Tuesday, December 11, 2007

Rationing Health Care

Discussions about rationing health care almost always treat it pejoratively, ignoring the fact that it is done all the time. For example, giving everyone a brain scan every month would probably produce a measurable reduction in deaths from brain tumors. But the cost would be so outrageously out of proportion with the benefits that we would never consider it.

That is an extreme example but cost/benefit judgments – a form of rationing - get made every day in health care. The question is, who should make those judgments and in what circumstances?

On that subject, friend and erstwhile colleague Jeff Ackerman recently sent me an article from the Jerusalem Post discussing Israel’s 2008 budget for the state-subsidized basket of health services. It quoted advocates who are urging an increase larger than the 1% allocated by the national Treasury. It also included several stories of people described as being in dire need of drugs not yet included in the basket. Rationing is being done by government and people are objecting to the decisions being made.

Then last Sunday’s Boston Globe included a letter from Mitch Rabkin, long-time CEO of Boston’s Beth Israel Hospital, now retired. Commenting on an earlier article on the subject of health care costs, Rabkin stated as follows:

“Staff model HMOs and Medicare’s diagnosis-related group hospital payment arrangements, two effective cost-containment initiatives, show that transforming insurance risk to providers is fundamental to making the system efficient and effective.”

Staff model HMOs hire their own doctors and are paid a fixed monthly premium to provide care to their subscribers. Kaiser of California is probably the best-known example.

Medicare’s diagnosis-related group hospital payment system pays the hospital a pre-determined lump sum per admission based on the diagnosis.

Whereas the fee-for-service system gives providers an incentive to do more, these two approaches reward them for doing less (i.e., rationing) and, importantly, for being more efficient. As Rabkin suggests, they have proved effective in controlling cost. I would add that there is no evidence that they have on balance been harmful to patients.

Rationing being unavoidable, would you rather have it done by government or by providers? I side with Rabkin. Let the providers do it.

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