Why Health Care Costs Exploded After World War II(mises.org)
mises.org
Why Health Care Costs Exploded After World War II
https://mises.org/blog/why-health-care-costs-exploded-after-world-war-ii
80 comments
Interestingly, Viktor (Victor?) had doctors in his family, such as Georg Klemperer (see https://translate.google.com/translate?hl=en&sl=de&u=https:/...): [He] was a German internist. ... [He was] a son of the Reform rabbi Wilhelm Klemperer and had seven siblings, four sisters and three brothers. His brothers were the writer and literary scholar Victor Klemperer , the physician Felix Klemperer and the lawyer Berthold Klemperer (1871-1931). The conductor Otto Klemperer (1885-1973) was his cousin.
As to Viktor or Victor, this makes me think its the same person: https://translate.googleusercontent.com/translate_c?depth=1&... . The article there mentions his treatise LTI - notebook of a philologist (LINGUA Tertii Imperii: Language of the Third Reich).
As to Viktor or Victor, this makes me think its the same person: https://translate.googleusercontent.com/translate_c?depth=1&... . The article there mentions his treatise LTI - notebook of a philologist (LINGUA Tertii Imperii: Language of the Third Reich).
The money quote:
What were the real reasons for the return of medical price inflation?
A: Undoubtedly, moral hazard.... There are two aspects to moral hazard that are at play in health care. [...] The [second, more important] aspect of moral hazard stems from the fact that every single medical encounter or medical act can be said to be ordered toward the preservation of life or toward the well-being of the person.This by itself presents a strong incentive to use medical services, and the behavior should not have the same negative connotation as in the first aspect of moral hazard. In fact, economist John Nyman has argued that the behavior by which insured people would use more health care is a social good.
The bottom line is that one does not need to be sick to utilize medical services and that all that is needed is a plausible argument that if a medical action is taken, life may be prolonged or enhanced. Such plausible arguments are not hard to come by, especially in a health care system where doctors and hospitals are largely paid on a fee-for-service basis. There is no objective limit on what can be considered “desirable care,” and if cost is not a consideration, more medical actions will be taken.
What were the real reasons for the return of medical price inflation?
A: Undoubtedly, moral hazard.... There are two aspects to moral hazard that are at play in health care. [...] The [second, more important] aspect of moral hazard stems from the fact that every single medical encounter or medical act can be said to be ordered toward the preservation of life or toward the well-being of the person.This by itself presents a strong incentive to use medical services, and the behavior should not have the same negative connotation as in the first aspect of moral hazard. In fact, economist John Nyman has argued that the behavior by which insured people would use more health care is a social good.
The bottom line is that one does not need to be sick to utilize medical services and that all that is needed is a plausible argument that if a medical action is taken, life may be prolonged or enhanced. Such plausible arguments are not hard to come by, especially in a health care system where doctors and hospitals are largely paid on a fee-for-service basis. There is no objective limit on what can be considered “desirable care,” and if cost is not a consideration, more medical actions will be taken.
When we had a $10 copay for in network visits we took the kids in every time they were a little sick. With 3 kids thst could mean 3 visits in one week.
My copays are now $35, it adds up - if was paying full price I can see how I would first call the nurse hotline or go to the pharmacy to describe the symptoms and get OTC medication
My copays are now $35, it adds up - if was paying full price I can see how I would first call the nurse hotline or go to the pharmacy to describe the symptoms and get OTC medication
we took the kids in every time they were a little sick
Why? There's really not a lot a doctor is going to do for your kid's sniffles. Just wait it out. Even if it were free, I wouldn't take a kid in for a minor illness. Hell, even if you paid me a nominal amount, I wouldn't waste the time. This is an education problem. It sounds like you're taking your kids to the doctor too often, regardless of cost.
Why? There's really not a lot a doctor is going to do for your kid's sniffles. Just wait it out. Even if it were free, I wouldn't take a kid in for a minor illness. Hell, even if you paid me a nominal amount, I wouldn't waste the time. This is an education problem. It sounds like you're taking your kids to the doctor too often, regardless of cost.
