This morning we address the “if they have insurance, they’ll use it, which will drive up costs…and inevitably lead to rationing” reason to not favor universal coverage.
I used to agree with the first part of the statement; the ‘moral hazard’ argument. Now, after reading comments on this blog and others,and doing more research, I don’t agree with it at all.
“Rationing” is one of those scare words designed to make people think they’ll die before getting an MRI to diagnose cancer. But first things first.
The moral hazard argument has been debunked most effectively by Malcom Gladwell in an article in The New Yorker.
Here’s an excerpt. (emphasis added)
“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?”
My experience is somewhat different, but not necessarily contradictory. In the insurance industry it is generally accepted that when individuals first get coverage for services such as dental or vision, there is a dramatic surge in utilization and therefore cost. No surprise there; all those cavities and bad teeth and persistent toothaches need fixing. And it is inevitable that when people get insurance, they will get that mole checked out, those prescriptions filled and try to find out if that lump is really nothing after all.
So costs will go up, for the insurer. Over the short term. Over the longer term, the newly insured will utilize health care much like the folks that have had coverage for a long while.
That is why the moral hazard argument against universal coverage is nonsensical; if you buy into moral hazard, than you are arguing against any kind of health care coverage at all. Unless that’s really what the moral hazard-istas are all about.
Will society’s costs increase?
Hard to say. It is well-established that those without health insurance are less healthy than their insured brethren; the differential increases dramatically when comparing people with chronic or acute conditions – the insured are dramatically healthier.
And unhealthy people cost more than healthy people, are less productive and earn less income, and pay less in taxes.
Societally, the healthier we are, the better we can compete economically and the more successful we will be as a nation.
We’ll squish the second part of today’s “UC is bad” argument in just a couple sentences. If UC makes costs go up, will there be rationing? Costs are going to go up with or without UC. And we currently have rationing, defined as limitations on care. If you’ve ever tried to get into see a dermatologist, neurosurgeon, or hand surgeon you know. And that’s after you’ve gotten the OK from Nancy Nurse at 1-800-May I Please.
Final fact. Rationing is dependent on the number of providers and facilities. And many countries with universal coverage have more physicians, hospital beds, MRI and CAT machines per capita than we do. Americans are admitted to the hospital less frequently and see their doctors less often than citizens of other Western countries.
So people in countries with universal coverage have better access to care, and more people are covered. Oh, and it costs less too.
One of the things I find strangest is that it seems like pro-business people are the ones most actively against health reform. It surprises me for two reasons. First, employers currently pay a disproportionate share of health care expenses. Second, as you said, a sick population is a less productive one. Don’t these capitalists want healthy workers on the front lines adding value to their companies? Everybody’s worried about how we’ll compete against China and India, and here we are wasting some of our best resources, our people, because we don’t want to pay for their health care. It makes no sense.
Spike, Let’s provide the same health care benefits as China and India employers do so we can be as productive and competitive!
I am with you! Let’s Go!
Yea Team!
As I’ve said before, I support universal health insurance coverage. I also think moral hazard on the part of individuals is overemphasized as an issue. The more important issues are (1) we have the technical capability to generate considerably more healthcare than the society can afford to pay for, as can every advanced country, and (2) doctors drive virtually all healthcare spending through hospital admissions, ordering tests, prescribing drugs, referring to specialists, consulting with patients and doing procedures themselves. Every time a service is rendered, it generates income for a healthcare provider whether it’s a doctor, hospital, imaging center, lab, device manufacturer, drug company, etc. Moreover, there are lots of gray areas in medicine. How many times a year should a patient with heart disease or diabetes see his or her doctor for routine monitoring? There is often some added information that could be at least marginally useful to the doctor if the patient gets one more (expensive) test. When should an oncologist tell a late stage cancer patient that chemotherapy should be stopped, especially when it’s a big income producer for the doctor? Should patients with dementia or advanced Alzheimer’s get any medical interventions other than comfort care? Every advanced country rations care one way or another. Sometimes it’s explicit and sometimes it isn’t.
With respect to healthcare financing, while Medicare can probably stay as is for the 65 and older population (in terms of financing), a payroll tax is probably the best approach to finance care for the rest of us. Both France and Germany rely heavily on payroll taxes as well. Optional supplemental insurance could fill in the coverage gaps, and we could provide subsidies to lower income people to purchase such policies. The rest of us could buy them if we want to or self-insure.
Barry, you capsulized my sentiments completely, and I’ve long thought that an American variant on the French or German system was the way we ought to go.
Unfortunately, under current political leadership, it just won’t happen. I’m usually an optimist, but I take the pessimistic view because of what’s happening right now with the S-CHIP fight.
You, me, and a lot of people agree that private insurance with government subsidies for the low-income is a necessary component of a universal coverage plan. But what is S-CHIP? Private insurance with government subsidies for the children of low-income families.
Unfortunately, S-CHIP has been framed by its opponents as welfare. It most certainly is not welfare. Recipients become members of a health plan, and get a commercial health plan’s ID card (usually Blue Cross). The reimbursement to providers is at the commercial rate — not the Medicare or Medicaid rates — so access is not generally an issue. The members pay a token premium, but no copays.
So we already have the model in place for what many agree should be a vital part of the future ideal. And it’s for kids — KIDS, DAMMIT! And there are forces that don’t want it funded.
If we can’t cover kids, who can we cover?