| Why we must ration healthcare |
The impossibility of NOT rationing healthcareThe definition of healthcare rationingLet’s be clear, first of all, on what we mean by rationing healthcare. Many definitions have been used, and most talk blandly about such things as the allocation of scarce resources, or the fair distribution of available benefits or goods or commodities. I object to such definitions on the grounds that they are misleadingly soothing. There is nothing pretty about rationing healthcare. Rationing is bad, and if we’ve got to do it we ought to face up to what we’re about. It might keep us more honest. So here’s the definition I like:
This definition has the virtue of being straightforward. Also, it puts the onus on us (since we’re the ones deciding not to buy the services) instead of on those nasty “scarce resources” themselves. That makes it more difficult for us to dance around the real issue, which is, if we decide we’ve got no choice but to ration healthcare, then we ought to feel obligated to do it in the least harmful way possible.
Another advantage of this definition is that it gives us a starting point upon which we all can agree: The rationing of healthcare is undesirable, and so it should be undertaken only if there is no other alternative.
There is no other alternative. Unless we’re all willing and able to pay out of our own pockets for all of our own healthcare – a fiscal impossibility – rationing healthcare is an economic imperative. There are two ways of explaining why rationing healthcare is unavoidable, a short way and a long way. The short explanation of why rationing is unavoidableIn any advanced society such as ours, where some sort of centralized funding agency creates a pool of money from which most of the healthcare bills are paid (whether that centralized funding is accomplished through a government agency like Medicare, or through a private agency like an HMO, or through some combination of these), even if that centralized funding agency is extremely large and powerful and coercive, there still will always be limits to how much money can be placed into the pool. On the other hand, the amount of money that could be conceivably spent to purchase all the potentially useful healthcare for every individual in the population is essentially limitless. This means that, one way or another, somebody is not going to receive all the available healthcare that might be potentially useful to them. Rationing is occurring. Q.E.D.
I personally find this explanation to be quite convincing. And if you do too, you can simply skip the rest of this section and move on to the next. But since rationing healthcare is such a horrific idea to contemplate, some of you who otherwise are entirely reasonable individuals might not have gotten “there” yet. If you are in this category, and a much more comprehensive proof of the unavoidability of healthcare rationing is necessary, read on. The long explanationThe central issue is whether sufficient financial resources are available to allow us to avoid healthcare rationing. In considering this issue, we should ask the most difficult question first – is there a limit to what we should be willing to spend on healthcare? How much should we spend on healthcare?During the great healthcare debate of the first Clinton administration, it was generally held as abhorrent that healthcare was consuming 13% of the Gross Domestic Product (GDP). While there was great disagreement at the time as to whether the entire healthcare system should be managed by the government, I don’t remember much public disagreement at all on whether the total amount of spending was too high. Clearly, said the consensus, it was.
On the other hand, many of my physician colleagues were saying in those days, as not-quite-disinterested observers whose incomes depended on society’s willingness to spend lots of money on healthcare, “Who says 13% is too high? If not healthcare, what should we spend the money on? Caribbean cruises? Sports cars? Why not spend 20 or 25% or even more of the GDP on healthcare?”
I for one cannot blame my doctor friends for asking a question as reasonable-sounding as this one. The correct answer, however, is not the one they expected. For there is indeed a fundamental limit on how much society should spend on healthcare. We were exceeding that limit in 1994, and we’re certainly exceeding it now.
That limit is defined by a straightforward economic principle: When we are buying consumable products that we are consuming ourselves – products like Caribbean cruises, sports cars, ice cream and healthcare – we should spend no more than we are able to pay ourselves.
There is no question that we’re spending more on our healthcare than individuals are able to pay, and have been for quite some time. In 2002, for instance, we spent an average of $5440 per year on healthcare for every man, woman and child in the United States. This is far more than most Americans could comfortably handle themselves.
More importantly, this amount is greater than we are able (or at least willing) to pay even on a collective basis. Instead of paying for our healthcare as we go, we’re simply adding much of the cost to our huge federal deficit, both through Medicare and Medicaid expenditures, and by subsidizing “private” healthcare through tax deductions for insurance premiums. Thus have we arranged to pass on a huge and growing financial burden to our children, grandchildren and generations yet unborn, clearly in violation of the principle that those who consume products or services ought to pay for them. So is this just a “fairness” argument?It is unfair to ask future generations to bear the debt we accumulate when we consume healthcare for our own benefit. But, you may be saying, so what? Lots of things are unfair, and who said life was supposed to be fair, anyway?
