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Moral Hazards: What Happens When You Think Healthcare Is Free

By Alan Dappen, M.D.

“Doc, you’re the best! You saved my life, and my wife’s. You delivered my kids and brought them through sickness — time and again. I trust you, and can confide in you … Hey, wait a minute … Are you still a Preferred Provider?”  

This is a statement I heard all too often as a primary care doctor beholden to third-party providers. When a long-time patient asked this question, I felt like the mythological Damocles, who precariously sat beneath a sword suspended by a horse hair, for if I answered “No” to that question of “Are you a Preferred Provider” the sword would fall, swiftly.

No matter skill, knowledge, talent, caring, quality, experience, price or level of trust of their current primary care practitioner, 90-95% of patients who ask “Are you my preferred provider?” paradoxically will exit one primary care provider’s office to entrust the decisions of their day-to-day health care to another physician picked by their insurance company, even though this new doctor may be a stranger who signs a contract to do the job for less money.

For decades now patients have been led, like lemmings, by the belief that the vast majority of healthcare is virtually free because they have health insurance usually wholly and partially funded by someone else, like their employers of the government. Furthermore, patients trust that the providers of this health insurance know what is best for their care.

Because someone else is footing the bill, we as patients have absolved ourselves of the responsibilities associated with finding and consuming good care. Instead, the hope of getting what appears to be virtually free health care trumps all other considerations of care, whether it is quality, level of expertise, convenience or accessibility. Few of us are immune to wanting to get something for less, or better yet, something for nothing. This behavior leads to moral hazards, which are most easily explained by the WIFM (“What’s in it for me”) concept, and best exemplified by the way we eat at a buffet, drink at an open bar, or most recently by how the banks flocked to the sub-prime market to make easy, big money.

In health care, these moral hazards mean patients do not hold themselves accountable for finding the quality of care they desire at a price that makes sense. Instead, patients often rush for more health care believing that more care is better care; or to specialists because this means more competent care; or to more tests because this translates to more comprehensive results; and finally to more drugs and more treatments because these mean a longer, happier life. And patients do so because they believe their care is “free.”

Most patients are loathe to believe the numerous studies contradicting many of these beliefs. Due to the set up of the current “free” care healthcare system, patients are shielded from the actual costs of care, so they do not carefully consider these costs when assessing care. Take, for example, that a new chemotherapy drug for colon cancer cost $40,000, and yet only adds an average 1.5 months onto a patient’s life. Or that the newest brand name antidepressant costs 6 times more than its older, generic cousin (Prozac), with no evidence that it works any better. And finally, consider this example: a 70 year-old man with severe, irreversible chronic end-stage heart and renal failure, who has been bed-ridden for 3 months with numerous deep bed sores, and whose family demands “keep him alive no matter the cost.”

Unfortunately, the WIFM game doesn’t end with the patient.  Imagine the beauty of running a business when all your customers say, “Don’t worry, just send the bill to Mom (the employer) and Dad (the government) and they’ll pick up the tab.”  It is not rocket science to understand how this led physicians to a business model that guaranteed customers as long as they played by the providers’ rules; nor to understand how drug companies produce more and more “me too” drugs that offer no advantages over generic precursors but cost 6 times more; nor to see primary care physicians moving to specialization, with little difference in training compared to primary care while doubling or tripling fees; nor insurance companies keeping 30-40% of all collected money for “administration, policing, and profits,” and their executive team pocketing exorbitant rewards, like the United Health Care CEO who amassed almost $2 billion in just a few years.  How dare he?!

This then is the systemic toxic effects of our health care system. The moral hazard of free healthcare binds us into one big dysfunctional family. Whatever happens, let’s make sure someone else is paying for care.

Here’s the rub: insurance has a social value for protection against large or chronic, recurring costs to help ensure your financial well-being. Primary care, on the other hand, is something all of us need, on average 1-2 hours a year and a can cost the patient as little as $300. What minimal cost to pay for staying healthy today, building for a healthy tomorrow, and ideally decreasing our need for more expensive healthcare later on. Yet few are willing to pay only a little bit today for their day-to-day care – no matter its level of quality, accessibility or convenience, unless it is “free.”  So, in a world of moral hazards, what is going to happen to typical primary care?

Stay tuned and we’ll review the dirty little secrets primary care plays to survive and why it really does matter to you.

Until next time, I remain yours in primary care,

Alan Dappen, M.D.

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4 Responses to “Moral Hazards: What Happens When You Think Healthcare Is Free”

  1. Peter says:

    Excellent editorial on moral hazard in healthcare.

  2. dhandelsman says:

    I couldn’t agree more. Only recently, I had the experience of needing new glasses. The vision care provider knew more about my coverage than I did, and implored me to not leave any of ‘my’ money on the table. It’s not my money. The insurance carrier is footing the bill so I can get some service I don’t actually need.

    I’ve seen this in a variety of patient care settings, and it’s caused me to wonder what services I really need. My insurance allows for dental xrays every ‘x’ months, and my dentist knows it. Ditto for other diagnostics from other practitioners.

    I’m fortunate that I have healthcare insurance provided by my employer, and I fully appreciate it. I’m also aware that my practitioners often know more about my coverage than I do, and are adept at using my insurance to their advantage. Is the care better? I don’t honestly know, and I don’t that I can adequately question the need for this diagnostic or that test — especially when it’s ‘covered’. They’re the doctor, not me.

  3. Robin says:

    I think this article is right on, except for one small part.

    “…is virtually free because they have health insurance usually wholly and partially funded by someone else, like their employers ….”

    I chose my job partially because part of the package was decent healthcare insurance. I consider it (as does my employer) part of the whole salary/benefit package, thus not “free” but part of my compensation for work done.


  4. Alan Dappen MD says:

    To Robin’s point:

    You are correct to challenge my use of the word “free.”

    Examples like a buffet, sub-prime lending incentives and driving gas guzzlers when gas is cheap are also not “free.” Instead they impair our judgment to weigh our actions against other responsibilities and externalities.

    “Free” should be read euphemistically as “subsidized.”

    Let’s use your example. “As long as my employer is subsidizing (part of my benefit package) my health care, the WIFM is… I’ll work for this person and no longer need to worry about those horrendous health care costs. Now that my health care as been prepaid I can consume health care without worrying about the price. Ergo the moral hazard is unchanged from the word “free. “

    We seem to have no problem paying for haircuts, eating out, paying the plumber, the carpenter, the mechanic, the vet among thousands of other services we consume weighing decisions of cost benefit, quality, carefully, but when it comes to our own personal health, what primary care doctors have discovered is the entire patient doctor relationship hinges on the singularity of the
    $20.00 co-pay. For $20.00 patients expect quality, patience, time to explain oneself, attention to wellness, review of multiple issues, a meaningful personal relationship, a few prescriptions, a detailed explanation of risks and benefits of treatment, a review of other possible ideas in the differential diagnosis, and hopefully to get a few tests, and labs ordered not to mention an introduction to a specialist.

    Coming soon are the games primary care plays to extract as much compensation from the insurance company as possible since it’s obvious that none of this really costs $20.00. Since you (the patient) aren’t paying for this, you don’t need to concern yourself with what I’m about to do to extract my “fair share.”

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