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The Moral Hazard Myth

[ 0 ] August 21, 2007 |

Repeating a frequent argument, a commenter to this thread says:

The structure of a universal care system should somehow promote and reward healthy living.

How does one deter the freeloaders who take poor care of themselves and then overuse the system for years on end (as sort of mental health therapy)? “It will not happen” is a questionable response – it happens now.

Frankly, this gets us to one legitimate critique libertarians have of universal health care: it can be used to bootstrap lots more nanny statism. I can live with that given the net positives of having a better health care system, but it’s regrettable.

For this reason, however, it’s worth noting that the argument is lousy, a subset of the utterly bizarre belief that medical care works according to similar incentives as markets for consumer goods. As Malcolm Gladwell notes with respect to the claim that having health insurance (rather than paying for doctors out of pocket) represents a major moral hazard:

The moral-hazard argument makes sense, however, only if we consume health care in the same way that we consume other consumer goods, and to economists like Nyman this assumption is plainly absurd. We go to the doctor grudgingly, only because we’re sick. “Moral hazard is overblown,” the Princeton economist Uwe Reinhardt says. “You always hear that the demand for health care is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into the hospital because it’s free? Do people really like to go to the doctor? Do they check into the hospital instead of playing golf?”

For that matter, when you have to pay for your own health care, does your consumption really become more efficient? In the late nineteen-seventies, the rand Corporation did an extensive study on the question, randomly assigning families to health plans with co-payment levels at zero per cent, twenty-five per cent, fifty per cent, or ninety-five per cent, up to six thousand dollars. As you might expect, the more that people were asked to chip in for their health care the less care they used. The problem was that they cut back equally on both frivolous care and useful care. Poor people in the high-deductible group with hypertension, for instance, didn’t do nearly as good a job of controlling their blood pressure as those in other groups, resulting in a ten-per-cent increase in the likelihood of death. As a recent Commonwealth Fund study concluded, cost sharing is “a blunt instrument.” Of course it is: how should the average consumer be expected to know beforehand what care is frivolous and what care is useful? I just went to the dermatologist to get moles checked for skin cancer. If I had had to pay a hundred per cent, or even fifty per cent, of the cost of the visit, I might not have gone. Would that have been a wise decision? I have no idea. But if one of those moles really is cancerous, that simple, inexpensive visit could save the health-care system tens of thousands of dollars (not to mention saving me a great deal of heartbreak). The focus on moral hazard suggests that the changes we make in our behavior when we have insurance are nearly always wasteful. Yet, when it comes to health care, many of the things we do only because we have insurance—like getting our moles checked, or getting our teeth cleaned regularly, or getting a mammogram or engaging in other routine preventive care—are anything but wasteful and inefficient. In fact, they are behaviors that could end up saving the health-care system a good deal of money.

As far as I can tell, here’s not much empirical evidence that the “moral hazard” has a major impact — it’s pretty hard to explain why the American system, which offers less insurance than other comparable ones, is so much more expensive, for example. The reason above is an important one: financial disincentives discourage you from preventative medicine, but not from treatment for more serious illnesses.

None of this surprises me, because the argument also strikes me as illogical on its face. The thing is, being healthy is its own powerful incentive. Maybe I’m unusual, but even though I have decent health insurance I don’t actually enjoy being sick, bedridden, in physical pain, spending time in doctor’s offices, etc. Do people really think it’s common — even subconsciously — for someone with a relatively healthy lifestyle to get health insurance and see that as an opportunity to go on that all Popeye’s, deep-fried HoHos, and Cutty Sark diet they’ve been hankering for? I don’t understand this reasoning at all. There may be room for some minor disincentives at the margin, but the idea that universal healthcare won’t work because the possibility of being bankrupted by medical bills is the major incentive people have to be healthy is bizarre.

