The Moral Hazard of MRIs

“Moral hazard” is a popular finance term that often gets applied to health insurance.  InvestorWords.com defines it as “The risk that the presence of a contract will affect on the behavior of one or more parties.”  You’ll hear it from those who oppose reform a lot, who will argue that extending coverage and benefits to those who have not had it previously will encourage them to use it to excess and take risks with their health.  This argument is usually based more on fear than evidence – countries with universal health care do use cost-effective preventative care more than we do, but don’t have more hypochondriacs.

But there are clear instances of moral hazard in our health care industry.  The presence of easy access to medical technology like CT scanners and MRI machines have begun to guarantee their use, whether doing so has anything to do with making patients better or not.

The New York Times today has a fascinating article detailing the many problems of using imaging scanners in medicine, from the oddity of a scan done on old equipment netting as much compensation as a scan on the newer machine, to no guaranteed standard for technicians and supervising physicians, to large variances in competency of the radiologist reading the scans.  There’s the requisite tale of injustice – a woman whose first can was inconclusive, but since her insurance company refused to pay for a second MRI, her doctor went ahead with a knee surgery and long rehabilitation, all of which the insurance company paid for.  The operation, of course, revealed that the cartilage hadn’t been torn after all.  The whole exercise had been a waste, as a clearer MRI scan would have shown.

The fact that imaging is a wild, wild West, suffering from a lack of regulation, clear standards for both equipment and technicians, or an easy way to enforce the standards that are on the books is bad enough.  Far worse was the report from the GAO that indicated that 2/3 of the MRI scans charged to Medicare were done in the office of the doctor who ordered the scan.  There’s also heavy evidence that the presence of the scanner changes the behavior of the doctors, as those offices are 3.2 times more likely to order an MRI scan.  And why not – the article estimates that having an in-house scanner can net a practice between $500,000 and $1 million per year.  If the machine is right down the hall in your office, and there’s a decent reason to have a scan done turning a $150 for visit into a more profitable enterprise… well, at the least, you’d think once or twice about it.

MRI machines, CT scans, they’re a necessary component of modern medicine.  The information gleaned from a good scanner and a good radiologist reading the scan can save lives, and prevent costly errors like the knee surgery in the NY Times story.  But there’s no doubt that money in medicine corrupts, even with the best of intentions.  We had 1.8 million MRI scans in 1990.  In 2003, that number was already up to 24.2 million.  Some of those doubtlessly led to better health outcomes, but not all of them.  And rest assured, someone is getting rich off of it.

Those looking to root out moral hazard in health care and prevent waste should stop worrying about providing routine checkups to working families who can’t afford insurance.  Instead, they should follow the money.

(Photo credit:  Thomas23 on Flickr.)