Sunday, 18 April 2010

Tea Party-surprised at the surprise

I've been a bit surprised at some of the surprised reaction to a recent poll revealing the kind of people that make up much of the Tea Party movement.  It seems some have been working under the assumption that Tea Partiers are all illiterate Kentucky hillbillies and were surprised to learn that the "18 percent of Americans who identify themselves as Tea Party supporters tend to be Republican, white, male, married and older than 45" ,  are more educated than the general public and "are more likely than the general public to say their personal financial situation is fairly good or very good". I suppose that proves one shouldn't make hasty generalizations from a couple of really hilarious Daily Show clips.

But, why would anyone be surprised that an ultra conservative "movement" is made up of the most conservative people in the country — well to do, white, old Republican male heterosexuals? It stands to reason that the group fighting change the hardest is made up of those in the most advantaged group in society. (Incidentally, I'm also not very surprised to learn that Tea Partiers are more likely than the general public, and Republicans, to say that too much has been made of the problems facing black people.)

What also surprises me is that some seem to be interpreting this information about who makes up this "movement" as a reason to take it more seriously. Doesn't it suggest just the opposite, i.e., effectively dispelling the notion that the Tea Partiers reflect the voice of "the common people"? That a bunch of old rich white straight male conservatives are willing to fight tooth and nail — and aren't above enlisting Fox News demagoguery to do so — against change and economic justice isn't a reformation or a revolution or even a populist movement, it's nothing more or less than business as usual.

Update: Note, for example, how Rush is trying to portray the Tea Party movement: first time that "common average ordinary everyday citizens" have "risen up" "since the Civil War", i.e.,  a narrative of "the people are rising up," rather than the more accurate "the elites who've always held power will do whatever they have to do to retain control".

Thursday, 1 April 2010

Individual Mandate Penalties

Austin Frakt argues that the penalty for not buying health insurance under the Affordable Care Act is not too low, as some, including me, have argued. The problem, of course, is that if we disallow the practice of rejecting or penalizing people with pre-existing conditions the amount these people will pay for their insurance won't actually reflect the risk of payout they present to the insurance company. To compensate, people with less risk will have to overpay given the amount of risk of payout they present to the insurance company. So, being greedy people as we are, why would anyone overpay like this? Well, that's where the penalty comes in. (The other fact, of course, is that those without insurance are getting a free ride insofar as emergency rooms are still obligated to treat them, so it's only fair that they pay some kind of penalty to reflect this free ride.)

But, my concern is that the penalty might not be adequately high. Health insurance in the US is so expensive that a $600 penalty is small beans compared to the cost of a year of coverage. So I worry that low risk people won't buy insurance leaving a smaller pool of people sharing a heavily disproportionate amount of the costs. Nonetheless, based on coverage and penalty rates in Massachusetts, Frakt argues that the penalties under ACA are adequate. He may well be right and if he's right, I wonder why. There are a few possible explanations:

a) The $600 is greater than or equal to the amount that they're, effectively, overpaying. I don't think that's the case, but would need more data. And, of course, the more people that participate in the plan, the closer this comes to the actual overpayment. (And, yes, arguably, insofar as any comparable health care insurance will have to compensate for the effective subsidy for pre-existing conditions, the person is not really overpaying at all, i.e., one is really only overpaying if they could have received the same good or service elsewhere for a lower price. )
b) People actually tend to be slightly irrational consumers. The typical consumer would rather overpay by X and get some real value in return than pay a penalty of Y and get nothing in return even if X is more than Y. In the former case, it feels less like we're just wasting our money.
c) Another explanation, one that I prefer, is that people simply perceive it as a fair obligation despite the fact that they recognize they're overpaying. They willingly take on the overpriced insurance just as many people willingly pay taxes despite realizing that the direct benefit they receive from the tax is less than the amount they pay out. But insofar as this is true, the penalty could work against us. There's a discussion in Freakonomics about a day care that experimented with charging a small penalty to parents who showed up late. The effect of the penalty was to increase tardiness. The reason is that people perceived the penalty as simply a, quite affordable, fee for extra babysitting and no longer felt a moral obligation to show up on time.