“People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.” –SuperFreakonomics
What are the unintended consequences as the growing number of insured Americans meets up with moral hazard and a growing shortage of healthcare providers?
By Jerry A. Boggs | Last updated on December 15, 2015 | Originally posted on May 21, 2012
Most of us drive our vehicles very carefully, even though we have insurance to cover accidents.
But suppose you had no insurance. Think how much more carefully you’d drive. And how much more slowly. Yes, you would. And you’d likely drive less. (And maybe walk more and become healthier for it.) I think one thing’s for sure: there would be a lot less dangerous texting while driving!
“With automobile collision insurance, one is more likely to venture forth on an icy night,” writes Harvard economist Richard Zeckhauser.
For many people, I suspect, the more vehicle insurance they have and the less their deductible, the more they might tend to drive and the faster and less guardedly. (To check that in yourself, keep imagining how you’d drive without insurance.) That means more accidents in which people are killed and injured. Vehicle insurance is a wonderful thing, preventing bankruptcies and poverty and bestowing peace of mind. But it is disquieting to know that insurance has the unintended consequence of providing these benefits at the cost of more accidents, more injuries, and more deaths than if no one had insurance.
In a report on how to fight pandemics, the March 2012 Discover magazine says the secret to fighting them is “knowing their real cause: disease factories built by people. Ironically, hospitals turn out to be highly efficient disease factories. They allow the proliferation and spread of dangerous germs among patients, and the evolution of those germs to extreme levels of virulence.”
Yet over a decade ago the news from the Journal of the American Medical Association (JAMA) was even more alarming:
“America’s healthcare system is the third leading cause of death in the U.S., causing between 230,000 and 284,000 fatalities per year, behind only heart disease and cancer.”
The report didn’t say the third leading cause of death is poor health. It said the healthcare system itself: in other words, our country’s third leading cause of death is the legions of good-intentioned doctors, nurses, and others whose ultimate duty is to help us avoid death.
“Our ever more sensitive technologies,” Dr. Atul Gawande, a public-health researcher, writes in the May 11, 2015 issue of The New Yorker, “turn up more and more abnormalities — cancers, clogged arteries, damaged-looking knees and backs — that aren’t actually causing problems and never will. And then we doctors try to fix them, even though the result is often more harm than good.”
JAMA provides a breakdown of the deaths caused by health care (for other breakdowns, go here):
- 12,000 deaths per year due to unnecessary surgery [Emphasis mine]
- 7,000 deaths per year due to medication errors in hospitals
- 20,000 deaths per year due to other errors in hospitals
- 80,000 deaths per year due to infections in hospitals
- 106,000 deaths per year due to negative effects of drugs* (See also the Nov. 19, 2012, report by Dr. Sanjay Gupta, CNN’s chief medical correspondent.)
“Pharmaceutical drugs are 62,000 times more likely to kill you than supplements.” –Dr. Mercola
To the JAMA list we must add the figures cited in September 2012 by Shannon Brownlee, Acting Director, Health Policy Program, New American Foundation: “The estimates are that tens of thousands of cancer deaths are being caused by medical radiation.” (CT scans, MRIs, etc.)
Then add the nearly 200,000 hospital patients who may be killed each year by blood clots following surgery or illness. (Older patients are also at a higher risk of having a heart attack following surgery for hip or knee replacement.) A growing problem, blood clots are the leading cause of preventable hospital deaths in the U.S., according to David Goldhill, author of the article “How American Healthcare Killed My Father” and the book “Catastrophic Care, released January 8, 2013, citing a report in The Wall Street Journal. (Watch Goldhill’s video.)
It’s almost enough to make one ask, “Why don’t we drop our health insurance except for catastrophic coverage and stay away from doctors except in a dire emergency?”
Suppose,, for a moment, that no one had health insurance. Because of the law of unintended consequences, lots of things could happen, good as well as bad. A good:
In 2008, shortly after the economic collapse, I was watching TV as a CNN reporter interviewed a woman on the street. She had just lost her job. The reporter asked how she was coping.
