We Shall Pay No Price, Bear No Burden, Meet No Hardship... (Well, Most Of Us.)

by hilzoy

Uwe Reinhardt, a health economist at Princeton, has a great op ed in the Washington Post today. It's about the administration's failure to ask for any sacrifice from us to support the wars in Iraq and Afghanistan. Excerpt:

"The strategic shielding of most voters from any emotional or financial sacrifice for these wars cannot but trigger the analogue of what is called "moral hazard" in the context of health insurance, a field in which I've done a lot of scholarly work. There, moral hazard refers to the tendency of well-insured patients to use health care with complete indifference to the cost they visit on others. It has prompted President Bush to advocate health insurance with very high deductibles. But if all but a handful of Americans are completely insulated against the emotional -- and financial -- cost of war, is it not natural to suspect moral hazard will be at work in that context as well?

A policymaking elite whose families and purses are shielded from the sacrifices war entails may rush into it hastily and ill prepared, as surely was the case of the Iraq war. Moral hazard in this context can explain why a nation that once built a Liberty Ship every two weeks and thousands of newly designed airplanes in the span of a few years now takes years merely to properly arm and armor its troops with conventional equipment. Moral hazard can explain why, in wartime, the TV anchors on the morning and evening shows barely make time to report on the wars, lest the reports displace the silly banter with which they seek to humor their viewers. Do they ever wonder how military families with loved ones in the fray might feel after hearing ever so briefly of mayhem in Iraq or Afghanistan?

Moral hazard also can explain why the general public is so noticeably indifferent to the plight of our troops and their families. To be sure, we paste cheap magnetic ribbons on our cars to proclaim our support for the troops. But at the same time, we allow families of reservists and National Guard members to slide into deep financial distress as their loved ones stand tall for us on lethal battlefields and the family is deprived of these troops' typically higher civilian salaries. We offer a pittance in disability pay to seriously wounded soldiers who have not served the full 20 years that entitles them to a regular pension. And our legislative representatives make a disgraceful spectacle of themselves bickering over a mere $1 billion or so in added health care spending by the Department of Veterans Affairs -- in a nation with a $13 trillion economy!

Last year kind-hearted folks in New Jersey collected $12,000 at a pancake feed to help stock pantries for financially hard-pressed families of the National Guard. Food pantries for American military families? The state of Illinois now allows taxpayers to donate their tax refunds to such families. For the entire year 2004, slightly more than $400,000 was collected in this way, or 3 cents per capita. It is the equivalent of about 100,000 cups of Starbucks coffee. With a similar program Rhode Island collected about 1 cent per capita. Is this what we mean by "supporting our troops"?

When our son, then a recent Princeton graduate, decided to join the Marine Corps in 2001, I advised him thus: "Do what you must, but be advised that, flourishing rhetoric notwithstanding, this nation will never truly honor your service, and it will condemn you to the bottom of the economic scrap heap should you ever get seriously wounded." The intervening years have not changed my views; they have reaffirmed them.

Unlike the editors of the nation's newspapers, I am not at all impressed by people who resolve to have others stay the course in Iraq and in Afghanistan. At zero sacrifice, who would not have that resolve?"

I am feeling a little sick at heart right now, so rather than try to find words for all this, I'll just add excerpts from some more articles. First:

" "He was thinking about invading Iraq in 1999," said author and journalist Mickey Herskowitz. "It was on his mind. He said to me: 'One of the keys to being seen as a great leader is to be seen as a commander-in-chief.' And he said, 'My father had all this political capital built up when he drove the Iraqis out of Kuwait and he wasted it.' He said, 'If I have a chance to invade·.if I had that much capital, I'm not going to waste it. I'm going to get everything passed that I want to get passed and I'm going to have a successful presidency." Herskowitz said that Bush expressed frustration at a lifetime as an underachiever in the shadow of an accomplished father. In aggressive military action, he saw the opportunity to emerge from his father's shadow. The moment, Herskowitz said, came in the wake of the September 11 attacks. "Suddenly, he's at 91 percent in the polls, and he'd barely crawled out of the bunker." (...)

