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Thursday, September 29, 2005
Moral hazard
If I were teaching a class on health care policy this would be the first day's reading assignment and set the tone for the semester. It's not so much about different plans or politics as it is about the underlying way the entire issue (and a number of others as well) is perceived and thought about. I don't think anyone can really debate healthcare in this country without understanding the issues presented here. You should read the whole thing but here are some highlights (that don't really do the article justice):
One of the great mysteries of political life in the United States is why Americans are so devoted to their health-care system. Six times in the past century--during the First World War, during the Depression, during the Truman and Johnson Administrations, in the Senate in the nineteen-seventies, and during the Clinton years--efforts have been made to introduce some kind of universal health insurance, and each time the efforts have been rejected. Instead, the United States has opted for a makeshift system of increasing complexity and dysfunction. Americans spend $5,267 per capita on health care every year, almost two and half times the industrialized world's median of $2,193; the extra spending comes to hundreds of billions of dollars a year. What does that extra spending buy us? Americans have fewer doctors per capita than most Western countries. We go to the doctor less than people in other Western countries. We get admitted to the hospital less frequently than people in other Western countries. We are less satisfied with our health care than our counterparts in other countries. American life expectancy is lower than the Western average. Childhood-immunization rates in the United States are lower than average. Infant-mortality rates are in the nineteenth percentile of industrialized nations. Doctors here perform more high-end medical procedures, such as coronary angioplasties, than in other countries, but most of the wealthier Western countries have more CT scanners than the United States does, and Switzerland, Japan, Austria, and Finland all have more MRI machines per capita. Nor is our system more efficient. The United States spends more than a thousand dollars per capita per year--or close to four hundred billion dollars--on health-care-related paperwork and administration, whereas Canada, for example, spends only about three hundred dollars per capita. And, of course, every other country in the industrialized world insures all its citizens.
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Policy is driven by more than politics, however. It is equally driven by ideas, and in the past few decades a particular idea has taken hold among prominent American economists which has also been a powerful impediment to the expansion of health insurance. The idea is known as "moral hazard." Health economists in other Western nations do not share this obsession. Nor do most Americans. But moral hazard has profoundly shaped the way think tanks formulate policy and the way experts argue and the way health insurers structure their plans and the way legislation and regulations have been written
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"Moral hazard" is the term economists use to describe the fact that insurance can change the behavior of the person being insured.
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The focus on moral hazard suggests that the changes we make in our behavior when we have insurance are nearly always wasteful. Yet, when it comes to health care, many of the things we do only because we have insurance--like getting our moles checked, or getting our teeth cleaned regularly, or getting a mammogram or engaging in other routine preventive care--are anything but wasteful and inefficient. In fact, they are behaviors that could end up saving the health-care system a good deal of money.
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At the center of the Bush Administration's plan to address the health-insurance mess are Health Savings Accounts, and Health Savings Accounts are exactly what you would come up with if you were concerned, above all else, with minimizing moral hazard. The logic behind them was laid out in the 2004 Economic Report of the President. Americans, the report argues, have too much health insurance: typical plans cover things that they shouldn't, creating the problem of overconsumption.
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Americans with Medicare report themselves to be happier with virtually every aspect of their insurance coverage than people with private insurance (as they do, repeatedly and overwhelmingly), they are referring to the social aspect of their insurance.
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The issue about what to do with the health-care system is sometimes presented as a technical argument about the merits of one kind of coverage over another or as an ideological argument about socialized versus private medicine. It is, instead, about a few very simple questions. Do you think that this kind of redistribution of risk is a good idea? Do you think that people whose genes predispose them to depression or cancer, or whose poverty complicates asthma or diabetes, or who get hit by a drunk driver, or who have to keep their mouths closed because their teeth are rotting ought to bear a greater share of the costs of their health care than those of us who are lucky enough to escape such misfortunes? In the rest of the industrialized world, it is assumed that the more equally and widely the burdens of illness are shared, the better off the population as a whole is likely to be. The reason the United States has forty-five million people without coverage is that its health-care policy is in the hands of people who disagree, and who regard health insurance not as the solution but as the problem.
2 Comments:
Aren't the arguments about footing the bill for someone else's ailment or misfortune exactly what insurance is about? We pay a premium each month that goes to the company and gets put in with everyone else's premium. If we have an ailment, a broken bone, whatever, it comes out of that kitty and insurance makes it affordable because even though money comes out, not everyone uses what they put in, so it balances out? This is what insurance is, right? The problem, I think, comes from the pharmeceutical companies and that end of things. They don't want this because their great profit ride might end. How much do they spend on advertising each year? The budget must be phenomenal. It's not just what we see on TV and in print, it's the pens and notepaper with their drug on it. They buy lunch for entire clinics daily all over the country. They lobby our senators and reps in DC and at state level. They even make stuffed toy body parts like beanie babies to give to pharmacists- my uncle has a whole collection(spleen! liver! gallbladder!) This is a profit and free market economy problem... how do you begin to solve it when they have so much money to pour into fighting it? They must love that it's called socialized medicine, because then the cattle out there think it has to do with communism and we fought the cold war for 50 years so that must be bad, so we can't have that.
I didn't mean to get off on a rant here, but... well, there you have it.
this is from one bitter cheese head
By 
, at
10:35 PM
Thanks for the comments, Bitter Cheesehead. I know I could find a lot of good uses for a $2,000/year savings on health care costs.
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