Is Math a Myth?

There are those who are calling for scaling back mathematics education. One “public intellectual” (whatever that is), Andrew Hacker, has even written a book on the subject: “The Math Myth.”  Hacker loves to use words like “inflict” rather than “teach,” and wonders why we torture young Americans with math education in these days of computers and smart phones. (More on Hacker later).

Here is one reason. Mathematics is the science of reasoning. You might think that of little use, but you must use reasoning to weed out the arguments of political hacks and charlatans every election season. Here is an example.

On November 2, many newspapers ran a political cartoon by Jim Morin of the Miami Herald. The target of Morin’s partisan jibe was those who are concerned about the increasing expense of “Obamacare” premiums.

In the cartoon, a large, rotund loutish fellow, labeled “Health Insurance,” holds the message  “George W. Bush Years (up) 100%.” Next to him is a small, rotund fellow with the message “Obamacare (up) 25%.” Finally, a frenzied character, apparently Republican, is shouting “OH NO, WE NEED TO REPEAL IT!”

Here is Morin’s reasoning:

• Health insurance premiums increased 100% over the Bush years,
• Obamacare premiums are projected to increase only 25%,
• Therefore those concerned about Obamacare increases are hyperpartisan, hysterical idiots.

But, in truth, Morin is either preying on your mathematical ignorance or is a mathematical ignoramus himself. Neither interpretation is flattering.

Over the eight years of the Bush presidency, health insurance premiums did indeed increase about 100%. However, Obamacare premiums are projected to increase 25% this year alone. These two numbers can’t be directly compared because they occur over two very different timeframes.

It’s like saying that Sally made 25 dollars this year and Joe made 100 dollars altogether over the past eight years and then claiming that Joe makes a lot more money than Sally. If we annualize those earnings, Sally makes $25 per year while Joe makes only $12.50 per year ($100 divided by eight).

To compare the two health insurance rates of increase, we must find a common time scale. With a few simple calculations, we find that health insurance premiums increased approximately 9% per year over the eight Bush years. In fact, the Obamacare increase is nearly three times that of Bush on an annualized basis. Morin’s thesis is bankrupt.

Back to Andrew Hacker, who believes that your children are wasting their time in mathematical training. Let’s see how that works in reality.

In late August of this year, Hacker was interviewed on the weekly NPR show “Science Friday.” A political scientist by trade, Hacker is teaching a course called “Numeracy 101” at Queens College which is intended to impart a minimal, but adequate, amount of mathematical training. As a practical exercise, working with his students, Hacker calculated the answer to this question: “What is the ratio of black people killed by police as opposed to white people?”

Hacker breathlessly announced their findings: ” We’re the only ones who’ve discovered it. It’s a public statistic. For every 100 people killed by police, white people, 270 black people are killed. OK?”

Here is mathematical dilettante Hacker crunching numbers to support his liberal belief in racist police officers who kill 2.7 black people for every white person. The NPR audience, surely, ate it up.

But the truth may be a hard master. The Washington Post has been maintaining a database of police shooting statistics for several years based on “public information, news reports, and social media.” They believe it to be not perfect, but quite representative.

In 2015, the Post reports that 494 whites were killed by police. Applying the Hacker ratio, we would expect that 1,334 blacks would have been killed. But such is not the case. The WaPo reported 257 black deaths, a regrettable number, but an order of magnitude less than Hacker’s claim.

In this day and age, it is vital that citizens and voters attain and maintain a modicum of mathematical literacy. It is required to detect and debunk the claims of those aiming to sway you. These claims will be many, and you must question them if they don’t pass the smell test.

We may yet regret our collective decision refusing to expand charter schools. Match Charter in Boston, for example, serving inner city kids, delivered the astounding result of 97% of 10^th graders proficient or advanced in math, compared to 54% of district students.

We need more of that, not less.

Obamacare - Mind-numbing Complexity

"Professor Butts and the Self-Operating Napkin"

The implementation of the Patient Protection and Affordable Care Act is causing some considerable perplexity and dissension among the citizenry. But its goal is crystal clear.  According to Kathleen Sibelius, Obamacare’s primary objective is to “make coverage more secure for those who have insurance, and extend affordable coverage to the uninsured.”