According to Herskowitz, George W. Bush's beliefs on Iraq were based in part on a notion dating back to the Reagan White House - ascribed in part to now-vice president Dick Cheney, Chairman of the House Republican Policy Committee under Reagan. "Start a small war. Pick a country where there is justification you can jump on, go ahead and invade."

Bush's circle of pre-election advisers had a fixation on the political capital that British Prime Minister Margaret Thatcher collected from the Falklands War. Said Herskowitz: "They were just absolutely blown away, just enthralled by the scenes of the troops coming back, of the boats, people throwing flowers at [Thatcher] and her getting these standing ovations in Parliament and making these magnificent speeches."

Republicans, Herskowitz said, felt that Jimmy Carter's political downfall could be attributed largely to his failure to wage a war. He noted that President Reagan and President Bush's father himself had (besides the narrowly-focused Gulf War I) successfully waged limited wars against tiny opponents - Grenada and Panama - and gained politically."

Second: George W. Bush, on his reasons for joining the Texas Air National Guard:

"I was not prepared to shoot my eardrum out with a shotgun in order to get a deferment. Nor was I willing to go to Canada. So I chose to better myself by learning how to fly airplanes."

Third:

"They all left together, Charlie Company, the so-called "Black Sheep," 160 members of the Army National Guard on their way to Iraq from this small southern Louisiana community. As the buses rolled down Main Street, residents poured out of homes and businesses to wave goodbye to their citizen soldiers - college students, truck drivers, river workers, clerks. Students from Terrebonne High School left class and streamed onto the street for a last glimpse, some with tears rolling down their faces.

Three months later, six of them returned together in flag-draped coffins following the worst single combat incident for the National Guard in Iraq. Seven soldiers had been killed when a roadside bomb struck their Bradley fighting vehicle, flipping the 50,000-pound vehicle upside down and killing everyone inside. Six of the men were from Charlie Company, four from Houma and nearby Raceland. The community was devastated.

"The city took it very hard, even if you didn't know the soldiers," said Graham Douglas, principal of Terrebonne High School. "There was a lot of mourning." The funerals lasted days, and before the six soldiers could be buried, two more Louisiana National Guardsmen were killed by another roadside bomb. (...)

For years, the primary lure of the Guard and Reserves was money for college and some additional pay. That's what attracted Christopher Babin, one of the six Louisiana guardsmen killed. The same for Warren Murphy of Marrero, La., who was killed with Babin. And for Lee Goldbolt of New Orleans, a Southern University student and one of two Louisiana soldiers killed in March when a car bomb detonated near their Humvee.

"When he saw it was so hard to get a decent job and to go to college, he joined the Guard," his mother, Denise Goldbolt, said. "It meant he was able to go to college, and have an afternoon job. And he wanted to help me because I hadn't worked for a while because of major surgery." The new dynamic has all but eliminated those benefits. (...)

Recruiters say dramatic pay cuts over long periods of time have caused some Guard members to choose not to re-enlist. "Good soldiers are getting out because they fear going back overseas," Young said. "I'm making $150,000 and my wife is a stay-at-home wife. Now I'm in Iraq and I'm making $30,000. I can't take that kind of pay cut for a year, 18 months." (...)

"It's harder on us because we're not used to this, we're not set up for deployment like the active military," said Louisiana guardsman Josette Paul, who spent seven months in Kuwait. "If you're in the regular military, they're already away from home. We have to suddenly take our lives and put it in storage. If you're a single parent, somebody now has to take your children. And what if you're single like me, no kids, no dependents. Who is going to take care of my things, bills, rent, car, home, pets, while I'm away?" "

Fourth.

Comments

[Phil]

Hilzoy, I recently read Sharon Waxman's Rebels On The Backlot, her account of how several very idiosyncratic, outsider directors managed to get movies made in the studios in the late 1990s. One of the directors profiled was David O. Russell, director of Three Kings. She relates a story of how the very liberal Russell was dragged to an event by a Warner Bros. exec, an event which turned out to be a fundraiser for GWB's presidential campaign.

Upon meeting Bush, Russell explained that he had just made a movie about the Gulf War; Bush expressed interest and said how proud he had been of his father.

"Actually," said Russell, "my movie is pretty hard on your father for leaving both the Kurds and the Iraqis out to dry once he got Saddam out of Kuwait."

