Policy Can Drive Inequality—It Can Also Redress It

The racial reckoning of the past year has turned attention to how policies promote racial inequality in economic and health outcomes in the United States. This question is what drives Dr. Naomi Zewde, a health economist and assistant professor at CUNY SPH.

“I look at inequality, especially in wealth and insurance, and how public policies can reduce it,” says Dr. Zewde. In her research, she has found a strong correlation between lack of Medicaid coverage and housing eviction, shown why private Affordable Care Act (ACA) insurance plans are cost prohibitive for millions of consumers, and found that a policy of starting every American off with a trust-style investment could reduce historic wealth inequality.

While working on her doctoral dissertation in Health Policy and Administration and Economics at Pennsylvania State University, Dr. Zewde began looking into why so many fewer people than predicted had enrolled in private insurance plans under the Affordable Care Act. It had been assumed the Marketplace plans would be welcome to consumers who needed coverage. But after creating a model using the Medical Expenditure Panel Survey, which collects data on Americans’ medical bills, she discovered something different: For one in four Americans previously uninsured under the ACA, it’s less costly to go into bankruptcy for medical expenses than to pay for Marketplace plans, except in the most catastrophic situations.

That’s because, in addition to premiums, the Marketplace mostly offers high-deductible plans, requiring insured patients to pay healthcare costs out-of-pocket until they hit a certain amount—the median in 2016 was $3,600—before the insurer covers the costs. The idea is that such plans protect wealth, because after hitting the deductible, patients are no longer on the hook for medical costs. But with over one-quarter of Americans $400 away from financial hardship, there is little wealth to protect. The study results, published in the Journal of Risk and Insurance, point to the flawed design of insurance plans that are such a large share of the private market.

“You know that political party the Rent is Too Damn High? I think the takeaway is ‘the deductible is too damn high.’” says Dr. Zewde. “If it’s so high that it can’t provide any financial protection, that’s not good coverage. People want health insurance that gets them healthcare.”

After discovering high-deductible health insurance’s failure to protect wealth, Dr. Zewde became interested in a policy that could be successful at it. She learned about “Baby Bonds,” an idea proposed by economists Darrick Hamilton and William Darity, Jr. which would give every newborn a trust that they could draw money from starting at age 18. The amount invested would range from $500 to $50,000 and be highest for households with the lowest net worth. It would cost $80 billion, which is less than 10 percent of the yearly cost of Social Security.

To see how the policy would play out, Dr. Zewde ran a model using data from the Panel Study of Income Dynamics. She found it would significantly reduce the disparity in wealth between Black and white Americans, from 16 times greater to 1.4 times greater, or from $46,000 for whites and $2,900 for Blacks to $79,143 compared to $57,845, respectively, according to a paper she published in The Review of Black Political Economy. A Baby Bonds bill is pending in the U.S. Senate, proposed by Senator Cory Booker, and attracting wide support from Democrats.

Says Dr. Zewde: “Baby Bonds does not make anyone a millionaire, but it does bring the bottom up a lot. It lifts everyone up, but it brings the bottom up more than it brings up the middle and the middle more than the top. It equalizes having a right to financial stability when you’re starting out your life.”

Dr. Zewde has also looked at how medical bills impact housing. As a postdoctoral fellow at Columbia, she joined colleagues to investigate rates of evictions in states that had chosen under the ACA to expand Medicaid against those that hadn’t.

Using data from The Eviction Lab at Princeton University, the study, published in American Journal of Public Health, found that only states that hadn’t expanded saw a rise in evictions. In fact, correlation between eviction and Medicaid expansion—which gave coverage to millions more low-income adults in states that offered it—was so significant, the data showed differences based on when counties started expansion.

“What it tells me is that there are people out there who are choosing between medicine and rent,” says Dr. Zewde. “Once you cover their medicine, they’re better able to pay their rent.”

Dr. Zewde was motivated to study inequality from an experience visiting Ethiopia, the country from where her parents emigrated. When the daughter of a farmer her family knew became sick, she struggled to get medical care because it was too expensive.

“I realized there was a pretty big difference in the kind of care that she could get, versus what I could get if something like that were to happen to me,” she reflects.

Dr. Zewde joined the CUNY SPH Health Policy and Management department in 2019 and teaches health economics to master’s and doctoral students. She was drawn to CUNY because of the school’s affordability and the student body’s representativeness of New York City.

As a researcher, she is directly invested in having an impact on policy. She is a fellow at the Roosevelt Institute, a progressive think tank. She is also working with the Economic Security Project and the New School’s Center on Race and Political Economy on a study of guaranteed income that will be released in May. Currently, she is volunteering on the campaign for the New York Health Act, a bill for single-payer insurance in New York State that, after years of effort, has won the support of the majority of state lawmakers. She came to support the approach after continuously finding in her research that tax-financing is the only proposal that ensures that insurance is meaningfully affordable. And last year around the height of the Black Lives Matter movement, her Baby Bond study received significant media attention including in the Atlantic, the Economist, and the Washington Post.

“It’s very fulfilling to be thinking and writing and coding at your desk and then have it reflected somewhere,” says Dr. Zewde. “Especially for something good.”