Leaving the EU -- The Moral Hazard of Sick Care
In Sweden, a cough gets you a doctor's note to rest. In America, it triggers specialists, diagnostics, and co-pays. But insuring the medical buffet is expensive. It also crushes the genuinely sick.
Catching up with friends and family after so long abroad, I am inevitably asked to comment on the difference between the American and European health care systems. In the increasingly fruitless effort to straddle the left-right chasm that has opened up on this as on so many issues, I hem and haw as diplomatically as possible and change the subject. But perhaps here, in writing, I can finish a thought or two without raising the ire or losing the acquaintance of people who, since I left nearly two decades ago, are conditioned to seeing caveated acceptance and nuanced disagreement as outright betrayal.
American Progressives want what Europe has. American conservatives fear it. As is so often the case, neither side has a firm grasp of what they think is going on in Europe. I can’t claim any expertise, myself. In fact, I know equally little about the “health care policies” of either place. But I do know that there is no such thing as a European health care system. There are as many systems in Europe as there are individual countries.
As a sovereign entity, Sweden sets its own policies for a population roughly the size of North Carolina, inhabiting an area slightly larger than California. So the first consideration for American admirers of the Swedish system is whether or not it can be scaled to a continent with a population 32 times greater. Pick any social issue where one side insists we adopt, and the other that we reject, the policy of the Old Country, and they are more than likely arguing over a fiction that does not exist. When we talk of setting such policies in Washington, it would be more appropriate to see if there is anything comparable in the EU capital of Brussels than in Stockholm or Berlin or Paris. If the progressives really wanted socialized medicine as they have it in Europe, they would have to discover a newfound respect for the virtues of federalism.
But if it is possible to take Sweden as a proxy for “the European model,” then I have to say, based on my experience, there is less on offer, but for less cost. Swedish physicians simply don’t issue as many prescriptions, make as many referrals for specialists and machine diagnostics, or recommend as many invasive procedures as American patients are accustomed to. Whether that is because of a lack of funding or because the population is generally healthier, the practical result is a medical culture that relies heavily on the patient’s own biological resilience. While most of the world addressed the COVID pandemic with draconian lockdowns, mask mandates and mRNA injections, Sweden famously maintained life as normally as possible, relying on voluntary common sense and natural herd immunity. (The maximum public venue size was ample enough to accommodate the three or four friends I knew well enough to have a drink with; the curfew for pubs and restaurants was well past my bed time; and the two-meter recommended social distancing was about half of the space that Swedes keep between themselves innately. Ergo, for me, life barely changed).
I discovered exactly how far the Swedish medical system is willing to test that biological resilience during a bout with a severe, rattling cough that I was absolutely certain required immediate antibiotics. I had to phone the clinic first, which insisted on a self-administered COVID test. When that came up negative, the clinic provided a “doctor’s note” instructing my employer to give me ten days off until my scheduled appointment, at which a nurse took blood samples, a doctor put a stethoscope to my chest, and I left with permission to take another week off and a bottle of morphine.
I knew the Swedes were very reluctant to prescribe antibiotics, but I was shocked at getting a morphine prescription for an undiagnosed cough. The doctor said it would help me sleep while my own antibodies kept up the fight. If I was still coughing in another week, I was instructed to call back to the clinic and schedule an X-ray. Here again, whether to spare the patient from trace amounts of radiation or to spare the state the steep cost of operating the machinery, the Swedish medical establishment is remarkably disciplined in rationing its high-tech diagnostics. As it turned out, the cough cleared up before an X-ray was necessary. I never found out what my blood was tested for, and never even got a diagnosis. On the plus side, I didn’t die and have barely had to clear my throat in the five years since.
The Moral Hazard of the Medical Buffet
In Sweden, the system expects you to weather the storm because you aren’t paying for a luxury consumer experience. Contrast this Nietzschean wellness approach to how it would likely have been handled in the States, where the health care consumer, insured through his employer, seeks medical attention from a doctor who doesn’t know the worth of his work and simply directs his patients to the billing department. Since the patient is only on the hook for a co-pay, the doctor might as well order a second opinion, a CT scan, and maybe a biopsy, just to be sure. And until there’s a diagnosis, treat the symptoms with a prescription or two. Not the generic stuff, but the patent-protected new miracle drugs that the patient saw on TV, the ones talked up by the pharma rep during the last all-expenses-paid golf trip.
The risk of abuse in a system whose beneficiaries don’t bear the full costs associated with that risk is known to economists as “moral hazard.” With the exception of banking, no sector in America is more rife with moral hazard than health care. As a mandated employee benefit, in which the corporate employer pays 83% of the premium for individuals, 73% for families, and in which the employee’s contribution is taken out before he’s handed his paycheck, the actual cost of insurance is barely visible. The consumer can hardly be blamed for utilizing every available test and prescription. When the system goes to such great lengths to hide the true price tag behind a flat, nominal co-pay, the patient treats that co-pay not as a fraction of the total charge, but as the entrance fee to a medical buffet—accepting the maximum level of care under the assumption that his premiums have already settled the rest of the tab.
