interviews
Insurance Coverage Design
by Naomi Zewde
September 24, 2020
This interview with Naomi Zewde, an Assistant Professor in the Graduate School of Public Health & Health Policy at the City University of New York, and a research fellow at the Roosevelt Institute, was conducted and condensed by franknews.
Naomi | I focus on health insurance coverage and the economic and financial implications of insurance coverage design. I look at how these things affect household financial wellbeing.
franknews | We know that medical debt is rising. What is happening in the healthcare system that explains the increase?
The issue of consumer debt in general in America is almost like a slow fire.
If people don't have the resources to meet their basic needs healthcare, education, housing — these fundamental things end up being sources of debt.
In healthcare, people’s deductibles are growing at incredibly fast rates; deductibles are growing much faster than premiums, and certainly much faster than wages over the past decade. People are left exposed to a greater share of their medical expenses, and exposed to huge medical bills — typically more than what most people have in their savings. That creates a lot of stress and fear, and often the threat of that financial burden deters people from seeking care.
What drives the prices of care up?
We don’t know.
The United States spends more on healthcare, both in dollars and in percent of GDP, than any other OECD country, but it is not clear exactly what we are spending that on.
We have a lower life expectancy. We have fewer physician visits per capita. We have a higher rate of chronic conditions. Those who provide healthcare - physicians, nurses - are not necessarily reaping the benefits either. We know that the utilization rate of the healthcare system is not unique to the United States. So why are the prices so high? That is up for debate.
We do know a few things. One, we know that a lot of this money goes towards the vast administrative bureaucracy — something that is unique to the United States. We also know that the government in other countries set prices: they either operate as the sole purchaser and thus dictate prices or they dictate prices through legislation. In the United States, Medicaid has price controls, but private insurers can charge whatever they want. There is no real way for anyone to fight back. There's no designated person to say no, you're charging too much.
Based on your research, what effect does this have on households’ finances?
I have done work around housing evictions and medical debt. We found that Medicaid expansion reduces the rate of home eviction. Going into the research it was not necessarily clear what relationship the two would have, if any. It sounded plausible — people with chronic conditions, for example, end up having to choose between rent and care. But it is astounding to think about the fact that the design of our healthcare system can have these ramifications.
I also found, in a paper that came out last month, that for 25 percent of people who were uninsured before ACA, it's cheaper to file for bankruptcy than to reach a deductible of the subsidized ACA private insurance policy.
Wow.
It’s surprising right! But it makes sense and might explain why there is such low participation in ACA private insurance policies. The congressional budget office projected that 10 million more people would enroll in these plans than actually did; only 8 million people got these. They were way off. The paper investigates why.
And what did you find?
I suspected from the beginning that it was because the deductibles are so high. The median deductible for the silver tier coverage is $4,000. There is a sweet spot in terms of the subsidies that substantially lower your deductible and premium. If you make between $12,000 and $18,000 a year, subsidies will bring down the deductible to around $200. But once you make $24,000 a year as a single adult, you're facing between a deductible between $3,000 and $4,000. So in designing the policy, it was kind of like, we will give extra subsidies to lower-income households, but not in a way that reflects what it is actually it's like to live with these medical bills. It feels divorced from reality.
Our findings don’t necessarily mean the people have to declare bankruptcy. Bankruptcy sucks and hospitals also know that when you file for bankruptcy, they typically do not get anything out of it. So, they look to work with you. Neil Mahoney has a paper, Bankruptcy as Implicit Insurance, that essentially shows that hospitals tend to settle with consumers at their cost of filing for bankruptcy. Hospitals essentially say, whatever you were going to lose if you were to file for bankruptcy, just give that money to us instead.
That reminds me of what Deborah Thorne said in our interview with her: "As Americans, we often rely on credit cards to be our social safety net. And when that falls apart, we are left with bankruptcy.” What is your understanding of how we got to this place?
It's tied up with a social-political larger trend. I have been watching this show called the Black Journal from 1968 to 1977 with a bunch of progressive Black scholars.
I watched one that was right after Nixon got elected, and everyone was saying, "America is taking a turn towards facism. All of American’s white guilt money is gone.” I think that really well foretold this mass acculturation that happened under Nixon.
