John C. Goodman

Health care economist

John C. Goodman (born 22 May 1946) is president and CEO of the Goodman institute for Public Policy Research, a think tank focused on public policy issues. He was the founding chief executive of the National Center for Policy Analysis, which operated from 1982 to 2017. He is a senior fellow at the Independent Institute. The Wall Street Journal and The National Journal have called Goodman the "father of Health Savings Accounts." Goodman received a Ph. D. in economics from Columbia University in 1977 and has taught and done research at Columbia, Stanford, Dartmouth, Southern Methodist University, and the University of Dallas. In 1983, he founded the National Center for Policy Analysis (NCPA), a think tank that was the source of such policy ideas as Health Savings Accounts, Roth IRAs, automatic employer enrollment in 401(k) plans and allowing seniors to continue working without penalty after they begin receiving Social Security benefits. In his 2012 book Priceless: Curing the Healthcare Crisis, Goodman asserts that empowering both patients and caregivers to control healthcare decisions produces greater patient satisfaction at substantially lower costs. The book emphasizes the importance that patients, payers, and providers each operate according to economic incentives that encourage them to consider both the costs and benefits of care, innovate to improve outcomes and lower costs, and provide subsidies that do not arbitrarily benefit one group (like workers at companies that provide insurance) at the expense of other groups (like workers at companies that do not). He regularly briefs members of Congress on economic policy and testifies before congressional committees. He is author and co author of 15 books and more than 50 published studies on such topics as health policy, tax reform and school choice. He has addressed more than 100 different organizations on public policy issues. He writes a column for Forbes and an occasional weekend column for Townhall. He has appeared 23 times on C Span.

Born on May 22, 1946, Goodman grew up in Waco, Texas. In high school, he won several statewide tournaments. This experience served him later in life when he became a TV debating partner of conservative polemicist William F. Buckley. He attended college at the University of Texas in Austin, where he became involved in campus politics and was elected vice president of the student body. The following year he lost the race for president to Lloyd Doggett, who later served as a senior Democratic member of the House of Representatives. University of Texas student politics was a training ground for such politicians as Texas governors Allan Shivers and John Connally. After college, Goodman enrolled in the graduate economics program at Columbia University, where he earned a PhD. He credits his experience with campus politics as vital to shaping his Columbia University dissertation—which used tools of economics to explain political outcomes. Among the faculty who gave him guidance were three Nobel Prize winners – Robert Mundell, Edmund Phelps and William Vickrey.

Goodman's dissertation was entitled The Market for Coercion: A Neoclassical Theory of the State. It was in the field of public choice, which merges economics and political science. As the term "neoclassical" suggests, the dissertation used marginal analysis—which was a radical departure from the voting models favored by public choice theorists James Buchanan and Gordon Tullock and their followers, on the one hand, and University of Chicago economist George Stigler's "regulatory capture" theory, on the other. With his colleague Phil Porter, Goodman published three articles extending the theory to the fields of regulation, the production of public goods, and welfare economics. Their article on regulation won the prestigious Duncan Black Prize awarded by the Public Choice Society in 1989. An important issue in public choice economics is whether a stable equilibrium exists. In traditional voting models it typically does not. Yet Goodman showed that in a neoclassical model the conditions for stable equilibrium are easy to satisfy. Three other departures from previous thinking were also important.

Every law and every regulation tends to have winners and losers. Both groups have a self interest in either supporting or opposing the change. However, the passage of a law is a "public good" for those who support it and a "public bad" for those who oppose it. In either case, individuals benefit from their group's success, whether or not they contribute to the effort. A well known proposition in public finance holds that if all behavior is voluntary, public goods will tend to be underproduced. In politics, this means that the effort groups make to secure political goals will always understate the true value they place on achieving those goals. The reason is that each individual has an incentive to be a free rider, contributing little or no effort while hoping that others will contribute a lot. The groups that are most successful in overcoming the free rider problems and securing more effort from their members are the groups that are the most successful in the political system. Note: an individual may be member of several different groups, including groups that oppose each other. For example, an auto worker might pay dues to a union that supports higher tariffs on car imports. But as a buyer of cars, he may pay dues to an auto club that opposes them. In his role as a producer he is a member of a pro tariff group. In his role as a consumer, he is a member of an anti tariff group. What matters most is the behavior of groups as groups, not the behavior of individual members.

Imagine a political system in which the laws change every week. One week we might have a tariff on auto imports; the next week it's gone; the week after that it's back again. That would describe a system with no political equilibrium. By contrast, equilibrium exists if the tariff tends to stay the same from week to week until there is a fundamental change in one of the parameters of the system. Goodman not only showed that the neoclassical approach realistically models stable political systems, he also identified what an equilibrium must look like. Continuing with the tariff example, the marginal effort the proponents are willing to make to secure a small increase in the tariff must equal the marginal effort the opponents are willing to make to oppose it. These efforts could be in the form of votes, campaign contributions, etc., and the kind of effort that is possible will differ from system to system. Any deviation from this condition means that the decision maker risks being replaced by a rival, who can gain an advantage by supporting the set of equilibrium policies over the deviation.

