My Point of View
Health-Care Rationing Is Inevitable
Let's stop debating the why of rationing and get on with the how.
By Knight Kiplinger, Editor in Chief, Kiplinger publications
February 2010
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Editor's note: This story was published prior to the passage of health reform legislation.
Rationing remains the ultimate taboo in the health-care debate. Nobody -- including me -- likes to be told by a health-care funder, whether private or public, that it won't pay for treatment. But I believe that formal rationing will someday take hold in the U.S., regardless of whether pending health-care legislation is enacted. It's a matter of simple affordability. The high cost of wonderful new medical treatments will far exceed our nation's ability to pay for them.
The Congressional Budget Office projects that, at its recent rate of annual growth, the cost of Medicare and Medicaid -- not including privately funded health care in the U.S. -- will triple from 4% of the nation's gross domestic product in 2007 to 12% in 2050, then surge again by half to 19% of GDP in 2082. That 19% would be about the same share of our economy that Washington spends today on all functions of government -- pensions, defense, education and so on.
More ominously, the biggest factor in this crisis won't be the increasing number of Americans on the Medicare and Medicaid rolls. It will be the ever-higher per capita consumption of health care -- people seeking more miracle drugs, more replacement of joints and organs, more of everything. Curbing wasteful medical practices, squeezing doctors and hospitals, and controlling drug prices won't save nearly enough. If unchecked, this situation portends higher taxes and premiums for private insurance, plus the starvation of other societal needs.
Someday, the parties that pay for health care in the U.S. -- rarely the individual patient, most often an employer, its insurer or the government -- will have to create carefully considered cost-benefit analyses for every kind of medical care that might be sought by patients at every stage of life, from prenatal to old age.
These analyses will be crafted by knowledgeable experts -- doctors, economists, bioethicists and actuaries -- with all of us looking over their shoulders and kibitzing. They will decide which therapies are effective or ineffective. They will decide whether society's limited resources should be concentrated -- as now -- on the last stages of long lives or focused on improving the health of children and young adults, who have many more years ahead of them.
The process will be contentious, but from it will emerge standardized, rational policies for approving or denying payment for a wide variety of medical procedures and drugs, based on the patient's prognosis and age. That's rationing, and most other nations do it now. Patients who want to undergo a procedure that has not been approved will be free to do so in an open, global health-care market -- and pay for it themselves, if they can.
Yes, some of our perceived medical needs -- and many of our wants -- won't be met under rationing. Knowing that in advance, perhaps more of us will change the way we live now to reduce our future demand for scarce resources.
Today, many Americans engage in a kind of voluntary self-rationing. With living wills they instruct loved ones not to expend family funds and taxpayer money to keep them alive by extraordinary means. Some cancer patients, faced with very slender odds of survival, choose not to embrace the most-aggressive therapies, even if covered by their insurance, preferring palliative care while letting nature take its course.
Without rationing, health-care costs in the U.S. will crowd out spending on every other important function of government and society -- providing quality education for our young, cleaning up our environment, funding basic scientific research, and protecting our nation's natural and cultural landmarks. Without medical rationing, our country's competitiveness and standard of living will suffer.
So let's stop debating the why of rationing and get on with the how.
Columnist Knight Kiplinger is editor in chief of Kiplinger's Personal Finance and of The Kiplinger Letter and Kiplinger.com.
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Reader Comments (9)
Posted by: Andrew Brunskill at 01/16/2010 07:04:30 PM
Dear Mr Kiplinger, Thank you for your excellent article on Rationing, I suggest you be given the "Telling it like it is Emperor's new clothes award" for 2010! As a physician who trained in the UK initially we were taught that knowing the cost of tests and procedures was something that a professional should know. We did know someone was paying for them! I was astonished on coming to the USA to find that this knowledge was almost totally lacking in US health care. Yet in most other areas of US life it is indeed known that cost is an important component of judgement. Of course the blinders finally came off when I was interviewed for a position in private health care and was told that my reimbursement would be related to my "productivity" - where apparently productivity represented the number of expensive tests and imaging procedures that I would be recommending for my patients. Here the value of this knowledge would relate to my own pocket! The fact that some time honored clinical skills and questions might make some of these tests unnecessary seemed to have been completely overlooked. There are clear links between how much and what type of care is used, reimbursement models (salary, fee-for-service) , payment models and insurance types. I later found another perspective again as medical Director of a non profit health plan. Here I had to assist in arbitrating appeals by patients for procedures to be reimbursed that the plan was inclined to deny. What a spectrum! All human life was there. I remember requests for having your feet rubbed with crystals in a Swiss clinic to cure your cancer, ionic boxes for your allergies, wood supplies for the winter heating for your asthma. But some of the most poignant were the requests where the medical evidence was just not in or changing. Few involved can forget the dramatic changes in our perception of bone marrow transplant for breast cancer as first three negative trials were reported and then the one positive trial was shown to be fraudulent. The truth is that the health care professions are in desperate need of support in knowing the value and costs of different alternatives. The Agency for Health Care Research and Quality is one of the few Federal agencies that recognizes it but is in continual danger of strangulation by special interest groups who seem scared what an open discussion of effectiveness might show. I think the term "rationing" will never fly - we have to rename it "budgeting" (of course this term does not seem to have been that popular either!) . Names are important - "socialized medicine" is how the US sees the UK , "socialized education" is how the UK sees education in the USA (the proportion of children in private schools in the UK is notably larger than in the USA). Things must get better and I think your honesty is a step forward on this. Thank you!Andrew Brunskill. Clinical Assistant Professor Health Services, University of Washington.
