Retroactive UHIP Checks Illustrate the Hazards Inherent in the System


The latest UHIP debacle provides a warning about what this system will look like when it’s fully operational:

The update caused the Unified Health Infrastructure Project (UHIP) system to recheck the eligibility of applicants for the State Supplemental Payment program, and in cases where they were found to have been eligible for payments for a number of previous months, they were retroactively sent an individual check for each month. But no note was attached to explain why the identical checks had arrived.

Move past the scandal of the system’s not working and imagine what this looks like when it’s functional.  People will automatically get checks, and they’ll automatically go up and down with their eligibility.  That will be a very visible incentive for people not to earn money, because they’ll be accustomed to watching their benefit amounts go up and down.

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The popularity of lotteries and raffles show that people can be irrational about money in this way.  Just as people will shell out cash for an almost imaginary possibility of winning, they will sometimes give up the potential for more money when they see an existing income source reduced.  Or they can learn the lesson the other way:  After their work-related income goes down, they’ll see an automatic increase in welfare to help make up for it.

One suspects that the number of welfare recipients (or people, for that matter) who keep spreadsheets and line graphs of their total income to be relatively small, especially quantifying benefits that don’t necessarily come with an obvious dollar amount.  Moreover, people will tend to put a thumb on the scale of their feelings when it comes to exchanging assistance for work to the extent that the jobs available to them aren’t the most exciting.

This is one of the many ways that UHIP will enhance the negative effects of a welfare state more than it gains taxpayers in efficiency.