This presumes that expanded insurance coverage will improve health, and well it might. But this is not a given – there are many other factors affecting the nation’s health. (Hint – obesity, alcohol, tobacco).

A secondary goal of Obamacare is to “bend the cost curve”, that is, to make health care (and hence insurance premiums) cost less than it otherwise would have. Again, this is within the realm of the possible, perhaps over a long time frame. But early experience shows 2014 insurance premiums increasing at an alarming rate, often double the cost of 2013.

A key feature of Obamacare is its complexity: a multitude of tightly interdependent moving parts. The inauspicious roll out of Healthcare.gov (termed a "debacle" by the administration) is only a symptom of the law's impenetrable convolution. 

One might make reference to Rube Goldberg, whose contraptions were fantastically complex. But in the end, they could actually be made to work. The administration is fervently hoping for such good fortune.

As well meaning as it is, Obamacare has two fundamental shortcomings:

1. Mind-numbing complexity

1. Valiant but misdirected goals

To the first point, Obamacare features a flurry of economic features intended to fund the program. These include requiring all policies to provide a broad range of “essential” services regardless of whether the policyholder wants or needs those services. For instance, young single men do not require maternity coverage but will be forced to pay for it. Older folks do not need pediatric care but are obligated to purchase it. This is not “essential” coverage at all but, rather, hidden taxes.

But Obamacare has plenty of obvious taxes, too. From a sympathetic website (www.obamacarefacts.com), here is a partial list of Obamacare taxes:

• 2.3% Tax on Medical Device Manufacturers

• 10% Tax on Indoor Tanning Services

• Blue Cross/Blue Shield Tax Hike

• Excise Tax on Charitable Hospitals which fail to comply with the requirements of Obamacare

• Tax on Brand Name Drugs

• Tax on Health Insurers

• Elimination of tax deduction for Rx drug coverage with Medicare Part D

• Employer Mandate $2000 to $3000 per employee

• Medicare Tax on Investment Income of 3.8%

• Medicare Part A Tax increase of 0.9%

• 40% Excise Tax on "Cadillac" plans

• Annual $63 fee per subscriber to fund “risk corridors”

• Medicine Cabinet Tax (OTC medicines no longer qualified as medical expenses for HSA/FSA)

• Additional Tax on HSA Distributions

• Contributions to FSAs are Reduced

• Medical Deduction Threshold tax increase

• Individual Mandate (the tax for not purchasing insurance if you can afford it)

Using static scoring, the Congressional Budget Office has projected the revenue to be garnered from these sources. But humans aren't static and behavior easily morphs. Another source of complexity and uncertainty.

This combination of mandates and complicated funding sources (not to speak of over 11,000 pages of regulations) has made the program mind-numbingly complex and led to the first of many unintended consequences (the recent cancellation of millions of “non-conforming” policies). People are perplexed, puzzled, and, perhaps, a little bit scared.

To the second point, the stated goals of Obamacare are misdirected in that what we want, what we really really want, is to directly improve the health of the American public. Obamacare assumes that insurance for all will improve general health. And it might.

But if we’re in a mandating mood, then let’s mandate that sugar and fructose and salt and unhealthy fats be removed from our diets. Require that people eat high fiber, low glycemic-index diets under threat of penalty. Demand that everyone walk 10,000 steps per day (age adjusted) or pay a sloth tax.

According to Harvard Health, the medical costs of poor diet and obesity run nearly $200 billion per year to treat diabetes, cancer, heart disease, etc.  That amount, if even partially avoided, would most assuredly “bend the cost curve”.

But we are Americans, free of spirit in our loose fitting clothes. We’d rather purchase mandated “essential” insurance coverage than have our love affair with junk food disrupted. As voters, that’s our prerogative. And who knows - it just might work.

Risk and the Affordable Care Act

Storm-tossed ship at sea

Life is risk. Only inanimate objects need not deal with it.

