The Myth of Moral Hazard (in patients)
Wednesday, June 10 2009
In defense of the WSJ editoral board, Peter argues:
Reduction of moral hazard is the key.
“Moral hazard” is the phrase coined by economists to describe the situation when a safeguard against risky behavior – like insurance – encourages that risky behavior. Seatbelts are an example; make everybody wear seatbelts, and there is a demonstrable increase in unsafe driving.* Peter’s argument is that health insurance works the same way: if you insulate people from the cost of care, they’re more likely to demand more care.
The problem is that this assumes health care is intrinsically desirable. The reason people drive unsafely is because it’s fun, or at least gets them someplace faster. Health care is not fun. It sucks. And health care is desirable to patients only insofar as they believe it’s necessary. I know lots of people who want to drive fast but don’t need to; however, I don’t know anybody who wants more health care but doesn’t need it. Suffice to say moral hazard in health care is largely a myth for patients, and so increasing patient responsibility for the bill won’t fix healthcare. Behind the cut, I explain why.
In 2005, I had a series of emergency room visits for high fevers related to my Crohn’s. Every time, the doctors insisted on a CT scan of my gut. And every time, the scan was inconclusive; I was treated with IV antibiotics and sent home with a prescription for oral antibiotics.
One could argue that a lot of this treatment was wasted, and I should have been discouraged from visiting the ER by paying more of the cost myself. But this ignores the fact that I already had plenty of incentive to avoid the ER. The ER is a miserable place to spend the night, and every CT scan I got involved drinking a liter or so of contrast medium, getting more contrast pumped into my butt, and having iodine injected into my blood. I needed no incentive beyond the threat of CT scan to keep me away from the ER.
And the truth is, I did my best to avoid the ER. My gastro had told me that 103.5 degrees Fahrenheit was the highest fever I could safely manage on my own, so that was my bar. The fevers always came in the middle of the night, when no other medical facility was open; there were many, many nights that I stayed home with a fever hovering between 102-103 degrees – aching, burning, freezing, miserable, exhausted and sleepless, but still happy as a pig in shit that my fever wasn’t high enough to send me to the ER. Sure, the $100 co-pay wasn’t enough to discourage me from going in – but that’s because the place itself was so unpleasant.
And most of health care is unpleasant. The medicines are a hassle at best, disgusting at worst, the hospitals terrifying and depressing, the tests usually invasive and humiliating. I can’t think of a single aspect of health care that would worthwhile if it wasn’t necessary (except for Vicodin, which is cheap). So the notion that insurance encourages patients to seek out the annoyance and terror and humiliation of health care for its own sake is, frankly, insane. Which is to say there might be a few – a very few – who have some mental pathology that makes health care fun for them, but that’s also an illness in need of treatment.
But Peter isn’t all wrong: he admits that moral hazard is a problem for physicians. I would go farther, and say that moral hazard in health care is exclusively a problem of physicians.
After the first couple ER visits, I decided the CT scans were unnecessary (a conclusion proven absolutely correct, I should point out). So I tried to talk my doctors out of the scans, so they would spare me the contrast and humiliation. I wanted them to give me the IV antibiotics and send me home, but nothing doing. Each time, they insisted the CT scan was entirely necessary; moreover, they refused to let me leave the hospital without it. And if I checked myself out, it would be AMA – against medical advice – and thus I would be liable for the entire bill, which insurance would not pay. The problem, you see, is that doctors have all the power, and none of the responsibility; if moral hazard is a problem, it’s a problem of physicians.
Let me put this in terms of Peter’s hypothetical:
The physician says: “Let’s order this MRI to rule out a tumor.”
The patient says: “Ok, it’s a low risk, but I’m not paying for it, so go ahead.”
For this hypothetical to work, you have to make a couple of heroic assumptions: first, that the physician doesn’t have any financial interest in the MRI or the treatment for cancer; second, that the patient knows as well or better than the physician the risk of cancer. Both of these assumptions are false in virtually any real-world case. Almost any patient is going to get the MRI, even if the risk of tumor is low. Moreover, the alternative Peter offers this patient is basically Russian roulette; sure, it might not be a tumor, but if you don’t get the test and it is a tumor, you’re probably going to die.
I say “almost any patient” because Peter has offered as a hypothetical a situation very similar to something that actually happened to me. By early 2006, I’d done a half-dozen inconclusive CT scans; by that point, I could suck down contrast like Takeru Kobayashi does hot dogs. None of it did any good, so the physicians decided to one-up me, and ordered an EUA – examination under anasthesia. A colo-rectal surgeon knocked me out, opened up my anus with what I can only imagine was a pneumatic speculum, poked around inside me with a flashlight, and took some biopsies. I woke with a sore anus and a rectum packed with bloody, shitty gauze. It was awful.
A few weeks later, I met with the surgeon in his office; he told me that the EUA showed I might have colon cancer, which he felt I probably did, and that I had to get another EUA immediately to verify his diagnosis. I refused, on the grounds that it was not a terribly high risk, and I couldn’t afford to miss any more work – and also, it sucks to wake up with bloody, shitty gauze in your rectum. I told the surgeon we would have to wait and see for the time being. The surgeon. fucking. lost. it. “You’re in denial – you’re going to kill yourself – why would you do this to your family?” He shouted at me, using cancer to threaten and bully me into getting the EUA done.
