Health Savings Accounts, responsibility and alcoholism
I wrote the following letter to The New Yorker, responding to Malcolm Gladwell’s piece entitled “The Moral Hazard Myth,” in the August 29, 2005 issue:
Dear Sir:
Malcolm Gladwell is right in suggesting that the sick pay more for health care. However, his argument that overall costs will not drop as increasing numbers are given an ownership stake in their care flies in the face of reality. While many do not pig out at all-you-can-eat diners, some do, increasing overall costs. If we want to decrease these costs, which help the sick and well alike, we need to create incentives to conserve scarce resources. Destroying the price mechanism, which universal care does, guarantees overuse. Health Savings Accounts go far in creating the incentives that up the odds of people consuming only what they really need.
In addition, Gladwell turned the idea that the mess we have inherited is an accident of history inside out. The relevant history is that employees got tax-free income for employer-paid medical costs due to WWll wage and price controls. Employers, legally unable to offer higher wages and compete for employees in the time-honored market-oriented way, got around the caps by substituting tax-free benefits, which included all-you-use health coverage. This removed incentives to conserve health care resources, a perversity that has only gotten worse with Medicaid and Medicare.
The problems in other countries, which Gladwell holds up as models, include massive queues for care. They also include amazing attitudes on the part of health care consumers. When visiting Denmark twenty years ago I was appalled at the amount of smoking and cost of cigarettes, which were $4 a pack when ours were close to $1. I asked smokers how they could afford to consume so much with prices vastly higher than ours. The uniform response was that cigarettes were cheaper since, as they put it, “the government will pay for my cancer.”
Instead of completely removing incentives to use health care resources more sparingly, we need to increase them. In my book, this includes allowing insurers to discriminate far more than they do today in terms of pricing. In researching several books I’ve authored on alcoholism, I found that alcohol and other drug addicts likely consume over 25% of health care dollars and constitute 50-90% of emergency room admissions. By allowing regular and random alcohol and other-drug testing of those who have proven to society they cannot safely use alcohol or other drugs and giving insurers the right to slap hefty surcharges on those who fail such tests, we may increase the number of sober addicts and dramatically decrease the cost of medical care for everyone.