Whether one has sympathy for the stoicism, or disdain for the callousness, inherent in such sentiments, the ethics of how we finance healthcare is indeed important. However, its importance doe not lie in our concern over peoples’ feelings should they be treated unfairly. Instead, its importance lies in the fact that the type and magnitude of the unfairness we’re dealing with here goes well beyond the merely “routine,” merely unpleasant injustices we deal with every day.
Mundane, everyday unfairness – the kind about which an American stoic might well advise, “Just suck it up!” – abounds, to be sure, in our healthcare system. Here’s just one obvious example: Millions of struggling, low-to-middle-income Americans, who themselves have no health insurance, find that precious dollars are confiscated from their paychecks to pay the Medicare expenses of well-do-do retirees. Unfair? Sure. Should we fix it? Certainly. (And we probably would, too, if making it virtually impossible for millions of Americans to get health insurance weren’t such an effective means of covert rationing.) But really, that’s just one of the routine injustices we see every day.
The injustice we’re talking about here, where the massive and continually growing bill for our own healthcare is being passed on, via the federal deficit, to future generations, is of an entirely different species altogether. This injustice stems from our violation of the economic principle which dictates that people need to pay for their own consumable products. There’s a reason this is a principle and not just a “nice to have” – following this principle is necessary in order to keep our economy, and our society, stable.
Clearly, our society takes pains to keep individuals from violating this economic principle, specifically, by enforcing strict limits on how much debt a person can accumulate. People are allowed to borrow even rather large amounts of money, as long as they promise to repay it and their credit rating is sufficiently high. But if a person should fail to pay back what they owe according to a predetermined schedule, society will quickly take very definitive steps to interrupt further borrowing, and will bring great pressures to bear to try to force them to repay. By no means will society allow individuals to simply accumulate more and more debt.
Any society that expects to thrive will do the same, that is, will not permit individuals to accumulate more debt than they can repay in a timely fashion. The reason, quite simply, is that people die. If people were routinely permitted to compile large amounts of debt until the day they die, finally leaving all that debt to be borne by people who haven’t died yet, the economic system would collapse. We have no choice but to insist that when individuals buy things, they make arrangements to pay for them before they depart this vale of tears.
Fundamentally, the same economic principle – purchasing no more than one can pay for – holds for society itself as well as individuals. That is, society must actually pay, eventually, for everything it buys through its agent, the government. But for society the timeframe for repayment is substantially different than for individuals, because society, in economic theory at least, lives forever. The accumulation of debt, even very large amounts of debt, thus is less alarming, since society will “always” be there to pay it back.
Furthermore, the ability to carry a large debt is important to the normal functioning of any complex society. Among other things, the ability to carry very long-term (i.e., multi-generational) debt enables the government to borrow the money it needs to do the long-term things that benefit multiple generations of humans – things like improving the nation’s physical infrastructure, maintaining national defense, advancing medical research, and engaging in other forms of non-commodity spending that will allow our country to progress and grow stronger, and steadily improve the lives of successive generations of its citizens. This kind of debt, then, the “right” kind, is an investment in the nation’s future.
Where things begin to go awry is when we begin to burden society with the “wrong” kind of debt, the kind used to purchase products and services that are simply “used up” by individuals, such as healthcare. This kind of debt – the kind where individuals become “entitled” to personal services provided by the government – does not constitute an investment for the future, but instead merely constitutes a massive debt load, one that should not be borne by future generations.
Even more importantly, when the government takes on a new entitlement such as the burden of paying for healthcare, the checks and balances that ought to apply to the federal budget are no longer effective. If Uncle Doug needs quadruple bypass surgery, as long as he can get his doctor to admit that he needs it, he gets it. There are no intrinsic checks to this kind of healthcare spending decision.
When a society faces an accelerating debt burden that is completely open-ended and not subject to normal checks and balances, that society is dealing with what I'll call a disproportionate economic variable (DEV). DEVs are dangerous. Unless brought under control they push an economy toward collapse.