"Well," said Bush, "I might just have to go in there and finish the job someday."

This was also in 1999.

[John Thullen]

I like Reinhardt's point here, but I'm not sure I buy the health care/moral hazard premise.

Is it really true that well-insured people use health care with abandon? Who are these people? Are they breaking down doors demanding catheterization of their nether regions? Are they begging for radical brain surgery? Are they concentrating on upping their white blood cell counts so the doctor will hospitalize them and by some lucky break recommend bone-marrow transplants?

I hate hospitals, and I put off going to he doctor until pain is unbearable. Who among us can't wait for that next kidney stone?

[bernard Yomtov]

Is it really true that well-insured people use health care with abandon?

Not to detract from Reinhardt's more important comments, but the answer, more or less, is yes. Not "with abandon," maybe, but pretty freely. I'm guilty myself.

[hilzoy]

John: the concept of moral hazard is used elsewhere -- I know it best from non-health economics, where it's used to describe what happens when (for instance) people who hold bonds issued by developing countries that go bust are compensated somehow, and then come to assume that investing in those countries is risk-free. I have never been sure it works in health either -- I mean, I'm sure there's some of it (hypochondriacs who would use endless amounts of health care if it were all free, and possibly also people with serious illnesses who face a choice between treatment X, which is cheap, and treatment Y, which has a minutely better chance of curing the disease but costs huge amounts -- but I wouldn't think people would be just lining up to consume unnecessary health care either.

[dmbeaster]

Did Bush create the "moral hazard" as opposed to exploiting it? As of 2002-2003, the United States had gone a long time since it had to face the grim consequences of war. And the rise of the all-volunteer army, and its spectacular success in 1991, further insulated people from the grim realities of the decision to go to war. It could seem painless -- it wasn;t necessary for Bush to create such an illusion.

Bush & crew have certainly done everything to nurture that illusion. What is so sick is that to maintain the illusion of little sacrafice for the greater population, they are sacraficing the warriors who answered their call to service. The misuse of the Guard and the miserly measures for veterans are cynical and sickening.

And they also demonstrate the political cowardice underlying the Bush war policy -- its just one big photo-op so long as the ugly realities of the war can be masked, even if that requires shoving aside those who have sacraficed the most.

Is it any wonder that such people were unable to plan the occupation with any competence? They are all posers for that moment on the flight deck, and not true leaders.

[Slartibartfast]

Is it really true that well-insured people use health care with abandon?

Speaking for myself, no. I go to the doctor as little as I can get away with. I think I've had maybe two physicals in the last half-decade; one of which was mandatory for adopting and the other of which was...well, let's say I'd passed a critical milestone in the male lifespan, at which time some unpleasant things occur. My kids go when they are due for something or other immunization-wise, or when they've developed some inexplicable fever that won't go away. The wife goes equally seldom or when I manage to communicate that the hormone balance may not be in the best of tune (NOTE: without actually saying as much. Men, pay special heed: this is an important point, and may save you a trip to the doctor or even ER).

So: no.

[Anarch]

Speaking for myself, kinda. I had severe chronic health problems a few years ago that defied diagnosis so I was in and out of my doctor's office on a regular basis. Once those cleared up (mysteriously of their own accord) I've basically only been back for regular check-ups, and that primarily to ensure that I'm not in danger of a relapse.

[hilzoy]

Back on topic: there's just something about having this essay hit me so close on the heels of the massive giveaway that was the energy bill, and therefore having the combination of not beginning to take care of the actual soldiers who are risking their lives, giving huge amounts of money to people who really don't need it (certainly not as much as our troops need up-armored vehicles), and the transparent failure to really try to address critical problems, all nestling together in my head, that just sent me over some edge or other.

[bob mcmanus]

hilzoy, you just need to get past thinking that some of the smartest, most experienced, most competent people in the history of the country are stupid or careless or shortsighted. Rumsfeld and Cheney and DeLay are quite capable of delivering the needed armor. They choose not to.

Once you accept that they know exactly what they are doing down to the minutist detail, then you can start trying to figure why they are making the choices they are making. There are multiple reasons. The ones that survive Iraq will be tough m********ers.

