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Thursday, September 11, 2008

Health Insurance


Dr. Lester CN Simon

I wish to suggest to you that by departing from its annual health expo to a road show, the MBS in exposing us to a paradigm shift not just in the way it functions but also in the way patients and health officials come to grips with healthcare delivery.

My premise is based on my understanding of the term, “moral hazard”. I came across this term in an article, The Moral-Hazard Myth, in 2005 in The New Yorker Magazine, by one of my favourite writers, Malcolm Gladwell, author of The Tipping Point. In fact, this address owes a great deal to the article by Malcolm Gladwell, a very insightful writer and thinker. Moral hazard is a term used by economists to describe the notion that insurance can change the behaviour of the person insured.

Moral hazard refers to the paradoxical and hazardous effect insurance can have by inducing risky and wasteful behaviour. It is not peculiar to insurance at all. You are insured and driving a car with all the appropriate insurance so you may drive faster and rougher. You are using a condom so (with all the appropriate “insurance”), so, to repeat the phrase, you may drive faster and rougher.

The “moral” part of the term, moral hazard, is derived from the fact that mathematicians studying decision-making in the 1700s used "moral" to mean "subjective". But we may simply understand moral hazard, as noted, to be the increase or new risk and wastefulness associated with the insured. It is felt that moral hazard arises because an individual does not bear the full consequences or costs of his actions, and therefore has a tendency to act less carefully than he otherwise would, leaving another party (like the MBS) to bear responsibility for the consequences of his actions.

According to Gladwell, it is the fear of moral hazard, the potential increase in risk and resulting wastefulness from insurance, that prevents the expansion of health insurance in USA. Hence some 45 million people (and counting) in USA are without healthcare coverage. One way to diminish moral hazard is co-payment in which the client pays a part of the cost, or deductibles. The insurance company assumes that through co-payment or deductibles, the patient will use the healthcare system more responsibly and hence moral hazard is reduced.

The crucial point Gladwell posits is that the problem with moral hazard is that healthcare is not like other types of insurance; nor is it like other waste-prone products. If the government were to give us free water or electricity, or both, the moral hazard argument is that we become irresponsible and wasteful since we do not have to pay. However, barring a very few pretenders or hypochondriacs, most people do not eagerly run to the doctor just to look at the doctor’s face. People seek health care because they are sick, or at least because they feel unwell. I am painfully aware that some clients do go to doctors to buy sick leave that they are not entitled to but that is another topic for another road show. I know some of my colleagues will come at me for saying this but I can defend my position.

Gladwell gets to the meat of the matter in The Moral-Hazard Myth by regarding the fundamental function of insurance. One model is to equalize the financial risk between the healthy ones in the country on one hand and the sick ones on the other hand. He refers to this as a sort of social insurance. We pay because we know that when we are sick and cannot pay, someone else will subsidize our healthcare delivery, as we subsidized others when we were well and paying. This is the form of health insurance practiced in large part in Canada, Germany, Japan and most industrialized nations with universal healthcare. This is not so in USA. The other model is the actuarial way in which we pay according to our actual individual situation and history, like care insurance, for example.

By putting the MBS on a road show, it begs the question: Where is the MBS going? Do we go forward by putting more of the cost of healthcare on the individual consumer by way of private insurance? In so doing we will reduce the redistributive element of the social insurance model. If the future of health insurance will be more along the lines of socialized (MBS-Style) as apposed to, or to a greater extent than, privatized health insurance, we are making fundamental assumption according to Gladwell. We are assuming that the more equally and widely the burdens of healthcare are shared, the better off the population as a whole is likely to be. In my opinion, this noble assumption can only hold in practice if we also assume and make real that the other burdens of the good life and not just the burden of healthcare are shared as well in word and in deed.

This is why I referred to a paradigm shift that the MBS road show is exposing us to. In fact, the MBS is exposing itself and all of us and asking us to consider not just the social insurance sharing of healthcare versus confined, private health insurance. It is forcing MBS and all of us to regard also the conjoint social aspects of education, crime and violence, immigration, general taxation, public health, etc. Indeed the MBS road show will drive us to the tipping point to regard all aspects of the way we live. Sadly, it took another killing for some of us to realise that it is not just tourism that is everybody’s business.

And so, with this exposure to the reality of sharing the wider aspects and burdens of living together, and not just healthcare, I am proud to be part of this noble effort as we join with the MBS to not only, “Get on the Road for Better Health”, but to get on the road for a less unequal and a more just and modern Antiguan and Barbuda.

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