All organisms have evolved ingenious ways to manage risk (or become extinct as a penalty for not doing so).  A squirrel buries its acorns in multiple locations to avoid starvation if a single cache were compromised. Field mice use a keen sense of smell to locate food under cover of darkness. Early humans, while successful hunters, learned to avoid SabreTooth Cats (the South American variety having 12 inch canines and weighing in at 1,000 pounds).

As mankind’s civilization became more robust, the daily risks of predation and starvation faded. The business of trade created a huge new requirement for risk management. Storm tossed seas, brigands, and shifting desert sands imperiled many a caravan and convoy. Trade was risky and techniques evolved to manage it. Four thousand years ago, the Chinese divided up shipments over many vessels when traversing dangerous rapids, a technique possibly borrowed in concept from squirrels.  All of these human and animal techniques are a form of insurance, a method to protect against risk.

The first hint of commercial insurance emerged nearly 3,000 years ago when Babylonian merchants paid a premium on their cargo loans in exchange for a promise that the loan would be discharged if the cargo were lost or stolen. The premiums could be steep, but the expense was far preferable to a total loss.

In the United States, commercial insurance was pioneered by, perhaps not unsurprisingly, our own Benjamin Franklin. As well as having invented the Franklin stove, Ben also developed a means to insure property owners from fire losses. The concept was to spread the risk of fire over a large population, with owners paying premiums into a common pool. Franklin as well developed the concept of risk mitigation by refusing to insure high risk properties (all-wooden structures). This was intended to modify the behavior of builders and buyers, and it worked.

Later in the 19^th and 20^th centuries, commercial insurance companies did much to reduce the risk of fire by sharing statistics with state and local governments and suggesting building codes to reduce the incidence of accidental fires. By refusing to insure noncompliant properties, the industry was able to influence builder and buyer behavior and further reduce the risk of loss. During this time, commercial insurance expanded widely beyond property to include coverage for life and accidents. The key was statistical analysis by actuaries who determined risks, probability of losses, and set the required premiums.

Health insurance evolved slowly beginning early in the last century. Medical fees then were typically handled directly between the patient and the provider (doctor or hospital). This could be financially devastating if a serious or chronic health condition occurred. Baylor Hospital in Dallas Texas approached the problem by offering a prepaid plan where participants (subscribers) would be assured up to 21 days of hospitalization for $6 per year. This evolved into the Blue Cross Plans.

At about the same time, lumber and mining camps in the Pacific Northwest wanted to provide medical care for their employees (it’s hard to think of more dangerous occupations). The camp owners paid monthly fees to “medical service bureaus,” groups of physicians, who then provided medical services to the lumberjacks and miners. In 1939, the first Blue Shield Plan was established in California based on this model.  In 1982, the hospital and doctor groups joined to become the Blue Cross and Blue Shield Association.

Broad employer-based health insurance emerged as a consequence of government wage controls during World War II. Competing for scarce labor, companies created non-wage fringe benefits to attract workers. Company paid sick leave and health insurance became a standard offering. In an odd way, we have Hitler and Hirohito to thank for our current system. Perhaps that was their way of getting even.

So here we are, about to embark on the next great phase of health insurance now promised to all Americans. It was inevitable and only the mechanisms remain to be debated. What are some factors to be considered? Here are a few:

1. The third-party payer system we use insulates us from price information. We have no idea how much a knee replacement is going to cost and little incentive to find out. Yet a study by a large California employer revealed that arthroscopic knee surgery varied from $4,300 to over $26,000 across a number of reputable hospitals. There is no incentive for the patient to shop around and no competitive pressure on the hospitals to rein in prices.

2. Economists have written much on the moral hazards of insurance. These range from arson fires for profit to murder in order to collect life insurance, but also include the overutilization of services simply because one knows that one is insured. It is this overutilization that is most pertinent to our consideration.

