Saturday, October 10, 2009

Rationing Health Care: What We Already Do, Done Better

It's a dirty word that no politician dares to utter, but any discussion of health reform, and of cost containment, demands that we talk about rationing. As stated by ethicist Peter Singer argued this past summer "The debate over health reform in the United States should start from the premise that some form of health care rationing is both inescapable and desireable. Then we can ask, What is the best way to do it?" My goal with this post is to better explain rationing, show why it need not be a dirty word, and show how we already engage in health care rationing everyday.

Let's start our discussion in Oregon circa 1987. Oregon's Medicaid program only covered adults with earnings below 60% of the federal poverty level (FPL), but the state wanted to find a way to cover everyone up to 100% FPL - but the state could not spend any additional money. A state commission was formed to determine how to achieve this goal. The commission looked at all services provided by Medicaid and divided them into approximately 700 treatment groups. The groups were then ranked based on medical and cost effectiveness. Treatments that scored well were given a low number, treatments that fared poorly were assigned a high number. Figure 1 shows the treatment groups on the horizontal and the income level of the population on the vertical - the grey area represents treatments that are not covered.

Oregon was providing access to all 700 treatment groups to every Medicaid recipient with earnings below 60% FPL, but nothing was covered for those earning 60% FPL or above (the grey area in figure 1). The Oregon legislature decided that in order to provide health insurance to everyone below 100% FPL they would stop covering the least effective (high numbers in figure 1) treatments. The state stopped covering treatment categories that fell above treatment group 550 (figure 2). This saved enough money that the state was able to provide coverage for treatment groups 1 to 550 for everyone earning below 100% FPL. It was explicit rationing of care, those services deemed to be the least medically or cost effective were dropped, but the state was able to increase the number of people covered by Medicaid by 50%.

So what are the national implications of all of this? Imagine that the 700 treatment groups identified in Oregon were extrapolated to the entire country. Currently, those with good insurance, in Medicare, in Medicaid (other than in Oregon), and those who are wealthy have access to all 700 treatment groups. But access to those treatment groups declines as income (and likely the quality or presence of insurance) drops. Figure 3 shows how health care is already rationed in the United States everyday. The poorest Americans, those lacking adequate health care, have limited access to any of the 700 treatment groups. As income rises so does access to care. This is rationing, but unlike the Oregon experiment, this rationing is driven entirely by one's ability to pay for care. Rather than rationing to ensure that everyone has equal access to a set standard of care it is rationing that provides some unfettered access to care while others can access very little. And it's all based on ability to pay, not on need.

The solution, based on the Oregon example, would be to limit access to the least effective services, and with the money saved, extend equal coverage to everyone (figure 4). In Oregon, the state was dealing with a finite pool of funds for the Medicaid program. Nationally, we would be dealing with a finite pool of funds drawn from the population via taxes to fund universal health care. The inclusion of the entire population in the purchasing pool would likely mean fewer excluded treatments.

In a prior post I argued that the only way to effectively control costs was to implement a single-payer model of health care delivery in the United States. I cited the McKinsey Global Institute's finding that America spends 30% more on health care than we should - largely due to overuse of services. Ending the overuse of services, and therefore saving substantial sums of money from our $2.5 trillion health care economy can only be achieved effectively via single-payer. Achieving those cost savings would require empowering some governmental agency to review service use and determine which treatments are most and least effective, and therefore which services to be covered with our finite resources. It would be explicit rationing, but unlike our current approach to rationing health care, it would be based on providing equal access to the same standard of care – regardless of income.

Special credit goes to Donald Barr and his terrific book “Introduction to U.S. Health Policy” for key information and concepts used to inform this post.

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