We should congratulate 2020 candidate Sen. Elizabeth Warren, D-Mass., on recognizing that incentives matter. Warren has a new plan to equalize black and white maternal mortality numbers. Taking money away from those who allow more black than white mothers to die from their pregnancies is indeed a recognition of that most basic lesson that economics teaches us: incentives matter. We could always hope that this newfound knowledge begins to inform her plans for taxation and other things, but: baby steps, baby steps.
The problem with this new plan is that incentives really do matter and thus it’s important to make sure that any attempt to design them gets them right. This being something that is really terribly, terribly difficult. Markets aren’t, by any means, perfect, and they rely upon that most basic human incentive: the desire to gain more by having to do less. Once we start to allow the technocrats to try to design how things are going to work we have that problem of whether they’re going to quite grasp the more complicated ways we can all react to their plans. We can also describe this as the problem of unintended consequences.
The basic problem that Warren describes is entirely true. Black women do die at an alarmingly higher rate (three to four times) from the complications of pregnancy than do white women. Yes, something should be done about this.
That does not mean that Warren’s something is the right thing to be doing.
The plan is that places which reduce that disparity in death rates receive more money. Those that don’t, or where it worsens, receive less. Sure, hits to pocketbooks are decent incentives even if humans are often motivated by other ones, too: honor, praise, community, social standing. They can all also serve to motivate people to do things and or not do others.
There is a certain problem with concentrating upon the difference, of course. One place where the gap has been narrowed is North Carolina. Part of the equalization is the result of a rise in the white maternal mortality rate. That might mean greater equality, but we might think that a high price to pay for that increase in racial justice.
It is detailed examination of the causes of the difference in maternal mortality which informs as to what the problem might be here. The reasons so many more black mothers die is not purely a result of the maternity care or even the wider pregnancy care they receive throughout pregnancy. Yes, it is possible to point to direct and indirect racism in the hospitals themselves. But there’s no great mystery nor complexity to why the difference exists overall.
Maternal mortality is really a reflection of general maternal health and would-be black mothers are generally in poorer health than white. This is just a reflection of the wider society surrounding us all.
No, this is not to excuse it all, nor is it to try to offer up a solution. But it is things such as obesity, diabetes, and hypertension which kill mothers. They are all also diseases and conditions more prevalent in the poorer among us. Even the slightest eyeballing of the usual statistics will tell us that black Americans have, on average and in general, worse economic outcomes than white. There is therefore no surprise that the diseases or conditions of poverty are killing more of those poorer in our society.
We can even, as we should, decry this racial injustice and insist that we’re going to do something about it. But trying to get the hospitals doing the few months of maternity care to cure something caused by the general socioeconomic condition of the entire population isn’t going to work.
That is, whatever incentives we’re providing those hospitals in trying to improve the rate, what is it they’re actually supposed to do? Which is where the misalignment of incentives comes in.
Imagine you’re a hospital, perhaps a hospital administrator, admissions manager, or some such. You know that you’re not going to be able to move the dial much on this, because the problem is too general for you to influence. But if the maternal death rate among blacks at your particular institution doesn’t converge with the white one, you’re going to lose money under Warren’s plan. What do you do? Stop taking those most-at-risk black-mothers-to-be. That’s the incentive you’ve got presented to you anyway.
Yes, we are seeing a distinct fall in hospital access in poorer districts even as it expands in richer ones. We’ve not tried this particular incentive of Warren’s yet, but the general possibility is clearly there. Because of the intractability of the problem during an actual pregnancy, the incentive will be to not treat those who might be problematic.
If the incentives are wrong, Warren’s plan will bring about the opposite of what we desire. It would make it more expensive to offer maternity care to black women and we’ll find that fewer will offer such care, leaving exactly those who most need it without the very thing we’re trying to promote.
There is one more point here, too: Black women are more likely to be uninsured than white. Just another example of that basic inequity. The uninsured are obviously those who already are likely to suffer from those conditions of poverty. The Warren plan would incentivize those healthcare providers who currently provide such care to turn away, if they can (and there are always methods other than just flat-out refusal) those who need it most.
This is just one example of the general problem with Warren’s general worldview. Reality is a horribly complex place, and designing plans and policies to alter it is distressingly difficult and well beyond the usual abilities of the technocrats. As this specific example shows us, the desire to improve black maternal mortality rates is highly likely to end up increasing them by denying those who need that maternal care the most access to it, simply because the incentives are designed wrong.
Paying people who do better would work; penalizing those who do worse won’t. That second part introduces that perverse incentive to deny treatment altogether.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
