Moral Hazard
"The United States takes up 5% of the global population but accounts for over 50% of the global healthcare expenses" This is actually not a shocking news. Previously, we learnt that the US uses an unproportionate amount of resources in the world. There has always been a great disparity between the rich and the poor, the haves and the have-nots. However, the great expenses in healthcare is costing the nation as they insurance companies face bankruptcy. This leads to the issue of moral hazard.
I have always heard of the term 'Moral Hazard' but have not go into what it actually means. In my understanding, moral hazard is the situation when an individual acts differently when he/she is exposed or protected from certain risks. Healthcare insurance is something that may lead to moral hazard. When a medical insurance holder fell ill and needs to be hospitalized, he is likely to make full use of his insurance, regardless of whether he really needs that amount of medical attention. On the other hand, hospitals do no have the incentive to stop him from doing so because they gain from the high medical fees collected. This is a win-win situation for both parties. However, what happens to those people, not covered under insurance, who really needs extensive medical attention and facilities but are unable to afford them???
That is the problem of moral hazard and the rising healthcare cost. Medical attention is not given to people who are most needy of it, but to people who can afford it. I feel that this defeats the purpose of healthcare. Shouldn't curing the sick and poor be the main priority of medical innovations and technologies? There are healthcare innovations because we want to be immune to illnesses, adapt and survive. However, having said that, in reality, many healthcare innovations are market-driven and cater to the rich because no industry can survive without a market or profit. Hence, whether medical innovations should be for the general good or be market-driven is highly debatable and an issue that should be further discussed in class.
The issue on moral hazard becomes increasingly important in the greying society now. Countries with ageing population are beginning to find ways to curb the rocketing healthcare costs. In Singapore, the introduction of the Medisave and Medifund. These healthcare policies help to reduce the effects of moral hazards. Medifund acts like a social safety net by subsidizing the healthcare cost of the needy. Medisave helps people to save up for their medical fees and no problem of moral hazard occurs because the more people use their Medisave now, the less they are left with in the future.
However, are these healthcare policies effective in helping the poor gain greater access to healthcare services? Does Medishield- a policy that involves the purchase of health insurance using Medisave, cause moral hazards? The Medisave withdrawal limits are generally sufficient to pay the charges incurred by a patient staying in a Class B2/C ward in a restructured hospital. However, should Singaporeans decide to stay in higher class wards or seek treatment from private hospitals, they may have to pay part of the bill in cash. Does this restrict the poor from seeking the best medical attention they need?
Cost effectiveness
Is it more cost effective to save a poor man's life as compared to a rich man's? Statistics have shown that the rich spends alot on healthcare just to increase their life by a year while some poor requires only cheap/affordable healthcare services to maintain years of their life. In economic sense, it indeed seems more cost effective to save the poor man's life. My opinion still stands with what I mentioned above that I believe medical attention should be given to the party that requires it the most, however, this is sadly not the case in reality.
Issue on Patents
The dilemma: Patents will encourage medical innovations because intellectual property is protected, but at the same time denies the poor from such innovations because they are unable to afford them.
Research companies will lose the initiative to innovate if patents are removed because their ideas are can be easily stolen and therefore they cannot reap the benefits of a supernormal profit by relying on high barrier of entry to their industry. On the other hand, the removal of patents will allow drugs to be mass-produced and with greater economies of scale, they will be more affordable to the poor.
However, an alternative view to this dilemma will be that even if patents are removed, companies can still profit depending on the market structure in which they choose to operate in. They can earn a large amount of revenue by selling drug to many people at a cheap price instead of selling the same drug to a small market at a high price. I felt that this is an interesting idea which I have not considered before.
Genetic engineering: For or Against?
I feel that the answer depends on the purpose of the GE. If it is for therapeutic purposes, such as the therapeutic cloning of an organ to replace a damaged one or to correct a genetic disease such as albino or down-syndrome, I feel the GE is justified because it corrects life-threatening/impeding diseases. However, if it used as a tool to enhance the quality of an already normal human, GE will not be justified because the use of it is abused beyond the means of saving lives. Instead, genetically modified humans will have an unfair comparative advantage over the others who are unable to afford it.
Ultimately, our answer will depend on whether we view life as though "everything is a miracle" (rising star) or "nothing is a miracle" (falling star). Hence, to be a rising star, we should not reject the idea of GE as there are certainly benefits to be reaped from it. Instead, regulations should be in place to prevent the abuse of such benefits.
I rate this session 9.5/10 because I really enjoyed this topic and the discussions raised in class are insightful!
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