Doctors and medical administrators likewise participate in the moral hazard. Justifiably terrified of malpractice litigation, they are already inclined to err on the side of doing too much rather than too little, but when the bill goes to the faceless insurance company and not to the patient standing before them, price discovery goes out the exam room window. There is no billing code for “watchful waiting” to see if the human immune system can heal the malady on its own.
With consumers and suppliers sheltered from the true costs, it is left to the insurance company to play the villain’s role of enforcing the mathematical reality, rationing care through sheer administrative inertia. This is the genesis of the uniquely American labyrinth of prior authorizations, out-of-network surprises, and arbitrarily denied claims. In a functioning free market, a business that offers abysmal customer service is swiftly punished by consumers who take their money elsewhere. But in the employer-sponsored model, the insurance company’s true customer is the human resources department. The patient is merely an end-user who cannot fire his insurer without quitting his job.
Not that long ago, the CEO of a major insurance conglomerate was gunned down in the street, prompting a wave of sympathy for the assassin from Americans who viewed his victim as a monster for routinely denying medical claims while raking in for himself an eight-figure salary. But under the circumstances, his extraordinary compensation made dark economic sense. In a system devoid of price discovery, he was paid handsomely to perform the most hated job in the market: the bureaucratic distributor of limited resources in the face of unlimited demand.
With almost no financial friction to discourage frivolous use, the comprehensively insured employee seeking an MRI for a tension headache can all-too-easily crowd out the oncology patient fighting for a life-saving biologic. When the American health care market is structurally incentivized to indulge the paranoia of the worried well, the desperately ill are the collateral damage, forced, at a time when they are most vulnerable, to take the offensive in a bureaucratic war of attrition. The system is profoundly cruel to those who are genuinely sick, but to lay blame exclusively with the insurance companies is to overlook our own culpability in demanding expensive, subsidized cures for trivial complaints and, in many cases, a lifetime of bodily neglect.
The Semantics of Health vs. Medicine
While Americans visit the general practitioner less frequently than Europeans, they lead the industrialized world in polypharmacy, high-tech diagnostics, and specialist interventions. We have come to treat our personal roster of specialists—my cardiologist, my neurologist, my endocrinologist—as a bizarre marker of middle-class status. Yet, for all our exorbitant spending, we are no healthier than industrialized nations that offer far less. By many metrics of chronic disease, we are in fact worse off. The fundamental error we make is semantic: what we are endlessly debating is not “health care,” but “medical care.” Genuine health has very little to do with hospitals, billing departments, and patented drugs.
Perhaps Europeans better understand this distinction. The Swedish approach to health seems to begin long before a patient goes to the clinic, with walking and cycling serving as modes of transportation much more relied on than in the US, and a diet that largely excludes toxic preservatives, artificial dyes and hyper-processed chemical additives. In fact, the European Union strictly regulates or outright bans many of the ingredients found in American grocery stores. I am not advocating any such nanny-state laws here; grown boys and girls should be perfectly capable of exercising personal discipline in the management of their own pantries. But we cannot ignore how a highly processed diet, chronic sleep deprivation, relentless stress, and a sedentary lifestyle correlate with the chronic illnesses that clog our medical infrastructure.
But even if we were to make the necessary physical adjustments and properly redefine health care as the individual’s responsibility, we would still need to re-calibrate our understanding of the concept of medical insurance. The fundamental purpose of any insurance is catastrophic risk management—a pooling of capital to protect against the ruinous financial impact of the unforeseen, like a house fire or an earthquake. An annual physical, a prescription for a common rash, even the setting of most broken bones, were once paid for out of savings, for the very reason that they were common enough events that everyone was expected to plan for them. As Lanhee Chen of the Hoover Institution observed, the American model of health coverage operates more like a prepaid service plan than actual insurance. Chen compares it to auto insurance, which protects the policy holder from a sudden car wreck, but doesn’t cover routine maintenance like replacing brake pads or getting an oil change, because there is no risk to pool against. Everyone needs an oil change.
If we insured our vehicles the way we insure our bodies, we would expect our auto policy not only to cover oil changes, but also wiper fluid, and a weekly run through the car wash. We would immediately recognize how absurdly more expensive and bureaucratic car ownership would be than it already is.
The Pre-Paid Service Plan Collapse
Yet, we insist on forcing third-party payers to cover the full range of diagnostics and pharmaceuticals whenever we get the seasonal flu. When confronted with the compounding absurdities, the progressive reflex is to advocate for a single-payer system. This is essentially arguing that because third-party coverage with a handful of insurance corporations has destroyed price discovery, we should consolidate that coverage under one plan run by the government. This ignores both the staggering scale of the United States and the cultural reality of our medical entitlement. Pooling the risk of 340 million people into a single government monopoly, while maintaining the expectation that this monopoly must fund the routine care of an unhealthy population, is a prescription for administrative collapse.
Even in Sweden, with a presumably healthier baseline and a population the size of North Carolina, a growing percentage of citizens are purchasing private supplemental insurance simply to bypass the wait times of their socialized system. A government monopoly, instead of eliminating the need for rationing, would simply replace a script-reading claims clerk with a federal review board. With either version of third-party insurance, be it employer-mandated or single-payer, the relentless demand will continue to drive up premiums, co-pays and subscription costs, and drive down the overall standard of care.
For the sorely afflicted and hypochondriac alike.