The United States is not unique in this march away from social egalitarianism over the last half of the 20th century, but we are living through the consequences.
How do we return protections?
There is this famous paper - It’s the Prices, Stupid. I think there needs to be some kind of direct effect on price.
You mentioned the government can do so by either acting as the sole buyer of care or passing legislation. What do you think is the best way to achieve fair prices?
Right. One way of doing so is through a single-payer system. I am actually working on a study now that is going to be published to the Roosevelt Institute that compares single-payer with a public option.
There are two things to know about single-payer that are useful in this context.
One, it would get rid of most of the bureaucracy involved in negotiating prices — the different insurance companies, the different kinds of billing, and different plans. Right now, every doctor's office has multiple people whose full-time job is to understand how to interact with every single different plan of every different insurance company. There are many people employed on the side of the insurance company as well. Under a single-payer system, that would be gone. There wouldn't be multiple different rules to understand, and that reduces the aggregate resource use that is allocated towards healthcare.
Two, a single-payer system is tax-financed. That is important in terms of equity. You get to decide what percentage of household income should be allocated towards healthcare. Basically, the way our healthcare system is designed now means that the more money you make, the smaller percentage of it you have to put towards healthcare.
It is regressive, and no one has a choice but to participate in it.
If we structure it as a tax-financed healthcare system, the way we fund most of our infrastructure, you just get to decide what percentage of household income you are going to take from each household along the income distribution.
interviews
Impact Investment For The Circular Economy
by Rob Kaplan
January 31, 2019
Rob Kaplan is Founder and CEO of Circulate Capital, an impact-focused investment management firm dedicated to financing innovation, companies, and infrastructure that prevent the flow of plastic waste into the world's ocean while advancing the circular economy.
How do you define a circular economy?
I think a circular economy is one where commodities and resources are managed in perpetuity. So that there is no waste, but instead it's a resource for future innovation and product manufacturing.
In transitioning from a linear system to a circular one – who becomes responsible for the end of life? Especially in a time where goods are globally dispersed.
Well, I think the answer is that everybody's responsible. There's no single entity that is responsible for how it's managed at the end of its life, in my opinion. That's why this is a systems challenge that requires a systems solution.
Part of the challenge you're noting is the aspiration of a circular economy with the reality of where waste exists today. Because, circular economy in many ways is an aspirational concept. Especially within consumable products. It doesn't really exist. As we look to invest in companies that can prevent plastic pollution and instead drive towards more circular opportunities, it is a matter of degree. It's not, we'll get there tomorrow in that perfect ideal. It's more about, we've got a lot of waste that's not being managed appropriately. How do we improve that in a way that can create value for those communities? And also prevent the pollution at the same time.
What do some of those solutions look like in practice for you and the companies you work with?
We've been looking at how to invest in South and Southeast Asia for the last couple years. I'd say most of the opportunity that’s "shovel ready" today is in the waste and recycling sector. They are usually startup recycling companies that are generally the first line of formality. Where they're buying materials from waste pickers as well as municipalities in some cases. And then adding some kind of value to it. We also see a number of recycling facilities. They're a little bit further downstream from the collection aggregation. We have started to see a little bit of reusable and returnable systems, but they're in a very early stage at this time.
When you work with a large multi-national company, such as PepsiCo or Coca-Cola, what does their commitment to this process look like?
They have two different levels of commitment. The first is they are committing to improve their own operations and supply chains. Almost all of our investors have direct commitments about what they're doing to increase the amount of recycled materials they use in packaging and design for recyclability. Then, they are also committing capital to our strategy to allow us to invest in companies that can increase the amount of recycled material available for their use and the use of others.
They are also providing expertise and resources, and network. They are providing essential off-take and the ability to buy the material after it's collected and sorted. That's a big part of the challenge. The market that's available to buy this material. Needing that kind of surety of off-take.
We’ve discussed circular economies from a variety of perspectives and backgrounds. Science, academia, advocacy. You approach it as a business. Why is your work a necessary part of the puzzle?