“Along with my job, I lost my health insurance,” she said [I paraphrase]. “Now I have to really be careful to watch what I eat, lose weight, exercise, and take better care of myself.” I got the impression that while she had health insurance, she tended to be a bit reckless with her health, figuring she was covered if she got sick.
In January 2014, I read this story:
Chelsea Byers of Flagstaff is insured for the first time in her life through Healthcare.gov and couldn’t be more pleased. She might even go skiing for the first time, now that any injuries from an accident would be covered. –Arizona Daily Sun, January 21, 2014
Some people, maybe many, take on more risk when they feel they have a safety net under them. That’s because, according to a Slate.com article, “Insurance is also the source of what economists call ‘moral hazard,’ where those who are protected against the consequences of their actions take greater risks than they otherwise would.” “The Oregon Health Insurance Experiment” adds: “Although health insurance is expected to improve health through increases in the quantity and quality of health care, it is also possible that by reducing the adverse financial consequences of poor health, health insurance may discourage investments in health and thereby worsen health outcomes.” In the May 5, 2013, Business Insider, Joe Weisenthal says of a study done by the RAND Corporation:
But the study also tracked the health outcomes of each group, and there the results were more surprising: With a few modest exceptions, the level of insurance had no significant effect on the participants’ actual wellness.
In that study, did moral hazard mitigate the benefit of insurance on wellness, since the well-insured might generally be less vigilant about watching their health than the poorly-insured and the uninsured? Similarly, will moral hazard, along with the patient harm created by the increased stress on doctors by the increased demand for their services, offset the wellness gains promised under Obamacare despite its preventative services provisions?
A hint that moral hazard may indeed undermine Obamacare’s goal of better overall health is in a July 2, 2012, Time.com’s commentary: “But in the end, it’s hardly certain that health care for all will give us a healthier nation. It seems logical that when we have insurance, we are more likely to access and utilize healthcare resources, and so we will be healthier. But there’s increasing evidence showing that much of the care we receive probably provides marginal clinical benefit, and that more care isn’t always better. Good health is still determined more by personal choices than insurance, hospitals and procedures.”
“To be clear, there will always be some baseline benefit to being insured versus not being insured, even if you account for the moral hazard. A major Institute of Medicine report in 2009 found that uninsured adults are more likely to be diagnosed at an advanced stage of cancer, more likely to die from a heart attack and less likely to recover from a serious injury.” –Dr. Sanjay Gupta
(The number of people affected by moral hazard can depend on the type of moral hazard; i.e., private insurance vs. a government bailout, which is also insurance. And how legitimate or valid one sees moral hazard may depend on one’s political bent. Liberal Times columnist Joe Klein may not think moral hazard is triggered by health insurance for individuals, but he apparently does think it’s triggered by government bailouts to big banks, which he ought to know aren’t things but collections of people who make decisions just like people such as CNN’s woman on the street. Says Klein, “Sadly, neither President Obama nor Mitt Romney have addressed the ‘moral hazard’ that accrues from having banks that are too big too fail….” See a New York Times argument. There needs to be a non-partisan study of the real, determinable effects of moral hazard.)
Returning to CNN’s interviewed woman: Without health insurance, she became like the driver without car insurance.
And what if insurance — liability insurance for protection against malpractice lawsuits — were unavailable to doctors? Would doctors, too, become like the driver with no car insurance, the result being more-careful doctors, which is to say less injury and death to patients under their care? (Without liability insurance, of course, we’d no doubt have fewer doctors, and healthcare would be harder to get — but perhaps that would not be entirely bad!)
How many more people, because they now have insurance, will pay less attention to diet and exercise like CNN’s woman on the street, and develop medical problems (such as diabetes) that require visits to the doctor that they would not have had to make while uninsured and cautious?
Enter President Obama’s Affordable Care Act (ACA), which requires millions of uninsured to buy insurance.