Until a few decades ago, healthcare in America acted like any well-behaved economic sector. The size and growth of spending on healthcare was directly related to the size and growth of the GDP-that is, it was a proportionate economic variable. Specifically, until the 1950s the cost of healthcare was a fairly steady 4 percent of the GDP. This began to change during the early 1950s (at about the time the Tooth Fairy variety of Quadrant IV healthcare was becoming established), so that by 1960, the cost of healthcare was growing much more rapidly than the overall economy. Healthcare spending accounted for 5.3 percent of the GDP in 1960, 7.3 percent in 1970, 10.2 percent in 1980, 13 percent in 1993, and 14.9 percent in 2002. Over a relatively short period the demand for healthcare took on a life of its own, with an apparently endless capacity for growth that is disproportionate to the growth of the overall economy.
There are few examples of DEVs in real-life economics, because they are inherently unstable and destructive. The only common example occurs during wartime, when the demand for military spending grows out of proportion to the overall economy. Wartime spending is a tolerable DEV, because wars are temporary. The expenditures for conducting war can usually be borne as debt, and are gradually paid back by society after the war ends. It is a debt that is accepted as the price of long-term societal existence. It is another form of investing in the future.
One reason warfare is temporary is that in a prolonged war a nation can spend itself into oblivion. The demise of the Soviet Union was directly related to the ever-increasing military spending that we forced on it by our ever-increasing military spending during the Cold War. The defunct Soviet Union is the poster child of DEVs.
Whereas warfare is temporary, our growing demand for healthcare is not. The demand for healthcare spending is bottomless; there are no apparent limits. Healthcare expenditures are behaving as a relentless, voracious, DEV, one for which there is no end in sight.
The Grand Unification Theory of Healthcare tells us there are two ways to get control of the DEV that healthcare has become. One way is to have everybody pay for their own healthcare, out of their own pockets (that is, move to Quadrant II healthcare). Because individuals cannot engage in unlimited deficit spending as the government can, the growth in healthcare spending in Quadrant II would slow dramatically and eventually would find its natural ceiling. We can't do that, however, because healthcare is an entitlement, and individuals cannot be expected (or even permitted, according to some) to pay for it themselves. The second way is to ration healthcare openly (as in Quadrant I healthcare), which would give us the opportunity to select the proportion of the GDP we think ought to be spent on healthcare, and hold expenditures, through rationing, to that level. But we can't do that, either, because it would be rationing.
So we've backed ourselves into a corner. We've taken a sphere of commerce that economic principles dictate ought to be paid for by individuals - given that it delivers products and services consumed by individuals - and we've convinced ourselves that the government ought to pay for it. Yet we still claim the right to make all the spending decisions ourselves. In other words, we've embraced the entitlement mentality and the no limits mentality at the same time, and it has driven us into Quadrant III, where we can support our fantasy of unlimited-but-free healthcare. And in creating this fantasy, we've created a fiscal time bomb, one that is scheduled to go off in our children's or, at best, in our grandchildren's lifetimes and whose massiveness will gravely threaten societal cohesion.
We need to admit that there is indeed a limit to what we should spend on healthcare, even if we liberally define that limit as “something less than would eventually cause our society to disintegrate” – especially since so far we are failing to meet even that modest limitation.
Still, even conceding that there are limits to what we should spend on healthcare does not necessarily lead to the conclusion that we must ration. We have already established that before coming to that conclusion, we should leave no stone unturned. Therefore, let us examine the reasons healthcare is so expensive. If we understand the costs, perhaps we can avoid rationing by figuring out how to bring those costs down. Three reasons for the high cost of healthcareDuring the great debate on healthcare during their first administration, the Clintons had a simple and straightforward explanation for the uncontrolled growth in healthcare spending. To paraphrase loosely: there are just too many greedy doctors using too much expensive technology.
The problem when one tries to refute this synthesis, at least for those of us physicians who do not like being characterized as avaricious (and for the biomedical engineers who do not like their remarkable efforts being characterized primarily as expensive), is that there is at least some truth to it.
Most economists agree, however, that there are actually three main factors driving up the cost of healthcare. These are:
* waste and fraud * increasing use of expensive technology * rapidly aging population
The first two factors correspond, more or less, to the Clintons’ explanation of the problem. The difficulty with their explanation (aside from the minor sin of being insulting to some of us) is that it downplays the most pressing reason for the rising cost of healthcare. And with good reason. It is easy, even advisable, to criticize doctors for being greedy. It’s even okay to criticize technology as long as you don’t get too specific about it. But it’s not nice, or politically smart, to criticize the population for getting older.
