on the rising costs of healthcare, moral hazard, and what this means for you (and the entertainment industry)

Last week, we talked a bit about the basic health insurance vocabulary you gotta know. This week, we're going to make some use of what we learned to better understand a current economic phenomenon.

One of my favorite concepts in health economics is moral hazard–the idea that someone is more likely to undergo a costly or risky situation if they know they are protected by against the cost/risk because someone else will be footing the bill. Putting this in healthcare terms, if you know you have a great coverage plan, you are more likely to seek medical care, or visit the doctor for a sniffle, or undergo expensive but questionably necessary procedures. This is because the cost to you will be severely reduced from what it otherwise would have been because of your insurance coverage.

Moral hazard is a tricky lil bugger, not because it's particularly hard to understand, but rather because it's hard to overcome. One of the ways insurance companies (or employers) are dealing with the rising American healthcare spending is by raising the out-of-pocket costs, mostly deductibles, for consumers and thus reducing the moral hazard that results from healthcare coverage. Thus, we've seen a reduction in the rate of healthcare spending (finally), which helps reduce the federal deficit. However...

These increasing out-of-pocket costs¹ are causing some people to avoid even routine healthcare altogether. They're also having an effect on other markets–Americans are spending less on entertainment, retail, and childcare. ² This only makes sense. If Joe Schmo's bank account were a pie, when the slice that is his out-of-pocket healthcare spending increases, there is less pie available for other expenses.

Healthcare in the United States is expensive, but necessary. While you may not be able to control an increase in your deductible, you can shop around for a reliable doc, research procedures to determine their necessity, and practice preventative measures (washing your hands regularly, eating well, exercising, sleeping!!!) to keep costs low. To start the New Year right, next week I'll discuss some best practices for staying healthy [thereby avoiding hefty healthcare spending] and happy in 2015. And since I won't see you until then, Happy New Year!

Have a healthcare question you want answered? A topic you want addressed? Email whatthehealthnow@gmail.com!

1. Increased costs of mobile phones are also contributing to the reduced spending in other markets.
2. Knutson, Ryan, and Theo Francis. "Basic Costs Squeeze Families." Wall Street Journal. 1 Dec. 2014. Web. 27 Dec. 2014.