Health-Care Rationing Is Inevitable

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.

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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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