Sunday, March 8, 2009

What Wealth [Inequality] Means for Health

President Obama's recent budget proposal has been declared unanimously "ambitious." The health component of Obama's plan includes $634 billion dollars in spending over 10 years as a "down payment on health care reform." According to an article in the San Francisco Gate, approximately half of this amount would be generated by limiting charitable and mortgage interest deductions on taxpayers above the 28% income tax bracket and more would come from reducing Medicare payments to private insurers.

Given that I have little expertise in economic growth and government fiscal planning, I cannot comment to any great extent on the details of the budget plan nor its impact of the growing deficit and national debt, etc. However, I am excited to reflect on what it could mean for public health. 

An October 2008 report ranked the US just behind Mexico and Turkey for having highest income inequality of all OECD (Organization of Economic Cooperation and Development) countries.  In fact, many studies have found that countries with more equal distribution of wealth have -- at ALL levels of income -- better health outcomes. That means that not only does living in a more equal society confer health advantages to the poor and disadvantaged, but it also benefits the health of the wealthy. Notably, the health of the poor is improved to a much greater degree than the health of the wealthy (think of what $5000 could mean for someone making $20,000/year compared to someone making $200,000) through such redistribution. 

So how might this work?
  1. Increased income may improve a person's ability to access needed resources (e.g. health insurance, transportation to health care, living in a toxin-free environment, buy healthier foods)
  2. Increased income may improve a person's mental health and reduce stress (resulting in lower rates of chronic disease, such as hypertension and cardiovascular disease)
  3. Redistribution of income may promote programs and services for the poor
In areas of great income inequality, housing segregation, stereotypes, and blame hamper the rich from investing greater resources towards disadvantaged populations. For example, why support a new 'free clinic' when you can build a state-of-the-art hospital with the latest health technologies? All too often highways, rivers, and walls separate the haves from the have nots -- and do not allow us to come together and learn from each other. 

How this might affect the middle class is something that I haven't been able to fully flesh out. I think that it is likely that they would benefit from these measures; though proposals that hurt entrepreneurial activities and small businesses could certainly serve as a disincentive for some who are trying to bridge that gap between the middle and upper class. Furthermore, it may need to be reassessed whether those making $250k should be labeled as "wealthy" to the same extent as those making much more. As an interesting Fox News (yes, Fox) article pointed out "HENRYs [high earners, not rich yet] carry significant mortgages, pay heavy property taxes, make charitable donations and sock money away for their children's college education." The slight increase in income tax coupled with the lack of deductions for mortgage payments and charitable giving may decrease the spending of people earning this much -- further deteriorating the economic situation. I just don't know.

My final assessment: this economic plan could be one of the single-most important factors that improve population health in the United States in the 21st century. While individuals may not see an overwhelming effect on their health, society as a whole could benefit greatly.


Mike said...

A few thoughts:

I am not sure that the Obama Administration is concerned about HENRYs that have high mortgage payments and are saving for their children's education. Obviously, a collapse in this part of the market will have far reaching implications, but we just aren't there yet.

I think, rightfully so I might add, the stimulus is centered to expand unemployment benefits for those who lost their job and can't pay to put food on the table or can't pay medical bills for their children. Imagine not having enough money to pay for food? A scary thought that millions are dealing with on a daily basis... And we are the richest nation in the world. Yikes!

Perhaps the stimulus will create a job for someone who just bought a house but lost their job. I rather see money spent on that before we give HENRYs a new tax break - No one likes paying taxes but it is about priorities now. New tax cuts for HENRYs or increased unemployment benefits. Hopefully not the former.

My question for you is that you say society will benefit but individuals might not... How will this exactly work? Could you expand a little?

Thanks Kate! Good workkk- I enjoy reading.

Kate M said...

Thanks for your comments, Mike. I agree with you -- the administration's concern are not for those who are just being made "uncomfortable" or setback a bit by this economy. He is concerned with the families whose lives will be impacted acutely, and noticeably by unemployment and rising costs of living.

For example, I am shocked by how our government has let the poverty line stay absurdly low as incomes in our country have increased. Most Americans think the poverty line is around $40,000 for a family of 4 and it is just above $20,000. Crazy!!

With regards to social benefit vs. individual benefit - I believe I was implying the model of diminishing returns to health. So as income increases, we see gains in peoples health. But at as income rises, the subsequent health benefit of further absolute increases in income not longer show such a big effect.

Once you take that into account, you can see that by "redistributing" income from the wealthiest members of society to the poorest members of society one would find an insignificant decrease in wealthy individuals' health, but a huge increase in the poorest peoples' health. Averaged over the whole society, this more equal distribution of wealth would lead to a healthier population than that of the society with high income inequality.

Thanks for your comments and questions!

Mike said...

Thanks for the response Kate.

In political parlance, most aren't comfortable with the concept of "redistribution." Obviously what you are talking about is a form of redistribution but we rather talk in terms of equity (i.e., what is fair). We have the greatest income inequality in our nation's history - that gap has clearly grown.

Those of us on the political left only ask that everyone gets a fair shake - we don't want to take from the rich and give to the poor. Instead, the wealthy have a moral obligation that they must fulfill (and this might include funding a national health insurance program).

I know this is a nuanced argument and hard to reconcile but it is also an important point to make in order to gain traction with the american public on this point.