[JKC]

"The ones that survive Iraq will be tough m********ers."

Methinks they will be p*ssed off m*********ers, too.

[ral]

John Thullen: Is it really true that well-insured people use health care with abandon? Who are these people?

Slartibartfast: Speaking for myself, no.

This is, I think, not quite the right way to look at a "moral hazard" argument.

The real question is, what will the aggregate reaction of large numbers of people be to a given policy? Individually, people make decisions based on many factors, and it may be impossible to predict the behavior of a single individual. But, with a large population, a policy may have a predictable effect.

For example, let's take ads for prescription medicine. Will anyone admit to being swayed by those stupid TV ads? Yet millions of dollars are spent on this advertizing. Why? Because it's effective. For some people (a large enough number to make the ads worthwhile) it tips the balance. This may be for any number of reasons (some of them even sensible), but the drug companies paying for the ads have determined, irrespective of the reasons, that they are worth the money.

I think it is reasonable to argue that if I do not bear the cost of a given action, I am more likely to choose that action than otherwise. It may not be the deciding factor for me, personally, but when millions of individuals are involved it can make a difference for many of them.

[heet]

I had to check here to figure out exactly what a "moral hazard" entails.

[John Thullen]

Yes, Heet, I'm curious as to how Terry Schiavo lied about her need to consume health care. Really.

I'm currently trying to consume arthoscopic knee surgery. Apparently, if I consume this surgery, there will be less arthroscopic knee surgery for others to consume, according to the resources allocation folks consuming my time at the insurance company.

If I wanted to consume ice cream or, say, like David Bowie, eye liner, there would be no subsequent shortage of ice cream or eye liner. Cool system, when it works.

But then I wouldn't want to impinge on my freedom-loving sacred access to ice cream or eye liner by re-allocating those resources to solving my limp.

Lest we be fooled though, Iraq is a moral hazard.

[Frank]

John Thullen- Usually I find your posts clever. Either this time you are being too clever for me, or you misunderstand what moral hazard is. It is a common and basic term of art in economics so I'm pretty sure you should be able to find a good definition, by Paul Krugman or Brad Delong if you care to.

In any case please elucidate further what you mean.

[Slartibartfast]

This is, I think, not quite the right way to look at a "moral hazard" argument.

Granted, but it sort of presupposes that I was looking at the "moral hazard" argument to begin with, as opposed to simply injecting the second (and, as it turned out, the last) in a series of uninvited anecdote.

[Tom H.]

Certainly in my family health insurance leads to increased consumption. My wife believes in chiropractic care. There's no way I'd pay thousands of dollars every year for it, but the State's insurers are happy to.

[John Thullen]

Hilzoy, good post. Frank, good point. Sorry I didn't get back sooner. Sometimes my attempts to be clever lead to threadjack and an overactive snark gland.

I understand moral hazard, having done lots of investing and rank speculation without a safety net in the stock market for many years. I could have used some moral hazard. But I have a problem with the theory of moral hazard (Ral addresses the theory here very well) as it pertains to rationing health care.

It's when we get down to individual cases that I don't get it. Anarch and Bernard Yomtov have needed medical care and yet they fess up to perhaps violating some economic law by seeking it and consuming it. Anarch's problems were solved without too much intervention, apparently, but even if they had not been, what's the problem, except to Anarch.

So what if someone else (an insurance pool) is paying for Anarch's care. Would we prefer that Anarch examine his non-subsidized budget in a world of totally prevented moral hazard and decide that his ruptured spleen could wait until his Christmas fund matured?

As far as I know, insurance companies don't pay for cosmetic surgery. If they did, we could have more moral hazard than there are Gabor sisters. I get that. But if Zsa Zsa requires a tumor removal, she ought to get it. I doubt she'll enjoy the procedure and the ensuing chemotherapy and radiation so much that she recommends it to Eva, which would be too late anyway.

There is no moral hazard involved in seeking legitimate medical care. And, yeah, the word "legitimate" is a land mine.

And no, I don't believe Medicare should pay for Viagra. And chiropractors are dicey. But that's the nature of back pain.

But enough.

Back to Iraq and the moral hazard involved in bugging the Veteran's Administration to look after those lifelong, oozing gut wounds.

It may be that the mere existence of a Veteran's Administration is a problematic moral hazard. Folks see the wheelchairs and head wounds and think maybe war is a good thing; we gotta have it!

[bernard Yomtov]

John T,

I did not violate an economic law. I demonstrated it. Which is to say I used resources that I would not have used had the cost not been covered by insurance. Without going into detail, suffice it to say that my basic problem had been satisfactorily addressed, and I went ahead to seek extra assurances, though I strongly suspected, as it in fact turned out, that they were unnecessary.

In most cases, of course, insurance is a good thing. We don't want people not seeking needed care because they can't afford it. But it does create the incentive to overuse resources.

ral's description is indeed a good one. There are always people at the margin. Just because you think you would not be influenced by something that doesn't mean no one would be. This applies not just to moral hazard situations.

[Anarch]

And no, I don't believe Medicare should pay for Viagra. And chiropractors are dicey. But that's the nature of back pain.

I agree Viagra probably covered. I completely disagree on the subject of chiropracty and other forms of secondary care (or whatever the moniker de jour is); I'm a firm believer in an ounce of prevention on pretty much every level, and I think that our system as a whole does a shockingly poor job of securing that.

[Anarch]

Doh. The first sentence above should read: "I agree Viagra probably shouldn't be covered." There's a fundamental difference to me between sexual dysfunction and the reduction or elimination of pain; the former is a luxury, the latter is (or should be) a necessity.

[felixrayman]

The inability to have sex isn't pain?

[Gary Farber]

"There's a fundamental difference to me between sexual dysfunction and the reduction or elimination of pain; the former is a luxury...."

Mm. I've been fortunate enought to not have the former (yet), but I rather think I'm inclined to disagree. Do you feel that your life would be significantly unchanged were you, to put it straightforwardly, unable to achieve an erection or ever have an orgasm? Is there some reason this dysfunction should be regarded as some sort of bodily function that is unimportant to most humans, and that treating it is too trivial to be covered by insurance?

If that's a "luxury," so, in my book, are having ten fingers and ten toes. Why should insurance pay for a big toe to be sewed back on? Isn't that a "luxury? Just as is having facial cosmetic surgery to cover up scars from, say, being mauled by a dog?

I mean, an awful lot of surgery and treatment doesn't address matters of survival, and might equally be judged a "luxury." Is that the standard we wish to use? If not, what should be the standard, other than "restoring normal life" as best as is practical?

Hell, who needs arms and legs? We could all get along with wheel-chairs, after all. I'm sure you would draw the line before that, but what's the standard, then?

[John Thullen]

Anarch: I agree on the chiropractor thing. It should be covered, because of the nature of back pain (and other pain). But I see the dicey nature of the field, in that it is so non-specific.

And Gary Farber convinces me that maybe Viagra should be covered by Medicare, too.

What I really desire is that Medicare taxes be raised to pay for these items. Unfortunately, we have folks with zeppelins in their pockets running Washington.

Bernard: Yes, your formulation was more accurate. You demonstrated a law of economics. Now, stop it. ;) No, actually it's O.K. with me that you went a little overboard on the medical attention. Please raise my taxes to cover the overage. But I'm cutting you off the government-provided ice cream.

[Anarch]

Do you feel that your life would be significantly unchanged were you, to put it straightforwardly, unable to achieve an erection or ever have an orgasm?

It would be radically changed. That's not at issue; the question is whether this should be considered a default (e.g. zero copay) part of governmental health care.

Is there some reason this dysfunction should be regarded as some sort of bodily function that is unimportant to most humans, and that treating it is too trivial to be covered by insurance?

If one is drawing lines in the notion of health-care insurance? Yes. I'd obviously prefer to have such insurance but again, that's not the issue.

Hell, who needs arms and legs? We could all get along with wheel-chairs, after all. I'm sure you would draw the line before that, but what's the standard, then?

Exactly as I said: pain. The inability to experience certain forms of pleasure is not, IMO, equivalent to experiencing pain. That's not a bright line and I'm far too tired to expand on this but it'll do for now.

[California Health Insurance]

I agree with Bush on advocating insurance premiums with very high deductibles. Health insurance should be affordable for everyone.