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Neil H. Buchanan

Rationing Health Care: We Have Always Done It, We Do It Now, and We Always Will


Thursday, August 27, 2009

As the debate over health care reform has become increasingly degraded over the past few weeks, one of the claims that has been treated as a serious complaint about the Democrats' plans -- unlike, say, the claim that the plans include "death panels" -- has been the assertion that their proposals will result in the rationing of health care.

A news article in yesterday's New York Times, for example, profiled an older, politically very conservative couple from Georgia who had attended a town hall meeting to express opposition to the Democrats' proposals. The husband said that he was worried that his wife, who is a breast cancer survivor, would end up "on a waiting list" under the Democrats' plans if the cancer returned.

What is Rationing?

As college students return to campuses across the country, those who enroll in economics courses will learn that, in fact, nearly every good and service in the world is rationed. This is such a basic fact of any economy that it is presented in the first week (and usually in the first lecture) of virtually every economics course in the country, no matter whether the professor is liberal or conservative, Keynesian or Monetarist, neoclassical or neo-Marxist.

What does it mean to ration goods? Any good that is "scarce" -- that is, there is not enough of the good to go around -- must be rationed in some way. For example, if one hundred people want a widget, there are only eighty widgets, and we cannot increase the number of widgets available, we need to decide directly or indirectly how to choose which twenty people will walk away empty-handed.

There are a number of ways in which this can be done. The widgets can be offered on a first-come, first-served basis, which is usually accomplished by having people wait in line. The widgets can be offered by a lottery. The owners of the widgets can choose the lucky recipients on the basis of friendship, political power, religious affiliation, or any other method of distinguishing among people. We can also allow the widgets to be sold for a price, which would presumably drive some of the potential consumers away as they reconsider their desire for widgets in light of their other spending priorities.

In other words, "rationing" has such a broad meaning that it can be used to describe virtually any method of allocating scarce goods and services. The word itself, however, carries such a negative connotation that it has political potency, making an attack on someone else's plan more frightening and worrying. When someone says a good will be rationed, many Americans think, "Someone is not going to get the good, and I do not want to be that person."

Rationing in Health Care Today

Applied to the problem of health care, rationing is especially important, because people could ask for an almost limitless amount of medical care if it were available to them. Beyond the life-threatening diseases that dominate headlines, there are plenty of situations in which even someone who is not a hypochondriac could decide that he or she needs more preventive care, or would benefit from having another mole checked, or a cough looked into. These need not be idle or frivolous concerns, because so many diseases are treatable if detected early but fatal if discovered too late. Each of us might want to have access to a personal doctor at all times, if that were possible.

Before modern medicine emerged as a full-blown industry in the mid-Twentieth Century, medical care was rationed by a combination of price and the simple availability of a doctor or lack thereof. With the creation of the modern medical-industrial complex, however, it became the norm to ration medical care through the odd happenstance of a person's employment status -- that is, what kind of insurance a person could obtain through her employer. The health insurance industry came to be organized around this approach, making individually-purchased health care so expensive that virtually all unemployed people and people whose employers do not provide health insurance (and who are not independently wealthy) simply do without. They are, in other words, the unlucky people in our current form of rationing.

For those who do not receive their medical care through a health insurance company, the rationing mechanism is the emergency room. There, the oldest forms of rationing take place, a combination of getting in line and "triage," where the intake professionals allow the cases that appear to be the most serious to jump forward in line. Cost is still, in fact, part of the equation, as emergency rooms do in fact try to bill people for services that are supposedly free of charge.

Even for those who have health insurance -- and, we should emphasize, who will not lose that insurance due to job loss or because they become ill -- health care can be rationed in surprisingly crude ways. For instance, one effect of health insurers' bureaucracies is to discourage people from seeking medical care in the first place, because people simply cannot know in advance whether care will be covered by their insurance.

This becomes particularly difficult when people must try to figure out the subtle rules for matters such as "out of network" care. For example, I know of someone who was on a vacation a few hundred miles from home and suffered a serious blow to the head by falling on ice. He decided that he was not hurting so much that it was worth entering the "Twilight Zone" of his health insurer's rules for seeking and receiving care outside of his home state. Happily, choosing not to see a doctor was not disastrous in this case, but the very existence of those opaque rules acted as a disincentive to seek medical attention.

The larger point is that some people who would otherwise like to receive medical care are not receiving it, due to various features of our existing health care system that are, in fact, forms of rationing. These people might or might not be literally lining up in waiting rooms, but something is standing in the way of their ability to improve their health – and thus, for them, health care is effectively rationed.

Waiting Lists, Bureaucrats, and Other Bogeymen

Perhaps it is unfair, however, to apply such a broad economist's definition of rationing to the health care debate. What seems to worry people most is that some bureaucrat might deny us coverage that we would otherwise receive from a willing doctor. If we limit the definition of rationing to the notion of creating such a gatekeeper, however, it is still true that we are currently rationing care in exactly the ways that opponents of reform efforts decry.

The denial of care by health insurers is by now an infamous part of our health care system. People are regularly thrown out of health insurance plans because of de minimis infractions that are used as pretexts to save insurers' money. The determination that some treatments are "experimental" must be made by someone, and that determination is a decision to ration care away from the unlucky patient.

Who makes those determinations? Bureaucrats, of course. They are not government employees, but they nevertheless fully deserve the title of bureaucrat for their role in applying technical rules to determine who will, and who will not, receive care. In many cases, these decisions determine who will live and who will die.

The strength of the Democrats' current proposals to reform the health care system lies in their efforts to deny insurers the discretion -- which has been so badly abused -- to ration health care on the basis of arbitrary and procedurally-suspect grounds. The goal is that we will no longer allow "pre-existing conditions" to be used as a reason to drop a patient from an insurance plan. And, there will be no more recently unemployed workers or workers at small businesses who cannot buy coverage at anything like an affordable price.

This means, of course, that something has to give. If we commit to providing medical care to more people, then we will either have to increase the total amount of medical care available or reduce the receipt of medical care elsewhere. And this is exactly what the current proposals try to do, encouraging increases in the amount of health care available, and attempting to determine which types of coverage that are currently being provided are not doing anyone any good.

This latter point – the point that the health care reform proposals will involve decisions by panels of experts to deny coverage for certain types of treatments -- is in part the basis for the accusation that some faceless board of technocrats will soon be denying medical coverage to some people in certain situations.

That accusation is true, but it is a meaningless accusation. We currently have faceless bureaucrats rationing coverage behind closed doors, using criteria that are not disclosed to the public and that at least appear to be motivated more by profit than by sound medical science. The advantage of even the most narrow form of "rationing" that the current legislation would impose is that, at the very least, we would know who is making those decisions and what criteria they are applying. And that knowledge would empower us to critique and, if necessary, alter the decisionmaking system in order to make it fairer and more humane.

The bottom line? There is not, has never been, and can never be, enough medical care to cover everyone in every situation. Rationing is a fact of life. Current health care proposals in Congress would change the rules for rationing, bring them into the light, and create accountability for the decision makers. If we do not adopt those proposals, we will go back to the chaotic form of rationing that has been killing far too many of us for far too long.

Neil H. Buchanan, J.D. Ph. D. (economics), is a Visiting Scholar at Cornell Law School, an Associate Professor at The George Washington University Law School, and a former economics professor.

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