OP-ED

How We Ration Care

There are not very many good things you can say about a deep recession. But from a researcher’s point of view, there is one silver lining. This recession has given us a natural experiment in health economics — and the results are stunning.

But, first things first. Here is the conventional wisdom in health policy:

  • In the United States, we ration health care by price, whereas other developed countries rely on waiting and other non-price rationing mechanisms.
  • The U.S. method is especially unfair to low-income families, who lack the ability to pay for the care they need.
  • Because of this unfairness, there is vast inequality of access to care in the U.S.
  • ObamaCare will be a boon to low-income families — especially the uninsured — because it will lower price barriers to care.

As it turns out, the conventional wisdom is completely wrong. Here is the alternative vision, loyal readers have consistently found at this blog:

  • The major barrier to care for low-income families is the same in the U.S. as it is throughout the developed world: the time price of care and other non-price rationing mechanisms are far more important than the money price of care.
  • The U.S. system is actually more egalitarian than the systems of many other developed countries, with the uninsured in the U.S., for example, getting more preventive care than the insured in Canada.
  • The burdens of non-price rationing rise as income falls, with the lowest-income families facing the longest waiting times and the largest bureaucratic obstacles to care.
  • ObamaCare, by lowering the money price of care for almost everybody while doing nothing to change supply, will intensify non-price rationing and may actually make access to care more difficult for those with the least financial resources.

Interestingly, the natural experiment that forms a test for these two visions is the recession.

As explained in a recent report from the Center for Studying Health System Change, middle class families are responding to bad economic times by cutting back on their consumption of health care. They are postponing elective surgery, forgoing care of marginal value, and making more cost-conscious choices when they do get care. This reduction in demand is freeing up resources which are apparently being redirected to meet the needs of people who face price and non-price barriers to care. From 2007 to 2010:

  • The percent of the population experiencing an unmet health care need actually fell from 7.8% to 6.5%.
  • The percent of people who say they have delayed care fell from 12.1% to 10.7% over the same period.

And this is in the middle of one of our worst recessions!

As Figure I shows, during the recession the money price barrier to care actually rose among the uninsured, although the increase was not statistically significant. The number of uninsured people reporting access problems because they were “worried about cost” rose from 91.5% to 95.3%. (Translation: virtually everybody who is uninsured worries about cost.) Yet over the same period, the number of people experiencing access problems because of waiting and other non-price barriers was almost cut in half (falling from 40.3% to 24.1%).

Source: Center for Studying Health System Change

Clearly, the decrease in non-price barriers is what is responsible for the dramatic increase in access to care. Figure II shows what some of the most important of these changes were.

 

 

 

 

 

 

Source: Center for Studying Health System Change

These results are consistent with an earlier study we reported on. When North Carolina Medicaid tripled both the time price of obtaining prescription drugs and the money price, researchers found that time was more important than money in deterring access to care.

Figure III is I think the most important figure of all. Suppose that in an attempt to increase access to care, we add one more doctor, one more nurse or one more clinic. Who is likely to benefit? The figure implies that the higher your income, the greater the likelihood you will gain. During the recession, for example, the percent of people experiencing an unmet need with income at 400% of the poverty level or above was more than cut in half. Yet, among those with income below 200% of poverty, the percent of those with unmet needs actually rose.

Source: Center for Studying Health System Change

Think (metaphorically) of a waiting line for care. The lowest-income families are at the end of that line. The longer the line, the longer they will have to wait for care. If you do something to shorten the line, you will be mainly benefitting higher-income people who are at the front of the line.

Why is that? As I have explained before, many of the skills that allow people to do well in the market are the same skills that allow them to do well in non-market settings. High-income, highly educated people, for example, will find a way to get to the head of the waiting line, whether the thing being rationed is quality education, health care or any other good or service. Low-income, poorly educated individuals will generally be at the rear of those lines.

One policy implication is that we should allow low-income people on Medicaid greater access to services whose prices are determined in the marketplace. For example, let Medicaid enrollees add to Medicaid’s fee with out of pocket money and pay the market price at walk-in clinics, surgi-centers and free standing emergency care clinics. Another implication is that we should make it easier for market-based suppliers of care to reach low-income patients (e.g., by relaxing occupational licensing restrictions).

A third implication concerns ObamaCare. As we have pointed out before, about 32 million people are expected to be newly insured, and if economic studies are correct, they will try to double their consumption of medical care. The act inexplicably forces middle- and upper-middle income families to have more coverage than they would have preferred (a long list of preventive services with no deductible or copayment); and once they have it they will use it. Yet in the light of this rather large increase in demand, nothing in the act really increases supply. (I suspect this was to induce the bean counters at CBO to low-ball their estimate of the cost of the bill — if there are no new doctors, CBO is likely to assume there will be no additional care, regardless of what was promised.)