More On Southwick

[ 0 ] August 21, 2007 |

From Nan Aaron:

The Post is wrong. Why are so many unions opposed to Southwick? Because Southwick voted against the interests of injured workers and consumers in divided decisions 89 percent of the time. Why are civil rights groups opposed? Because he also voted overwhelmingly — 54 of 59 times — against defendants alleging juror discrimination. That prompted his own colleagues on the Mississippi Court of Appeals to accuse him of “establishing one level of obligation for the State, and a higher one for defendants on an identical issue.” Southwick, they charged in a dissent, placed his “stamp of approval on the arbitrary and capricious selection of jurors.”

Right. Which is, of course, might make him an attractive Republican Supreme Court nominee someday….

Lucky Duckies!

[ 0 ] August 21, 2007 |

In addition to what Roy says, I’d like to highlight this odd part of Megan McArdle’s counter to Ezra’s attack on Giuliani’s health plan:

Moreover, as a class, the old and sick have some culpability in their ill health. They didn’t eat right or excercise; they smoked; they didn’t go to the doctor as often as they ought; they drank to much, or took drugs, or sped, or engaged in dangerous sports. Again, in individual cases this will not be true; but as a class, the old and sick bear some of the responsibility for their own ill health, while younger, healthier people have almost no causal role in the ill-health of others.

Virtually any healthcare thread will eventually produce someone making this kind of argument: we shouldn’t pay for healthcare for sick adults because it’s their fault for smoking, drinking, being fat, or some other lack of virtue. What these arguments leave out, however, is that 1)everybody dies regardless of their personal habits, and 2)people who die tend to get sick and rack up lots of health care costs at the end of their lives. For this reason, for example, it’s far from clear that smokers are more expensive consumers of health care; smokers consume more health care when they’re alive but also die earlier, which saves expenses later on. And then when you consider that as a class smokers are also much less expensive in terms of Social Security…this argument is pretty clearly specious.

What’s really going on here, in most cases, is what John Holbo in his classic review of Dead Right called “dark satanic millian liberalism“: to some libertarians, apparently, the fact that letting poor people die of preventable illnesses will compel them to be ascetic, conformist, risk-averse drones is a feature, not a bug. This puritain wing of the libertarian movement is especially easy to reject, and I don’t know about you but for me it’s not much of an argument against providing universal health coverage.

The Problem With Attracting Conservative Evangelicals

[ 0 ] August 21, 2007 |

The story about the Bush administration pre-empting states from expanding healthcare programs for children reminds me that I forgot to comment on the latest Michael Gerson joint. To follow up on a point I’ve made before, Gerson is often used an example of how conservative evangelicals can be brought into the fold to support Democratic economic policies if only women, gays, etc. could have their policy priorities thrown under the bus. But this is the problem:

First, Rove argues that Republicans win as activist reformers, in the tradition of Lincoln, McKinley and Theodore Roosevelt. “We were founded as a reformist party,” he said in our conversation this week, “not to be against something, but to help the little guy get ahead.” The models he cites are 401(k)s and the mortgage interest deduction — government policies that encouraged individual wealth and ownership.

Yes, Gerson talks in the language of social justice, and is probably sincerely concerned about it. But the problem is that his conception of social justice and helping the poor manifests itself…in support for highly regressive tax breaks and William McKinley being his idea of a reformist president. At any rate, the idea that conservative evangelicals are a “moderate” position on abortion away from joining the Democratic Party is dreaming in technicolor. The vast majority of Republican evangelicals support Republican economic policies, whatever language they express that support in.

My Hands Remain Unwringed

[ 0 ] August 20, 2007 |

I’m frankly not sure even what to say to Josh Patashnik’s response to my post from earlier today. Essentially, he concedes the merits of the arguments Matt and I made but argues that “it would be comforting to at least see a bit more hand-wringing and equivocation from Yglesias and Lemieux before condemning Wittes’s piece” because Wittes –unlike us — is “grappling with the real conundrum here.” But the “conundrum” is perfectly straightforward. Senate Democrats acknowledged the need to update FISA and hammered out a deal. The administration reneged, and then the Democrats simply gave them what they wanted, and what they wanted was essentially a blank check. I don’t think any “hand-wringing” is required to reject this legislation because 1)once these powers are given it’s almost politically impossible to take them away, and 2)because I don’t think unchecked, arbitrary executive power is an effective means of protecting national security, and our Constitution is based on the same premise. The solution, in this case, is worse than the status quo, and it’s also extremely problematic to accede to the blackmail of crying “national security” every time the President chafes against legal restraints.

