Drowned

THE MORAL-HAZARD MYTH
The bad idea behind our failed health-care system.

Mickey Kaus is vigorous today in his dissent against Malcolm Gladwell's latest contribution to the New Yorker. Gladwell's article is admittedly quick to turn from a throughgoing looking at the entire health care picture to an explanation of the faulty thinking behind Health Savings Accounts. On the other hand, while I know a lot about HSAs because I write about them at work, and Kaus knows about them because he's obsessed with understanding the ins and outs of every proposed health care system, I'm willing to wager that we're members of a distinct minority that have considered the implications of these G.O.Playthings before reading Gladwell's article.

Health Savings Accounts are a good idea in theory--and if your employer offers to switch you to HSA-eligible coverage and deposit a share of the cost savings into your HSA tax-free, you should jump at the opportunity, especially if you're a twentysomething with no child-birthing plans in the near future. But precisely because they seem like such a deal for well-employed twentysomethings, they're a bad plan for most Americans and for the country in aggregate. HSAs let those most likely to remain in good health opt out of the larger insurance pool, leaving a picked-over population to pay higher and higher premiums for the simple reason that they're growing older and more risky to cover. This is patently unfair to them--their own health insurance rates have always reflected risk-sharing with older, higher-risk folks--and it will be even more unfair as more people take advantage of HSAs in coming years.

Unfortunately, HSAs are so wonky in nature that they require financial advisers to structure correctly; hence the accusation, often made, that they are nothing more than another tax shelter for the rich. But they are more than that, as Gladwell ably points out. They represent an attempt to shift the paradigm of health care by encouraging consumers to reduce their utilization of the system. Deductibles, which have grown by leaps and bounds in recent years, haven't stopped people from visiting the doctor; HSAs, by placing the full price tag for care in front of patients and asking them to take money out of an account that could otherwise grow tax-free (or their own pocket) to pay for it, are intended to prevent many doctor's visits by getting people to think twice about the cost of a visit.

That's fine if the visit being reconsidered is frivolous, but how many twentysomethings will forgo needed care and checkups, then use the extra wages from their employers to buy a flat-screen TV or an Xbox instead? Creating an additional "moral hazard" to visiting the doctor is not the answer; lowering the cost of care by eliminating the layers of bureaucracy designed to prevent patients from accessing care without the approval of an insurance company, and using the savings to fund additional slots in medical schools and residency programs until the supply of doctors meets the demand for care, is. If more people read and consider Gladwell's article, maybe our national conversation can begin to move in that direction.