What we can expect is a rather large increase in non-price rationing — as waiting lines grow at the family doctor’s office, the emergency room and everywhere else. In such an environment it is inevitable that those people in a health plan that pays fees below the market price will be pushed to the end of the waiting lines. These include the elderly and the disabled on Medicare, low-income families on Medicaid and (if Massachusetts is a guide) people with subsidized insurance in the newly created health insurance exchanges.

Ironically, ObamaCare may end up hurting the very people many ObamaCare supporters thought they were going to help.

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

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  5. I am disappointed that whoever manages this website does not screen better for irrelevant personal postings. What is more significant for me is where are these figures coming from. I am in primary care and do my best to meet preventative milestones yet am almost certain I do not meet 85% of insured or certainly 65% of uninsured women even coming in every 2 to 3 years to be screened. Every week I see people who have not been in for checkups for 3 to 10 years, So really somewhere in excess of 65% of all eligible women receive screening pap smears in America? Lets have figures of total pap smears versus population again by states or zip codes or something. What of figures that claim 50% of hypertensives and diabetics are ignorant of their disease and not treated. Surely they at least were detected when they were having their pap smear or prostate cancer screening??

  6. “How does any of this counter John’s argument that our poor/uninsured aren’t locked out of the system?”

    Nate, you have to read the report not just Mr. Goodman’s interpretation.

    “The decline was driven primarily by fewer access problems for insured people, likely reflecting recession-related decreases in the demand for medical care. Nevertheless, the access gap between insured and uninsured people widened in 2010 compared to 2007, especially for lower-income people and those with health problems. Among people reporting problems get- ting medical care, the cost of care was an even bigger concern than in previous years. Fewer people encountered health system-related barriers, such as getting timely appointments with doctors, possibly reflecting freed-up health system capacity because of lower demand.”

    “The number and proportion of uninsured Americans increased sharply between 2007 and 2010—from 42.8 million in 2007
    to 51.7 million in 2010”

    “At the same time, the incidence of unmet need among the uninsured fell slightly from 17.5 percent to 16.6 percent, but the change was not sta- tistically significant. Although unmet need did not increase for the uninsured between 2007 and 2010, the gap in unmet need between insured and uninsured populations widened in 2010 compared to 2007.”

    “Overall, in 2010, people with incomes below 200 percent of poverty—$44,100 for a family of four—were 3.1 times as likely to report an unmet need as those with incomes at or above 400 percent of poverty (9.3% vs. 3%). This imbalance has grown since 2007, when low-income people were only 2.2 times as likely as higher earners to forgo care (see Table 1). Between 2007 and 2010, unmet needs declined for high-income people— from 5 percent to 3 percent—but remained steady for those in the low- and moderate-income groups.5
    Within each income group, uninsured people were roughly three times as likely as insured people to report going without needed care.”

  7. How does any of this counter John’s argument that our poor/uninsured aren’t locked out of the system? I don’t see where he made any comment on the medical necessity of the services just that cost is not as great of an impedement as access to resources

  8. Glad I am not the only one who noticed. He knows the literature well enough to cherry pick examples where there are other reasons for not screening or operating at the high rates seen in the US, but never notes those alternate reasons, which I suspect he knows.

    Steve

  9. why? When private third party payors have another method to substitute for price rationing they have no business being in business but when a government third party payor has another method to substitute for price rationing that is acceptable?

    What if the private third party payor has a more efficient and equitable substitute then government, why would you deny the public superior and more efficient service just because its private and not government?

  10. Margalit does that also apply to the government who is also a third party payor, do they have no business being in business?

  11. It’s not surprising that “Meaningful Use” measures exclude measures such as health status over time, care episode outcomes, and care availability — all very meaningful to consumers. So the effects of rationing, however it is caused, are not on the dashboard. That is an elegant way to claim credit for doing something while avoiding stakeholder-measurable accountability.

  12. “All scarce resources have to be rationed.”
    ___

    Well, yeah, but that’s not exactly news. Lots of smart, accomplished people have been wrestling with the implications for a long time. See, e.g., Einer Elhauge’s 1994 “Allocating Health Care Morally.” To wit:

    “Health Law policy suffers from an identifiable pathology. The pathology is not that it employs four different paradigms for how decisions to allocate resources should be made: the market paradigm, the professional paradigm, the moral paradigm, and the political paradigm. The pathology is that, rather than coordinate these decision-making paradigms, health law policy and employs them inconsistently, such that the combination operates at cross purposes.

