The issue of health care reform is shedding light on an underlying problem not just with the supply and demand for health care services or how we pay for it, but more importantly on how we prioritize the importance of health care and the strength of our wealth health. We have become used to investing next to nothing in our health and for this primary reason, the United States should embark on a policy that moves us away from additional health insurance, not more of it.
The Democratic party has made the issue of health care a component of its platform over the last few decades and President Obama promised during his campaign to address the problem of 47 million people in America having no health insurance. To address this problem, the administration and democratic members of Congress have proposed offering a government-sponsored health insurance plan that they hope will provide a competitive option to private health insurance companies eventually leading to slowing down increases in insurance premiums.
Slowing down the increase in health insurance premiums may be possible with the entrant of a government funded health insurance provider, but what is more likely is an increase in the moral hazard problem that health insurance overall engenders. Moral hazard refers to the reduced incentives that the insured have to prevent compensable losses. For the consumer of health care services who is fully insured, she can make herself better off by not spending any of her money on her health. Society, or at least her fellow policyholders who may be taking better care of themselves, may end up worse off.
Insurance companies attempt to reduce the element of moral hazard by requiring a co-payment. For example, your insurance may require that you pay some amount when you visit the doctor or spend down some deductible before insurance pays for treatment. In addition, it may be very costly for an insurance company to determine whether you are exercising regularly, not smoking three packs of cigarettes a day, or eating your vegetables. As the insurance company’s cost of monitoring a consumer’s preventive methods (or lack thereof) goes up, the less likely is the consumer going to exercise, diet, and stop smoking.
Moving more consumers on to another insurance plan, whether the plan is private or government sponsored, will only add to the moral hazard problem. Government, in its attempt to maintain inexpensive health insurance, will fail to promote health care by intentionally avoiding the monitoring necessary to ensure consumers practice preventative care. The slippery slope may not get steeper, but as we add more consumers to the hill of no accountability, there will be an eventual mudslide in terms of the human costs resulting from continued poor health care habits.
What the Obama administration should be focusing on is why, with our willingness to purchase food, cars, houses, and clothes without any subsidies or insurance, would Americans not give the purchase of health care services the same priority. In the 1950s, Americans paid for 50% of their health care out of pocket. Today we pay approximately 10% of our health care out of pocket. If our health is our wealth, why are we afraid to invest in it?
Our decision to socialize our health care by spreading our cost of care onto society through insurance contributes to health care consuming 16% of our gross domestic. We have also allowed health insurance, much like credit, to become a proxy for our wealth. If anything, the existence, prevalence, and desire for health insurance is a subliminal admittance that we have failed to accumulate a sufficient stock of wealth and autonomous income sufficient enough to protect the most important asset that we have which is us.