Truck and Barter: Lessons in Incentives

January 03, 2005

Lessons in Incentives

By Ian

Hospitals are trying to figure out if it sends the "wrong signal" to have a Mickey D's in the lobby ready and waiting for the guy who just had heart surgery.

At a time when two-thirds of American adults are overweight or obese, putting their hearts and arteries at grave risk, health officials and physicians are urging people to be watch their weight and eat healthier.
Having french fries at a leading center for treating heart disease sends the wrong message, officials of the Cleveland Clinic believe.

Of course, if the hospital is private property, I don't mind at all if they decide that the only food service should be through Seattle Sutton, Lean Cuisine, Baja Fresh, the Outback, or Cold Stone Creamery. Then again, I would mention that, at a time when hospitals are losing money, turning away rent from high-volume places maybe isn't the wisest financial move. If they're just going to stop through a drive-thru on the way home, why not capture some of the market? But that could just be me.

If people bore more of the direct cost for their medical problems -- heart disease in this case -- would they be more willing to take care with their eating habits? Sure, the heart poblem the man in the story is having treated is going to drive up premiums, and makes it hard for him to get new or different insurance, but that's a far cry from getting a bill a week later that has, say, a five- or even six-figure bottom line. If there was some sort of tote-board next to the refrigerator, totalling up the likely medical costs for every extra slice of cheese or spoonful of sour cream, then the answer is clear. Since people are often very bad at weighing potential risks and assessing the future, however, it's not so clear.

To be sure, the poor are both the most likely to be without health care, and also the most likely to be overweight. The issue, I think, stems from the progress in making processed foods has driven out costs while infusing the product with items that put on weight. Or at least their concentration has increased dramatically -- think "high fructose corn syrup". Without paying monthly premia, these people also don't face a direct cost for health care, but do assume a much higher risk and face a far more worrisome situation. Eating well is an expensive proposition in this country as compared to pre-packaged meals and fast food, however, and the increased risk doesn't reduce the gap.

But my question then becomes: is providing state-funded health care -- such as proposed plans to extend health insurance in an ever-more socialized way -- to the riskiest possible group going to help in terms of producing better health results? Certainly the costs of health care provision would be driven up by the new people who are now using services at a higher rate than the less risky group. And the presence of health insurance hasn't created a drive towards healthy living among the covered. In fact we'd expect the opposite. I understand that some people would feel better knowing that more and more people are covered, but I'm not certain that I see how this results in what I assume to the be ultimate goal of health insurance and thus access to health care: healthier people. (Note that I don't count children or coverage of children in this, since I think there is a strong case to be made about their inability to understand -- though how we cover children alone is a question I've not got a good answer to.)

Is the desire to make sure people are covered, or to have healthier people? If it's public funds being spent to achieve and end, I'd prefer to have a clearer purpose.

Posted at January 3, 2005 10:17 AM

Comments

A good question. Clearly, health policies in the US are not narrowly tailored or defined enough to be labeled "for the creation of a healthier population", though we can see token moves in this direction over the past decade (see anti-smoking campaigns).

The efficiency argument is that government has finally taken an interest in the originally Progressive cause of good health and the costs of treatment are conceivably higher than the costs of prevention. Some insurance companies are moving in this direction with extended coverage of alertnative health (eg massage therapy).

Comment by alina at January 4, 2005 08:56 AM | Permalink

i agree on the McDonalds bit. who cares about "wrong signals"? If a heart disease center encourages healthier alternatives to eating, then they'll have less repeat customers. It'll be much better to increase profits by keeping with the McDonalds... stupid liberals.

"If people bore more of the direct cost for their medical problems -- heart disease in this case" -- What in God's name are you blabbering about? Heart disease is no picnic, and it kills millions of people each year. That's a much more persuasive incentive than an extra $ 6,000 bill -- (is this point really even arguable?)

Americans are very bad at weighing the risks of eating poorly. It's a mystery, but probably it has to do with culture & education. In Japan, for example, food & nutrition make up a much bigger part of both, and Japanese people are infinitely healthier (thanks to veggies, fish & tofu). The other problem is addiction to foods such as McDonalds.

Clearly, giving poor people access to health care would increase health care immesurably. I'll admit, I'm biased on this score due to what happened to my cousin Rodney. Rodney got injured at work when his boss asked him to carry a heavy box across an icy parking lot. After years of being jerked around by a host of doctors, all saying different things and throwing away his lifes saving on a host of remedies which never worked, Rodney gave up. He couldn't work, his back was often too stiff to get out of bed, and thus he got fat. One day he decided enough was enough, and ended his life.

Given the harm it caused my family, I can't say I'm unbiased on the issue of universal health care. But the costs of not having universal health care are not just human and moral, they are also economic. Rodney was only 35. He could have worked for another 20 years, if only he'd gotten the proper medical treatment. His little girls, growing up without a father, seem doomed to a life of poverty without him. I was so pissed off when I found out, that I took off of work for a couple days, and i wasn't the only one. If you count all of those costs of not having universal health care together, it is far in excess of Rodney's health care, and he was one of the high risk ones.

Comment by doug at January 5, 2005 01:10 AM | Permalink

"I understand that some people would feel better knowing that more and more people are covered"

i think i was too nice to you in my first post. You should withdraw this comment ASAP, before people mistake you for an asshole. Making liberals "feel better knowing that more people are covered" is not the point. The point is to provide health care to people who don't have it.

with all due respect, doug

Comment by doug at January 5, 2005 01:16 AM | Permalink

Well, it's always nice to know that people are out there.

Sorry to hear about the trouble your family has had with heart disease. I can certainly understand, having a long family history of bad hearts and losing people at various ages to complications.

Butmy issue is with the line you draw from having health insurance to being more healthy. My point about the man who has both insurance and heart problems is that, according to this article, the heart problems are not preventing a lot of people from eating things that are astoundingly bad for them. You rightly mention this yourself. My issue is that this issue of poor risk calculation doesn't change with the presence of health insurance. The people coming downstairs from having angioplasty to getting a Big Mac and fries aren't demonstrably better because they have health insurance. My grandfather had heart trouble that didn't change his eating or smoking habits -- despite being a doctor.

Insurance isn't a guarantee of seeking out health care, as a good portion of the country aptly demonstrates. One of the strengths of insurance comes from pooling together people of varying risk categories that are largely unobservable by the insurance provider (though they are often surprisingly good at figuring things out and discriminating on price appropriately). This comes at a price, though. The more you cover (through lower rates -- approaching a zero price), the more likely it is you cover riskier people, and the actual costs go up since there will be more people who have to start taking out more than they put in through taxes, premia, etc.

Again, my point isn't to wish poor health on people. It's simply to question the rationale behind some policies. Some questions are better than others.

And, honestly, no one's ever "mistaken" me for an asshole. They're pretty darn sure about it right off the bat.

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