Warning: This theory may be hazardous to your health

September 3, 2005

Guest Post by Morbo

I’ve often suspected that one of the reasons the right wing opposes national health care is that people might use it. Americans might like it and get accustomed to the idea that government programs can be pretty cool. In other words, people might start treating national health care like Social Security. That scares the hell out of the “government-is-always-bad” far right.

Malcolm Gladwell confirmed my suspicions in a recent New Yorker article. The piece, “The Moral-Hazard Myth,” is well worth a read. I found it especially interesting because Gladwell fills in lots of gaps. He starts by giving a name to the operational Republican theory of why people using health care is bad.

It’s called “moral-hazard theory,” and it works like this: Insurance is an effort to make our lives more secure. However, it can have a paradoxical effect in some cases. Gladwell uses the example of a homeowner with a zero-deductible fire policy being less diligent about clearing brush from his house.

Moral-hazard theorists believe universal health insurance would encourage wasteful spending: People will run to the doctor every time they get a hangnail. But, as Gladwell points out, moral-hazard theory in regard to health care collapses because “consumption” of the health-care industry “product” isn’t like consumption of other goods.

For starters, most people don’t particularly enjoy interacting with doctors, nurses and hospitals. The majority of people would rather be doing just about anything other than sitting in a cold waiting room wearing a cheap paper robe that ties in the back.

Also, moral-hazard theory tends to work in reverse when it comes to health care. Some insured people with hypochondriac tendencies may rush to the doctor too often. But consider the alternative: If people without coverage delay seeing doctors until their conditions become chronic, they become much more expensive to treat.

In other words, it costs a lot less to occasionally treat someone who’s not really sick than it does to treat someone with a chronic illness that could have been detected by a routine check-up.

Gladwell uses the example of having moles on his body checked out to see if they were cancerous. If he had been responsible for 100 percent of the visit, Gladwell writes, he might not have gone. Should a mole turn out to be cancerous, it would not be treated until the condition was far advanced. That’s going to cost a lot more than a routine pre-cancer screening.

Writes Gladwell:

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.

President George W. Bush’s call for private health-care saving accounts, Gladwell writes, is exactly what moral-hazard theory demands. He quotes a 2004 Bush administration report that attempted to downplay the heath-care crisis by noting that many Americans voluntarily choose to go without health care insurance even though their employers offer it. In the report, this was portrayed as a risk some are willing to take because they are young and have been in good health. It was an obvious attempt to downplay the health-insurance crisis by making it appear that many of the 45 million uninsured want to be that way.

Rubbish. In fact, most people “choose” to forgo health-insurance coverage because they simply cannot afford it. Gladwell cites the case of Gina, who works in a beauty salon. The salon offered her a bare-bones health plan that would have cost her $200 a month. Yet Gina makes only $900 per month. As Gladwell writes, “She could ‘choose’ to accept health insurance, but only if she chose to stop buying food or paying the rent.”

So there you have it. Under Republican theory, people who have the temerity to use health-care are wasteful. Those who go without because they cannot afford the premiums are simply exercising their freedom of choice.

If the right wing had to explain it with a straight face, the entire facade would come tumbling down in a minute. Luckily they don’t. Their pals in the insurance industry have enough “Harry and Louise” commercials to see to that.

Rich people stay healthy. Poor people get sick and die.

  • I used to believe that all Americans shared the
    same goals: jobs, housing, food, retirement
    security, health insurance, a decent standard
    of living and a college education for every single
    person, no exceptions. I thought the debate was
    about how to achieve these goals.

    Now I realize that Republicans don’t want any
    of these things for everyone. Only the rich
    should have these things, and the rest of the
    people will just to have to fight like dogs for
    the scraps left behind.

    That’s the ownership society.

