Immigration, Children, and America: The Dreams of Hispanic Youngsters

Beginning

In college, my friends and I started an after school pre-k literacy program for Hispanic children.  Because Hispanic children in the United States face major obstacles standing in between them and their own dreams.  Our current immigration laws refuse to give immigrant Hispanic children citizenship and continue to break up Hispanic families.  This economically (and arguably morally) jeopardizes our nation’s promise of opportunity--our American Dream--for any child who works hard.  Here’s why.

Introduction to Academic and Economic Issues Facing Hispanic Children

Compared to all other ethnicities in the US, hispanic children have the highest high school dropout rates in the country¹, and they academically underperform their white peers at every grade K-12².  Consequently, as adults these children can expect to be unemployed, earn low-incomes, and struggle as they straddle the lines between struggling and living^3,4. 

Source of Academic and Economic Gaps

These children’s gaps in academics and economics are the result of their cognitive and noncognitive skills deficits that began in and grew larger since their early childhood⁴.  Their mothers, who raise them and who, on average, come from disadvantaged backgrounds with little formal schooling, know they should invest in developing their children’s skills--but they don’t know how and their children’s skill deficits reflect that lack of knowledge⁶. 

Almost half, 46%, of all Hispanic children in 2010 had mothers who had not graduated from high school (8% for Whites)--and 20% of them had mothers with an education below the 8th grade; and among immigrant Hispanic families, the percent of a Hispanic children with a mother without a high school education rises to 54%; the percent with a mother’s education below 8th grade, up to 29%! 

Unfortunately, these mothers do not read to their children as frequently as more educated mothers do; do not use and expose their children to vibrant, expansive language and vocabularies as frequently; and they do not enroll their children into high quality preschool and early childhood programs that develop their children’s skills where they, the mothers, cannot^5,6.  These children lack these investments, and this lack of investment causes them to develop skills deficits that open up early in their lives, widen over time, and predict academic achievement gaps and adverse life outcomes according to their finances and health.

These children also largely live in immigrant homes where Spanish is the dominant language in the household.  This linguistic isolation makes learning in the American classroom all the more difficult, as English proficiency is a major predictor of academic success for Hispanic children⁵.

NOTE: 

1.  Child defined as child aged between 0 and 8 years of age.

2.  All percentages in following statistics are taken from footnotes 5 and 6

Why Do These Gaps Matter?  The Development of and Interaction Between Cognitive and Noncognitive Skills

The first 5 years of a child’s life are critical for their success as adults in the labor market.  Within these first few years of life (and even before birth), children develop most of their cognitive and noncognitive skills that determine the rate at which they learn and the size of the positive impact that schooling has on their lives.  Cognitive skills are the “smarts” of a child.  Being able to do math problems immediately and solve equations and puzzles.  The non-cognitive skills, also termed their social and emotional skills, are their “soft skills,” their ability to motivate themselves, to be patient, to persevere, and to sit down to study for long periods of time.

According to James Heckman, University Professor at the University of Chicago, children with larger amounts of non-cognitive skills develop their cognitive skills faster.  They learn faster.  When they realize this, they in turn invest more in their non-cognitive skills too because they realize the complementary benefits of investing in both skills. This is dynamic complementarity:  it is a virtuous cycle.  And the more a child already knows, the easier it is to learn new skills!  This is self-productivity.

Simply put, a child that can study for long periods of time and remain motivated to learn is going to learn faster than another child that does not.  And the more the child continues to learn, the more the child will be willing to study longer, making learn even easier over time.  Lastly, the more a child already knows, the easier it is to learn something new!

Most importantly, there is a critical window in time in a child’s life where these skills first develop and are easiest to develop.  These are the years from birth to age 5.

The Future if We Don’t Act

As Hispanic immigration trends remain constant for the foreseeable future, as largely  disadvantaged and uneducated Hispanic mothers and families immigrate from Mexico and Central America to raise their children in the US, these children will continue to drop-out of school at the nation’s highest rates; they will continue to academically underperform;  and they will continue to struggle economically in the labor market⁵. 

