What if you could have hummus insurance? You paid a monthly premium and whenever you felt like having hummus you could go to your local supermarket and get it at no charge. Sounds like a good deal to me (I’d probably opt for the more expensive plan that allows for pita bread). If I had hummus insurance I would be eating hummus by the bucketfull. I’d dip every food I have in hummus: Crackers, bread, celery, pasta, salad, pizza. I’d be eating hummus cereal for breakfast. Peanut-butter and hummus sandwiches for lunch. Hummus a la carte for dinner! Economists have a name for this phenomenon: They call it “moral hazard.” When applied to insurance moral hazard suggests that, like my hummus-hyped self, people will take advantage of what is insured by indulging in it excessively.
Now moral hazard puts the insurance companies in a difficult position: How could they afford the troughs full of hummus I am consuming? The answer is they probably couldn’t. What would most likely happen, then, is that the agencies would slap on enormous co-pays to discourage subscribers from eating a gut-busting amount of hummus. As it turns out the concept of “moral hazard,” and its implications, are a part of the rationale for health insurance co-pays (just like it was for hummus co-pays), as well as the rationale for limiting socialized care. Moral hazardists say that without any monetary charge people will abuse insurance policies and will go to see providers when it is not necessary. While moral hazard is a great theory for why hummus insurance wouldn’t work, it is not that great a theory when it comes to things like health insurance. There are two reasons why moral hazardists have it wrong:
(1) Unlike hummus, going to the doctor doesn’t taste great on pita. This is to say that going to the doctor isn’t a fun thing to do. People don’t go to the doctor for just for kicks–they go when they need to. It is a hassle. You get poked with weird instruments and it’s always really cold in the exam room and you have to sit there in just your underwear and socks. Moral hazard, then, fails to apply in this respect–there is no incentive to go to the doctor when it is not necessary.
(2) Second, and more important, is a basic misunderstanding about the role of a patient and the role of a provider. To accuse a patient of going to the doctor “unnecessarily” is to hold the patient responsible for diagnosing the significance of her own symptoms. And this is why moral hazardists have it backward–one of the main purposes of having a health provider is to tell the patient whether something is significant. By discouraging patients from seeing a doctor by hiking co-pays, insurance companies are asking the patients to do the doctor’s job for her. And it is this kind of burden that prevents people from detecting diseases early when the symptoms might mistakenly–but understandably–be judged as insignificant by a patient.
While hummus insurance might be a long way off, health care reforms seem to be something we can expect in the near future. Don’t let theoretical misunderstandings get in the way of progress.