I never understood this amongst my cow-orkers when I worked at Microsoft ("co-pay? What co-pay?"). I don't care if a doctor visit is free, I'm not so starved for entertainment or human contact that I'm going to drag kids to a doctor because they have the sniffles.
A lot of insurance companies also have a heath-line where you can call a Nurse and give they symptoms - they either tell you wait it out or go to the doctor.
Saved us a bunch of time and money - and saved my life: I have a respiratory infection that I refused to see the doctor about. My wife eventually called the nurse, gave the symptoms and duration. Turns out, I was really close to dying.
Saved us a bunch of time and money - and saved my life: I have a respiratory infection that I refused to see the doctor about. My wife eventually called the nurse, gave the symptoms and duration. Turns out, I was really close to dying.
That's a pretty uncharitable way to look at it. I don't have kids but it's a lot easier to imagine that they're thinking something more like "I'd rather not take chances with my kids' health". It may not be particularly rational when you consider the time cost, but it's a hell of a lot more understandable than insultingly assuming they're "starved for entertainment or human contact". In general, plausible explanations that don't require being a dick tend to be better.
In general, plausible explanations that don't require being a dick tend to be better.
Oops, guess we both failed. I wasn't "explaining" anything, as I clearly stated that I didn't understand it. One will assume what they assume when there is a lack of information, whether you find it insulting or not.
Oops, guess we both failed. I wasn't "explaining" anything, as I clearly stated that I didn't understand it. One will assume what they assume when there is a lack of information, whether you find it insulting or not.
Where is the source to support that claim of moral hazard?
The US has much less doctor consultations per person per year than other OECD countries which is an indication of the contrary:
Page 101: http://www.oecd-ilibrary.org/docserver/download/8115071e.pdf
The US has much less doctor consultations per person per year than other OECD countries which is an indication of the contrary:
Page 101: http://www.oecd-ilibrary.org/docserver/download/8115071e.pdf
I'm fairly skeptical of claims of moral hazard on the part of the patient. Even if healthcare is free in monetary terms, it still has a big cost in time and annoyance. Going to the doctor is annoying. Seeing a specialist is annoying. Getting surgery is the worst thing ever.
Where moral hazard likely plays a bigger role is on the part of the doctor. It is always better to prescribe another test or a pill, or some precautionary treatment. It both makes you money and covers your ass from lawsuits, and you don't feel guilty about making your patient pay for it because insurance will cover it. This is a pretty good case study of how the process can get very dysfunctional: http://www.newyorker.com/magazine/2009/06/01/the-cost-conund...
Where moral hazard likely plays a bigger role is on the part of the doctor. It is always better to prescribe another test or a pill, or some precautionary treatment. It both makes you money and covers your ass from lawsuits, and you don't feel guilty about making your patient pay for it because insurance will cover it. This is a pretty good case study of how the process can get very dysfunctional: http://www.newyorker.com/magazine/2009/06/01/the-cost-conund...
If the patient had to pay the full cost of the tests, they might take a bigger interest in how necessary they are and whether the prices make sense. So they are participating in whatever moral hazard is there.
This requires a specific known price for everything. Instead the industry is focused on making prices as opaque as possible.
Worse prices are non binding, often stated prices have little relationship to billed prices.
Worse prices are non binding, often stated prices have little relationship to billed prices.
This was my biggest issue with Obamacare. It did nothing to increase price transparency.
More broadly, I think the discussion needs to move away form health "insurance" because what we're really talking about is health care financing.
More broadly, I think the discussion needs to move away form health "insurance" because what we're really talking about is health care financing.
The insurance industry has a perverse incentive to increase systemic prices. If they make say 10% profit due to competion, then ~10% of healthcare spending paid for by insurance = their profit. Thus, their profit increases as prices rise. Sure, they want to tamp down on specific bills, but things like restricting the supply of doctors helps pad their bottom line.
Consider, A 1% chance of a problem is reason to buy insurance. However, if the bill is always ~2,000$ then some people will pay for it, but it's skippable (2$/mo). If it's 20,000k then more people would pay for it and pay more money (20$/mo). If it's 200,000k then it's less affordable (~200$/month) but even if you only get 1/2 the population that's still more profitable. It's only when prices get to 1% of 2,000,000$ that it's simply unaffordable and most people would skip the ~(2,000$/mo) bill.