This means we’re going to have high rates of poverty, violence, incarceration, high school dropouts, and civil-strife—we’ll have a big chunk of the nation living in horrible conditions; and we’ll have increasing inequality across racial and class lines that will only fuel racial and class violence.

What this all means if we do nothing:

Simply put, Hispanic families tend to be, on average, poor, uneducated, and linguistically isolated.  Families expressing these characteristics, unfortunately, provide suboptimal early childhood environments for their children causing their skills deficits which lead to adverse life outcomes, including lower educational attainment and poverty.  It is also well documented that families expressing these characteristics also express higher fertility rates: this leads to a vicious cycle of intergenerational, adverse early childhood environments and therefore intergenerational poverty.

Immigration, Children, and America

These children have dreams.  They live in the United States; they grow up under the American flag; they make friends with American children--and they are American in every way except for their parents’ immigration status (or their own). 

And 70% of them end up in only 10% of our schools, and usually they’re the worst we have. 

Instead of giving them our immigrant Founding Fathers’ promise of opportunity, we stack the odds against them.  Instead of helping their mothers get an education, we send them back to their native countries--leaving their child to grow up without a parent, without an advocate, without someone to invest in their human capital--their cognitive and noncognitive skills.

We exacerbate their skills gaps and then deride them for their poor performance in our schools and their performance in our labor markets--even though they pick our vegetables, fruits, and crops at dirt-cheap wages so we can eat them at dirt-cheap prices.

We endanger our country’s promise of opportunity for the tired, the poor, the huddled masses yearning to breathe free.

Why My Friends Decided to Teach

If we actually invested in our Hispanic children, kept their families together, provided education to their mothers, these children would go to college, earn higher incomes, raise their employment rates, and--instead of allegedly draining our economy--would make our economy and nation grow faster, grow more resilient, and grow closer to our Founding Fathers’ vision of our nation as the home of opportunity.

That’s why my Hispanic friends decided to teach.  Because everyday that we focused on investing in these children’s human capital--in their cognitive and noncognitive skills--the closer we get to tearing down one obstacle in front of them: their skills gap.  If we could at least tear this obstacle down, we have then gotten these children one step closer to their American Dream.  Whatever that may be for them.  To be a doctor, a mechanic, a teacher--anything. 

Because they deserve the same shot, like every child in America, at their own American Dream.

References

1.  United States. Institute of Education Sciences (IES), National Center for Education Statistics, US 

Department of Education. Fast Facts: Dropout Rates. US Department of Education, 

2013. Web. <http://nces.ed.gov/fastfacts/display.asp?id=16>.

2.  Reardon, S. F., & Galindo, C. (2006). Patterns of Hispanic students’ math and English literacy test 

scores in the early elementary grades: A report to the National Task Force on Early 

Childhood Education for Hispanics. Tempe, AZ: National Task Force on Early Childhood 

Education for Hispanics. Retrieved November 28, 2007, from 

http://www.ecehispanic.org/work/patterns.pdf.

3.  United States. Bureau of Labor Statistics, US Department of Labor. Employment Projections:

Education and employment rates by educational attainment. Washington, DC: BLS, 2013. 

Web. <http://www.bls.gov/emp/ep_chart_001.htm>.

4.  Heckman, James (2008), “Schools, Skills, and Synapses,” Economic Inquiry, 46(3): 289-324.

5.  Understanding the language development and Early Education of Hispanic Children.  Eugene

Garcia and Erminda, 2012.

6.  Risley, Todd, and Betty Hart. Meaningful Differences in the Everyday Experience of Young

American Children.  York, Pennsylvania: Paul H. Brookes Publishing Co, 1995.

