Moral Hazard Myth

| Tue Aug. 23, 2005 11:29 AM EDT

In the New Yorker this week, Malcolm Gladwell takes on health insurance in America. Needless to say, it's awful—especially for those who can't afford it. In particular, this vivid description of what it's like not to have health insurance deserves the full blockquote treatment:

Gina, a hairdresser in Idaho, whose husband worked as a freight manager at a chain store, had "a peculiar mannerism of keeping her mouth closed even when speaking." It turned out that she hadn't been able to afford dental care for three years, and one of her front teeth was rotting. Daniel, a construction worker, pulled out his bad teeth with pliers. Then, there was Loretta, who worked nights at a university research center in Mississippi, and was missing most of her teeth. "They'll break off after a while, and then you just grab a hold of them, and they work their way out," she explained to Sered and Fernandopulle. "It hurts so bad, because the tooth aches. Then it's a relief just to get it out of there. The hole closes up itself anyway. So it's so much better."

People without health insurance have bad teeth because, if you're paying for everything out of your own pocket, going to the dentist for a checkup seems like a luxury. It isn't, of course. The loss of teeth makes eating fresh fruits and vegetables difficult, and a diet heavy in soft, processed foods exacerbates more serious health problems, like diabetes. The pain of tooth decay leads many people to use alcohol as a salve. And those struggling to get ahead in the job market quickly find that the unsightliness of bad teeth, and the self-consciousness that results, can become a major barrier. If your teeth are bad, you're not going to get a job as a receptionist, say, or a cashier. You're going to be put in the back somewhere, far from the public eye. What Loretta, Gina, and Daniel understand, the two authors tell us, is that bad teeth have come to be seen as a marker of "poor parenting, low educational achievement and slow or faulty intellectual development." They are an outward marker of caste.

How did we get to this point? Gladwell points out that one idea more than any other has taken hold of American policymakers when it comes to health care and thwarted real reform: namely, the idea of "moral hazard." People will do unhealthy things, the theory goes, if health insurance becomes universal. Instead Americans need to be buried in co-payments and deductibles and gatekeepers so that they only get the care that they absolutely need and no more. But, as an old RAND study pointed out, when people are forced to pay more out of pocket, they tend to cut back on care they really need. (Although Gladwell neglects to point out that, on average, health did not deteriorate among those who had higher copayments in the RAND experiment—the problem is that looking only at "averages" can obscure some real casualties; also, this result remains fairly controversial.)

Meanwhile, as the horrifying tooth anecdote above reveals, patients aren't always the best judge of what constitutes "necessary" care. So the uninsured cut back on dentist visits, thinking that those at least are expendable, and as a result, their health and life deteriorates. (By the way, this is also a pressing argument for dental coverage, which is even rarer than health insurance, but no less important.) The conservative idea—lauded by, among others, George W. Bush—that people don't pay enough for their own care is fundamentally flawed. As Gladwell nicely puts it, these are people "who regard health insurance not as the solution but as the problem." America, as a whole, will get increasingly richer and richer in the future. There is no reason why we shouldn't spend that wealth in making sure that this isn't a country where people are pulling out their own teeth with pliers down in the basement.