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October 20, 2008

Moral Hazard and Health Care for All

Arch Surg. 2008;143(10):931-932. doi:10.1001/archsurg.143.10.931

Changes to increase US health care coverage are in the air. State programs that expand access provide financial help with insurance premiums to those in need. Complete coverage provided at the federal level for those unable to afford insurance has also been proposed. However, a practical concern is that if people have free health care, they might take too much of it, making the system unfair and too costly. This is called a moral hazard, an economic concept that relates the amount paid for something to its value. According to this theory, individuals will choose to take something that is free or already partly paid for, but they might not choose it over some other commodity if they have to pay the total cost of either. For example, people eat more at buffets because they pay a fixed price.1 With car insurance, people are more likely to choose repair at a cosmetic body shop if they have a low deductible. In health care, the concern is that when people have insurance, particularly without copays (or deductibles), they will have no incentive to choose only the care they need. Pauly2 noted that this is not because of moral perfidy but reasonable economics.

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