The Case for Early Childhood Education Programs for Latino Migrant Students

[All quoted text--the indented text--come from this research paper, Latinos and Early Education: An Account of Diversity and Family Involvement by Cuellar, Rodriquez, and Garcia of Arizona State University (Word Document).  Highlighted text are other references of information.]

Latino immigration brings the United States both amazing economic benefits, like complementing our labor force and creating jobs for Americans, and tricky public policy problems, especially within  the American public education system that struggles to appropriately respond to a new, rapid influx of non-English proficient students and their academic struggles and large (yet decreasing) high school drop out rates.

States like California are finding it difficult to cope and adapt with this influx of immigrant children, whose households are generally low-income (58%) and uneducated with "only 9.5% of young Hispanic children had a mother with a college degree."  But our public education system has to adapt and change according to these children's needs simply because

Latino children are the fastest growing segment of the U.S. population; their families vary greatly, they often attend poor quality schools, and are likely to not achieve educationally as much as children from other ethnic groups.  This is in part related to the poor quality of the schools that Latino children often attend.

And most importantly and unfortunately--these students--a high proportion of them are not English proficient:

In a report using ECLS-K—the Early Childhood Longitudinal Study-Kindergarten Class of 1998-99, a nationally representative database that includes standardized test scores for children starting in kindergarten through the 5^th grade, Galindo & Reardon (2006) found that half of Hispanic kindergarteners are classified as language minority students and that 30% at the beginning of Kindergarten are not considered English proficient.  This is an important fact, because English language proficiency has been documented to be a key determinant of educational success (Gandara, Rumberger, Maxwell-Jolly, & Callahan, 2003; Reardon & Galindo, 2006).

This isn't necessarily surprising considering 

Most young children of Hispanic descent come from immigrant families.  In the year 2000, 64% of these children were either immigrants themselves (first generation Americans) or were US-born children-of-immigrants (second generation American).  Of these 64%, most (88%) fit the latter category (Hernandez, 2006).

How do we continue to change the tide and increase the academic success for our fastest growing population group?  We must continue, as the authors in Cuellar, Rodriquez, and Garcia state, developing programs that teach and prepare immigrant parents not only to become but how to become involved in their children's cognitive, linguistic and therefore academic development from the beginning--between ages 0-3.  And where parents find it extra difficult to provide structure for their children and develop their abilities in the formative years, we need directed and targeted afterschool programs that focus on reading comprehension and English literacy for this relatively poor and weak-English speaking student population (I'll have a post on afterschool programs later, with statistical tables and stuff!  Wuhoo!).

We need programs that integrate the partnership between non-profits, community, and family networks--programs like the following are great:

1.  Project FLAME (Family Literacy:  Aprendiendo, Mejorando, Educando)

Based at the University of Illinois-Chicago, Project FLAME particularly focuses on improving parent involvement and academic achievemnt of "children of limited English proficient parents" teaching parents

what types of books are appropriate for the age of their children, and are encouraged to reach out in the community to access literacy materials and create at home literacy centers.  Parents are also provided with English as a second language courses and encouraged to engage in reading and writing activities with their children. Through workshops in the program parents learn the value of interacting with their children in activities such as talking, singing, and playing.  The program emphasizes on talking with children about books.  In order to improve parent-school communication, parents learn about what schools expect from their children academically and are encouraged to volunteer in their children’s classroom.  

2.  Parent Institute for Quality Education (PIQE)

The fundamental premise of PIQE is that low-income, recently immigrated parents to the United States need information about the dynamics of the U.S. educational system, about how to collaborate with the school and teachers, and about how to assist their children at home (PIQE, 2007).  PIQE offers this information through a program that consists of eight ninety-minute sessions in which a range of topics are discussed, including home–school collaboration, the home, motivation, and self-esteem, communication and discipline, academic standards, how the school functions, and the road to university (Chrispeels & Rivero, 2001; Chrispeels, Gonzales, & Arellano, 2004; Golan & Peterson, 2002).