Goodman's interest in health economics began with his study of the British National Health Service. It was the first time anyone had used public choice theory to explain all the major features of British medicine. He followed with a study of the 150 year history of the suppression of markets in health care at the urging of the American Medical Association. Regulation of who could practice medicine, regulation of medical schools, regulation of hospitals and regulation of health insurance all followed the AMA agenda, according to the study. In 1992, Goodman wrote Patient Power with Gerald Musgrave. The book shaped right of center thinking on health policy—from Newt Gingrich to Paul Ryan—for many years. Its thesis: patients should be empowered in the medical marketplace the way consumers are empowered in other markets. This ran counter to the thinking in virtually all health policy circles, however. The dominant view at the time was adherence to managed care, under which decisions are made by experts, typically following formal practice guidelines. In Priceless (2013), Goodman's approach to health economics was even more radical. He portrayed the health care system as a complex system that cannot be understood with conventional economic tools such as supply and demand curves. In doing so, he rejected the approach of every major health economics textbook on the market. Even so, the book won praise from people in and out of government and across the political spectrum—including Peter Orszag, who was chief economist for President Barack Obama at the time.

Goodman's most important policy success has been the adoption of Health Savings Accounts (HSAs). They allow people to manage some of their own health care dollars in tax free accounts. The idea was first introduced to the public policy community in Patient Power, but HSAs were initially opposed by every major health and business lobby. For that reason, they did not become available to most Americans until 12 years later—in 2004. As of 2016, 40 million American families had HSAs. A majority of large employers now offer high deductible health plans, with savings accounts attached, to their employees and these types of plans are the fastest growing product in the health insurance marketplace. More than half of all private health plans in South Africa are Medical Savings Account plans. Singapore has an extensive system of "medisave" accounts. There are also health savings accounts in China. Under current tax law, employer deposits to HSAs are treated the same as employer payment of health insurance premiums—they are excluded from the employee's taxable income. However, under Obamacare people receive fixed sum tax credits to buy their insurance and most Republican Obamacare replacement plans also use tax credits. In an article in Health Affairs, Goodman and Wharton health economist Mark Pauly argued that the right way to subsidize health insurance for everyone is with a tax credit. Further, they showed that a Roth HSA, with after tax deposits and tax free withdraws, is the right account to combine with the credit. Today's tax law places rigid restrictions on how HSAs can be used. For example, there must be an across the board deductible, covering all medical expenses. However, Goodman now argues that accounts should have no deductibles or copayments. For example, employees could be given an account from which to manage all primary care. Diabetics and patients with other chronic conditions could manage their own budgets along with incentives to manage their own care.

In 1989, a series of NCPA studies of taxes on the elderly led to the repeal of the Medicare Catastrophic Coverage Act, an attempt to extend drug coverage to Medicare beneficiaries. This was the first repeal of a major federal welfare program in more than 100 years. Nobel Laureate Milton Friedman, the editors of The Wall Street Journal and many others credited Goodman and his coauthors with the change, citing NCPA studies and its communications efforts as the primary reasons for the policy reversal. In 1994, Hillary Clinton failed in a major effort to reform the health care system. In his book Whitewash: What the Media Won’t Tell You About Hillary Clinton, Brent Bozell says that Goodman was one of three people who were most responsible for the defeat of Hillary Care. (The other two were Sen. Phil Gramm and commentator Bill Kristol.)

Health reform has been an enduring interest for Goodman. In Characteristics of an Ideal Health Care System, he identified ten ways in which government policies were creating the very problems many reformers want to solve. In Designing Ideal Health Insurance, he showed how public policies were preventing the insurance market from meeting people's needs. In the Journal of Legal Medicine, he argued for a do no harm approach—under which government policies that are causing problems would be repealed and replaced before any other reforms are considered. One of Goodman's reform ideas is to replace all the ways government currently subsidizes health insurance through tax and spending programs with a universal, refundable tax credit—essentially giving every citizen a fixed number of dollars for health insurance. That idea was elaborated with Mark Pauly in Health Affairs The legislative version of the McCain approach was introduced by Tom Coburn and Richard Burr in the Senate and Paul Ryan and Devon Nunes in the House of Representatives.

In an article at the Health Affairs Blog, Goodman argued that there were six major problems in the Affordable Care Act that will not go away without major reform. For example, the first problem is that people are being required to buy a health plan whose cost is expected to grow at twice the rate of growth of their income. These ideas were expanded into A Better Choice, a monograph published by the Independent Institute. Beginning in 2015, Goodman helped House Rules Committee Chairman Pete Sessions (R TX) and Sen. Bill Cassidy (R LA) develop a replacement plan for Obamacare. The plan calls for a universal tax credit for health insurance, personal and portable health insurance for employees and a flexible Roth HSA. In a post at the Health Affairs Blog, Sessions, Cassidy and Goodman argue that their plan is not only better than Obamacare, it would create universal coverage.

With the help of Madsen Pirie and Eamonn Butler at the Adam Smith Institute in London, Goodman introduced Margaret Thatcher's 22 techniques of privatization into the United States, leading to increases in privatization at the state and local level.