All Kidding Aside---Health Care Rationing and the Eldery

The issue of health care rationing has become a hot topic in the current debate over health care reform, with President Obama suddenly on the defensive from concerns that the disabled and elderly will face politically coerced restrictions on access to health care. (I think using the buzz-phrase “death panels” to describe what’s in the House bill is a stretch, but then I felt the same way about the phrase “torture memos,” so I guess people really do reap what they sow).

So let’s go back to the first installment of “Trouble Indemnity” to analyze this.

Because we can not draft complete contracts in health insurance, any health insurance system will have some aspects of what can be called rationing. The only question is how that happens, and what types of procedures are more likely to be rationed.

To restate: I can sign an almost completely defined contract on my car. I can sign a contract such that, if a limb falls on my car and destroys it, I will be reimbursed for original purchase price, current fair marker value, or replacement cost. The associated premiums will vary accordingly. The second concept, “current fair market value,” leaves the most room for post-event negotiation, but even the most generous contract, full replacement value, has a pretty-well defined bound (adjusted for inflation or not, which can be a part of the contract). The existence of deductibles will give me more of an incentive not to park under slash-pines during a tropical storm.

The problem is that no insurance system, private, non-profit, or government, can sign a contract that says “we will cure you of cancer [lupus, MS, ALS, etc.]”.

In an indemnity system, I agree to a multi-part rationing system that typically starts with the requirement that my proposed treatment has to be approved by a physician, and then includes something like a lifetime maximum benefit. Because this creates a third-party payer problem in terms of my incentives and my physician’s incentives, indemnity systems also ration with deductibles and co-pays. A second phase of rationing occurs when the system has to deal with the adverse selection problem (again, see the previous installment of “Trouble Indemnity”).

At the other extreme are single payer government plans, in which rationing is carried out through the political process. For example in Britain, this is called NICE (for a good explanation and defense of single-payer health care rationing ---although not of NICE-­­­­-- see this link in the Times).

HMOs are a hybrid in which customers, typically in return for lower deductibles and higher lifetime maximums, agree to a rationing system that over-arches the patient-physician relationship.

However, a key difference is whether the rationing system is disciplined by competition, as it is in the largely private automobile insurance market. There is usually the least customer choice in government single payer systems (although in Britain private care is an option, and Canadians have the safety valve of the USA private system just a few minutes drive away).

Is there a difference in the pattern of rationing of the kind that is the subject of the current debate over “throwing Grandma under the bus?” In my reading, there is no doubt that the NICE system in Britain adopts a rationing scheme that tends to favor younger and otherwise healthier patients at the expense of the less healthy and the elderly.

By way of full disclosure, my Mother was diagnosed with lung cancer at about age 72. She refused the offer of lung cancer surgery, and settled on palliative measures only. She lived about 3 ½ years, probably not as long as had the surgery gone well, probably longer than if she had suffered complications from the surgery. A few years earlier, she had almost died from a nose-bleed because of what must have been an inherited blood-clotting condition. She didn’t want to go through something like that again. I not only supported her decision, I used my power as her health-care power of attorney to insure that, in the last few weeks of her life, she wasn’t put into an ambulance for transport to an imaging facility. Instead, we just increased her pain medication. The point is that this was all her decision. If she had been 52, and had not had real fears of the side effects of surgery, I might have tried to argue her out of it. In any case, it was not the decision of NICE or anything like it.

Currently, in the United States, we have a hybrid system that favors the very poor (Medicaid), the elderly (Medicare), those who have a job with a company that offers a group policy (the majority of us), and everyone else who is healthy enough to obtain reasonably-priced private coverage. The least advantaged U.S. citizens are probably working people who have just too much income and too many assets to qualify for Medicaid, who lose or do not have employer-based health insurance, and who find individual health insurance policies prohibitively expensive, perhaps because they have existing illnesses, perhaps because they have the misfortune to live in states where government regulations drive up the costs of basic personal policies. (I’m setting aside the more difficult question of health care for people who are in the country illegally.)

The point is, because we are dealing with sickness and inherent contracting problems, any system is going to have rationing of something that is beneficial. If I were writing a health care plan, I would try to rely more on lower cost, readily available health care plans. If I were really in a “what-the-heck” mood, I would talk about Christian denominations re-establishing the charity hospitals that they ran for decades before they joined the current health care establishment. These approaches are no less oriented to the “least of” our society than the single-payer government plans being so fervently promoted by the leaders of the mainline Protestant denominations.