Thursday, September 07, 2006

The Moral Hazard Theory and Health Care

Another reason used by conservatives to justify not creating a National and Universal Health Care program is that providing everyone a guarantee of health care creates a “moral hazard.”

From Wikipedia:

In law and economics, moral hazard is the name given to the increased risk of problematical (immoral) behavior, and thus a negative outcome ("hazard"), because the person who caused the problem doesn't suffer the full (or any) consequences, or may actually benefit. Such a concern typically arises in the context of a contract (for example, an insurance policy).

The moral hazard theory states that a consumer that has insurance is more likely to engage in more risky behavior than if he did not have any insurance at all. The logical problem with the moral hazard theory being applied to health care is that it is a fallacy to think that the consumer failing to utilize the insurance available the consumer “does not suffer the full (or any) consequences” of not seeking care. On the contrary, the consumer risks having any potential problem fester and metastasize into something much worse.

On the argument that consumers will engage in more risky behavior if they are insured belies the observation of human behavior throughout history. Mankind is comprised of risk-taking creatures -- especially in the United States. The risk-taking nature of our civilization is arguably part of what makes us successful. From bungee jumping to using recreational narcotics, our civilization is full of people who, for the thrill of it, engage in irrational risky behavior. It defies scientific observation of human activities to say that imposing medical costs onto people will persuade them to stop engaging in risk-taking adventures.


Karl said...

The other question is do we want people to stop engaging in risky behavior? I spent close to a year studying risk taking behavior in monkeys(I don't know how the study got funded either) But one thing I noticed was that the Monkeys that took risks, which was defined as how quickly they approached a novel items, were usually the ones that did the best in social interactions and later became the ones who dominated the group.

To an extant risk taking behavior seems to be a symptom of feeling comfortable in ones surroundings and may not be the cry for help that some people believe.

Of course you can also argue that just because "well adjusted" monkeys take risks it does not mean that well adjusted people take risks.

OkieLawyer said...


That is one of things I was trying to say: Americans are, by and large, a risk-taking people. We are the frontier-thinking people who settled new lands. You might say: "it's in our blood."

karl said...

Seems like one of the problems is that people are trying to eliminate risk and at the same time creating people without coping skills.

karl said...

This seems to fit somewhere although I am not sure where:

By PAUL ELIAS, AP Biotechnology Writer
Tue Sep 12, 5:27 PM ET

SAN FRANCISCO - Stanford University will bar physicians working at its two hospitals from accepting even the tiniest gifts from drug industry sales representatives to try to eliminate corporate influence from medical decisions, the school announced Tuesday.


The policy takes effect Oct. 1 and also bans accepting gifts from other companies such as medical device makers that do business with the hospitals. The policy also prohibits the doctors from accepting free drug samples and publishing articles in science journals that were ghost written by corporate authors. The industry's sales force also would be prohibited from areas where patients are seen and from dropping in without appointments, a common sales tactic.