Why "moral hazard" is hazardous

August 28, 2005 at 11:48 AM (Health Care, Health Care Plans)

to our health. This article from the New Yorker explains the current accepted way of thinking about healthcare here and why it is so dangerous to the country’s overall health to accept this model and have more and more and more uninsured people.

A couple of key quotes from the article:

““Moral hazard” is the term economists use to describe the fact that insurance can change the behavior of the person being insured. If your office gives you and your co-workers all the free Pepsi you want—if your employer, in effect, offers universal Pepsi insurance—you’ll drink more Pepsi than you would have otherwise. If you have a no-deductible fire-insurance policy, you may be a little less diligent in clearing the brush away from your house. ”

The idea of course is if you are forced to pay more for your health care, you’ll be more efficient about it.

“In the late nineteen-seventies, the rand Corporation did an extensive study on the question, randomly assigning families to health plans with co-payment levels at zero per cent, twenty-five per cent, fifty per cent, or ninety-five per cent,”

[Participants didn’t cut back on “frivolous” care alone. They] “…cut back equally on both frivolous care and useful care. Poor people in the high-deductible group with hypertension, for instance, didn’t do nearly as good a job of controlling their blood pressure as those in other groups, resulting in a ten-per-cent increase in the likelihood of death…”

On a personal note: I don’t do nearly as much dental care as I need myself, and I’m borderline hypertensive but I have chosen not to go on meds. Three guesses why. And that’s even with coverage!

The article goes on to raise useful questions about how a medically ignorant person is supposed to *know* what care is ‘frivolous’ and what care is useful. And one person’s “frivolous” test is someone else’s useful, life saving tool.

The article focusses on economics and patient accounts , so that is perhaps why the most important impediment to universal health care is missing from its text.

Private health insurers have a vested interest in keeping their [sometimes even profitable!] bureacracies going, and pay lobbyists in Washington major money to fight against any idea of universal health care.

Existing bureacracies with deep pockets simply will not allow these ideas to reach their natural conclusions. It happens with government bureacracies too, as they try to keep their turf when any reorganization happens.

It’s not a luxury, like an SUV or a countryclub membership. Healthcare coverage is a necessity the country cannot afford to do without.

Tip of the hat to Geotenncare for the link.

16 Comments

  1. The Angry Gimp said,

    Wow. Call me a commie, but shouldn’t health care be a human right? I don’t understand this country at all.

  2. The Angry Gimp said,

    Wow. Call me a commie, but shouldn’t health care be a human right? I don’t understand this country at all.

  3. imfunnytoo said,

    Yep. I posted on that question awhile back…

    I’m actually in favor of a public/private collaboration, because I think that’s the only thing that the private insurers will accept…expand Medicare and Medicaid some, and have risk pools for high risk working people that the private insurers would have to bite the bullet and cover.

    I also think requiring everyone who is offered coverage through their job to pay for it might reduce costs overall…but who knows in this country…?

  4. imfunnytoo said,

    Yep. I posted on that question awhile back…

    I’m actually in favor of a public/private collaboration, because I think that’s the only thing that the private insurers will accept…expand Medicare and Medicaid some, and have risk pools for high risk working people that the private insurers would have to bite the bullet and cover.

    I also think requiring everyone who is offered coverage through their job to pay for it might reduce costs overall…but who knows in this country…?

  5. bridgett said,

    And kids. That we leave universal health care for children under 18 to the happenstance of the states is unbelievable.

    Somehow the federal government (and much of the voting public) seems to have gotten into a game of Fannie Dooley — you know, the old “Fannie Dooley” game on Zoom? — except that predictably, our dyslexic prez has gotten the game all wrong. It runs something like “George Bush loves fetuses and hates toddlers.” (Then again, one can also say “George Bush loves the combat wounded, but hates amputees.” You can do this all night and it always works…)

  6. bridgett said,

    And kids. That we leave universal health care for children under 18 to the happenstance of the states is unbelievable.

    Somehow the federal government (and much of the voting public) seems to have gotten into a game of Fannie Dooley — you know, the old “Fannie Dooley” game on Zoom? — except that predictably, our dyslexic prez has gotten the game all wrong. It runs something like “George Bush loves fetuses and hates toddlers.” (Then again, one can also say “George Bush loves the combat wounded, but hates amputees.” You can do this all night and it always works…)

  7. imfunnytoo said,

    ….just amazing…to think that so many will not fight the lobbyists and *get people covered* arrgh…

    I never played Fannie Dooley….

    I was a Zaxon freak. Learned it from that unfortunate crush I had on the pianist who was devoted to the writings of Ayn Rand (Shudder)

  8. imfunnytoo said,

    ….just amazing…to think that so many will not fight the lobbyists and *get people covered* arrgh…

    I never played Fannie Dooley….

    I was a Zaxon freak. Learned it from that unfortunate crush I had on the pianist who was devoted to the writings of Ayn Rand (Shudder)

  9. bridgett said,

    Fannie Dooley — the secret is to come up with two things (mostly related or synonyms), one spelled without repeating letters and one with repeating letters. As in…

    Fannie Dooley Hates pasta, but loves noodles.
    Fannie Dooley hates lunch, but loves dinner.
    Fannie Dooley hates twenties but loves dollar bills.

    and so forth…

    Kids go nuts trying to figure out the trick. I guess the joke above isn’t very funny if you’ve never played FD. It was one of those girl scout camp/long trip favorites.

