Almost one in five UAE residents between 20 and 79 years old suffers from type 2 diabetes, a figure that the government calls "shocking". The economics of type 2 diabetes exposes just how challenging it is to design insurance and treatment plans for dealing with the disease.
Type 2 diabetes has two traits that interest economists.
First, in addition to its medical treatments, exercising regularly and maintaining a healthy body weight – measures that require self control rather than deep pockets – drastically reduce the likelihood of the disease developing and worsening. Second, while the direct treatments are relatively cheap, the complications arising from the advancement of type 2 diabetes, such as heart and vascular diseases, amputations and more, are expensive to treat.
This is what renders some sort of medical insurance scheme or universal health care potentially necessary – the medical costs, including those for treating the complications, are beyond what many low-income families could ever summon. If they are not subsidised directly by the government, or indirectly via the insurance premiums paid by healthy people, then sufferers will be forced to forgo treatment.
This thinking underlies the UAE government’s commitment to providing its citizens with free health care. The problem is that assisting sufferers with the high costs of treating type 2 diabetes and its associated complications inadvertently exacerbates those costs at the level of the economy, because of the first trait: the substitutability of medical and lifestyle treatments, also known as the moral hazard problem.
As the 2016 winners of the economics Nobel Prize showed, insuring people undermines their incentive to behave responsibly. In the case of type 2 diabetes, theoretically, the cheaper you make medical treatments, the less effort people will exert in pursuing a healthy lifestyle. Some people in the UAE are understandably reluctant to cut down on kabsa and endless sugar-laden cups of tea, or to force themselves to go to the gym when they could be watching Arabs Got Talent. Free health care renders that reluctance a lot more affordable.
A study by the economists Jonathan Klick (Florida State University) and Thomas Stratmann (George Mason University) examined the roll out of diabetes coverage mandates across 42 states in the US. They demonstrated that the type 2 diabetes sufferers who received a bump in benefits suffered a systematic increase in their body mass index (BMI) compared with non-sufferers, and with sufferers denied the improved health coverage.
The moral hazard problem in health care is like that in car safety, whereby the economist Sam Pletzman hypothesised that forcing people to wear seat belts to decrease deaths would encourage people to drive more dangerously.
A draconian solution to the diabetes moral hazard would be to classify the disease as being completely the responsibility of the citizen, to offer no financial support for the treatment. In this vein another economist, Gordon Tullock, half-jokingly proposed installing spikes aimed at drivers’ foreheads on vehicle steering wheels as a way of encouraging safe driving.
The problem with this approach is that type 2 diabetes is not purely the result of lifestyle decisions – some unlucky people get it for genetic reasons and these are people whom health policy should be looking to assist. There is no way to definitively determine the reason for someone getting the disease, leaving policymakers facing a quandary on how best to balance insurance and incentives.
To bypass the trade-off, the UAE Government has dedicated significant resources to awareness campaigns to help citizens improve their lifestyles, without exposing them to the brutal financial incentives that an uninsured sufferer faces. Global experience suggests limited effectiveness of such measures and reminds us that in the UAE and elsewhere, health policy is genuinely difficult to get right.
We welcome economics questions from our readers via email (omar@omar.ec) or tweet (@omareconomics).
Omar Al Ubaydli is programme director for international and geopolitical studies at the Bahrain Center for Strategic, International and Energy Studies, and an affiliated associate professor of economics at George Mason University.
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