Unnecessary Restrictions Are Holding HSAs Back

Federal law requires consumers to have a “qualified high-deductible health plan” before they can open a tax-free health savings account (HSA).  Today, Sarah Rubenstein of the Wall Street Journal reports that those rules make HSA-compatible coverage more expensive than necessary. 

In a recent paper, I argued that Congress actually requires HSA holders to have a “high-but-not-too-high-deductible health plan,” and that Congress should let consumers choose their own health insurance.

Calling All Parents

For months, a battle has raged in New York City over whether students should be allowed to have cell phones in public schools. In fact, in April the city ran something of a dragnet operation in schools looking for weapons and instead ended up confiscating 129 phones at one school alone.

Parents say their children need the phones to keep in touch with them on the kids’ way to or from school. The Bloomberg administration counters that having the phones in schools can be disruptive, that they are sometimes used for cheating on tests, and are even employed in gang activities. And now the dispute has reached the point where the City Council is getting involved, promising to pass legislation permitting children to carry phones.

All of this, of course, is ridiculous. Gangs operated in school for decades without cell phones, and for years NYC schools have successfully practiced a sort of “don’t ask, don’t tell” policy that let kids carry phones as long as they didn’t go off in class or get used for nefarious purposes. But this is what happens when you force everyone to support a single, government-run, school system: People fight over everything because only one group’s values and opinions can ultimately become policy. The result: All kinds of stupid arguments, and schools that are constantly paralyzed by politics.

Sweatshops and Socially Responsible Consumption

Nicolas Kristof has a wonderful column, “In Praise of the Maligned Sweatshop,” in today’s New York Times. Regrettably, it is behind the paywall. Luckily, Greg Mankiw has excerpted a good bit. Important nugget:

[C]ompanies like Nike, itself once a target of sweatshop critics, tend not to have highly labor-intensive factories in the very poorest countries, but rather more capital-intensive factories (in which machines do more of the work) in better-off nations like Malaysia or Indonesia. And the real losers are the world’s poorest people.

Here is a great example of the way so-called “socially responsible” consumption can be self-undermining. Not that there’s necessarily anything wrong with wanting justice with your Corn Flakes. Acts of consumption are causes of effects, and we have every right to worry about what those effects will be. But if the effect you’re intending goes beyond the satisfaction you get from a bowl of Corn Flakes, then you need to actually know how cause and effect are related in order to be sure that you’re not causing exactly what you’re trying to prevent, which wouldn’t be very responsible, would it?

In wealthy societies, where people are more in need of meaning than further material comfort, it is inevitable that consumers will want more than just coffee beans and sneakers. Many of us want coffee beans and sneakers the consumption of which will affirm our identity and provide a small injection of meaning into our lives. The difficulty is, consumers are just terrific at identifying good coffee qua coffee, or good shoes qua shoes, but are simply lousy at identifying good coffee or shoes qua output of a fair process of production that really helps the poor. You can’t taste bad economics in your Costa Rican shade-grown and unseen suffering doesn’t chafe when you run.

Maybe we need a new campaign for socially responsible consumption: “Look for the sweatshop label.” Or, alternatively, just try buying products that are the best value for the money. The “being cheap never felt so good” campaign?


No, Really — You Have a Point

Matthew Holt of TheHealthCareBlog.com devotes a lengthy post to criticizing my (much lengthier) paper, “Health Savings Accounts: Do the Critics Have a Point?

Holt – who has an HSA himself, as I understand it – is not entirely critical. For example, he calls Cato “the sensible libertarian’s think-tank.” As for the uncomplimentary parts, I found them odd.

For example, Holt accuses me of concluding that no, critics of HSAs do not have a point. Yet the paper has an entire section titled “Criticisms That Raise Serious Issues” (pp. 11-22) where I validate many criticisms of HSAs. In particular, I agree that in some instances people with high-deductible insurance might skimp on care in ways that harm their health (though there is scant data to demonstrate that this actually happens). Thus, I agree with the Commonwealth Fund that HSAs should be liberalized to allow people to choose insurance with coverage below the deductible.

Also, Holt accuses me of ignoring the fact that risk segmentation results in reduced subsidies to the sickest insureds. Yet that is a central theme of the “students & professors” hypothetical (pp. 6-8). And on page eight I write:

Though HSAs may reduce hidden subsidies to sicker workers, they do not preclude subsidizing those workers in other ways.

I could go on. From his criticism of it, it doesn’t appear Holt read the paper very closely.

Politics Is Not Religion

Will Wilkinson offers some telling criticisms of Charles Morris’ recent New York Times op-ed.

Morris writes that the economy has a “spiritual dimension” that is lacking in contemporary America. He implies that an active and expansive government should supply a “conviction of fairness, a feeling of not being totally on one’s own, a sense of reasonable stability and predictability.”

The state, then, should be in the business of providing spiritual goods.

Morris’ essay reminded me of what one of the founders of neo-conservatism, Irving Kristol, once wrote: “A nation whose politics turn on the cost of false teeth is a nation whose politics are squalid.”

So politics is apparently about more than mere material matters; it has a higher dimension. In our time, that higher dimension has become the politics of national greatness that in turn became a crusade to bring democracy to others.

Both Kristol and Morris are confusing politics for religion. They expect more from politics than it can or should give. Or at least, they expect more than a politics consistent with liberty can give.

Good News (and Some Uncertainty) from the Peruvian and Czech Elections

Citizens in Peru and the Czech Republic rejected the far left in those countries’ elections this weekend.

Peruvians gave 54 percent of their votes to former president Alan Garcia against 46 percent for nationalist candidate Ollanta Humala. Garcia is no market liberal, but at least he promises to stick to democracy, orthodox macroeconomic policies and not reverse the gains of Peru’s economy since it began liberalizing in the early 1990s. Thus Peruvians rejected Hugo-Chavez style populism and contributed to the regional backlash against the Venezuelan President’s desire to unite Latin America under his leadership. A more moderate and modern Latin America is taking shape among the countries along the Pacific Rim (with the possible exception of Ecuador) that are opting for free trade with the United States.

The fact that Peruvians voted for a candidate who is remembered as one of the worst presidents in Peruvian history (1985-1990) rather than for Humala says a lot about how deep anti-populist sentiment goes–at least among those who voted for Garcia. The problem for Garcia, and for governability in Peru, is that Humala won in the majority of Peru’s departments, mainly in the andean and jungle interior, thus revealing a divided country. The leftist-populist party also has the largest representation in the Peruvian congress. Already, Humala has declared the formation of a nationalist front, calling for all leftist organizations to unite. This may represent democracy in action, but it is a sign that Humala will remain a major irritant to the next government and possibly to social and political stability if Humala follows Bolivian President Evo Morales’s example of forging a path to power by creating unrest and instigating riots and violence to achieve political ends. Populism and the influence of Chavez have not been definitively defeated in Peru.

In the Czech Republic, the communists lost seats in the parliament and the pro-market Civic Democrats won a plurality, with 34 percent of the vote. Normally, the head of the leading party, in this case Mirek Topolanek, would form a government. But the elections resulted in an even split in the parliament–with the Civic Democrats and their allies holding 100 seats and the communists and the Social Democrats holding the remaining 100 seats. It is difficult to see how Topolanek will form a majority, but the coming days and weeks will surely see lots of political negotiations and some degree of compromise. If that doesn’t work out, the Czech Republic will have to hold general elections again in the next few months and hope that voters are more decisive in choosing between free-market reforms and euro-socialist polices.