One of healthcare’s many problems is that there is a disconnect between those who consume healthcare and those who pay for it. While the average patient is shouldering an increasing share of total cost, the major entities that pay for healthcare in the U.S. are employers and the government. The Kaiser Family Foundation found that for those with private health insurance, the average percent of health insurance paid by employers is 83 percent for single coverage and 72 percent for family coverage.
Because we are free to live our lives as we wish and a third party often foots the lion’s share of the bill for the health consequences of our choices, good and bad, it is argued that a moral hazard exists. A moral hazard is a situation in which party 1 bears the consequences for party 2’s actions, thus incentivizing bad or reckless behavior from party 2. It arises when both the parties have incomplete information about each other.
But is our current payment system a moral hazard? That individuals bear some responsibility for their health is undeniable. Behavior contributes to nearly half of cancer deaths in the United States, and up to 40 percent of all deaths. But viewing personal responsibility as a central driver of longer lives and lower medical costs is problematic.
Not surprisingly, most Americans think it is fair to charge those with an unhealthy lifestyle more (https://www.wsj.com/articles/SB115324313567509976), or to somehow penalize such people. Some states have tried this with Medicaid, but with disappointing results. In 2007, West Virginia asked Medicaid-eligible individuals to sign a personal responsibility agreement to qualify for enhanced benefits. The agreement required beneficiaries to keep medical appointments, take medications, avoid unnecessary emergency department visits, and participate in health screenings. Those who didn’t sign it — or couldn’t hold up their end of the bargain — had their benefits cut, and were enrolled in a basic plan that restricted prescription drug coverage. Less than 15 percent of those eligible signed the agreement, and more than 90 percent of children with Medicaid had benefits restricted. A key hoped-for outcome of this was to reduce emergency department use, but overall, the opposite happened. There was no clear improvement in health or healthy behavior. The experiment was scrapped in 2010.
There is another legitimate concern to this approach. It is unsurprising that when people must pay for a more of their healthcare, they use less care, but people also tend to lack the expertise necessary to make good choices about which care is indispensable. While the hope is that the average patient would spend more on preventative care, the risk of procrastination, with attendant increases in acute care costs, are real.
My take: I don’t think there are cogent arguments against any role for personal responsibility in healthcare. The real issue is how you determine responsibility and implement a program. For issues like smoking, it may be easier. If you offer counseling, nicotine replacement therapy, and other effective resources, it is possible (though difficult) to quit. What is harder are things like obesity, which is simultaneously caused by lifestyle choices, genetics, and socioeconomic status, which in turn influences physical proximity to fresh food, availability of transportation, education about diet etc. etc.). I think to eliminate the moral hazard, we should penalize behaviors that meet the following criteria, using smoking as an exemplar.
- The behavior is such that even those with minimal education are aware of its dangers, and that awareness includes school-based education, public health awareness campaigns that use multiple forms of media, and knowledge of the danger by peers. Smoking easily meets this criterion.
- The behavior is active rather than passive, and is unrelated to a necessity of life. Smoking again meets this criterion, as does alcohol abuse. Obviously, you do not need to smoke or drink alcohol to survive, and you need to go out and actively purchase these items, perhaps at the sacrifice of more essential and/or healthy things. Obesity would not meet this criterion—you need to eat to live; it’s a question of magnitude, not behavior.
- A good faith societal effort must be in place to remove obstacles to the corresponding healthy behavior. Before a failure of personal responsibility can be considered, it must be ensured that the individual is educated about the condition in question, has fair access to medical and other services to support a change in behavior (including transportation as needed), and has at least the minimum required resources to effect change.
In sum, reasonable accommodations and resources must be available such that there is a fair chance of success before punitive measures (such as reduced benefits or higher premiums) will be considered.