Let me take time out from book writing to comment on the recent appointment of Dr. Donald Berwick to run Medicare. This was a recess appointment made by President Obama apparently to prevent Republicans in Congress from reviving the debate about health reform. Dr. Berwick seems vulnerable because he has frequently commented about rationing of medical services, even admiring programs for rationing that have been instituted in England and elsewhere. Dr. Berwick’s critics want to argue that rationing is un-American, even evil. But rationing simply means that individuals do not receives all the services they would like regardless of cost. All goods and services are rationed, even in market economies. Health care services are no exception. There is no way around it – America rations health care services.
Unfortunately, U.S. market-based rationing of health services is highly problematic, for reasons that I have described in previous blogs. One problem is moral hazard due to health insurance. The only way to fix this problem is to completely eliminate health insurance (high deductibles slightly mitigate the problem), but this exposes individuals to unwanted financial risk, a solution that may be worse than the cure. This is the Catch-22 of health care. The other problem is inadequate and asymmetric information about medical need and outcomes, which leads to demand inducement and practice variations. Health insurers could intervene to correct these problems but they might have incentive to encourage under treatment. In any event, last decade’s backlash against managed care has tied insurers’ hands. For these reasons, U.S. market-based rationing is woefully inefficient. Health services researchers are in near unanimous agreement on these points and Dr. Berwick stands on solid ground.
Dr. Berwick looks to other models for rationing. England’s National Institute for Clinical Excellence offers perhaps the most sophisticated model. NICE rations by relying on cost-effectiveness data and restricts access to medical treatments that cost “too much” – generally more than $60,000 per “quality adjusted life year”. Interestingly, if we had true market-based rationing without insurance, many of the technologies rationed by NICE would be unaffordable to the average American so there might not be much difference. English-style is not without its faults. It is a one size fits all solution to medical decision making. It does not adequately account for the learning curve associated with many new, costly technologies and does not account for innovation spillovers (when using a technology for one purpose sparks other innovative uses.) It also begs the question of how to choose the cutoff – is a year of life worth only $60,000? Who gets to decide?
We should all agree that market-based rationing with health insurance is problematic. Doing without health insurance may be even worse. We can also agree that English-style rationing has its own faults. Who is to say which form of health care rationing is the lesser evil? The Republicans think they know the answer without really understanding the question. The President wants to avoid the question altogether.
Isn’t that a debate worth having?