In 2014, the ACA may bring into the healthcare system an estimated 32 million newly insured people, mostly young adults (though an astonishing 26 million other people will be left out, meaning the ACA is not very universal). Economic studies indicate that these young adults “will try to consume twice as much medical care as they have been,” often, I suspect, merely “to get my money’s worth.” (The rate of consumption may be mitigated by high deductibles and co-pays.) Moreover, the ACA will bring countless others into the healthcare system more often. It’s obviously supposed to do all that, since Mr. Obama rightly wants to spread the health around.
He also wants to spread Medicaid around to include millions of the uninsured poor. Yet according to a large study by the University of Virginia, surgical patients on Medicaid, the expansion of which President Obama himself described as putting “more people in a broken system,” are 97% more likely to die than those with private insurance and 13 percent more likely to die than those with no insurance at all.
“It’s like we’re handing out bus tickets and the bus is already full.” -Perry Pugno, vice-president for medical education at the American Academy of Family Physicians, Bloomberg’s “Doctors Brace for Health Law’s Surge of Ailing Patients,” September 24, 2013
And let’s not forget that every day for the next 18 years, 10,000 Baby Boomers, whose health on average is very poor and getting worse, will reach age 65 and become eligible for Medicare. Many Boomers will seek healthcare services before losing their employer insurance, and many others who’d had no insurance and had put off healthcare will put it off no longer.
Moreover, we have a fast-growing obesity epidemic (see chart), especially among the young, for whom obesity, a condition worse than smoking, has jumped from 9% of the adolescent population in 2000 to 23% in 2008, and threatening to overwhelm our health care system. The main threat is the costly diabetes that is often obesity’s side effect — some people call it diabesity — and the costly Alzheimer’s disease that is often diabetes’ side effect. (But see a less alarming report on obesity at PsychologyToday.com.)
We also have these troubles brewing:
- More than four in 10 U.S. physicians said they were emotionally exhausted or felt a high degree of cynicism, or “depersonalization,” toward their patients, according to researchers whose findings appeared in the Archives of Internal Medicine.
- “The high rate of burnout has consequences not only for the individual physicians, but also for the patients they are caring for”…. –Reuters, August 21, 2012; more at Medscape.com in a report dated March 28, 2013
- Six in 10 physicians said it is likely many of their colleagues will retire earlier than planned in the next 1 to 3 years. –Every Day Health, March 21, 2013. Even more doctors may want to retire earlier than planned if Kathleen Murphy, running for the House of Delegates, has her way: she wants to require Virginia doctors to accept Medicare and Medicaid patients despite these insurers’ much lower reimbursements.
- It’s not just doctors. “A new report from AMN Healthcare and its Center for the Advancement of Healthcare Professionals indicates that a third of nearly 9,000 nurses surveyed earlier this year say they want to quit. Couple this with 62% of registered nurses over age 54 who say they are considering retirement within the next three years, and it’s no wonder that Marcia Faller, RN, PhD, chief clinical officer at AMN Healthcare, said, ‘The harm to the health-care industry goes beyond the numbers.'”
The pressure and stress on doctors may explain why President and CEO of the Mayo Clinic John Noseworthy, drawing from his nearly 30 years as a neurologist, could say of his experience even before the Obamacare patient surge: “Probably 30 percent of the patients I saw were misdiagnosed, had the wrong tests done.” (He hopes this is redressed by modernizing reimbursement methods to “motivate and stimulate moving towards a more efficient system.”)
Finally, “one flaw in the Affordable Care Act,” says Business Week, “is that by prohibiting insurers from taking health risks into account in setting rates, it gives people no incentive to lower their premiums by losing weight….”
Against this worrisome backdrop, millions more may soon engage the overburdened healthcare providers who are, according to JAMA, our nation’s third biggest killer.
End-runs are underway, though possibly thwarted by dubious funding, to address the insufficient number of primary care physicians: “As Obamacare Looms, New Medical Schools Open To Address Doctor Shortage.” (See also this Bloomberg report.)
They’d better hurry. The number of doctors working less than full time is increasing at an alarming rate: “In 2011, 22% of male physicians and 44% of female physicians worked less than full time, up from 7% of men and 29% of women from Cejka’s 2005 survey.”
