Reader take: Moral hazard, and whether patients should consider cost in their health care decisions


The following is a reader take by an anonymous medical student.

One of the ideas that comes up in the search for explanations of high healthcare costs is the so-called “Moral Hazard”—the idea that insured patients are more likely to agree to unnecessary procedures because they don’t pay for them directly. Not everyone thinks it is real—does a patient have the medical knowledge to make an informed decision? Recently, I’ve become convinced that the Moral Hazard does exist. I’ve seen it with my own eyes.

This week in the genetics clinic we saw an adult patient with a classic case of Pendred syndrome: bilateral hearing loss that worsens with head injury, hypothyroidism, and a sister with the same presentation (implying genetic cause). He’d been diagnosed with hearing loss early in life, but the hypothyroidism developed recently, so he’d never been officially diagnosed with Pendred syndrome. His primary physician saw the signs and referred to genetics to confirm his suspicion.

From what I’ve seen in the past few weeks, the genetics department has an important role. A geneticist can be the person who puts the pieces of a medical puzzle together and finds the underlying cause for a myriad of symptoms, for example. Genetic testing for disorders can be useful and cost-effective. But it isn’t always.

The patient with Pendred syndrome was offered genetic testing to confirm his diagnosis. His insurance, the genetic counselor assured him, would cover the cost. He agreed to have the testing done: since it was covered, it couldn’t hurt.

But would it help? The geneticist made it clear that she was convinced that he had Pendred and even a negative test would not convince her otherwise. After all, the test misses about 10% of cases. Furthermore, the test result wouldn’t impact his care: his hearing loss and hypothyroidism would be managed the same no matter the result. It didn’t seem likely to affect pregnancy planning either. His parents were well past their child-rearing years. The patient was married and trying to conceive, but didn’t seem concerned with the slightly elevated risk his offspring had of hearing loss

The genetic counselor dutifully explained all this to the patient and offered: “All it will really provide is an explanation.” Don’t get me wrong, explanation and confirmation can be valuable. For some cases like this, a genetic test would be appropriate and helpful. But not without consideration of the costs.

Prices of genetic tests are not readily available, so I can’t say how much the insurance company had to fork over for this test. My experience is that even the cheapest tests are a few hundred dollars. Was this “explanation” worth a few hundred dollars to the patient? Maybe, but because the test was covered, no one even hesitated. My guess is that if the patient had had to pay out of pocket for the test, he would have been more likely to stop to consider the benefits of the test. He may have decided to go ahead with the test anyway, but it’s worth noticing that this cost-benefit analysis is often missing from patients’ healthcare decisions.

In reality, this moral hazard probably doesn’t account for much of our overall healthcare expenditures. There aren’t many situations as straightforward as the one I describe, where the patient can understand the facts and make an informed decision. But it can’t be denied: the moral hazard does exist. There’s no easy way to eliminate it, but it’s important for physicians and patients to be aware of the impact their actions have on total health costs. Insurance coverage is not free care—you are paying for it one way or another. Until we recognize that, it seems unlikely that physicians or patients will take the steps to reduce unnecessary expenditures.

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