What's most exciting about this program is

data from a performance evaluation that focused on the children of parents that graduated from the PIQE program in San Diego suggest that PIQE has had a bearing on school persistence, reduced the dropout rate, and increased college enrollment (Chrispeels & González, 2004; Chrispeels, Gonzales, & Arellano, 2004; Vidano & Sahafi, 2004).

3.  Home Instruction for Parents of Preschool Youngsters (HIPPY)

[HIPPY is] a free, 2-year, home-based early intervention program for 4-and 5-year-old children.  In the U.S., it is intended to provide educational enrichment to at-risk children[of limited English proficiency--aka English Language Learners (ELL)] from poor and immigrant families , increase school readiness, and foster parent involvement in their children's education

The 30-week HIPPY curriculum is an explicit, direct, instructional program.  The lessons are designed to develop a child's skills in three major areas: language development, problem solving, and sensory and perceptual discrimination 

Taught with a curriculum administered in Spanish, children enrolled in HIPPY for pre-school and kindergarten outperformed their peers in a study with a control group of students enrolled in an early childhood school that wasn't HIPPY.

Conclusion and Questions:

While we focus on teaching parents how to become involved in their children's education--specifically within the immigrant and Spanish-speaking latino community--as well providing these students the opportunity to attend higher quality schools, we must focus on pushing these children into early childhood education programs.

How do we provide these extra bilingual services at a reasonable cost?  And should we propose afterschool academic enrichment programs specifically targeted to children of lower socioeconomic statuses (SES)?  I think so.  But where do we find the funding if we don't already have it?  And what programs exist now that provide these services, and what are their affects?

I'll look into it.  This is a developing issue that I'm just beginning to explore.  But I have a somewhat personal stake in this, considering I myself am latino.  I was just fortunate enough to have two educated, motivated immigrant parents from Nicaragua who came to the United States with nothing but a dream to succeed--and ultimately for me to succeed.

I've seen the dearth of ambition caused by a dearth of opportunity within the latino-community ghettos--and I've even temporarily attended the poor quality and overcrowded schools many latino children from low SES attend.

I see myself in a lot of these latino children, I do.  And I see my parents in them as well.  If it weren't for my mother who pushed me to read when I was younger, who read to me every night, who ensured my English proficiency was high; if it weren't for the quality pre-k and kindergarten I attended in a private school in Minnesota; if it weren't for the successful acculturation to the "American" way of life and belief and pursuit of education; if it weren't for teachers who took time afterschool until 4pm to help me go over math problems and homework when I almost failed---I would never have been able to attend the University of Chicago, one of the nation's premier universities.

These children deserve better from us as a nation of collective gratitude and paying-it-forward.  They deserve to know they can do not what I've been able to do...but better.

Children and Health Focus

With the advice from my economics mentor, Anya Samak, I'm going to focus this blog into a Health Economics blog with a particular emphasis on children, education, and their health.

I'm also going to translate health economics literature/research into digestible and quotable blog posts, while providing the public quick references, evidence, and new knowledge gained from the most recent research--or research I find really interesting.

I'll also try to post interesting and up to date news articles I come across relating to health, youth development and education, as well as asking questions and expressing my own opinion and ideas.

Let's see what happens.

Thanks Anya, for the recommendation.  I think this could be something really cool.

Quality Assurance Assessment Program: Michigan FY2012

Here's a little table I had to make for my internship at CHRT this summer.  I did a lot of research on this, spoke a lot of state budget officials, and hopefully it's mostly right.

For the "Revenues Collected to Date," I got that information from successfully submitting a Freedom of Information Act (FOIA) request!  :]  That was cool.

Michigan's Provider Tax Structure FY2012:

(Click picture to enlarge)

Taxes: Are They Really "Too" Progressive?

