Health Care – Incent vs. Tax

There was a really good article in the NY Times last week about the effects of diet on American’s general health and well-being, and consequently, health care costs.

For anyone that pays attention, this is no surprise. If you live in suburban America, you would have to be blind not to see the rampant obesity that is driving around our cities. I say driving, because this problem does not seem to exist in major metro areas where people use their feet as the primary mode of transportation.

The point of the article above was simply that until insurance companies start enforcing better eating behavior through the use of things like the soda tax in NYC, our costs will continue to spiral upward. I agree with the premise, and with the overall goal, but not the means.

I was in Albany, NY in June for my niece’s wedding. I got in really late, and on the way out of Albany, we stopped at McDonald’s for a quick bite. I eat McDonald’s probably 4 times a year, but on this particular night it sounded really good. I ordered my usual Two Cheeseburger Extra Value Meal, which costs about $4 here in Raleigh. In Albany, however, it cost me close to $7! Almost 2x as much for the same food. I asked my sister what in the world was going on, and she explained that the state had imposed a “fat tax”, much in the same vein that they have imposed enormous cigarette taxes to discourage smoking.

I have no doubt that there is more of this kind of thing coming as lawmakers again try to make decisions for us that we should be able to make ourselves. However, I got to thinking after reading this article, and it seems to me that if health insurance was incentive-based, where the rates I pay are dependent on things like my age, my health history, and my risk based on family factors, the system might be able to fix itself for this particular issue.

Imagine if you had to have a yearly exam wherein the results determined what you paid, rather than the current “here is a population, we will absorb this much risk.” It would provide the incentive for people to get in and stay in good health. If you could pay $200 a month if healthy, but knew that if you became overweight or had high cholesterol or smoked, you would pay $600 or more, I think most people would work toward paying $200. A couple years ago, I went for my annual physical and was told by my doctor that I needed to lose 15-20 pounds before I turned 40. At the time, I did not consider myself overweight, but did what he told me to do anyway. On the other side of it, I feel way better, eat far less, and have formed the right kinds of habits to keep the weight off.

Think of all the things that already work this way. If you have good credit, you get a better mortgage rate. If you have no accidents, you pay far less in auto insurance.

We are all incented in various parts of our lives to do the right thing, and to live a certain way. This happens not because of government making it so, but rather because of the laws of a free society working the way they are supposed to.

Let people make the choice, and then let us deal with the consequences of that choice. It seems to be a better long term strategy than just opening up the public coffers and throwing money out to the masses, or soaking the so-called “rich” to pay for the next public sector boondoggle.