  • Health Care Economics
    One of the major economic flaws in the current system that Gladwell does not discuss is the fact that huge amounts of money are spent to shift costs around the system.
    The job of any particular unit in an HMO is to get someone else to pay for some particular line item. This fact is built into the system and cannot be avoided given the current structure. The argument for “managed care” is that it can squeeze inefficiencies and wasteful use of resources out of the system. (The latter is the “moral hazard” part.) And it is true that it can do this. If copayments for drugs are made large enough, for example, you will be less likely to use drugs that you don’t really need.
    However, there are also very large costs associated with this savings that improves efficiencies.
    First there are the costs Gladwell describes. If I don’t take my blood-pressure medicine and get a lot sicker, there will be much higher costs both to me and the HMO to treat the resulting diseases. From an economic (not a human) point of view, these will at least put economic pressures on the HMO to take a more enlightened view — to consider preventive care. Of course, lots of people will die in the process, and the HMO may go out of business, but hey!, that’s the market.
    A subsidiary cost to the system as a whole is the set produced by the shift just mentioned when it does not fall on the HMO that raised the copayment. If I change jobs, lose my job, or decide that the insurance isn’t worth the cost, the long-term effects of my high blood pressure still cost much more than the original medicine, but the cost shifts to me, to the HMO of my next employer, to an emergency room, to Medicaid, or whomever. The original HMO has saved a few bucks, but the costs to the system as a whole are much larger.
    The administrative costs of arguing about who is responsible for which costs are enormous, and many of these are not counted as costs by health care economists. There are the costs for claims people managing the phone banks in the Dakotas or in India — the low wage folks who are trained deny some payment, either because of a clause in a particular contract or on some made-up basis. Then there is the cost of the person at the doctor’s office, the doctor’s billing company, or the hospital, who has to be paid to try to argue with the people who are paid to deny the claim. Some of these costs are also required in a real health care system. You have to make sure charges are correct, to prevent fraud, etc. But, as is demonstrated by the much lower administrative costs of the systems of other countries and by places like the VA in our own system, most of these costs are much higher here because they are inherently adversarial, rather than adversarial in exceptional cases. The HMO claims manager gets his promotion on the basis of the money saved, not on the basis of the accuracy of payments, denials, etc. Moreover, much of the cost of our system is hidden. If I am a professional who can get away with spending time on the phone with the HMO call center in India to get legitimate claims paid, my employer pays for the work I am not doing. If I am an hourly worker who can’t take hours on the phone to dispute a claim, I take a loss for not being able to collect a perfectly legitimate claim. One reason that it pays the call center manager to see that people deny a lot of legitimate claims is that it is a good bet that a lot of people won’t know what’s going on, won’t be able to fight it, or will decide that it just isn’t worth their time. Most of these costs are completely hidden from the health system economists and accountants.
    Finally, there are all the costs associated with the large-scale planning and administration of this stuff. These include the HMO people who write plans, the millions of HR people or general management people in businesses who negotiate them with the HMOs and who (if you are lucky) argue with the HMOs on behalf of employees or who argue with the employees on behalf of the HMOs, or who argue with doctor’s offices, hospitals, doctor’s billing services…. You get the picture. Only some of these costs are included by health system accountants and economists.

    In summary, we have a system that is far more expensive than even the numbers show, and they already show that we pay twice as much per person as any other developed country for much worse care of the vast majority of people. For George Bush, Senator X, and Representative Y, of course, the U.S. really does have the best health-care system in the world. But then, if you are Hosni Mubarak, Egypt has a pretty good one too!

  • Republicans are selective and hypocritical about other instances of moral hazard. Federally subsidized flood insurance encourages building along coastlines on places like barrier islands. Of course, this is much to the benefit of developers and those who can afford vacation homes. Although there have been some on the right who have questioned the wisdom of these subsidy programs nothing has ever been done to eliminate them.

    Subsidies to the wealthy are never a problem, but there always seem to be academic theories to attack anything that would benefit everyone else.

