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Economic & Fiscal Policy
Legal Reform

DLC | Essay | July 27, 2010
The Right Path to Healthy Habits
By Edward Gresser

How do we manage risky but popular products? Policymakers worried about such consumer goods have three pretty good options:

  • Transparent and professional regulation: If a product is too dangerous to use, the relevant public-health experts in the FDA (or the Consumer Products Safety Commission) should ban it on a scientific basis. Alternatively, as in the case of fatty food, snuff, alcohol, and cigarettes, or diving boards and trampolines, regulators can require public education about the risks the product poses.
  • Democratic process: Congress, likewise, has the right to ban a product, limit its availability to adults only, or otherwise regulate it through the normal legislative process.
  • Personal choice, modified by actuarial science: Assuming the product is not actually banned; people should eat, drink, smoke, or chew it as they choose. If on the whole this creates health risks, insurance companies should be allowed to charge consumers higher premiums and therefore lower premiums on people who choose not to do so.

A different approach is to use lawsuits, bypassing the regular channels, to decide policy. This has been suggested -- and sometimes tried -- in fields ranging from greasy fast food and sugary sweets to diving boards. But in general it's a poor substitute for professional policymaking. A minor tremor during the big tectonic movements of health care reform suggests why.

Briefly put, an early health reform draft proposed allowing class-action lawsuits alleging damage to Medicare under the Medicare Secondary Payer system. Known to the illuminati as MSP, this system is meant to allow Medicare to file lawsuits to recover money, when the primary insurer of a Medicare beneficiary refuses to pay its claims, or when the reckless acts of a company or individual are responsible for the damage. (Texting whilst making a left-hand turn, I run over Granny; she survives; I refuse to pay the hospital bill, which Medicare then has to front. Medicare sues me under MSP; as I'm responsible for the injuries, I have to pay up.)

The idea in question would have changed this system to let lawyers, even without personally affected clients, file suits on behalf of large numbers of beneficiaries -- some harmed by their smoking or unhealthy eating habits, others perhaps quite healthy but in a statistical sense at risk. The lawyers would then collect the money should they win their cases, and share it with the beneficiaries and in some way with the Medicare program itself.

Having surfaced early in the health reform debate, the proposal quickly submerged. But perhaps it will emerge again later -- and it leads toward a poor approach to a large range of public health, consumer, and regulatory issues.

Lawsuits are appropriate when a company acts in a reckless or deceptive way that causes harm to its customers. Lawsuits are appropriate as well when someone who knows he should pay up to cover the cost of his mistakes refuses to do so. But they aren't the right way to deal with decisions made willingly by people who should be fully aware of the potential consequences those decisions can bring.

Used in the latter circumstances they create a lottery system, which bypasses experts and legislatures, fails to hold individuals accountable for their own decisions, and instead directs juries to punish or ignore makers of the products in question. Such a system skips careful and systematic policymaking, avoids responsibility for the consequences of personal choices, and substitutes legal talent for both.

There are simpler solutions which are more straightforward and more appropriate. Government can ban a dangerous product or limit its sale to adults. Products that are legal and widely used, and which regulators and legislatures have chosen not to ban, can be discouraged through public education and rational insurance rate setting. Should consumers buy them anyway, they should be left alone to enjoy their choice, and accept the consequences it may bring.

Edward Gresser is president of the DLC.