The Moral-Hazard Myth: The bad idea behind our failed health-care system
By Malcolm Gladwell
The New Yorker
August 29, 2005
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.
John Nyman, an economist at the University of Minnesota, says that the fear of moral hazard lies behind the thicket of co-payments and deductibles and utilization reviews which characterizes the American health-insurance system. Fear of moral hazard, Nyman writes, also explains “the general lack of enthusiasm by U.S. health economists for the expansion of health insurance coverage (for example, national health insurance or expanded Medicare benefits) in the U.S.”
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?”
“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.
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… 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.
http://www.newyorker.com/fact/content/articles/050829fa_fact
Comment: Having returned from an escape to the Eastern Sierras, I found my email box stuffed with recommendations to read Malcolm Gladwell’s article. I have. You should too.