Lessons from paying people to be less poor

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For the past three years, New York City has been paying members of some 2,400 poor families to do things like get dental check-ups, open savings accounts, hold down jobs, show up for school and carry health insurance. The cash incentives—typically ranging from $20 to $150 per desired behavior—are meant to get people with complicated, resource-constrained lives to invest in themselves and their children in ways that should ultimately break the inter-generational cycle of poverty.

It hasn’t worked too well. At least that’s the impression you get from reading today’s headlines. The mayor of New York, Michael Bloomberg, held a press conference to announce the program’s early results, which were mixed. More visits to the dentist, but no change in middle schoolers going to class. A reduction in the use of expensive financial services like check cashing, but a minimal budge in families having health insurance. The pilot, which has been funded entirely with private donations, won’t be extended beyond August, Bloomberg said.

Still, Opportunity NYC has been a real success, and we should all pay attention.

One of my main take-aways from reading our current cover story on health-care reform is that a whole lot of public policy gets made without anyone actually knowing what is likely to work. In my own limited reporting on health care costs, academics and policy makers have repeatedly referred me to a RAND Corporation study from the late ’70s and early ’80s. It was the last in-depth piece of research conducted on how insured people use health care services. Considering we just overhauled the entire health-care system, that’s kind of pathetic.

Opportunity NYC—the name of the poverty-alleviation trial in New York—sits in stark comparison to the usual let’s-just-throw-some-things-at-the-wall approach. Three years ago, New York set out to see if conditional cash transfer payments (the technical term) would work in Gotham. The city hired an independent evaluator of social service programs to track the data and analyze the results. The program was set up as a formal scientific experiment, complete with a control group of families not receiving payments. When the results came back, the city made a decision—based in actual evidence—to not expand the program across-the-board, but to continue working on the most promising areas that emerged during the pilot.

Credit for this approach is largely due to the government of Mexico, which started the program Opportunity NYC is based on, back in 1997. In Mexico, Oportunidades was a success. The reason I can say that is because I can go to this web site and read dozens of reports written by independent evaluation outfits. Why the program worked in Mexico but not in New York is a complicated question—possible causes range from the complexity of New York’s incentive structure to fundamental social differences (when kids skip school in New York it’s probably not because their parents need them to stay home and work on the farm).

The point is that a program that was proven to work in Mexico was expanded substantially, and one that was proven to work in only so-so ways in New York wasn’t.

I consider that a success. Especially when I read things like this, from our health-care cover:

The law explicitly prevents comparative-effectiveness research from being used to decide which services Medicare will pay for and how much it will reimburse.

As Karen and Kate and Alice wrote, “It was a victory for politics over science.” I can think of a few other phrases.

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