HealthLawProf Blog

Editor: Katharine Van Tassel
Akron Univ. School of Law

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Wednesday, August 22, 2007

Moral Hazard and Health Care

For a quick de-bunking of the health insurance as a moral hazard, Lawyers, Guns and Money (what a combo), has a good post,

Repeating a frequent argument, a commenter to this thread says:

Frankly, this gets us to one legitimate critique libertarians have of universal health care: it can be used to bootstrap lots more nanny statism. I can live with that given the net positives of having a better health care system, but it's regrettable.

For this reason, however, it's worth noting that the argument is lousy, a subset of the utterly bizarre belief that medical care works according to similar incentives as markets for consumer goods. As Malcolm Gladwell notes with respect to the claim that having health insurance (rather than paying for doctors out of pocket) represents a major moral hazard:

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?” . . . . .

None of this surprises me, because the argument also strikes me as illogical on its face. The thing is, being healthy is its own powerful incentive. Maybe I'm unusual, but even though I have decent health insurance I don't actually enjoy being sick, bedridden, in physical pain, spending time in doctor's offices, etc. Do people really think it's common -- even subconsciously -- for someone with a relatively healthy lifestyle to get health insurance and see that as an opportunity to go on that all Popeye's, deep-fried HoHos, and Cutty Sark diet they've been hankering for? I don't understand this reasoning at all. There may be room for some minor disincentives at the margin, but the idea that universal healthcare won't work because the possibility of being bankrupted by medical bills is the major incentive people have to be healthy is bizarre.

The structure of a universal care system should somehow promote and reward healthy living.

How does one deter the freeloaders who take poor care of themselves and then overuse the system for years on end (as sort of mental health therapy)? "It will not happen" is a questionable response - it happens now.

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