Healthcare and the Moral-Hazard Argument

A heap of thanks to Jon Armstrong at [Blurbomat](http://www.blurbomat.com/) for pointing out this [Malcom Gladwell article:](http://www.gladwell.com/2005/2005_08_29_a_hazard.html)

“Moral hazard” is the term economists use to describe the fact that insurance can change the behavior of the person being insured. If your office gives you and your co-workers all the free Pepsi you want–if your employer, in effect, offers universal Pepsi insurance–you’ll drink more Pepsi than you would have otherwise. If you have a no-deductible fire-insurance policy, you may be a little less diligent in clearing the brush away from your house.

This should be required reading for anyone that thinks that HSAs are the way to go. Gladwell provides information on the history of the failed Universal Healthcare movement (did you know that it dates back to WWI?), reasons why the current method of providing healthcare is a failure, and why HSAs are a categorically bad idea.

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Published:: 2.28.06 / 2pm

Category:: Life, Politics

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I’m a 29 year-old web designer, artist, gardener, mother-of-one, wife, and human being, living in the West Park area of Cleveland. Politically, I’d be classified as a flaming liberal. I’m one of those strange people that believes in free expression, human rights, keeping the planet around just a little bit longer, and allowing my kid to grow up to a peaceful society. In terms of spirituality, I’m Christian. I used to be Lutheran, now I’m just me.

I’ve been described as a hellion, strong-willed, stubborn, funny, loyal, and a number of things that are a little too blue to put on this page. In a different life I partied hard, drank like a fish, and cursed like a sailor. I still do a few of those things, but with more prudence. I have a fondness for black t-shirts and eyeliner, hairdye, jeans and workboots. I like to go barefoot when frostbite’s not a threat. I tend to be a little sarcastic.

I’m a recovering fundamentalist, a techno-junkie, a DIY-er and a research addict. I devour books as if they’re pints of Ben and Jerry’s. This sickens my spouse.

I have a number of websites including Burning River Studio and Bell Vance Art. I am a compulsive website builder. I love WordPress.

Distracted Mind is where I write down things that don’t belong anywhere else.

Mike 3.1.06 / 8am

Thank you for posting this! I’ve just gotten a crash course in the fallacy of “moral hazard” and the pitfalls of the American insurance system over the last several months. I was left bewildered by Bush’s HSA speech last month and this article articulates much of what I’ve been thinking and asking myself about it.

Tina 3.1.06 / 10am

Mike–no problem. I find the whole idea of embracing HSAs alarming. If anything, our whole healthcare system needs reform, not another crippling policy.

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Healthcare and the Moral-Hazard Argument

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