PS: This is borne out by single payer systems which tend to have vastly lower costs for the same procedure. Assuming similar economic conditions. http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS
Consider, A 1% chance of a problem is reason to buy insurance. However, if the bill is always ~2,000$ then some people will pay for it, but it's skippable (2$/mo). If it's 20,000k then more people would pay for it and pay more money (20$/mo). If it's 200,000k then it's less affordable (~200$/month) but even if you only get 1/2 the population that's still more profitable. It's only when prices get to 1% of 2,000,000$ that it's simply unaffordable and most people would skip the ~(2,000$/mo) bill.
PS: This is borne out by single payer systems which tend to have vastly lower costs for the same procedure. Assuming similar economic conditions. http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS
I blame the health care tax exclusion. If benefits weren't cheaper than wages and people weren't used to getting a health plan from their job, they would be more interested in demanding prices from providers.
Of course, the ACA doubled down on the problem with the employer mandate.
Of course, the ACA doubled down on the problem with the employer mandate.
Hell, even transparent pricing would reduce moral hazard significantly. Most patients have no idea what a procedure costs until they get billed.
Even worse, many doctors don't even know what a procedure costs to a patient due to the maze of bureaucracy both necessary and unnecessary in many healthcare facilities.
The doctors don't know either! Have you ever tried to talk to your doctor about how much something costs? You'll just be told to talk to the front desk.
And all you'll get from the front desk is the hyper-inflated "list price" (for the uninsured). If you have insurance, your (insurance negotiated) price is treated as Top Secret confidential information until you're actually billed. Neither the hospital nor the insurance company will disclose it to you in advance.
I have a HSA, and I've had to get stitches twice (two on a cut finger both times): one time it cost $400, the second time $1200 (same city, but different hospital and insurance). Outraged at the second price, I tried to figure out which hospital would be cheapest with my current insurance, and utterly failed.
I have a HSA, and I've had to get stitches twice (two on a cut finger both times): one time it cost $400, the second time $1200 (same city, but different hospital and insurance). Outraged at the second price, I tried to figure out which hospital would be cheapest with my current insurance, and utterly failed.
The patients qualified to do that are called doctors.
Unqualified patients can ask their doctor to explain what the test is for. Like, what risks does it rule out, is there much danger in waiting a week instead, etc. There's a whole line of questions that absolutely don't require an MD.
Just asking a few questions is already a big difference from doing whatever the doctor says.
Just asking a few questions is already a big difference from doing whatever the doctor says.
And if the doctor is unethical or is trying to CYA in the case of a malpractice lawsuit, and therefore doesn't properly indicate risks, effectiveness, etc?
Yeah, more patients asking more questions is not a silver bullet, it's just something I expect would put downward pressure on prices.
TBH, I don't believe that to be true.
Let's say you're a healthy 20-something that's been experiencing weakness in your hands. The doctor comes back and says "This could be either arthritis (5% chance), cancer (0.1% chance), or nothing at all (94.9% chance). Test X will rule out cancer and test Y will rule out arthritis, but they both have a false negative rate of 15% and a false positive rate of 15%, and each test will cost $1,000 to perform".
Now what do you do?
I would make the claim that performing either test would be irrational given the probabilities. But people aren't going to screw around with their health.
Your position also presumes that doctors know what the heck they're doing and can provide information to the patient that allows them to make an informed decision. This is meant as no disrespect to the profession at all, but the reality is medicine is a lot of guesswork. It's very normal for a doctor to prescribe a battery of tests, or trial medications, because all they can do is assemble hypotheses and then test them against the individual. I guarantee you, anyone with a chronic condition has heard something along the lines of: "Well, I don't know what that is, but let's try this drug and see if it helps".
This is fundamentally why I don't believe healthcare can work as a free market. A free market presumes rational actors and perfect information, and healthcare is the antithesis of those things.
Let's say you're a healthy 20-something that's been experiencing weakness in your hands. The doctor comes back and says "This could be either arthritis (5% chance), cancer (0.1% chance), or nothing at all (94.9% chance). Test X will rule out cancer and test Y will rule out arthritis, but they both have a false negative rate of 15% and a false positive rate of 15%, and each test will cost $1,000 to perform".
Now what do you do?
I would make the claim that performing either test would be irrational given the probabilities. But people aren't going to screw around with their health.
Your position also presumes that doctors know what the heck they're doing and can provide information to the patient that allows them to make an informed decision. This is meant as no disrespect to the profession at all, but the reality is medicine is a lot of guesswork. It's very normal for a doctor to prescribe a battery of tests, or trial medications, because all they can do is assemble hypotheses and then test them against the individual. I guarantee you, anyone with a chronic condition has heard something along the lines of: "Well, I don't know what that is, but let's try this drug and see if it helps".
This is fundamentally why I don't believe healthcare can work as a free market. A free market presumes rational actors and perfect information, and healthcare is the antithesis of those things.
There's plenty of tests that are less contrived. X-rays are done as a matter of course after treating a sprain. What would really be the costs of deferring them and only doing them when pain persists days later? Lots of people would not choose to defer them vs minimal risk, but lots of people probably would.
I'm not a huge believer that health care should be a market but at the moment we at least are supposed to have some sort of market, so I'd like to see market mechanisms applied where it is sensible.
I'm not a huge believer that health care should be a market but at the moment we at least are supposed to have some sort of market, so I'd like to see market mechanisms applied where it is sensible.
There's plenty of tests that are less contrived. X-rays are done as a matter of course after treating a sprain. What would really be the costs of deferring them and only doing them when pain persists days later?
Well, there's this (from http://www.foothealthfacts.org/Content.aspx?id=2827):
"Patients with unrecognized ankle fractures have a high risk of developing infection, arthritis and foot deformities that may make it impossible to walk normally again."
So what's your appetite for that risk?
Well, there's this (from http://www.foothealthfacts.org/Content.aspx?id=2827):
"Patients with unrecognized ankle fractures have a high risk of developing infection, arthritis and foot deformities that may make it impossible to walk normally again."
So what's your appetite for that risk?
[deleted]
[deleted]
There's a testable hypothesis right there.
Compare, if you will, the US system to the French system.
In the US, if I'm going to an in-network provider (any provider), I have a defined co-pay. I could go to the Mayo clinic, a family physician, or even urgent care.
In France, I pay full price for the visit at the time of the visit. My insurance provider then reimburses me at 80% of the "reasonable and customary" cost of the visit.
(This is changing, with French insurance companies creating networks and selling additional coverage that works more like the US system)
In the US, if I'm going to an in-network provider (any provider), I have a defined co-pay. I could go to the Mayo clinic, a family physician, or even urgent care.
In France, I pay full price for the visit at the time of the visit. My insurance provider then reimburses me at 80% of the "reasonable and customary" cost of the visit.
(This is changing, with French insurance companies creating networks and selling additional coverage that works more like the US system)
Fight it. In the US, networks aren't used to manage costs, they are used to deny coverage.
(As far as I can tell, insurance companies make an actuarial decision about accepting charges from a given area, they aren't negotiating shit with providers)
(As far as I can tell, insurance companies make an actuarial decision about accepting charges from a given area, they aren't negotiating shit with providers)
Interesting! I didn't know that. I wonder if the US system worked like that (pay up front, get reimbursed later) it would have any impact on costs?
I'm thinking it might for two reasons: (1) it pushes patients and providers to lay out costs before starting treatment [in non-emergency cases] and (2) it allows patients and providers weigh the economic costs relative to the potential benefit.
Trying asking what something costs in the US before getting treated and most of the time you'll get a blank look from your doctor's office. Or, they tell you "about $1000" and you get a bill later showing the cost was $7000. It's impossible to weigh the economic costs because you never know them until after the fact.
I'm thinking it might for two reasons: (1) it pushes patients and providers to lay out costs before starting treatment [in non-emergency cases] and (2) it allows patients and providers weigh the economic costs relative to the potential benefit.
Trying asking what something costs in the US before getting treated and most of the time you'll get a blank look from your doctor's office. Or, they tell you "about $1000" and you get a bill later showing the cost was $7000. It's impossible to weigh the economic costs because you never know them until after the fact.
Paying upfront is different from having transparent pricing though--even if you pay first and insurance reimburses you later, you still might not know the price until you get the bill.
In the end the two systems differ only in liquidity requirements, and perhaps counterparty risk (if insurance stiffs you). Otherwise the costs are the same, and since liquidity requirements affect primarily low-income people and those with little to no savings, it would disproportionately affect them.
In the end the two systems differ only in liquidity requirements, and perhaps counterparty risk (if insurance stiffs you). Otherwise the costs are the same, and since liquidity requirements affect primarily low-income people and those with little to no savings, it would disproportionately affect them.
The French system grants special cards to low-income people that allows them to charge their outpatient visits directly to insurance.
That's how some out of network providers handle billing. Essentially it offloads the entire claims submission process to the patient.
The Oregon Medicaid Study seems to suggest moral hazard in the sense of increased utilization because the patient isn't paying directly.[1]
Overall an increase in healthcare utilization, but no change in hard outcomes.
[1]https://en.wikipedia.org/wiki/Oregon_Medicaid_health_experim...
Overall an increase in healthcare utilization, but no change in hard outcomes.
[1]https://en.wikipedia.org/wiki/Oregon_Medicaid_health_experim...
What's always missing from these discussions is culture. Nobody wants to point out that a century ago, the zeitgeist regarded death as a natural thing, and took only nominally prudent steps to avoid it.
Now, we will expend enormous efforts, all available options, just to trivially extend the life of anyone and everyone with health problems.
Now, we will expend enormous efforts, all available options, just to trivially extend the life of anyone and everyone with health problems.
Did health care change because our attitudes about death changed or did our attitudes change as health care improved?
You seem to think it's the former, but I am almost certain it's the latter.
You seem to think it's the former, but I am almost certain it's the latter.
It can be both. They can feed back on each other.
While your argument makes sense from practical short-term standpoint, I think it also should be viewed more long-term. Each effort to extend life / save from immediate death brings experience, technology advancement. And what today might be just a short extension of life, in few years might bring several years of quality life, and in 100 years - even more.
Most of these short-term life extending efforts basically amounts to putting people on chemical and mechanical life support, which isn't going to be a source of significant improvements in life quality.
That's patently false. If you've got a drooling Alzheimer patient that has given up on their will to live, it's pointless to leave them hooked up to machines, prolonging their last painful days. There's no frontier advancement happening, just rent extraction.
But which is the chicken and which is the egg?
No mention of the switch to sedentary lifestyles and processed food, which also happened at the same time.
Mass automobile ownership off of manufacturing capacity built for WW2...
And the not unrelated explosion of the interstate highway system, the rise of the suburbs and the corresponding decline of the walkability of many population centers.
Declining rates of physical activity, a rise in cheap subsidized processed food, and a TV in every home . . . .
Declining rates of physical activity, a rise in cheap subsidized processed food, and a TV in every home . . . .
Moral hazard is universal, while US health care costs are out of this world
The main issue is that they artificially limit the number of doctors.
Explain yourself, I don't understand how they're artificially limited.
"Medical-school applicants basically need to have near-perfect GPA's and very high MCAT scores to get accepted to an accredited U.S. institution. Even among that much better qualified pool of applicants, only about 50 percent get accepted." http://www.cnbc.com/2015/04/30/doctor-shortages-heres-the-re...
There's medical school graduates that can't get into residency programs. The bottleneck in the US right now is residency slots.
And the reason for that is that Medicare (CMS really) pays for all the residency slots. There is pressure to keep the Medicare budget from growing too fast which translates to slow/no growth in residency openings.
That's an explanation, not a reason.
Providers with billions of revenue could easily afford to fund slots. They'd probably even benefit financially from it.
Providers with billions of revenue could easily afford to fund slots. They'd probably even benefit financially from it.
The words "reason" and "explanation" are nearly synonymous. (I went to http://www.merriam-webster.com/dictionary to be certain of this.) If anything, an explanation is built from a set of reasons.
So refurb gave a reason for a bottleneck, and now we need to figure out why providers apparently aren't taking steps that address it.
So refurb gave a reason for a bottleneck, and now we need to figure out why providers apparently aren't taking steps that address it.
The same reason IT guys oppose H1B visas? They like their earnings right where they are thank you.
reason(1), explanation(2).
Hmm...Why are there no privately funded residency slots?
Good question. You'd think private hospitals could use it to recruit full time physicians (i.e. we'll pay for your residency, but you need to stick around for X years as employee).
I don't know enough about how hospitals operate to understand why that's a good/bad idea.
I don't know enough about how hospitals operate to understand why that's a good/bad idea.
I just found out that because of this bottleneck foreign trained doctors who are otherwise completely qualified and have taken all tests to transfer qualifications cannot get residencies. I know of a foreign trained doctor who has been waiting 15 years. He has been doing EKG monitoring while he has been waiting.
All residency slots naturally go to US medical school graduates.
All residency slots naturally go to US medical school graduates.
Like lawyers and the bar exam, who decides who gets to be a doctor in the US? You have to get into a school and get licensed, and other doctors decide if you are up to the task.
Check visa requirements for doctors: http://m.shusterman.com/jwaiversfordoctors/
"International Medical Graduates (IMGs) must pass the the U.S. Medical Licensing Examination (USMLE), complete a medical residency in the U.S. and become licensed in a particular state in order to qualify to practice medicine in the United States. Often, IMGs obtain J-1 visas to come to the U.S. to do their residencies and fellowships. If so, they are compelled to return to their countries for a minimum of two years once their training is complete"
Doctors have huge lobbying power in their union the AMA
Check visa requirements for doctors: http://m.shusterman.com/jwaiversfordoctors/
"International Medical Graduates (IMGs) must pass the the U.S. Medical Licensing Examination (USMLE), complete a medical residency in the U.S. and become licensed in a particular state in order to qualify to practice medicine in the United States. Often, IMGs obtain J-1 visas to come to the U.S. to do their residencies and fellowships. If so, they are compelled to return to their countries for a minimum of two years once their training is complete"
Doctors have huge lobbying power in their union the AMA
Rising health care costs are a classic example of the tragedy of the commons[1].
In general, human needs are boundless, and as long as the people who make decisions about healthcare use do not bear the associated costs, health care costs will keep increasing.
The costs are two-fold : the financial cost of the medication, the doctor’s visits or the procedure and the moral or existential cost to the person who receives the care.
I argue that even in a fully subsidized, “free” healthcare system costs would not rise as fast as they are now in the USA (and elsewhere in the developed world) as long as healthcare use was only decided by the patient, who is the only one to suffer during futile procedures.
It is not surprising that care is most expensive in the ICU and the long-term facilities for the demented or otherwise disabled — in those setting the patients themselves do not decide, and their families bear nor the actual costs nor the sufferings incurred.
Anecdotally, those family members who care the least in everyday life, who never come to see the patient, are those who push the most for expensive, pointless care, who demand that “everything be done”. Every day, demented patients are shipped, alone and frightened, to emergency rooms, where they are put into restraints and treated for their tenth episode of aspiration pneumonia while their next of kin stay home watching TV and never bother to come.
[1] https://en.wikipedia.org/wiki/Tragedy_of_the_commons
In general, human needs are boundless, and as long as the people who make decisions about healthcare use do not bear the associated costs, health care costs will keep increasing.
The costs are two-fold : the financial cost of the medication, the doctor’s visits or the procedure and the moral or existential cost to the person who receives the care.
I argue that even in a fully subsidized, “free” healthcare system costs would not rise as fast as they are now in the USA (and elsewhere in the developed world) as long as healthcare use was only decided by the patient, who is the only one to suffer during futile procedures.
It is not surprising that care is most expensive in the ICU and the long-term facilities for the demented or otherwise disabled — in those setting the patients themselves do not decide, and their families bear nor the actual costs nor the sufferings incurred.
Anecdotally, those family members who care the least in everyday life, who never come to see the patient, are those who push the most for expensive, pointless care, who demand that “everything be done”. Every day, demented patients are shipped, alone and frightened, to emergency rooms, where they are put into restraints and treated for their tenth episode of aspiration pneumonia while their next of kin stay home watching TV and never bother to come.
[1] https://en.wikipedia.org/wiki/Tragedy_of_the_commons
Their explanation of moral hazard [1] is incorrect. A moral hazard occurs when someone who is insured subsequently pays less attention to preventing the deterioration/damage of the ensured object, in this case one's own body, than would otherwise be the case if they did not have insurance.
People do not pay less attention to their health because they know they are insured. Nobody wants to be sick or obese, and it is an absurd, academic, and out-of-touch to argument. It makes sense to apply the moral hazard concept to something like a car (driving recklessly if insured) but not something so integral as personal health.
Health care costs exploded because people (myself included) are weak-willed and uneducated, and will satiate their cravings for sweet/salty/mind-altering without a strong government to provide adequate health education, curb the bombardment of junk food/tobacco/alcohol/drug advertising, subsidize healthy lunches in school, and keep pharma regulatory capture in check.
Does anyone think: "I'll eat McDonalds twice a week, smoke a pack a day, and drink all I want because I'm insured." Come on...
[1] "the tendency for insured persons to utilize medical services more than they would if they did not have insurance"
People do not pay less attention to their health because they know they are insured. Nobody wants to be sick or obese, and it is an absurd, academic, and out-of-touch to argument. It makes sense to apply the moral hazard concept to something like a car (driving recklessly if insured) but not something so integral as personal health.
Health care costs exploded because people (myself included) are weak-willed and uneducated, and will satiate their cravings for sweet/salty/mind-altering without a strong government to provide adequate health education, curb the bombardment of junk food/tobacco/alcohol/drug advertising, subsidize healthy lunches in school, and keep pharma regulatory capture in check.
Does anyone think: "I'll eat McDonalds twice a week, smoke a pack a day, and drink all I want because I'm insured." Come on...
[1] "the tendency for insured persons to utilize medical services more than they would if they did not have insurance"
OP describes two separate aspects of moral hazard. You explain the first "I'll smoke all I want because I'm insured" which OP admits is the less important of the two aspects (although I'd bet most people who have even been uninsured for a period of time can relate to the extra fear of going skiing, renting a moped while traveling, or something similar).
The second aspect is what you cite in your footnote and falls in line with the definition of moral hazard, which more accurately is increased risk-taking due to not directly bearing the cost of those risks. In this case the "risks" taken are, for example, check-ups and preventative treatments which may or may not have a benefit justified by the cost.
The second aspect is what you cite in your footnote and falls in line with the definition of moral hazard, which more accurately is increased risk-taking due to not directly bearing the cost of those risks. In this case the "risks" taken are, for example, check-ups and preventative treatments which may or may not have a benefit justified by the cost.
I see your point, but I'd posit that the second aspect is the opposite of how moral hazard is normally taught and explained, which is a ratcheting up of risk due when one is insured, rather than an overuse of some public good, which is normally thought of as a tragedy of the commons: I have access to a public good, I may as well milk it for all its worth. Tragedy of the commons does not affect how somebody treats their own body.
At a higher level though, you need to look at what is actually driving healthcare costs. Is it the (relatively) inexpensive but overused checkup/preventative costs, or is it the expensive and overused prolonged treatments for preventable/chronic diseases such as type-2 diabetes, lung cancer, heart-attack/stroke, etc.
Eighty-six percent of all health care spending in 2010 was for people with one or more chronic medical conditions.
http://www.cdc.gov/chronicdisease/overview/index.htm
At a higher level though, you need to look at what is actually driving healthcare costs. Is it the (relatively) inexpensive but overused checkup/preventative costs, or is it the expensive and overused prolonged treatments for preventable/chronic diseases such as type-2 diabetes, lung cancer, heart-attack/stroke, etc.
Eighty-six percent of all health care spending in 2010 was for people with one or more chronic medical conditions.
http://www.cdc.gov/chronicdisease/overview/index.htm
No one is arguing that uninsured people would use more preventative care, right?
How is their explanation incorrect? Your explanation is simply a rewording of theirs. Of course, apart from that you are disagreeing that it exists at all for health insurance. But the fact that consumers have "skin in the game" as it were in addition to the insurance doesn't mean there's no potential for moral hazard. No doubt, if there were no personal wellbeing implications of treating yourself unhealthily, moral hazard would be even more severe, but it still exists in some non-zero quantity as long as you have insurance. Does it explain all the effects that the article claims it explains? Not necessarily.
Grandparent is making a distinction between, "I'll engage in less healthy behavior because I'm insured" vs. "I will use more health care because I am insured."
The latter doesn't imply the former.
The latter doesn't imply the former.
> Does anyone think: "I'll eat McDonalds twice a week, smoke a pack a day, and drink all I want because I'm insured." Come on...
No, they will think like well I have earned through hard work to enjoy simple pleasures of life. Expectation is government or someone should take care of them with that bazillion dollar healthcare budgets.
No, they will think like well I have earned through hard work to enjoy simple pleasures of life. Expectation is government or someone should take care of them with that bazillion dollar healthcare budgets.
Barking up the wrong tree. Costs are driven down mainly by innovations at the production side not due to consumer behavior.
The cost problem is almost entirely due to myth, paranoia, and authority worship, which means innovation that would drive down costs comes very slowly and painfully. These are the wages of refusing to question dogma.
The cost problem is almost entirely due to myth, paranoia, and authority worship, which means innovation that would drive down costs comes very slowly and painfully. These are the wages of refusing to question dogma.
No on denies that innovations drive down costs, this is from a libertarian blog...which basically worships market innovations and their effect on driving down costs.
But, if you ignore bad incentives and human behaviors in terms of driving up costs, you're gonna have a bad time.
But, if you ignore bad incentives and human behaviors in terms of driving up costs, you're gonna have a bad time.
You missed my point, which was that factors that influence productivity are more fundamental than those that influence consumption.
Nobody (sane) enjoys going the doctor.
Nobody (sane) enjoys going the doctor.
No one missed your point. Your point is obvious and terrible. You want the demand side of the equation ignored. Your world view requires that demands for health care be unrestrained and unquestioned and you perform whatever mental contortions you must to allow that view to remain plausible inside your head. You're mentality is common and identified in the story here:
"many academics and health care leaders found the idea of health insurance so appealing as to have a bias blinding them to the negative impact of moral hazard"
Your point has not been missed. It's just wrong. But don't worry; you have lots of company and you won't be left wanting for support from lots of other wrong people.
"many academics and health care leaders found the idea of health insurance so appealing as to have a bias blinding them to the negative impact of moral hazard"
Your point has not been missed. It's just wrong. But don't worry; you have lots of company and you won't be left wanting for support from lots of other wrong people.
Yes, you missed my point, because no, I don't want the demand side of the equation ignored.
I'm surprised that the libertarian Misces Institute doesn't mention the mainstream theory that fringe benefits like health care were due to high taxes - %93 was the top rate. So employers were incentivized to attract employees using benefits.
What percentage of the workforce was paid that rate? I imagine it was small enough (and they were wealthy enough) that it was not a big driver.
The article does mention an incentive to provide benefits over wages though:
More importantly, insurance programs benefited greatly from the federal Stabilization Act of 1942 which allowed companies facing scarce labor (during a time of price and wage control) to compete for this labor by offering health insurance benefits and by making those benefits exempt from payroll taxes.
The article does mention an incentive to provide benefits over wages though:
More importantly, insurance programs benefited greatly from the federal Stabilization Act of 1942 which allowed companies facing scarce labor (during a time of price and wage control) to compete for this labor by offering health insurance benefits and by making those benefits exempt from payroll taxes.
It was mostly jacked that high so that American businessman wouldn't profit too much from WWII.
Wait, there was real Health Care before World War II???
If moral hazard really is the problem (which I doubt), then surely the simplest way to guard against it is to introduce an "excess" charge that must be paid for each consultation?
Isn't that what a co-pay is for?
Before that, with the notable exception of surgery, they could only give a prognosis and hope for the best. Now they can prescribe pills that do work. There was a reason that Hitler promoted homoeopathy and all sorts of natural healing stuff - he could claim his Germanic naturopaths did not perform worse than the (traditionally Jewish) medical faculties of the time. [1]
[1] Before anyone throws about accusations of antisemitism - this is the thesis that Viktor Klemperer makes in this "Lingua Tertii Imperii". It's recommended reading about the insanity of Nazi Germany.