[Before we continue, I'm not entirely sure if this tax model I will reference includes cash transfers from local, state, and federal programs to individuals.  That would reduce the effective tax rate for the individuals receiving them.  And, on the graphic you'll see below, income doesn't seem to include cash transfers.]

Now, I agree our tax code is hugely flawed.  Our tax base is small, with large tax loopholes (which are tax expenditures!) available largely for the wealthy individual and business.  That's a fact.

Read Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform.

As I was saying, though, when you include all taxes--local, state, and federal taxes--the idea that the poor don't pay taxes, and that the taxes in the United States are extremely progressive seems uncertain and potentially flat out wrong (again, I say that as I look for information otherwise).  From the Economist:

The fact of the matter is that the American tax code as a whole is almost perfectly flat. The bottom 20% of earners make 3% of the income and pay 2% of the taxes; the middle 20% make 11% and pay 10%; and the top 1% make 21% and pay 22%.

 Now, look at this interesting graphic from Citizens for Tax Justice:

Taxes don't seem all that progressive now.  The conventional wisdom reasons that poorer folk still have to pay local and state taxes, which takes up larger chunks of their income compared to their much wealthier fellow Americans, who can also avoid a lot taxes through tax-sheltered accounts and other financial tools widely available to wealthier Americans.

The tax code seems to be progressive at first, and then becomes regressive. It's essentially flat.

Who really pays taxes, and at what rate?

It’s often claimed that the richest Americans pay a disproportionate share of taxes while those in the bottom half pay nothing. These claims ignore the many taxes that most Americans are subject to — federal payroll taxes, federal excise taxes, state and local taxes — and focus instead on just one tax, the federal personal income tax. The other taxes are mostly regressive, meaning they take a larger share of income from a poor or middle-income family than they take from a rich family.

Let's just get the facts straight, people.

Now, if we include both local and state cash transfers, but only federal taxes (including federal excise taxes), we have a very progressive tax system, according to the Congressional Budget Office, which Greg Mankiw references:

Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received.  For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):

Bottom quintile: -301 percent
Second quintile: -42 percent
Middle quintile: -5 percent
Fourth quintile: 10 percent
Highest quintile: 22 percent

Top one percent: 28 percent

The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned.

But then he notes,

Update: A reader points out the CBO's transfer data includes state and local transfers, but the tax data includes only federal taxes.  If state and local taxes were included, or if state and local transfers were excluded, the middle quintile might well turn positive, though the CBO does not provide the data to establish that conclusion definitively.

Side note: I SAW THIS FIRST, AND I SHOULD HAVE E-MAILED HIM!  UNFAIR!  Gosh darn it.


Boom.

Family Income and the Health of Children: The Poor Get Sicker and Sicker

If there was any question whether income and education affect health outcomes...well, there isn't one now.  Or at least there shouldn't be, after the hallmark study "Economic Status and Health in Childhood: The Origins of the Gradient" by Case et al.

She and her team of researchers found:

Immediately apparent in the left panel of Figure 3.1 (graph shown below) is the inverse relationship between family income and children’s health status for children of all ages. The correlation becomes progressively more negative with age—a phenomenon that holds throughout childhood and adulthood (note the change in scale between the panels). This steepening of the gradient with age is observed until roughly age 65, a result consistent with the findings of other researchers. The results for the PSID [Panel Study of Income Dynamics] are similar to those for the NHIS [National Health Interview Survey].

...on average, children’s health becomes poorer with age and...the differences in the health of wealthier and poorer children become more pronounced with age. 

Family income is not only a strong predictor of a child's health status at any given age, but it also seems to determine whether children face negative health outcomes that increase in severity as they age.

Being poor means that as children grow older, not only do they experience higher percentages of worse health outcomes, but their health status worsen over time--meaning the health gap between wealthier and poorer children only grows over time.

Family income really determines a child's health from beginning to end.  Income's protective power over children's health cannot be underestimated.

As Case et al conclude:

...income is itself protective of children’s health, or is correlated with things that are protective of children’s health. Perhaps both.