In addition, as I said last week it’s a mistake to focus too much on the particular nature of the Bush administration. Obviously, it’s especially foolish to give broad powers to a President who has demonstrated again and again that he will push any powers to the brink (and in some cases, as with FISA, beyond) of their limits, but it would be unwise to trust any administration with this authority. This would be bad legislation under a President Clinton or Obama, just as it’s bad legislation now.

Is This A Plot Conceived By Michael Skube?

[ 0 ] August 20, 2007 |

Tristam Shandy points us to this extraordinarily weak piece of media criticism from walking punchline Pajamas Media. As TS points out, the biggest problem is that it’s mostly unfounded speculation. But there are a couple more gems. I like this one:

Let’s go into the fact-checking department. [Beauchamp’s wife] Elspeth Reeve was one of three fact-checkers at the magazine.

Did she fact-check her husband’s articles? While it is hard to believe that an established magazine would make such an elementary error, so far no one at the magazine has bothered to address the question. That’s an interesting omission.

Even if Reeve did not double-check her husband’s reporting, she worked alongside the other two fact-checkers and often shared a take-out lunch with them in the magazine’s conference room.

She…had lunch with some of her co-workers! Truly, an enormous scandal. Similarly, I’ve heard rumors that Dick Miniter once had lunch with Roger Simon and Glenn Reynolds, so clearly his piece wasn’t fact-checked at all! And the scandal deepens:

Perhaps the fact-checkers believed that they didn’t have to check his work thoroughly because they knew and trusted his wife, who they affectionately called “Ellie.”

Clearly, we know that TNR committed journalistic malpractice because they called the wife of the person whose article was under review…by her name. I’m convinced! It’s entirely possible (although, the assumptions of this story aside, it’s hardly been proven with any publicly available evidence) that Beauchamp made up the entire story, but this is pretty feeble stuff.

I am looking forward to the story about how that journalistic beacon Pajamas Media was suckered into a laughably false story that Ayatollah Ali Khamenei had died, though…


[ 0 ] August 19, 2007 |

Amanda says most of what needs to be said about Michael Skube. But this is a pretty amazing punchline:

Not long after I wrote I got a reply: “I didn’t put your name into the piece and haven’t spent any time on your site. So to that extent I’m happy to give you benefit of the doubt …”

This seemed more than a little odd since, as I said, he certainly does use me as an example — along with Sullivan, Matt Yglesias and Kos. So I followed up noting my surprise that he didn’t seem to remember what he’d written in his own opinion column on the very day it appeared and that in any case it cut against his credibility somewhat that he wrote about sites he admits he’d never read.

To which I got this response: “I said I did not refer to you in the original. Your name was inserted late by an editor who perhaps thought I needed to cite more examples … “

And this is from someone who teaches journalism?

Perhaps I’m naive. But it surprises me a great deal that a professor of journalism freely admits that he allows to appear under his own name claims about a publication he concedes he’s never read.

Actually, if you look at what he says, it seems Skube’s editor at the Times oped page didn’t think he had enough specific examples in his article decrying our culture of free-wheeling assertion bereft of factual backing. Or perhaps any examples. So the editor came up with a few blogs to mention and Skube signed off. And Skube was happy to sign off on the addition even though he didn’t know anything about them.

