Collective myopia is a widespread but poorly understood problem that causes classes of similarly situated investors to underinvest in prospectively efficient improvements like education, capital, and preventive medical care. We introduce the concept of collective myopia, describe it, offer several solutions to it, and identify and discuss the real-world conditions that affect these solutions’ relative desirability. We apply our analysis to health insurance, prescribing a mandatory-membership clearinghouse, to be created by federal legislation, that would require its insurer members to cover prospectively efficient treatments identified by vote of the insurer members and, when an insured switches from one insurer member to another after the first insurer covers a prospectively efficient treatment, would require the second insurer to compensate the first. One specific impact of our proposal would be to induce insurers to cover bariatric surgery, which is the only effective and efficient treatment for morbid obesity, a condition that affects 1 in 20 adults in the United States and accounted for 5.5% of United States medical expenditures, or $63.2 billion, in 2004.
Available at: http://works.bepress.com/ronen_avraham/1/