(See a contrary view: “We don’t need more doctors.”)
A monkey wrench has already been hurled into the efforts to address the U.S. shortage of 91,000 doctors expected by 2020 (according to the September 2012 Wired magazine): The Association of American Medical Colleges “worries that the funding may soon not be there to support residency programs for this larger number of medical school graduates in the next two to three years. The Balanced Budget Act of 1997 [enacted in President Bill Clinton’s second term] capped the number of available slots for residents coming out of medical school as part of the law’s reduction in spending on Medicare, which largely funds residency programs.”
Once Obamacare is fully up and running — but with the cart before the horse — could our healthcare system then become, according to the audio book “Killer Cure,” the second leading cause of death? Or even, in the worst of ironies, the first?
I ponder this as I listen to the PBS Frontline documentary, “Hunting the Nightmare Bacteria,” which aired October 22, 2013. Its subtext is that at a time when bacteria are becoming highly resistant to antibiotics, makers of antibiotics are getting out of the business — this at a time when Obamacare will bring thousands of more people into hospitals, most of which, says Frontline, “aren’t required to report outbreaks to the government, and most won’t talk publicly about them.”
I realize the nature of politics tends to be “You must get what you can when you can in whatever form you can.” (That’s largely why government inherently is ineffective.) But when you do that and forge ahead despite the torpedoes in such an important, complex, vast-scale undertaking as the Affordable Care Act, you are, I think, flirting with disaster.
Do we really know what we’re doing?
Good news, December 1, 2015: “HHS: Dramatic Downturn in Hospital-Acquired Conditions“
November 20, 2015, note on moral hazard:
With Obamacare, fewer people than expected may visit the doctor. It appears the higher costs associated with President Obama’s healthcare plan — stiffly higher premiums and deductibles — could be discouraging many, especially low-wage earners, from seeking care.
Moreover, my own doctor said he reduced his patient-load by 30 percent because of Obamacare’s required e-paperwork. Many doctors are in the same boat, as a NY Times op-ed says:
“Patient care now requires routine interaction with an electronic medical record — an interaction that is increasingly interrupted by pop-up windows demanding some often unrelated action to proceed. These serve the dual purpose of data collection and compliance for performance measures. Patients probably do not care that doctors find these intrusions irritating and distracting, but they are often unhappy that doctors are spending more time with the computer and less with them.”
All this means more people will die from lack of care, and fewer from the effects of moral hazard. On the other hand, a New York Times report on December 14, 2015, says something different about the demand for healthcare insurance: “As Health Care Act Insurance Deadline Nears, ‘Unprecedented Demand’“
“Prescription Drugs More Deadly Than Car Accidents, Guns, and Suicide” -The Daily Beast, May 25, 2014
“We’re Still Not Tracking Patient Harm” -ProPublica, July 17, 2014
“Apocalypse Pig: The Last Antibiotic Begins to Fail” -National Geographic, November 21, 2015
The UK’s universal healthcare system produces a huge demand on medical services. To read about the consequences at one hospital, where hundreds of deaths occurred needlessly, go here. Also read “Britain told social inequality has created ‘public health timebomb’.”
* Source list regarding prescription drug abuse, compiled by Mercola.com:
- Morbidity and Mortality Weekly January 13, 2012 / 61(01);10-13
- CNN November 14, 2012
- Congressional Testimony May 24, 2011
- CNN November 14, 2012
- NYTimes.com April 20, 2007
- University of North Carolina April 25, 2011
- CNN November 15, 2012
- JAMA. 1998 Apr 15;279(15):1200-5.
- Altern Med Rev. 2010 Dec;15(4):337-44.
- Arthritis & Rheumatism, Volume 54, Issue 11, pages 3452–3464, November 2006
- The Journal of Neuroscience, 6 April 2011, 31(14): 5540-554
- Psychol Sci. 2006 Dec;17(12):1032-9.
For those who think the answer is a UK-styled healthcare system run entirely by the federal government: