It’s a Moral Hazard

[Originally posted on goofyblog 9.8.06]

Health care in the US is a mess. Americans spend $5,267 per capita on health care while the industrialized world’s median is $2,193, yet we go to the doctor and get admitted to the hospital less than people in other Western countries. We spend more than $1,000 per capita per year just on administration costs (Canada spends $300), and still over 45 million of us are uninsured (every other Western country insures all of its citizens).

Health in the US is a mess. Childhood-immunization rates in the US are lower than average. Infant-mortality is in the 19^th percentile. Life expectancy is lower than the Western average. Obesity from childhood on is at all-time high. Yet, the leading cause of bankruptcy filings in the US is for unpaid medical bills.

Why are we such a backward nation?

1. Like European countries, the push for health care in the 20^th century was carried by big labor unions, but unlike in Europe, the US unions worked just for coverage for their memberships. They were successful, but the burden of coverage was thrown onto private companies, thus their efforts excluded coverage for all and insured that someday (and that day is now) the big companies would lose competitive edge and even fail due to the enormous costs of maintaining private health care coverage for their employees and retirees.

2. Moral hazard theory as applied by economists and think tanks to health insurance. Moral hazard theory is the idea is that offering coverage for health care needs causes the insured to over-use it in a frivolous manner. This theory is responsible for the thicket of co-payments, deductibles and utilization reviews that now cripple American health-insurance systems. It’s responsible for the general lack of enthusiasm for expanding healthcare coverage here. Moral-hazard theory in health care insurance is bullshit.

“You always hear that the demand for health care is unlimited,” says Princeton economist Uwe Reinhart. “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?”

3. The denigration of the “social insurance” model–that group insurance is meant to help equalize financial risk between the healthy and the sick–which is the model used in the rest of the Western world (as well as in Medicare in the US), in favor of the “actuarial” model–higher costs for higher-risk customers and vice versa. The Bush administration’s Health Savings Account plan, introduced in 2003, is based on the actuarial model. This is turning out to be an effective way to increase health care costs in this country while at the same time guaranteeing even poorer coverage than we now have, whether insured or not.

Here’s an article on a person working for change. This issue is and will be critical in the next few years as it gets harder to support the excessive costs for health care in this country and as the population ages and gets poorer. Tasani’s motto on his web site is “Vote for what you believe in!” His site is a great place to start when looking at the reasons why there should be Medicare for Everyone.