The Economics Of Birth Control Subsidies

A blog about business and economics.
Feb. 10 2012 10:09 AM

The Economics Of Birth Control Subsidies

The Catholic view that helping women control their own reproduction constitutes "material cooperation with evil" is, I suppose, outside the scope of the Moneybox beat but the fusionist view that even secular people should endorse Catholic obscurantism on broadly libertarian grounds is on the inside. This strikes me as simply one of those cases where a strong form of libertarian opposition to subsidizing anything at all just ends up flying in the face of the common sense view that public policy should aim to make things better. Here Ben Smith quotes a study (PDF) from the Business Group on Health which argues that "Unintended pregnancies result in substantial excess direct medical claims costs and indirect costs such as disability, employee replacement costs, lost productivity, and presenteeism."

The point here is simple. While birth control costs more than nothing, it costs less than an abortion and much less than having a baby. From a social point of view, unless we're not going to subsidize consumption of health care services at all (which would be a really drastic change from the status quo) then it makes a ton of sense to heavily subsidize contraceptives. Now of course sometimes the economically rational course of action (kill everyone in Alberta and steal their oil) is immoral (killing is wrong) and therefore we don't do it. But just on the dollars and cents subsidizing birth control is a no-brainer. The unfortunate thing is that under the American setup the subsidies tend to be passed through the employer, which has set the stage for this controversy.

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Another point worth making is that this is one of these issues where the actual incidence of the costs of a policy and the legislative incidence are going to be quite different. Liberals often like making "employers" pay for things as an alternative to taxing people. But in practice, employers are making a tradeoff between health care spending and wages. If your employer shifts from not subsidizing contraceptives to subsidizing them, what happens is that the workers who don't use contraceptives are providing cross-subsidy to those who do. It's in effect the same as financing a free birth control policy through a tiny increase in the payroll tax, which seems to me like a totally reasonable course of action, but like it or not employers are only bearing the cost in a very formalistic sense.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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