For comparison, shorter verbatim Michael Skube: “[s]ometimes argument — a word that elevates blogosphere comment to a level it seldom attains on its own — gains from old-fashioned gumshoe reporting.” Indeed. For instance, one could — to pick an entirely random example — actually read some blogs prior to writing an LA Times thumbsucker about them…

"Curtis LeMay Without the Experience"

[ 0 ] August 19, 2007 |

I think this sums up Rudy pretty well…

Today From the Asylum

[ 0 ] August 19, 2007 |

Shorter Verbatim Michael Ledeen: “Washington diplomats have steadfastly refused to see the Iranian regime for what it is: a relentless enemy that seeks to dominate or destroy us.” Um, I’d have to say it’s not doing much of a job. Although since their public officials are capable of asserting power from beyond the grave, maybe they’re capable of anything!

Just to frighten you a bit, I’ll cite this passage from Supreme Discomfort:

…But then one night in February 2001, Bailey was channel surfing and caught [Clarence] Thomas on C-SPAN givng the keynote Francis Boyer lecture at the American Enterprise Institutes’s annual black tie dinner.


Thomas extolled the work of leading right-wing intellectuals — Gertrude Himmelfarb, Michael Novak, Michael Ledeen — and seemed to remove his judicial robe for the night and take up arms as a conservative movement combatant.

A guy who thinks it’s a serious possibility that Iran could militarily “dominate” the United States isn’t just some crank with a blog on a fourteenth-rate internet media outfit, but is an actual Respected Conservative Intellectual. It tells you all you need to know about the contemporary American conservative movement.

Kick Me Again!

[ 0 ] August 18, 2007 |

The WaPo comes out for arch-reactionary Leslie Southwick. If I understand their criteria, the Senate has an obligation to confirm any nominee smarter and less overtly racist than Harrold Carswell, no matter how little the lily-white 5th Circuit needs another doctrinaire right-wing statist appointed by an exceptionally unpopular lame duck President.

Next year: an editorial expressing shock and outrage that Southwick always casts conservative votes. After all, Dianne Feinstein called him “circumspect,” just like that nice Sam Alito!

Publius has more, taking on the silly argument that the president can consider ideology in judicial appointments but the Senate cannot.

OhMyGod, Gagne With A Spoon

[ 0 ] August 17, 2007 |

Speaking of bad trades — although in this case, of course, only ex post facto — the Gagne trade in turning into a catastrophe of Slocumbesque proportions (on the receiving end, at least.) Several teams must be happy that they didn’t “win” that particular bidding war right now…

Centrist Abortion Regulations: They Don’t Work

[ 0 ] August 17, 2007 |

I have a review of Helena Silverstein’s new study of judicial bypass provisions in parental involvement statutes up at TAP. My bottom line:

The particularly salient lesson to draw from Silverstein’s book is that it’s important to ask whether abortion regulations actually accomplish anything, even on their own terms. “Basing a policy that regulates the right to abortion on confidence that the law stands outside of politics and free of bureaucratic red tape,” writes Silverstein, “is a mistake fraught with consequences for those whom the right ostensibly protects.”

Support for these laws is often more about the assumption that compromise on abortion is inherently desirable rather than arguments about what benefits will come from the legislation. Is there any evidence, for example, that the lack of abortion regulation makes the decisions of Canadian women less responsible? Whatever their merits in the abstract, in practice “centrist” abortion regulations do little but put up obstacles in the path of the most vulnerable women while not accomplishing any useful objective. Parental involvement laws — which are largely superfluous for young women in good family situations and potentially dangerous for young women in bad situations — are a case in point, especially since the safeguards intended to protect the latter don’t work. Silverstein makes a careful, meticulous, and ultimately powerful case that even those who support the ends of parental involvement laws should reject them in practice.

Most abortion regulations that represent the compromise beloved by so many pundits are bad laws, for two different reasons. The first is that the regulations usually have no rational connection to the asserted state interest: statutes that allegedly advance goals such as “not using abortion at birth control” or “only allowing abortions that William Saletan thinks are appropriate” in fact obstruct some classes of women from obtaining abortions irrespective of the circumstances and do little to stop other classes of women from obtaining abortions irrespective of the circumstances. With parental involvement laws, there is at least a connection between the policy and the asserted interest, and the problem becomes that the policies just don’t actually achieve the results.

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