3. Community rating rather than risk-based premiums reduces the incentive to avoid risky behavior. For instance, imagine if fire insurance premiums were the same for all regardless of property conditions. The owner of a tumbledown wreck of a building with open fireplaces and candles in every window would pay the same rate as a modern structure built of fire-retardant materials and utilizing the latest in monitoring and fire suppression technology. That doesn’t seem right because it isn’t. But that’s precisely what we’re doing with health insurance.

There is one existing model that directly addresses these issues and has already proven successful. Policymakers should do more to encourage Health Savings Account (HSA) plans. With these, the employee and employer regularly deposit funds in a tax-advantaged account which can be invested and grow over time. The important distinction is that this money is yours – it belongs to you. Medical expenses are paid from this account as they occur. You are highly incented to avoid unnecessary services and to seek out the most favorable pricing. Further, you will optimize healthy habits (diet, nutrition, and exercise) out of enlightened self interest. You are protected from catastrophic expenses by a deductible provision in the policy. 

If a broad swath of Americans used HSA accounts, we would see improved health and, for the first time, downward pressure on medical costs. (HSA plans are allowable under the Affordable Care Act – this would require no new legislation).

As for any plan, there are critics. But this seems a rational place to begin. Assuming, that is, that you view the majority of people as responsible adults, capable of successfully leading their lives as they please. If not, that’s a pretty dismal outlook on your fellow humans.

The unintended consequences of Obamacare

President Obama signing the Affordable Care Act

What do these disparate items have in common?

          -  9.9 horsepower outboard motors

          -  50-seat regional jets

          -  29 hour work week

All are unintended consequences of government actions.

For instance, the great state of Maine, as well as other jurisdictions, require that 10 horsepower outboard motors and above be registered (and therefore taxed). What was the reaction of manufacturers? Of course, they detuned their 10 horsepower models slightly and rebranded them as 9.9 hp. Now, in the marketplace, 10 horsepower motors are extremely rare and 9.9 models plentiful.

The Federal Aviation Agency has a safety regulation (FAR 121 section 391) that specifies the following:

“For airplanes having a seating capacity of more than 50 but less than 101 passengers – two flight attendants [are required]”

Airlines could save a lot of money by using only one flight attendant in a 50 seat aircraft. And indeed they did, ordering the Bombardier CRJ200 in the 50 seat configuration in great numbers even though the aircraft was capable of carrying 52 passengers.

And finally, the Affordable Care Act (“Obamacare”) defines full time employees as those working 30 hours or more, and requires that those employees must be provided with full health insurance coverage.

“For purposes of section 4980H, a “full-time employee” is an employee who is employed on average at least 30 hours per week.”

So, once again, the reaction of the marketplace is predictable. The Huffington Post reports that the “Community College Of Allegheny County will cut the hours for some instructors to avoid paying for their health insurance coverage under new Affordable Care Act rules.” CCAC President Alex Johnson announced that they will be cutting the hours of 400 employees to less than 30 hours to avoid paying for health insurance, thereby saving $6 million.

But the surprising thing here is the comments posted in response to the Huffington Post article by their audience of typically liberal readers. Here is an example, directed at CCAC:

“If you can't afford to pay for employee benefits, don't start a business. Period.”

So let’s analyze this sentiment. This particular individual, representing the voting bloc that reelected President Obama, is advocating for higher unemployment.

How about this one?

“This is being portrayed as a failure of Obamacare, but it's more a failure of inadequate financing of state run higher education.”

This Obama voter is calling for higher tuition rates, a burden that parents and students already find intolerable.

And CCAC is only the tip of the iceberg. Similar stories are emerging regarding many other companies including Walmart and numerous others. For instance, the New American reports:

“According to the Orlando Sentinel, Darden Restaurants, Inc., operator of casual dining chains such as Olive Garden, Red Lobster, and LongHorn Steakhouse, is doing just that [reducing hours].”

The Affordable Care Act was validated by the Supreme Court and cemented by the election of 2012. The only surprise is that Mr. Obama’s supporters are surprised by its unintended consequences. Apparently, the 1,017 page bill should have been read before being voted into law.

Many liberals are now calling for additional legislation to prohibit companies from reducing hours to avoid health insurance costs. Proof only that big government always leads to even bigger government.