The Moral Hazard of Moral Hazard
Health Care CEOs, Workers, and Benefits
It is all too easy to see claimants, of all stripes, as people who will take unfair economic advantage of any situation and resort to moral hazard. If a workers’ compensation benefit is improved, for example, workers might be less careful at work and engage in more dangerous work activity than would otherwise be the case. Economists tell me this is so. They even show me studies purporting to prove it. And I think the argument might have been persuasive to me had I not myself worked in physical labor for 15 years (until my early-30s). But because I did perform that kind of work, and never once considered what my workers’ compensation benefit would be if I got hurt, I had instant doubt: not only about the mode of thinking, but also about the type of person seriously entertaining it.
Like most people my health plan has a deductible, and I have co-pays and various types of co-insurance that I must satisfy before obtaining health benefits. Those who claim to know assert that, were it not for this kind of co-insurance, I would not have sufficient “skin in the game” to self-ration health care (the way I should). I would splurge on all kinds of doctor visits, and generally do my part to make the health care system as expensive as humanly possible. It is in vain for me to contend that I would not do this. There are studies by experts showing that my cognitive impairment — the one that privileged elites claim makes workers believe the world is more dangerous than it is — prevents me from thinking rationally about health care delivery. The experts will help me control this impairment.
Here is a problem: the people who designed workers’ compensation and health care systems are very far removed from the working class. The experts who claim that my workers’ compensation benefit is adequate also work very hard to conceal their notion of adequacy. If they were to reveal it, working people would quickly recognize it as one that would gladly place them just-above-poverty. Almost none of the experts will ever be in danger of becoming injured at work (let alone pauperized). Most of them do not have family members flitting around the Gig economy living at subsistence levels (as do I). The Gig economy, if left to its own devices, will eventually deprive workers of the benefit of becoming quasi-destitute employees. But it is all for the best: workers will enjoy the flexibility of being underpaid and not receiving employment benefits.
Another thing that experts tell me not to worry about is the low levels of 401(k) savings throughout the country. Just think how “moral hazard” might operate to keep people from working hard if they had too much in defined benefit retirement savings. Now, we can all be more aggressive, to age seventy and beyond, as the invisible hand holds us all together. And it will have to do so because none of the retirement numbers make sense. And as we approach the “Peak-65 Zone” of the next two years — the highest number of citizens turning sixty-five ever — I will feel very glad indeed that the experts have everything firmly in hand.
Of course, if the experts have a bad day or two, and we find we need to band together a bit to fix our benefits, perhaps American-style labor law will bail us out. Any labor historian worth her salt knows that we would never have had federal labor law were it not for World War 2. There would be no labor law to erode (as it is about to do again shortly for the umpteenth time) were it not for the fear of strikes during wartime. I have been saying for a long time that we would have to reindustrialize; and that, as a result, teeny-tiny workers’ compensation benefits would have to improve as workplaces became “re-dangerous.” Little did I know that the process would be accelerated by the six-month collapse of the German government and economy, and the remobilization of war production in the West - no wonder unexpected people began unexpectedly to support unions and the NLRB. Nothing like world wars—and German unemployment—to focus the mind on improving relations with “labor.”
In the end, I say, it is all too easy for health care CEOs to claim that health care benefits must be limited to control the possibility of moral hazard. It is so easy to say this one might contend it is CEO moral hazard—a universal explanation for not paying claims. But anyone thinking we can just blast our way out of here is a coward and a simpleton. It’s not an original thought; let alone one to which a follower of Christ could ever subscribe.