But what about parental education?  That has to have some positive effect on children's health outcomes, considering that education tends to lead to higher incomes, right?

The addition of parents’ educational attainment to the set of controls has a large effect on the estimated income coefficients, reducing them by roughly a third for all ages relative to results using Controls 1. However, the gradients remain large and highly significant. Even with controls for parents’ educations, a doubling of household income is associated with an increase in the probability that a child is in excellent or very good health of 4.0 percent (for ages 0-3), 4.9 percent (ages 4-8), 5.9 percent (ages 9-12) and 7.2 percent (ages 13-17).

... 

Although adding controls for education does not eliminate the effects of income, the coefficients on parents’ educations are large and significant. Children living with a mother with a high school degree are reported to be in better health than those whose mothers have not finished high school (the omitted category here). Children whose mothers have more than a high school degree are reported to be in even better health. A similar pattern is seen with respect to fathers’educations.

So while parental education does improve the health of children, income still dominates when it comes to improving a child's health outcomes.

(Click to enlarge the graphs!)

I have more to expand upon.  The paper also covers children and chronic conditions.

Healthcare Inflation vs. US Inflation vs. Unemployment

US Health Care Inflation Rate data by YCharts

The darker shaded area indicates the recent recession.

The recession seems to have caused both the healthcare inflation rate and the US Core inflation rate to just about converge.  Which would have been nice, slowing down the growth of health care prices to a rate below or at inflation.  Except for the recession part.

Because when people are losing their jobs and losing their healthcare coverage, people tend to be unable to afford going to the doctor--and attempt to do without medical services they need.  That's not good.

Illuminated Insight on Competition

I read this free snippet--and found it breathtaking--from Edward Conard's book Unintended Consequences: Why Everything You've Been Told About the Economy is Wrong:

"Competition simply evolves and grows more intense over time."

Competition naturally affects how firms interact within the market to compete for market shares.  It forces them to bear larger amounts of risk--risk of failing if they don't innovate and change--and in turn this forces them to shift any risk they can away from themselves onto others: employees.  Like the development of the 401(K) plan.  Like Conard says, we can blame the corporations, but that's useless.

We have to blame competition.  It creates more risk.

And who likes to play with a lot of risk?

A super cool chart from the book:

Our productivity levels per worker have been much higher than any of our Western European counterparts because of our unprecedented improvements and developments in Information Technologies and the internet.  Why?  I'll have to keep reading, but so far, it's riveting.

This book is amazing, and it's an economics gold-mine.  If you like economics, you better get this book.  I'm getting it, shortly after I read a lot more about public health and a few other books on my list this summer.

Income Inequality: Bad Consequences :[

Bloomberg:

"University of Ottawa economist Miles Corak makes the strongest case yet that inequality and mobility are intertwined—the more unequal a society is, the greater the likelihood that children will remain in the same economic standing as their parents."

...

 "'When difficult decisions need to be made,” Pearson says, “the already diminishing resources for individuals at the bottom are the first to go.'"

...

[Most importantly] :

 "'The strong tie between family background and the chance of success runs counter to what we commonly understand as the American Dream,” Corak says."

We're letting the American Dream slip away.   In a sense, we can measure the American dream by the strength of the positive relationship between economic mobility and the gini-coefficient.  The more intense the relationship, the closer we are to losing what makes America exceptional.

 

Serious Moral Hazard: The Consequences of Mandated Insurance in all Markets

So this is just a commentary, but I think it's an important exercise in judgement analysis.

Peter Coy, my boy at Bloomberg Businessweek, just made the case that we shouldn't just be mandated to by health insurance, but we should be mandated to buy all types of insurance, because:

The logic of getting everyone to jump into the risk pool is powerful: Left to their own devices, many people will choose to go uncovered against fire, flood, car crashes, and cancer. Then, if something bad happens, they throw themselves on the mercy of society. The cruel solution would be to let them live (or die) on the streets. To our societal credit, we are unwilling to do this. A coverage mandate at least ensures that people who create the risks will bear the costs, on average, over time.