    This inconsistency results in part because, intellectually, healthcare law borrows haphazardly from other fields of law, each of which has its own internally coherent conceptual logic, but which in combination results in an incoherent legal framework and perverse incentive structures. In other words, health care law has not – at least not yet – established its self to be a field a law with its own coherent conceptual logic, as opposed to a collection of issues and cases from other legal fields connected only by the happenstance that they all involve patients and healthcare providers. [pg 1452]

    http://www.law.harvard.edu/faculty/elhauge/

    See also recent thoughts:

    ASPIRIN, ANGIOPLASTY, AND PROTON BEAM THERAPY:
    THE ECONOMICS OF SMARTER HEALTH CARE SPENDING
    Katherine Baicker and Amitabh Chandra*
    Harvard and NBER
    August 8, 2011

    Lest anyone blow the latter paper off as “liberal statist wonkism,” consider their close:

    “There is no single strategy that is likely to achieve efficient use of health resources. On the provider side, payments through public insurance programs can be bundled to encourage coordination, and providers can share in the financial gains of improving the efficiency with which they deliver care. On the patient side, more nuanced cost-sharing and leveling the playing field for higher-cost-sharing insurance plans can encourage patient involvement in decisionmaking and the balancing of resources costs against health benefits, as well as fostering competition. System-wide, better information is needed about which delivery systems – not just which drugs or procedures – are most effective.

    The U.S. has yet to wrestle with the question of public policy priorities in a world of scarce resources: even with perfect productive efficiency, we cannot cover all services for all people. When public resources come at a cost of lower economic growth, there must be some explicit consideration of the value of redistribution, and the public priority placed on covering different levels of service for different parts of the population. By first ensuring that health care resources are used more productively, we will be in a much better position to move towards spending the “right” amount on health.”

    Decades of contention.

  13. @September 9, 2011 at 8:52 am

    LOL.

    “you are just a narcissistic jerk who doesn’t want people to have the chance to voice dissent.”

    Right. I have SUCH suppressive power here.

  14. Full of sound and fury, signifying nothing, truly fits your windbag pontifications. If you were mature and responsible, which you are not, you would have corrected the misspelling to educate and inform, and then reply with a dissent that was respectful and informative, but since your first retort to me months ago, that I did not even address you in the comment, a retort that was demeaning, disrespectful, and arrogant, you just continue to be the a–hole your replies imply. And I am direct and frank, so I will not be “cute” in using false pleasantries to insult you back, to then falsely claim to be the better person here. You reply like an arrogant jerk, you do it to others, and people like me aren’t going to waste time trying to be reasonable with people like you any more.

    You are correct though that Mr Holt has allowed this kind of path to travel in threads to go with the likes of you in your personal attacks. You think you are so artful and slick by not using names but making sarcastic, dismissive statements. I know the likes of you Mr G, and at the end of the day, you are just a narcissistic jerk who doesn’t want people to have the chance to voice dissent.

    PPACA is going to be a terrible detriment to our society. I am not interested in the long winded pontifications that just muddle the simplistic endpoint the legislation is about, that the Democrat Congress did not want the public to review when they passed the crap, and how ironic that their main spokesman, Mr Obama, continues this same lame and dangerous kind of attitude with his speech last night on job creations. Basically again saying “pass the legislation and then we’ll look at the specifics later.” That is not leadership or representation, that is misleading and bullying people.

    Hmm, sort of like, you?

    Occam’s razor does fit the discussion. Happy I spelled it right now!?

  15. Really?

    Keep digging. Look in the mirror much? Gotta love such a target-rich environment of misstatements.

    “rigid, inflexible positions”

    That’s beautiful. Willful cluelessness. How charming. “cry foul”? You could hardly be much more confused with respect to the difference acerbity and outrage. Jousting with you will never rise to the level of outrage at this end of the wire. Moreover, I defy you to document where I have EVER called you or anyone else here the names you routinely call me.

    “I am surprised if he reviews the threads he continues to tolerate your bs.”

    Mr. Holt has already commented elsewhere on this blog regarding his tolerance for free speech.

    “Assuming your name is who you really are”

    One click away.

    Cheers

  16. Big deal, you think because you say who you are allows you to insult and demean people and then cry foul when you are called on it. Assuming your name is who you really are. Ever think that some people have to use aliases to avoid retaliation? Yeah, not a concern for someone who probably has little to lose with no personal stakes in this battle to ruin health care. Hey, all your alleged physician buddies must also have nothing to lose if they support your agenda.