    Zaxon — yikes. Remember Mr. Unpredictably Violent? I think he had a temper fit all over that machine one time when I bested him. That was the night where he broke the snack machine with his elbow. Ah, the wonders of young love.

  10. bridgett said,

    Fannie Dooley — the secret is to come up with two things (mostly related or synonyms), one spelled without repeating letters and one with repeating letters. As in…

    Fannie Dooley Hates pasta, but loves noodles.
    Fannie Dooley hates lunch, but loves dinner.
    Fannie Dooley hates twenties but loves dollar bills.

    and so forth…

    Kids go nuts trying to figure out the trick. I guess the joke above isn’t very funny if you’ve never played FD. It was one of those girl scout camp/long trip favorites.

    Zaxon — yikes. Remember Mr. Unpredictably Violent? I think he had a temper fit all over that machine one time when I bested him. That was the night where he broke the snack machine with his elbow. Ah, the wonders of young love.

  11. The Goldfish said,

    Here in the UK we have a National Health Service whereby all healthcare is free at the point of delivery. Those of us who can afford it pay a standardised prescription charge, subsidised dental bills etc, but those who can’t afford it, don’t.

    We are not, as a result, a nation of hypochondriacs. Of course there are folks who are over-anxious about their health, who put pressure on doctors to prescribe drugs or treatment. There are also those folks who don’t look after themselves as well as they might.

    But to suggest that money has much to do with this is a nonsense. The biggest price of not looking after oneself is illness and premature death – a far more powerful deterrent that an expensive insurance package, surely?

    As for frivolity, the NHS is criticised for paying for certain treatments which may be argued to be cosmetic or relating to people’s lifestyles – like IVF, which are very expensive and usually fail. However, your healthcare providers appear to invent entire syndromes in order to pedal new drugs and other wacky treatments.

    All this having said, it is certainly the case that when your poor, you are liable to weigh up the cost of healthcare against the cost of other essential things and not always prioritise correctly. A mother may well take risks or allow her health to suffer rather than have her children go short of anything. Personally, I haven’t seen a dentist in about seven years as we have a shortage in this area and the only way I can get on is to go private, something I cannot afford to do. If I have a dental emergency, someone would see me, but until then I brush three times a day…

  12. The Goldfish said,

    Here in the UK we have a National Health Service whereby all healthcare is free at the point of delivery. Those of us who can afford it pay a standardised prescription charge, subsidised dental bills etc, but those who can’t afford it, don’t.

    We are not, as a result, a nation of hypochondriacs. Of course there are folks who are over-anxious about their health, who put pressure on doctors to prescribe drugs or treatment. There are also those folks who don’t look after themselves as well as they might.

    But to suggest that money has much to do with this is a nonsense. The biggest price of not looking after oneself is illness and premature death – a far more powerful deterrent that an expensive insurance package, surely?

    As for frivolity, the NHS is criticised for paying for certain treatments which may be argued to be cosmetic or relating to people’s lifestyles – like IVF, which are very expensive and usually fail. However, your healthcare providers appear to invent entire syndromes in order to pedal new drugs and other wacky treatments.

    All this having said, it is certainly the case that when your poor, you are liable to weigh up the cost of healthcare against the cost of other essential things and not always prioritise correctly. A mother may well take risks or allow her health to suffer rather than have her children go short of anything. Personally, I haven’t seen a dentist in about seven years as we have a shortage in this area and the only way I can get on is to go private, something I cannot afford to do. If I have a dental emergency, someone would see me, but until then I brush three times a day…

  13. imfunnytoo said,

    And, when confronted with the very sensible truth of how your system actually works, our politicians who oppose universal coverage simply get huffy and say things like “Well, we don’t do that here,” and just that cranky announcement, along with all the lobbyists monies towards their campaigns, seems to keep our system just as it is…

  14. imfunnytoo said,

    And, when confronted with the very sensible truth of how your system actually works, our politicians who oppose universal coverage simply get huffy and say things like “Well, we don’t do that here,” and just that cranky announcement, along with all the lobbyists monies towards their campaigns, seems to keep our system just as it is…

  15. The Goldfish said,

    It’s not a perfect system of course, not by a long way, but the problem is to do with trying to organise something on that scale; the British NHS is the third biggest employer in the world (after the Chinese Army and the Indian Railways apparently). Fortunately, whenever anyone suggests that we do things differently the chief objection is “Yeah, but look at what happens in America!”

    This is also the cheif objection to returning the death penalty, ditching the Crown for a presidential system, arming the police or loosening up the firearms law. So it is very very useful. Unfortunately, it wasn’t enough to get rid of MacDonalds…

  16. The Goldfish said,

    It’s not a perfect system of course, not by a long way, but the problem is to do with trying to organise something on that scale; the British NHS is the third biggest employer in the world (after the Chinese Army and the Indian Railways apparently). Fortunately, whenever anyone suggests that we do things differently the chief objection is “Yeah, but look at what happens in America!”

    This is also the cheif objection to returning the death penalty, ditching the Crown for a presidential system, arming the police or loosening up the firearms law. So it is very very useful. Unfortunately, it wasn’t enough to get rid of MacDonalds…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: