Bad stories lead to bad healthcare policies

US Representive Phil Roe is considered an expert on healthcare by his peers. He co-chairs the Republican Doctors Caucus and the Republican Study Committee asked him to come up with a plan to replace Obamacare. In a recent interview about his plan, he revealed that he thinks moral hazard is one of the main problems with healthcare in America.  He illustrated the problem with this story:

If you go to a wedding …with a cash bar and you go to a wedding with an open bar, where is the most alcohol going to be consumed? Anytime it doesn’t cost anything, it’s overconsumed.

This story illustrates the concept of moral hazard; if something is free, people will overconsume it. But alcohol consumption is very different from healthcare consumption. Consider this alternative story:

If you go to a wedding with doctors injecting insulin for $10 and you go to a wedding with doctors injecting insulin for free, where is insulin going to be consumed badly?

In this case, free insulin won’t be overconsumed at either wedding because nobody is going to want it if they don’t need it and doctors have a moral and legal obligation to only give it to people who would benefit. If you go to a country where insulin is free versus a country where it is distributed by profit-maximizing companies, where are more people going to die prematurely from poorly managed blood sugar? The clear statistical answer is that diabetes is managed much better in nations with universal healthcare which means that it is free for anyone who needs it. You can do this for almost every kind of medical test or treatment:

If you go to a hospital with surgeons providing heart surgery for $100,000 vs. for free, where are heart surgeries going to be overconsumed?

There really isn’t a problem with overconsumption when surgery is free. In fact, there tends to be greater overconsumption of surgery when doctors have a profit motive to encourage overuse. That was one of Atul Gawande’s conclusions from studying why some cities consume more than twice as much health care than others. But what about something more addictive like the alcohol in the original story?

If you go to a hospital with doctors selling high-priced opioids vs. a hospital where doctors are handing out free opioids, where are they going to be over consumed?

There is little problem with prescription opioid addiction in societies that provide free painkillers because doctors have a moral and legal obligation to avoid over prescription. In fact, the prescription opioid epidemic is the biggest in the US where they are the most expensive because there is greater profit for drug corporations to encourage doctors to over prescribe in the US. There are many examples like this where Americans get too much healthcare, but they are usually explained by too much profit orientation among healthcare providers who overprescribe expensive treatments to make more money rather than by too much greed (a.k.a. moral hazard) by patients.  Why do so many smart people think that Americans always want to take more drugs and get more surgeries?

Yes, Americans do get too many caesarian section surgeries compared with other nations, but that isn’t because all American women secretly fantasize about getting cut open at great expense rather than giving a natural childbirth. It is because surgeries are often more profitable and convenient for providers than natural births in the American system. Even though caesarian sections are much more expensive than natural childbirth, they produce worse health outcomes except in the relatively few percent of cases where they are medically necessary so it looks like the American price system is giving the wrong incentives here.

Economists have done a very bad thing to the American healthcare debate by telling these simple stories whose moral is to suggest that America’s main healthcare problem is that our healthcare is too cheap and that is causing Americans to consume too much healthcare. American healthcare isn’t too cheap. We have by far the most expensive healthcare in the world. We should have the very least problem with moral hazard compared with all other rich nations because everyone else provides universal health insurance. Our main healthcare problem isn’t a problem with Americans having too much access to healthcare, but too little.

Would you rather go to a wedding and suddenly realize that you a life threatening illness and there are doctors who won’t help if you don’t have enough cash or would you rather go somewhere where the doctors are ready to treat everyone because they know that everyone in society has universal health insurance?

The very idea of moral hazard of healthcare is immoral because it implicitly assumes that poorer people’s lives are worth less money and shouldn’t get the same healthcare as richer people. We need better stories.

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Posted in Health

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