You can’t imagine how terrified and vulnerable I felt. But in Peter’s view – and for that matter, the Wall Street Journal’s – it is absolutely essential to our health care system that I not only worry about cancer, but also how I’m going to pay for the test that tells me whether I have cancer. The fact is, there are virtually zero people in the world who would not get the test if they could. I am one of those people, possibly the only one – but even I broke down eventually.
I left the surgeon to stew in his juices, and went to my gastro for his opinion. The gastro said I should probably get the EUA. I talked to my parents and my girlfriend; they said I should get it done. The very mention of the word “cancer” is so terrifying that it defies rational thought for most people; the surgeon might as well have put a gun to my head. I put him off for a couple months, but ultimately I went in for the EUA. The results were… negative. I didn’t have cancer. (And that was the last time I let that surgeon anywhere near my bum.)
So when somebody tells me the problem with health care is all these patients demanding care they don’t need, I have a very simply answer: bullshit. And if patients are demanding care they don’t need, it’s because physicians are telling them they need it, in some cases even coercing and bullying them into getting it. Physicians have most of the power in these decisions, and patients very little – which means it’s physicians, not patients, to blame for needless expenditures. (For more on this, you should read the now-famous Atul Gawande article in the New Yorker, if you haven’t already.)
So if moral hazard is a problem of physicians, not patients, how do we fix it? Not by making patients more liable for their bills; that will only lead to more bankrupt and/or dead people, which is exactly what health care reform is trying to prevent. If anything, we should be making physicians more responsible for their decisions; that is, to make them personally or professionally liable for the unnecessary care they provide. In Peter’s hypothetical, the physician has already decided that an MRI is a reasonable test, despite the low risk of tumor; yet Peter would hold the patient entirely responsible for the financial consequences of that decision. The reality of our system is that only physicians have the authority to decide what is and is not available to patients; until that changes, until patients have the authority to decide their own care, the responsibility for curbing waste falls to the physician, not the patient.
If reduction of moral hazard is key, then two things must change: first, physicians must bear more of the consequences of their decisions; second, patients must be given more authority for their care. But whatever the problems of moral hazard in our health care system, they won’t be be solved by making patients more vulnerable to the high cost of care. Moral hazard just might be a problem – I doubt it - but in any case it’s not one for which patients can or should be held responsible.
My two solutions to moral hazard:
1) Malpractice reform. Physicians will practice defensive medicine, versus normal evidence-based medicine, to protect themselves from future lawsuits. That defensive medicine usage does not come at a cost to them, so they are more than willing to protect themselves (and assuage the concerns of their patients!) using someone else’s money.
Eliminate defensive medicine through malpractice reform, and the effect of moral hazard on the physician side decreases.
2) Health savings accounts. Patients get tax benefits of having money from their employer dedicated towards savings in actual dollar amounts that belongs to the patients. The savings accrue over time. If the account owner does not need to use healthcare resources, the savings keep piling up. When needing an office visit, the account owner deducts a finite amount to pay for the office visit directly. The patient directly realizes the costs of care, but as was stated the money will be there in the account because of the structured tax benefits. High-deductible insurance is available at much lower monthly rates to offer patients benefits for emergent and expensive needs. Insurance will finally be what insurance is for: high expense costs.
Since patients own their health savings accounts, they are less likely to spend it on costs which are not absolutely necessary. Ruling out a tumor with an MRI when the probability of such an event is extremely low and appropriate clinical judgement does not warrant such a test, turns into a situation in which the patient will be less likely to spend his own money from the health savings account.
::
Physicians will still order tests which are part of sound clinical judgement, and patients will still be willing to pay for tests because they are deemed necessary by a physician who is not motivated by defensive medicine.
But, when physicians feel less pressure to order tests which are probably not necessary because of malpractice reform, and patients are less willing to pay for “probably not necessary” tests because they will have to deduct money from their very own personal health savings account, healthcare costs will decrease.
Peter –
Your first solution won’t address the problem of physicians ordering unnecessary tests for personal or professional gain. Read the Gawande article: expenses in MacAllen are unusually high even despite severe limits to malpractice suits.
Your second solution provides no mechanism by which patients can assess the worth or value of their care. The only way a patient is going to want an unnecessary MRI is if the doctor tells him its necessary, and the only way the patient is going to get that MRI is if the doctor okays it. And once a patient s convinced the MRI is both necessary and available, he isn’t going to pay attention to his deductible. And if the doctor invokes the word “tumor”, It’s no longer a freely made choice on the part of the patient. Even with high deductibles, physicians will still be able to pressure and coerce patients into unnecessary care.
1: Yes, a huge problem is when physicians forsake professionalism and seek their own benefit instead of the patients’. Though, this is a small part of the problem, and generalizing an outlier such as MacAllen to the entire nation (or the rest of Texas for that matter) is not wise.
2: Comparing MacAllen, Texas, where malpractice reform has been instituted, with El Paso, Texas, where malpractice reform has also been instituted, is a poor comparison to gauge whether malpractice reform works in general.
3: Price transparency is a key component to allowing patients to make the best cost-effective decision in where to go for medical attention.