The particular slice of the problem we are looking at is plastic pollution in Southeast Asia. We quickly realized it was going to take many billions of dollars of capital to build the infrastructure required to really stop the flow of plastic leaking into the environment and the ocean. We started to look at where would that capital come from? And we realized that it's not going to come from necessarily consumers or companies, but really, institutional investors that are financing the future of infrastructure in Asia. The only way to get those folks involved in this space is to show them that it's an investable marketplace. That there is a track record. That there is a pipeline of opportunity. And that you can make money doing this. We want to demonstrate that investing in waste recycling is as boring as investing in roads and bridges, for which there is a lot of capital allocated.
Our approach to this was “How do you turn this from a waste stream and a cost center into a profit center as a way to unlock that capital?”
When you say infrastructure, are you talking landfills, incinerators? What is that infrastructure?
Our focus is certainly on the recycling and reuse side. I think there is a reality that they need to have improved landfills in Southeast Asia too. But we're not particularly able or interested in financing landfills and incinerators are out of our scope.
Has the China recycling ban affected your day to day?
Oh yeah. I mean National Sword basically turned the entire recycling industry upside down globally. In the markets that we're particularly focused on, they were exporting waste to China too. They hadn't invested in their own domestic processing. That has caused big problems for them and has created great opportunities for investors, who are trying to build those companies within those countries, under those infrastructure projects.
I think most of the countries we're working in in Southeast Asia have also started to follow China's lead and stop accepting imported waste. The US and Europe are not contributing as much to ocean plastic these days as we used to. Because the exporting markets have dried up.
I think there's probably a shifting in the future where more of that will go to Africa, right? Because they haven't started those bans. But most of Southeast Asia has already either halted imports or is talking about halting imports.
Does all of this help move the agenda of circular economies further?
Absolutely. It was so cheap. No one had any incentive to invest in domestic circular economy opportunities because if you were in Los Angeles it was cheaper to ship a container of waste to China than it was to Chicago.
That's crazy.
One important point that I've been trying to communicate lately is that there is no silver bullet for these solutions. It's incredibly complex. People really look for elegant, simplified solutions. But a circular economy is complex. We're not going to be able to reduce our way out of this problem just like we're not going to be able to recycle our way out of this problem. You need both and many more solutions. I worry about absolutists that are trying to push agendas rather than really trying to drive environmental progress.
Our approach is very much, how do we deploy capital as much and as quickly as possible to stop this pollution and make triple bottom line in the process of doing it? Rather than, you know, any political perspective or point of view, it's really just the view of the investor that we're looking to bring to the conversation.
All or nothing doesn’t work here.
Yeah. It's really complex. How can anyone say that there's a single solution to something? If it were that easy, we would have figured it out already. And I think we're also starting to see, because of the topic getting so hot and everyone wanting a piece of it, they're all saying, “Well, what's my contribution?"
Right.
My contribution is activism. My contribution is lobbying or my contribution is X, Y, and Z. And so they're all sort of piling on without a really clear theory of change about where they think they're trying to drive the progress.
Has the re-upping of investment from petrochemical companies into the production of plastic affected your work?
Yeah. One of the interesting things about plastics and circular economies is you actually want that feed stock, right? If you start removing feed stock opportunities, like PET plastic, which is what most beverage bottles are made of, for example, that's really problematic from a circular economy and recycling perspective because PET is the most recyclable plastic that we have today. You'd want to see more of that recyclable material out there. Right now it's cheaper to make plastic out of petroleum or natural gas in the US. It could be cheap to make it out of old plastics. That's where I think the big unlock towards the circular economy comes in. How do you tap into those market forces of building massive chemical facilities and use that as your off take for recyclables? That's the opportunity to change the game and that's your supply and your demand.
Are you optimistic that that will start happening?
I think the petrochemical industry is starting to show that they're really interested in that idea. I think it's really complex and hard to do. There's a lot of barriers. But it's not a technology barrier necessarily.
Is it a political barrier?
It's not so much a political barrier, I think but... Why do you think it's a political barrier?
Because of the political and financial incentive to produce and frack natural gas. How do you switch where incentive lies?
Yeah. I think you're right there. Policy is a huge part of that. Especially in the US where natural gas is so cheap thanks to policy incentives and new technology. It's not so much the same thing in some of these emerging markets we're working in, which is where energy is very expensive and most of that additional capacity is coming online.