they agree with the program?
I don't think there is a monolithic view about anything in the US. Certainly not a cross. You know, any sort of big population segment. I think but most people in the US agree that as a wealthy country the US ought to be doing things to make all people share the benefits of being in a rich country and that includes healthcare as a big part of it. So that's one part. But I think there are a lot of worries about what will be the impact on the economy, federal budget, are thing affordable?. And people weigh those cost and benefits in different ways. So there are people like me who are very supportive not because we think everything is perfect but because we think that it is a good thing for us to do in light of the cost and benefits and there are other people who are opposed not because they think it is bad to help people but because they are worried about some of the other impact associated with it.

As you may be aware, President Rouhani has recently launched a similar pubic health care plan which requires people to pay only 10% of healthcare costs while extending insurance coverage to all Iranians. There are currently around 21 million insured 6 million uninsured people. In the meantime, people are somehow pessimistic about high-spending programs as in the past similar plans in the housing sector deviated from the original goal and led to inflation. Do you think health care programs have the potential to deviate the same way?
Well, of course I don't know in the sense that I am much less of an expert. Without giving a definite answer, I think the issue is kind of how can you get medical care delivered to people in the right way and pay for it in a good way. They are probably your biggest parts.

Can we say that the ObamaCare is Obama's legacy for the US people? And would it be possible that the one started by Mr. Rouhani can serve has his legacy in the same way?
I think all countries can improve their healthcare systems and that is true about richer countries as it is about lower and middle income countries. It is certainly one of the President's legacies. I don't know enough about Iran to know about the legacy of President Rouhani. And I suspect there are other issues that are more pressing in Iran. But that said, people all over the world need and deserve high quality health care.

Intelligent people prefer to study less risky branches of medical science and that runs the risk these branches being filled by less intelligent people. So, this will lead to social loss. Does the health economics have any solution for this problem?
I don't know that this is true in the United States. Risky subjects are often interesting, and intelligent people are attracted to them. Thus, we don't have this problem in the United States.