Friday, November 10, 2006

Is the "Moral Hazard" idea a myth?

I came across an interesting article about the way insurance is viewed, called The Moral-Hazard Myth at http://www.newyorker.com/fact/content/articles/050829fa_fact

The moral hazard idea — which states that insurance encourages risky and wasteful behavior by the insured person since the cost of consumption is paid by someone else — is considered a myth by some when applied to healthcare and is not a reason to assume Health Saving Accounts/High Deductible Helath Plans (HSA/HDHPs) or other methods of cost-shifting will reduce utilization and control costs by making people pay more out of their own pocket for care. They claim this is because, unlike other consumer goods, insured people don’t go to healthcare providers just because it’s free; in fact, most people don’t like to go to the doctor or take medications. Instead, what is most likely to happen when more costs are shifted to consumers is that they will forego routine preventive care and delay getting care for their health conditions. They way this will actually end up increasing overall costs because people will be sicker when finally going for treatment they needed all along. In addition, HSA/HDHPs, etc. replace the “social insurance” model of coverage, which equalizes the financial risk between the healthy and sick by having the well help pay for the care of ill people, with an actuarial model in which older and sicker people pay much higher premiums than the young and healthy who can accept bare bones policies.

What do you think?

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