My Teeth and Moral Hazard

Until this month I hadn't been to a dentist in over two years. This was the unfortunate result of no dental coverage and (truth be told) shocking laziness on my part. Turns out the damage was extensive (yikes), as was the bill (double yikes). Thankfully, we were able to get dental insurance through Laura Jean's new job so we didn't have to choose between our teeth and paying our rent. Since I will also be switching jobs soon, we've been looking at various health insurance options, and the whole thing has got me thinking about our national health system, which leaves 45 million people (and growing) without health coverage, works and doesn't work. The episode with my teeth reminded me of the opening section of a recent article by the always interesting New Yorker writer Malcolm Gladwell entitled:

The Moral Hazard Myth

It's well worth a read. The take-away points I got from it are the following:

• Insurance changes people's behavior to some extent. When people don't pay the full cost for some resource (like covered health care) they may tend to use it more, which might lead to wasteful overuse. Economists call this "moral hazard" and it is the intellectual underpinning of the conservative push for Health Savings Accounts and their opposition to universal health coverage (as exists in every other industrialized country).
• But, in the case of health care, is "more use" really "overuse"? Maybe, maybe not, it seems. Gladwell makes the point that uninsured people not only cut-back on "frivolous" use of the health system (whatever that might mean) but also necessary care and (more importantly) inexpensive preventative care (mammograms, yearly checkups, dental cleanings, etc) that has been proven to save a lot of money in the long run. And indeed, it is often said that universal health care systems are much cheaper than our American system, although I don't know much about the details. Hmmm. I guess since most of us aren't doctors, cutting costs in the health care system by forcing us patients to be more frugal is not really the best idea.
  
• Gladwell talks about two models of insurance: (1) social insurance, where the healthy pay for the sick and elderly (in the form of higher premiums or higher taxes), with the assumption that someone will pay for them when they (inevitably) become sick and elderly themselves, versus (2) actuarial insurance (think car insurance) where high-risk people with illnesses pay higher premiums for their care, while the young and healthy pay less. For me, option (1) just makes sense as a good way to organize society, a social contract between generations if you will, while option (2) seems unfair, although good for the insurance companies, no doubt. Driving a car is just different than health care, and shouldn't be treated the same way.
  

Anyway, I wish I knew more about this stuff, and I'd love to hear other folks' thoughts on it.