At first sight, it seems unquestionably obvious: let's get everyone to buy all types of insurance.  That way, we don't have to face that moral dilemma of asking ourselves, "Well, should I let that person I don't know just die, lose his home, and have the guilt of conscience that I refused to help another family, with kids, in need?"

I mean, our federal and state governments collectively already make us buy tons of insurance:

States require drivers to carry liability insurance. Your state government also provides you with—and charges you for—insurance against losing your job. The federal government mandates flood insurance for anyone living in a flood plain who has a federally insured mortgage. Social Security is mandatory insurance against a penniless old age, and the premiums are deducted from your paycheck, whether you like it or not.  

Great idea, then, right?  Maybe not.  What would happen if we were all covered for our potential mistakes or natural hazards?  Would we stop caring about where we move, ignoring "tornado alley" and building there anyway because, heck, you're covered, right?  Or flood alley?  Or earthquake alley?


More people may be harmed.  Because the perceived danger of living in a dangerous environment has decreased in risk, and therefore price.  This may then actually incentivize more individuals to live in the exact place where they initially try hardest to avoid: dangerous environments that increase their chances of major harm and reckless decisions.  And death.  Let's not forget death.  Why?  Because the financial risk is gone!


And Coy fundamentally makes an argument about finances.  People avoid buying insurance because it's too costly.  So, if we reduce the percieved cost, what's not to attract more demand of riskier living environments?


Decisions that used to cost more, like living in a flood zone, tornado alley, eating high-fat foods--now all cost less because he's paid a premium for protection against the negative consequences they bring forth: death.  And depending upon the estimate, each human American life is worth about $10 million.  So, looks like we've just lost that and more.


Unless, of course, they all die, and then we don't have reckless people raising premiums of insurance, and we leave only the risk-averse individuals alive.  But that's not necessarily equitable.  And it is a huge leap.  But that's the point.  To show that ensuring all people for everything is a huge, inequitable leap that borderlines fanatical and betrays our moral sentiments to help our fellow man.

The ACA Individual "Tax" Date: Why it Matters

A not-so-small and controversial mandate exists within the Affordable Care Act (ACA).  It has libertarians up in arms and liberals up in hopes.  It’s the ACA’s individual mandate—or tax individuals would have to pay for not purchasing health insurance.  While the mandate seems radical, it’s not—and it will probably lower your healthcare premiums!  The idea of our government strongly encouraging us to buy insurance isn’t new.  We have to buy car insurance if we own a car.  People generally don’t complain about that, because they want to be reimbursed if someone damages their car—imagine if someone who didn’t have car insurance hit you.

Yes.  The individual mandate is key to lowering your insurance premiums.  Hey, it's working in Massachussetts!

The conventional reasoning behind the individual mandate is straight forward.  Individuals who are more likely to be sick (high-risk consumers) are precisely those that apply for and enroll into health insurance plans.  This is called adverse selection.  These are individuals that recognize they will probably need care that is either long-term, intensive, or both—and therefore high cost.  Without insurance, they would likely be unable to pay for their out-of-pocket, and, recognizing their situation, also purchase health insurance.  To the insurer, however, high-risk consumers are expensive and expect to pay more for their coverage.

Individuals who are less likely to get sick (low-risk consumers)—usually the young and single—tend to avoid purchasing health insurance because they can reasonably assume their chances of needing expensive, intensive, and long-term care are very low (in fact, one in three young American between 18-34 did not purchase health insurance).  This tends to also reflect the fact that younger adults within the labor force are relatively poorer compared to their middle-aged or older counterparts that have worked 20+ years and have accumulated wealth and higher incomes over time.  Just as the low-risk individuals recognize their low chances of needing expensive care, so do insurers.  Insurers expect to pay significantly less for their coverage compared to their high-risk counterparts.  They are cheaper to insure.