  • national health care would enable people to get care which means they will live longer, be able to use medicare and social security.
    what a better way to take care of shortages in medicare and s.s. let them die before they can use these services.
    when bush was talking tax cuts before he was elected 2000, i wonder what he was going to do about s.s. and medicare and retiring baby boomers. well we know, dismantle s.s., make medicare so expensive it can’t be used and deny health care so more people will not make it to retirement. hurricane katrina is bush’s punishment for his sins against humanity, not punishment for n.o.

  • Natural selection, generally speaking, says that the weakest and sickest among us will die off while the strongest and healthiest will live, thrive and reproduce. The right wing approach to healthcare encourages and rewards the tenets of natural selection, which makes it all the more ironic that they refuse to publicly embrace it as scientific theory and instead insist on pushing the fantasy of creationism or intelligent design.

    Bottom line, they want the poor, the feeble and the sick to die before they become a drain on their wealth. The less people, the less taxes that need to be paid by the wealthy. It’s all a big con game that they try to mask as “limited government”.

    I imagine that, in the wake of the disaster in New Orleans, they will say, “See, the government can’t manage this sort of thing. It should be handled by the private sector.” Which, of course, will ensure that only those who can pay will receive any services. And the natural selection cycle continues. Goodbye poor, goodbye sick, goodbye weak.

    Just as they wish to spread freedom and democracy around the globe, this is how they envision eliminating weakness, sickness and poverty in the world. All the while trying to divert attention by claiming to be creationists and intelligent designists. It’s all a scam.

  • Katrina actually made me think about this issue, because if we had medicare for all, i.e. a single-payer plan, there would be no worry for these dislocated people about their health insurance. Unlike Medicaid, Medicare is not the responsibility of the states. The Texans wouldn’t have to worry about poor people moving in and adding to their welfare rolls.

    And if you have Louisiana insurance, getting care if you relocate to MA or anywhere far away, will be hell. Is it too crass to be raising this issue now?

  • I agree that there have been many mistakes made regarding hurricane response. However, I would be VERY CAREFUL as to reading too much into Kelly’s words. As written you state he is suggesting something — I doubt that, as a member of the military he took an oath to serve his commander in chief (that would be Bush right now, sad but true) and honor (i.e. upholding an oath) is important to Naval Officers and I would suspect even more so to public affairs officers who are work at establishing quality relationships with the media.

  • I’ve been without health care coverage for about a year and a half now since my husband’s employer decided that he could no longer afford to offer his employees the coverage. Because I’ve had previous health problems I can’t find affordable individual insurance,,in most cases the insurance companies won’t even accept me. I can’t afford the 400 to 500 a month premiums with 70/30 coverage and 3 to 5 thousand deductables for those who will.

    For most of the time that we were raising our family we could not afford health insurance coverage but although times were tough, we managed to pay for the medical care our family needed even if it meant paying for the costs over time. This is no longer possible with the over-the-top fees for medical services.

    I have a heart condition which is mosty untreated because I just can’t afford the tests and treatment. What am I supposed to do?

  • So, the ‘moral majority’ get their panties in a twist over issues such as gay marriage, yet see nothing ‘morally’ wrong with the fact that people in America do not have the basic right, yes RIGHT, to look after their health properly. Not because they’re already fit, or their employer can afford it, or they can afford it, but just because they’re citizens. Stories like Brenda’s represent the awful reality that just doesn’t get the publicity it deserves.
    I am currently working and living in Europe, and while the health care systems in various countries around the continent are by no means perfect, just the fact that there is a provision for everyone to get care, is inspiring. If the U.S. wants to consider itself a modern country, it cannot continue to exclude such a large group of people in this way. It ignores them at its peril. But then again, if we were a ‘modern’ country, we wouldn’t be spending such energy on trying to debunk evolution in the school system either. Interesting priorities we have.
    When I was a kid, my parents could not afford insurance for us, for a very long time. We were incredibly lucky to come out of it unscathed.
    Shame!

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