Thursday, August 6, 2009

Will Health Care Reform Result in Rationing of Services? Of course…..

One of the concerns we hear is that the Health Care Reform proposals will result in a “rationing” of health care services. While out walking one day, I realized that we already have rationing in our health care system. What’s that you say? Well, here comes the result of some of the 27 courses in economics and/or econometrics:

All scarce resources are rationed. Mostly in our economy, this is done through pricing, through the dynamics of supply and demand. Everyone does not get all of what they want.

With access to health care for the elderly primarily paid by Medicare, services are rationed according to the rules of Medicare and the Medicare Supplement Insurance the elderly have. For youth covered by SCHIP, services are rationed according to that program’s rules. For the rest of U.S. residents, health care services are rationed according to the rules of the marketplace – i.e., supply and demand. People with health insurance with complete coverage are somewhat restricted in the services they can access paid by insurance by the insurance policy coverage provisions. Beyond that, health care services are rationed by people’s ability to pay, related to their varying levels of wealth.

It is readily understood that not all available medical services make sense in every circumstance. Let’s explore an end-of-life scenario to illustrate. Assume Mary is an 82 year old widow with no children. no grandchildren and no other close family. She is suffering from cancer and has been told she has 6 months to live.

  • Her hip causes here extreme pain when she walks, and is told that that could be relieved if she were to get a hip replacement, followed by a four month physical therapy program. Should she? Most would question whether that would make sense in this case.
  • She discovers she has some rare liver disease which causes her to slowly lose weight and is slowly wasting away. Surgery that costs $30,000 which would take a three week recovery period would solve the problem. Should she have this surgery?
  • She falls and breaks her leg. This requires that she have her leg in a cast, and be in traction for two weeks to allow the leg bone to heal properly. Should she be provided this service?
  • She suffers from high blood pressure. She is told that if she would take pills costing $400 per month her blood pressure would be controlled. Should she be provided the pills?

Some of the above health care services some would agree should be provided while others may say they should not be. This exercise shows that it probably does not make sense for all possible health care services to be provided in all cases.

The questions arise, “Where do you draw the line? What are the criteria for the decision?” For example, in the case of Mary described above, does it matter whether Mary has a huge loving family rather than being without? Would it matter if she also suffered from dementia? Would it matter if she were a popular, former state Governor? A famous singer? A Moslem? A black? A man? Should the decision be based on cost, such that the pills for the high blood pressure are OK, but invasive surgery is not? Does recovery period affect the decision? Does the accidental nature of the leg break affect the decision versus a chronic problem such as the high blood pressure?

Another question is, “Who decides?” Currently, those covered by insurance or who have sufficient wealth to have reasonably full access to services feel they have the choice, and are loath to give up that choice. This to some extent explains why polls show that about 80% of people are satisfied with the coverage they have. (Another reason is that they are not paying the costs of the insurance but receive the benefits – a “deal” that is perceived as much more advantageous than if they had to pay for the coverage.)

Under a government plan, the decisions of “who gets what services” are determined by the provisions of the plan, such as is currently done through Medicare and SCHIP. To the extent that savings in the system seek to be achieved by restricting access, then there must be a mechanism for doing so, either through a hard and fast written rule of some sort or some decision-making mechanism. Even a “hard and fast written rule” would require someone to administer the rule, thus still requiring some decision-making person or body. Leaving the decision up to the doctor-patient would not likely be perceived as any restriction at all, so that means that the decision would need to be shifted to some independent their party or “board”.

Arguments against that are that (1) the decision would then be made by someone not as familiar with the specific circumstances of each individual case (and therefore introduce the possibility of poor decisions made) and (2) the loss of choice by the individual.

People will line up for and against any Health Care Reform largely along lines based on their self-interest. If they are happy with their current situation, with health care services rationed in a manner which currently favors them, they will be more likely to oppose changes. If currently rationed out of access to health care services (such as people from the age of 19 – 65 and who are not covered by employer paid insurance), they will likely favor their increased access to health care services, even with restrictions on how much or what kind of service they can get. Anything would be better than nothing.

The position for the status quo was stated as follows:

"To me it seems that the industry is saying they will cut health care costs by rationing care," said Greg Scandlen, founder of Consumers for Health Care Choices. "That could mean they will pay only for services that have proven to be effective. . . . I think people can ration their own care and not spend on procedures that aren't worthwhile," Scandlen said. "Consumers don't need a government committee or insurers to make that decision for them."
How they'll save $2 trillion on health care, June 9, 2009,

It appears clear that increased access to health care services by those currently denied (or limited) access will increase total costs to the health care system. I can’t see how it cannot. Unless significant increases in the supply of these services simultaneously occurs, some shortages of supply (or capacity) is bound to occur. This alone will result in the necessity of some mechanism for deciding who has priority of access. If the mechanism is not price and current access to insurance, what mechanism would be acceptable to ration those services?

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