So what does this have to do with ACA’s individual mandate? 

Insurance companies calculate premiums based upon the total cost they expect to pay to insure all their customers who have purchased health insurance.  For simplicity, we add together the expected cost of insuring high-risk consumers with the expected cost of insuring low-risk consumers.  This is the expected total cost of insuring all consumers.  To calculate the premium each consumer must pay, we divide the total cost by the number of consumers in total (high-risk + low-risk).  The premium is therefore an average price that high and low risk consumers pay. 

The low-risk pay more in premiums than what they receive, and that “left over” care provides for high-risk, who pay less in premiums than what they receive in care.   So, the low-risk consumers pay for the high-risk consumers’ “extra care. “ (This gets a little more complicated when we add in that companies also have to make a profit, but here we will assume the company is just breaking even in its commitments to cover its consumers.)

But what happens when the low-risk are relatively low-income young laborers who have decided health insurance is an unnecessary extra cost they want to avoid?  This means the average premium rises, because there are less low-risk consumers and less “left over” care for the high-risk.  Consequently, insurers raise their premiums to make up for that lost “left over” care. 

The individual mandate requires all (with few exceptions) consumers to purchase health insurance and therefore drive the average premium down. 

The mandate protects against this adverse selection.  And it protects against upward spiraling costs.

However, one of the major arguments against the Healthcare bill has been that the mandate is too weak!

            “The adverse selection death spiral

The problem, as PwC points out, is that the individual mandate is too weak. “While the new market rules [regarding pre-existing conditions] are implemented in full in [2014], the individual coverage requirement is…phased in gradually.’”

Michigan: Supply and Demand of Primary Care Medical Residents and Specialists

2008-2012 National Resident Match Program Results for Michigan.


Medical Students (UME) Matched to their Residency Specialization (Graduate Medical School).

Michigan:

UME Students Matched to Primary Care Residencies for GME:

	Years
Resident Type	2008	2009	2010	2011	2012	Grand Total
General Practitioner
Sum of Quota	94	94	99	111	109	507
Sum of Matched	83	83	86	98	99	449
Internal Medicine
Sum of Quota	153	157	182	168	190	850
Sum of Matched	153	157	181	168	190	849
Obstetrics-Gynecology
Sum of Quota	47	48	53	52	52	252
Sum of Matched	47	48	53	52	52	252
Pediatrics
Sum of Quota	91	95	110	109	103	508
Sum of Matched	90	94	107	104	103	498
Total Sum of Quota	385	394	444	440	454	2117
Total Sum of Matched	373	382	427	422	444	2048

UME Students Matched to Specialist Residencies for GME:

	Years
Resident Type	2008	2009	2010	2011	2012	Grand Total
Non-Primary Care Providers
Sum of Quota	521	553	580	606	596	2856
Sum of Matched	480	522	536	557	542	2637
Total Sum of Quota	521	553	580	606	596	2856
Total Sum of Matched	480	522	536	557	542	2637

Do you see a shortage?


What may lie behind these results of physician shortages within Michigan?  Basic economic intuition could say the barriers to entry within the medical field limit the supply of doctors.  By barriers to entry, I mean the high cost of medical school and residency.


Or, we could explain excess demand from untaxed healthcare fringe benefits that drive up the total demand of healthcare--and therefore doctors--at a faster rate than our current medical education system can accredit and train the necessary doctors to reach that demand.


But we also run into a few snags.  Bigger academic and research hospitals usually don't face shortages.  There could also be regional differences: rural hospitals may find it harder to compete for physicians in the National Residency Matching Program (NRMP)--which I'll discuss a little later--and be left with no doctors left to fill their positions after they've been taken by bigger research hospitals or urban hospitals with more prestigious residency programs.


I don't know.  I'll have to look into this a little more.  


Interesting to think about, no?