Another Health Insurance Market Failure

I remember during the conversations during Obamacare's construction, one of the more obscure issues was how insurance companies don't have clients for that long, so insurance companies do a poor job of encouraging long-term health (I couldn't find the statistic, but I believe the average person has the same company for somewhere in the area of three or four years).

This seemed to be a reasonable criticism of America's state of health affairs, and I could argue it in the abstract. After all, approaches that achieve long-term health benefits are investments that save money in healthcare coverage down the road, but if the insurance company isn't likely to reap the benefits, why should it make the investment? This is obviously a market failure, because the market could operate more efficiently, but providers (justifiably) are acting in their self-interest (in this sense, public health is arguably a tragedy of the commons our system has manufactured). However, I never had an explanation of how this works in practice.

I've now encountered my example, and it's frustrating experiencing how it works. I recently completed the final physical therapy session my insurance company will allow me to partake in, although my ankle has never fully healed. There's a decent chance that with another month of work I'll be much better off, but my policy doesn't allow for it. The hell of it is, spending some extra money now should pay off in the long-term, as the current state of my ankle leaves me in line for arthritis and other issues down the road.

No one refutes this. My physical therapist is the expert saying it will happen, on a logical level I agree with him based on my limited understanding of how joints work, and the insurance company likely understands. But I'm unlikely, statistically, to be with Blue Cross of New York in 20 years when my ankle becomes a real problem, so there's no rational reason to invest in therapy now. It will be someone else's responsibility at that point. Even if future surgery is way more costly than extra PT sessions this year, someone else will foot the bill.

I get the contra - if my insurance company allowed me unlimited visits, my physical therapist would be inclined to continue scheduling sessions even after they were no long necessary in order to make more money. Some providers would resist this temptation, some would be bad actors, and some would schedule unnecessary visits merely for the sake of erring on the side of caution. So even in a  system that pays for preventative care, there would still be concerns. Answers may be difficult to definitively determine, but our system is undeniably prejudiced against long-term economic decision-making.

Anti-Vaccine Movement as Class Conflict

A small measles outbreak at Disneyland (for more information, turn to this reporting) could reinject (or provide the first injection of) real talk into the anti-vaccine movement currently sweeping the nation. Maybe. Maybe it changes nothing. What's true is that the movement is racist and classist. Truth.

Two groups of people fail to fully vaccinate their children. According to the New England Journal of Medicine, the first type have kids that are more likely "to be white, to belong to households with higher income, to have a married mother with a college education, and to live with four or more other children." Suburban housewives? A nice portion of the equation. They also cluster, and probably hate science ($5 says if you know an anti-vaccer, they either don't believe in evolution, or know GMO corn causes cancer. Or both). Why should we care? Aside from the child endangerment they're wantonly engaging in, there's a second group of people who don't vaccinate: poor, predominantly minority families.

Aside from Michelle Bachmanns' crazy ramblings (does she have any other kind?), I was largely unaware that there was actually an anti-vaccination movement. Then this winter I started following IMGUR, and noticed a lot of posts seeking to disprove fallacies pushed by this anti-vaccination agenda. So I started looking into it, discovered these enclaves of anti-vaccer mothers in hippie dippie enclaves like Boulder, Portland, and Seattle, and became frightened. And frustrated. Low-income families have traditionally had issues with proper vaccination. There are a list of problems: low information, cost, transportation access, and a lower likelihood to follow up for a missed appointment due to additional life burdens not found in the cul-de-sacs of Boulder.

When someone brings measles onto a playground, two kids are going to get sick. One has anti-vaccer parents screaming, "bring it on!" Then they take their kid to a well-financed hospital and receive appropriate medical care in a sterile environment. The other kid has access to shit medical care, lives in an unhygienic and overcrowded community, and suffers greater harm. Generally speaking, rich people not vaccinating their kids doesn't put other rich kids at risk. Just the poor ones. Class conflict.

Every Story Has Two Sides (Earned Income Tax Credit Edition)

America's favorite welfare policy is the Earned Income Tax Credit (commonly referred to as the EITC). I can't verify this, but I'm sure a good poll would back up the assertion. The basics of the credit are that low-income earners receive additional money from the government to match wages on a sliding scale. The lower your income, the greater the match (if you're interested yet unfamiliar, the left-leaning Tax Policy Center breaks it down here). The larger question is if this policy is more important to poor people, or corporations.

That seems to be a weird question at first blush - why would a welfare program that costs money (and therefore requires higher taxes) be such a benefit to McDonald's? After all, the primary reason Republicans and Democrats get behind it is that it incentivizes work (you're not eligible for the matching credit if you're not earning wages to match) and the lowest earners get the biggest benefit by ratio (the most goes to those who are the most in need).

But the part that makes the tax credit great is the part that makes it the biggest corporate giveaway. Minimum wage earners are more satisfied with their low wages if the government provides a bit of extra cheddar to supplement income. Remove this subsidy, and earners will either pursue more leisure (following our Econ 102 work/leisure charts) or demand higher wages. And while workers eligible for the EITC have very low bargaining power, the fact remains that money is money. As long as a worker earns X, they're willing to provide Y amount of labor. Take away this government policy (X becomes X - EITC), and Y goes down correspondingly.

Following this line, the government is paying to subsidize willingness to work. Without the EITC, companies would be forced to pay higher wages to receive the same work. In times of high unemployment like 2008 this wouldn't be a concern, but in 2014 unemployment is dropping like a piece of paper (slowly but surely, while floating back and forth in an unpredictable pattern). People are happy working now, but maybe a minimum wage isn't enough in a world without this corporate subsidy. At least when there is greater demand for labor.

None of this is to suggest the EITC is a big corporate giveaway that should be scrapped - indeed, it serves a valuable purpose for people in need. And I'm not singling out big corporations - the small business owner with two low-wage employers struggling to stay open benefits just the same as Subway does. To characterize it as a corporate subsidy is misleading as it's more of an employer subsidy. But it's safe to assume the fast food industry is a lobbyist for the credit; I'm sure that makes for interesting bedfellows.

Every story has two sides.

A Post About Pie!

A rising tide lifts all boats, we’re told. There’s some truth in this – a growing economy means more people are making more money. Unfortunately, the tide has a habit of rising faster than the boats being lifted. This is what we call inflation. And it’s one more reason Reagonomics ain’t right.

A booming economy portends more jobs and higher wages, although America’s lowest caste will always be stuck making minimum wage. The next level, people above the poverty line and even some of the middle class, may see their nominal incomes rise. Unfortunately, Reagan never attended a class that taught about real interest rates. Example: say economic growth means you make 2% more this year than last year. That’s great! Unless inflation rises by 3% - than you’re comparatively poorer and have less purchasing power, even though you technically earned more dollars.

The vast income gap that began exploding during the ‘80s (and has further ballooned ever since) means that the rising tide has certainly lifted a select few. However, the purchasing power of the rich fuels greater demand, which increases prices, which means higher inflation. When those at the bottom rung are then told they’re better off because they’re making more money, they’re often presented with nothing more than a farce.

(Here come's the pie!): The comeback is often presented by way of another lame analogy: we needn’t reapportion the economic pie as long as the pie grows; then every piece is bigger. And the poor’s slice of pie may technically be bigger. Unfortunately, the real cost of pie just increased too.

Note: this phenomenon is further exacerbated when certain types of economic growth happen. Companies may become more profitable when they become efficient by shipping jobs overseas or mechanizing them (e.g., computers and robots replacing accountants and welders). There may be short-term economic growth, but at the expense of real purchasing power from non-dividend holders.

More Economic Pie!: