The moral hazard of cancer care

Economists use the term “moral hazard” to describe how individual consumers purchase goods and services differently when they have insurance than when they don’t. People with insurance perceive more than a dollar's worth of value for each out-of-pocket dollar spent, which can lead to inefficient use of services that may be unnecessary. In other words, when you have insurance, it’s easy to get lazy about what you’re being charged for covered goods and services.

I bring up this point because I finally took out my calculator today to tote the expenses for my cancer care to date. I’ve been so appalled by the intensity of my treatment, to say nothing of its duration, that I haven’t cared to know the financial details until now. Once the deductible of our insurance plan was satisfied ($7500), and I reached the coinsurance maximum (another $4000), I have only had to make a bunch of $20 co-pays to receive my care. I’ve simply dumped into a manila folder the snowstorm of claims reports that I’ve received from my insurance company over the last half-year. This file is more than a half-inch thick. I have not paid attention to what providers were charging, and not once did any of my healthcare provider bring up the cost of their services.

So what are my expenses to date? About $77,000—give or take a few thousand. This is what my providers have been paid, and not what was billed (a much higher number). It includes payment for diagnostic imaging exams, surgery, hospital care, doctor’s visits, lab workups, immunotherapy and radiation. Assuming I stick with the interferon, and need no additional treatment, my expenses could easily surpass $100,000 for the year.

Several years ago, when I went shopping for family health insurance, I opted for a high-deductible catastrophic plan. We were all healthy at the time, and since my income as a freelance writer was much less than as a corporate manager, I wanted to keep our premiums low. Little did I know the disaster that was looming.

Had we not been insured for some reason, I have to wonder if the treatment decisions I’ve made would be any different. At this stage, the cost of surgery, immunotherapy and radiation are all an investment in my continued survival. I can justify the $12,000 (or so) out-of-pocket expenses on that basis. If I had to bear all expenses of $100,000—not to mention earlier treatment expenses and those that may come later—I don’t know that I would have made the same treatment decisions. At some point the benefits of care exceed their cost, especially when treating a wily disease like melanoma. For most patients, interferon is a colossal waste of time and money.

I’m grateful for having insurance. My circumstances are an extreme example of how it pays to have a good plan, even if the deductibles are high. Only time will tell if the cost of the medical services I’ve consumed have been “efficient” or not. It’s impossible to know prospectively.