I first bow in Bill in Portland's general direction; Thanks, Bill.
CHEERS to Malcolm Gladwell. In yesterday's C&J poll, 83% think the government probably won't do anything about the impending health care crisis in America. As if on cue, Gladwell---author of the great "Blink"---pens a column in the New Yorker that shows why you guys are absolutely, tragically correct.
But the article Bill cites is so much more than what he says. More after the jump.
The link - THE MORAL-HAZARD MYTH
In this article, Maclom Gladwell discusses a great number of things - the working poor, a little-known theory of insurance, U.S. Economy, and how the Bushies are out to make sure that health-insurance is more like car insurance: if you have a tendency to get sick, your insurnce is hiked as though you're a risky driver.
Now, I live in Des Moines, Iowa, which prides itself to be an insurance capital (Principal, ING, American Republic, Equitable, and a number of other companies make their homes here) and have even worked in insurance as a tech support guy. And I didn't even know about what Gladwell outlines for insurance theory, despite an education program for the whole entire staff that was supposed to show us how insurance worked.
"Moral hazard" is the term economists use to describe the fact that insurance can change the behavior of the person being insured. . . Insurance can have the paradoxical effect of producing risky and wasteful behavior. . . But, if those efforts can backfire and produce riskier behavior, providing insurance becomes a much more complicated and problematic endeavor.
Because if you have an ironclad policy, you're more likely to run your car up a tree after that damn squirrel.
. . If you think of insurance as producing wasteful consumption of medical services, then the fact that there are forty-five million Americans without health insurance is no longer an immediate cause for alarm. After all, it's not as if the uninsured never go to the doctor. They spend, on average, $934 a year on medical care. A moral-hazard theorist would say that they go to the doctor when they really have to. Those of us with private insurance, by contrast, consume $2,347 worth of health care a year. If a lot of that extra $1,413 is waste, then maybe the uninsured person is the truly efficient consumer of health care.
The moral-hazard argument makes sense, however, only if we consume health care in the same way that we consume other consumer goods, and to economists like Nyman this assumption is plainly absurd. We go to the doctor grudgingly, only because we're sick. "Moral hazard is overblown," the Princeton economist Uwe Reinhardt says. "You always hear that the demand for health care is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into the hospital because it's free? Do people really like to go to the doctor? Do they check into the hospital instead of playing golf?"
I think Gladwell kind of loses the argument here - I think a far better way of explaining though comparison it would be to compare health insurance with other types of indeminify-ing insurance. Through moral hazard, we may reason that we're more likely to kill squirrels with our cars, but the moral hazard argument loses steam when we begin to factor in the other costs (that may be non-monetary) of actions not covered by insurance: We may get a new or repaired car, but we may kill ourselves, hurt or kill a loved one, destroy the tree that we climbed as a child in which the squirrel bit us, have to wait to get the car repaired, or lose a car that we have an attachment to. (See Sam Raimi and The Classic)
. . 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.
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. Several paragraphs are then devoted to explaining the theory of moral hazard. The report turns to the subject of the uninsured, concluding that they fall into several groups. Some are foreigners who may be covered by their countries of origin. Some are people who could be covered by Medicaid but aren't or aren't admitting that they are. Finally, a large number "remain uninsured as a matter of choice." The report continues, "Researchers believe that as many as one-quarter of those without health insurance had coverage available through an employer but declined the coverage. . . . Still others may remain uninsured because they are young and healthy and do not see the need for insurance." In other words, those with health insurance are overinsured and their behavior is distorted by moral hazard. Those without health insurance use their own money to make decisions about insurance based on an assessment of their needs. The insured are wasteful. The uninsured are prudent. So what's the solution? Make the insured a little bit more like the uninsured.
New addition - I couldn't help but notice a synchronicity in the article and my current situation right now. In September, I switch plans again (don't ask) and I'm again being told that I need to 'balance my expenditures against how much my family and I use health care.' In essence, I'm being told that I should make an educated gamble on my premium costs and deductable. Is my son going to contiune to get ear infections all winter after his tonsilectomy and ear tubes? It may happen because I think the symptoms of his problem were treated, not the actual cause (allergies to mold and dust). And will the fact that my wife and I really enjoy getting it on give us a new child, and a very large bill for the birth? And why should I penalized for wanting a vasectomy? Aren't doing something that reduces risk according to the health insurance company?
I'd copy this and give it to friends and relatives that are insured. It might make them reconsider what health insurance is all about - and then taking their concerns to polticians and their employers.