Posted by: Kay Schroer at 01/19/2010 02:56:41 AM
Dear Mr. Kiplinger, Your article "Rationing is Inevitable" reflects my sentiments entirely and I appreciate your courage in bringing the unthinkable to public attention. Barrons also discussed similar sentiments in this week's Magazine and I would hope your articles will generate much needed public attention and debate. Some years ago Oregon invoked considerable attention when, after public discussion, they laid out what Medicaid could cover. I do support "basic" health care for all but it should be just that, basic. There will be plenty of oppotunity for those who wish more to subscribe to additional insurance plans. I confess that I work for the VA, and think we provide the highest quality of care at a fraction of the cost of the private sector. Fifteen years ago when Congress freed the VA from the outdated funding model that allocated funds based on inpatient beds to an acuity based model the VA has undergone a remarkable transition of accountability and efficiency. We are still hampered by some antiquated government rules especially in hiring but we get on with it and do the best we can.
Posted by: Bob at 01/19/2010 08:42:33 PM
I take exception with Kiplinger's claim that health care rationing is inevitable. In a free market, rationing is unnecessary, since price ensures that supply equals demand. But our health care market is anything but free. As the first commenter (Brunskill) stated, prices are not made available; a recent survey showed most hospitals failing to quote a price for a hysterectomy when asked, in violation of the law. Not surprisingly, the price varied from $3,700 to over $60K. The supply of doctors is regulated by the AMA and certification boards who have a self-interest in constraining supply to keep wages high and growing. Funding for teaching hospitals comes primarily from Medicare, which has continually reduced funding in a myopic attempt to save money. Medicare and Medicaid tax revenues have, like Social Security, been raided to fund other government programs rather than being prudently invested to accommodate future needs. In addition, their fraud and abuse levels waste well over $100 billion annually. Drugs are approved by the FDA, which has a historically cozy relationship with drug companies. Special deals have been negotiated with these companies rather than getting competitive bids for Medicare/Medicaid and allowing importation to increase competition. Excessive pain and suffering awards from juries have raised malpractice insurance premiums and encouraged excessive testing and treatment to forestall lawsuits. Insurers have been given anti-trust exemptions and been prevented from operating across state lines, thereby constraining competition. Laws mandate hospital care for the indigent but provide no funding for it, causing the expense to be passed on to other patients. So-called lifestyle diseases from smoking, obesity, etc. contribute 25% to health care costs but health abusers pay no penalty for their bad habits. It’s little wonder that health care costs are skyrocketing but these issues are all correctable through government action. Rationing is NOT inevitable! And so which of these factors do the health care bills currently in Congress address? None of them...not one! Rather than accept rationing as inevitable, we should at least acknowledge that, to paraphrase Pogo, “We have met the enemy and he is...the government.” If President Obama had delivered on his promise to work toward sincere, bipartisan solutions, I have not doubt that the resulting health care bill would have found broad public support...AND won passage by Congress!
Posted by: Deborah Hutchings at 01/23/2010 03:20:07 PM
Dear Mr. Kiplinger, Thank you for the courage to acknowledge that the U.S. cannot continue to pay for all the health care everyone "wants" and that efficacy (along with some of the changes suggested by the other folks who have commented) will need to be taken into consideration.
Posted by: Ray Joiner at 01/29/2010 10:04:46 AM
Dear Mr. Kiplinger: Thank you for taking on this taboo subject. We as a nation have so far not had the courage to take this up. And thanks to poster Bob for bringing up one major aspect of high medical costs - our own bad habits (smoking, obesity, lack of exercise, poor dietary habits, abuse of alcohol, and so forth). Emotionality has trumped rationality in the national health care debate so far.
Posted by: Sam at 02/27/2010 12:34:52 PM
A relative of mine wtihout insurance waited 12 hours in an emergency room and was still not seen by a doctor. 2 days later she had to be taken, by ambulance, to another emergency room. We do have rationing today. Its done by price.
Posted by: Jack Lynch at 02/27/2010 01:14:00 PM
Where do the air lines get their pilots? We supply colleges for the Military to protect our country why not a Medical College? I wrote recommodations for two students who are both Medical Doctors but they could not afford the cost of the schools however they both had high SAT scores, and went on scholorships. There are many students in this type of group..On completion of med school they would be required to give fours of military service. Another 100 plus Doctors would be nice and may lower some costs.Check and you will find out the Med schools arevery limited. Us change it, we need Doctors.
Posted by: Jonathan Galin at 03/09/2010 07:13:45 PM
Sir, before you consider and call for rationing, I strongly suggest we have a national discussion on some form of price controls and limit of "profits" on large for-profit medical providers, insurers, Big Pharma, etc. It's quite apparent that in spite of our so-called "free market"/free enterprise system, collective gouging and extreme profiteering exists at the expense of the very citizens (you & I) who embrace these very systems as Americans. The question one must ask, is at what stage should "free enterprise" be allowed to enjoy extreme "profit" which is sending middle class American's to the poorhouse. This will continue to get worse if you continue allow unbridled price increases by for-profit companies without addressing this side of the issue. American's believe in a fair profit certainly but it has gone way past fair. Individual states have regulatory commissions that limit gouging and unfair trade practices against the citizenry, we need a model for this at the Federal Level to address our tremendous health care issues. The for-profit Health Care companies have brought this concept upon themselves as a result of their unmitigated greed.
Posted by: Gary Jensen at 08/15/2010 12:58:29 AM
Dear Mr, Kiplinger, Thank you for bringing rationing of health care to the forefront of discussion of its inevitability. This is occurring in the VA health system today where they are using a cost benefit analysis as to treatment that a person will receive even though a medical system both public and private insurance systems outside of the federal government agree it is warranted. I know that they have many patients and people do get lost occasionally in the system. While some aspects of the VA system are good, there are procedures that are rationed. In order to afford surgery that is needed one may have to go to other countries for a medical surgical vacation. I see this as a viable option in the new health care system.