Disasters; Penmenship; Medical Errors
September 30, 2005
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Mondo Calamari; Doctors; Lawyers; HMOs; Darwin Awards
September 29, 2005
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Compassion; FEMA; Lawyers; Organs
September 28, 2005
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Hospitals; Fraud; Google; Microsoft
September 27, 2005
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Dumping; Affiliating
September 25, 2005
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Organ Donation; Katrina
September 24, 2005
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Data; Stroke
September 23, 2005
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Google; Copyright; Unpublished
September 22, 2005
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Google, Katrina, Microsoft
September 21, 2005
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Moral Hazard, Moral Wrong
September 19, 2005
The Moral–Hazard Myth | The New Yorker | 8.29.05
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The U. S. health–care system, according to “Uninsured in America,” has created a group of people who increasingly look different from others and suffer in ways that others do not.
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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. 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 savings–and–loan crisis of the nineteen–eighties was created, in large part, by the fact that the federal government insured savings deposits of up to a hundred thousand dollars, and so the newly deregulated S. & L.s made far riskier investments than they would have otherwise. Insurance can have the paradoxical effect of producing risky and wasteful behavior. Economists spend a great deal of time thinking about such moral hazard for good reason. Insurance is an attempt to make human life safer and more secure.
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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?”
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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…
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The country described in the President’s report is a very different place from the country described in “Uninsured in America.” Sered and Fernandopulle look at the billions we spend on medical care and wonder why Americans have so little insurance. The President’s report considers the same situation and worries that we have too much.
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Health Savings Accounts represent the final, irrevocable step in the actuarial direction. If you are preoccupied with moral hazard, then you want people to pay for care with their own money, and, when you do that, the sick inevitably end up paying more than the healthy. And when you make people choose an insurance plan that fits their individual needs, those with significant medical problems will choose expensive health plans that cover lots of things, while those with few health problems will choose cheaper, bare-bones plans. The more expensive the comprehensive plans become, and the less expensive the bare-bones plans become, the more the very sick will cluster together at one end of the insurance spectrum, and the more the well will cluster together at the low–cost end. The days when the healthy twenty–five–year–old subsidizes the sixty-year-old with heart disease or diabetes are coming to an end. “The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance,” the Stanford economist Victor Fuchs says. Health Savings Accounts are not a variant of universal health care. In their governing assumptions, they are the antithesis of universal health care.
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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.
hat tip sjd