    You are more than a jerk, you are a hypocrite, and you are the thin skinned one. Really, attacking people for misspelling words, how adult. But, it does go along with your agenda of just insulting and harassing those with different points of view; you must be loved in your political circles for adhering to the standards of defense for your policies and interests.

    And a troll is basically as much one who stalks commenters. Go back to your pontifications with other posters who tolerate your rigid, inflexible positions. The next time you just write your usual garbage retorts, let’s see if Mr Holt will agree with me or you. I am surprised if he reviews the threads he continues to tolerate your bs.

    And for the last time, I have identified myself to the authors of this blog when I first started commenting, so stuff that retort in your pie hole.

  17. “The U.S. system is actually more egalitarian than the systems of many other developed countries, with the uninsured in the U.S., for example, getting more preventive care than the insured in Canada.”

    “Among US women age 40 to 64, 87% of those with insurance had a mammogram within 5 years, compared to 65% of those without insurance.
    The rate for Canadian women is 65% – the same as for uninsured women in the US.”

    “TORONTO — Some Canadians may be confused by controversy over new U.S. breast cancer screening guidelines, but experts here say the revised recommendations finally conform with what Canada has been advising women for years.

    The U.S. Preventive Services Task Force, a panel of independent experts, released revamped recommendations this week, including advice that women in their 40s should not have routine mammograms because there is no evidence they improve survival in that age group.”

    “Canadian women also have the same rate of screening for cervical cancer as uninsured US women (80%), over five years. Among insured US women, the rate is 92%.”

    “Health Canada is working with the provincial and territorial health ministries to coordinate cervical cancer screening activities and screening programs across the country. The aim is to reach high-risk women, standardize screening practices, assess new technologies, monitor results and provide better follow-up procedures.”

    So, is the 80% in Canada because of higher government “rationing” of services or just the rate that Canadian women establish because they don’t see the need for more frequent testing?

    “Among uninsured US men, 31% were screened for prostate cancer, compared with 16% in Canada. For insured US men, the rate is 52%.”

    “The evidence is insufficient to determine whether screening for prostate cancer with prostate-specific antigen (PSA) or digital rectal exam (DRE) reduces mortality from prostate cancer. Screening tests are able to detect prostate cancer at an early stage, but it is not clear whether this earlier detection and consequent earlier treatment leads to any change in the natural history and outcome of the disease. Observational evidence shows a trend toward lower mortality for prostate cancer in some countries, but the relationship between these trends and intensity of screening is not clear, and associations with screening patterns are inconsistent. The observed trends may be due to screening, or to other factors such as improved treatment.[1] Results from two randomized trials show no effect on mortality through 7 years but are inconsistent beyond 7 to 10 years.”

    “ScienceDaily (Mar. 29, 2011) — A new study on the use of prostate-specific antigen (PSA)-based prostate cancer screening in the United States found that many elderly men may be undergoing unnecessary prostate cancer screenings. Using data from surveys conducted in 2000 and 2005, researchers report that nearly half of men in their seventies underwent PSA screening in the past year…”

    I always get a kick when Mr. Goodman links to his own web page as proof of his statements.

  18. Shorter version of sites like this that basically support PPACA and the hidden perks that Nancy et al did not want the public to know back in March 09:

    Government still does not control health care as much as they try to get patients into Medicare and Medicaid, so, they will come up with a superficial legislation that claims to help everyone, when in fact it gives politicians the most control over the populace by dictating who gets whatever care politicians deem appropriate and accessible to whom they(politicians) want, when they want, and, wait for it, why they want.

    As much as I despise Republicans for their blatant efforts to help only those who easily help themselves, they had their random chance moment in doing the right thing in fighting this monstrosity legislation. Perhaps because they instinctively are afraid that if Democrats are able to keep PPACA in place, then Republicans and their supporters will be punished first.

    Call this crazy, paranoia, or sheer idiocy. Or, perhaps, it really is about Ochman’s razor, the simpliest explanation does in fact apply.

    You all figure it out. While you have time.

  19. “…. they should not be too surprised when they discover third-party payers have another method to substitute for price rationing”

    Nobody will be surprised. This is why private insurers have no business being in business.

  20. Sigh. And your proposal that will cut overall health care costs, but somehow everyone will pay the same fee is what? (It would be helpful if you stopped mixing in Medicaid and the uninsured right after each other. They are different populations.)

    “and once they have it they will use it. ”

    Explain Canada.

    As to the rest, yes, business is slow. Wait times are down in many specialties.

    Steve

  21. All scarce resources have to be rationed. If people believe it’s unfair to use price rationing for health care, they should not be too surprised when they discover third-party payers have another method to substitute for price rationing.

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