Let us examine these three factors briefly, to see if we can begin to characterize the degree to which each of them contributes to the rising cost of healthcare. Waste and fraudThere can be no doubt that there is a substantial amount of inefficiency in the American healthcare system. Eliminating inefficiency, in fact, is the major reason usually given for the great surge in the 1990s toward managed care. And without a doubt the American healthcare system during the over the past decade or so has made great strides toward eliminating waste.
Unfortunately for managed care organizations, however, it looks as if this variety of efficiency – the kind that finally culminated with disastrous attempts at enforcing drive-through childbirth and mastectomies – has been taken as far as it can go. The public has informed managed care organizations they’ve had about as much of this kind of “efficiency” as they are willing to tolerate, and to further improve efficiencies, managed care will have to look elsewhere.
Another point is worth mentioning here. As I point out in my Grand Unification Theory of Healthcare, a healthcare system operating under a scheme of covert rationing – like ours is, as I will shortly demonstrate – requires waste and inefficiency in order to create many of the subtle incentives necessary to facilitate covert rationing. This is why each of the efforts that are periodically initiated to simplify and streamline healthcare, sometimes introduced with great fanfare, invariably becomes gummed quietly to a halt within the bureaucratic molasses, just one more layer of glom in a vast conglomeration of regulations. All this systematic confusion is hugely inefficient and wasteful, and ironically, negates most if not all the savings produced by the covert rationing itself. This vignette offers an illuminating illustration of this phenomenon.
As for fraud, nobody knows for sure how much exists in the healthcare system. Any amount of fraud is inexcusable, and the federal government has identified the rooting out of fraud as a potentially very fruitful means of cutting the cost of healthcare. The Health Insurance Portability and Accountability Act of 1996 has many new powerful anti-fraud provisions, and accordingly, a recent Clinton budget specifies that $10 billion is to be recovered over the next few years by going after fraudulent practices. To the extent that true fraud is rooted out, the anti-fraud activity by the federal government will be good. However, it is almost certain that the heavy-handed means that are to be used in this effort will have an extremely chilling effect on every healthcare provider. In fact, the mandate to eliminate fraud presents a potentially powerful and particularly devious mechanism for covertly rationing healthcare. (This topic will be discussed in detail in a later section.)
But the politically popular notion that enough fraud exists to offset the rising cost of healthcare, even as broadly as the regulators are now beginning to define “fraud,” is not taken seriously by healthcare economists. Increasingly expensive medical technologyThe increasing use of technology in medicine clearly is driving up the cost of healthcare. The problem is that both patients and physicians perceive technology as offering substantial value to medical care, and often it undeniably does so.
Thanks again to managed care, the use of high-cost technology in medicine is not quite the free-for-all it was a few years ago. Hospitals and practitioners, faced with reduced reimbursement, have had to begin controlling high cost interventions (and, for that matter, low cost interventions), in order to stay in business.
The problem is, most of this high-tech stuff works as advertised. High-cost medical technologies most often provide at least some benefit, even if that benefit is sometimes only marginal. If the technology exists to help patients, both physicians and their patients want to use it. If the technology does not exist, congress is lobbied and telethons are held to pay someone to invent it.
But technology is hugely expensive. Consider, for instance, what it will do to our healthcare budget when we finally succeed in developing a practical, safe, fully implantable artificial heart. Such a device will probably cost $100,000 per each, give or take a few tens of thousands, and upwards of a half million Americans each year will become potential candidates for it. This one new (highly sought after, fervently desired) technology alone would break the bank.
Even reconsidering our use of technology, however, will take a major adjustment in attitude. Advanced medical technology clearly is included in the “no limits” paradigm, and Americans fully expect to receive whatever medical benefits the biotech industry has to offer. Furthermore, as we have noted, Americans also fully expect continuing advances in technology to eventually cure every medical disorder we can think of, up to and including death itself.
If we are to rein in the cost of healthcare by addressing the high cost of technology, either a sober reevaluation of our insistence on more technology will have to take place (a proposition that currently seems out of the question), or we will have to stifle innovation through covert rationing. So far, obviously, the latter approach has been chosen. A rapidly aging populationThis, I will argue, is where the real money is.
Old people use a lot of healthcare resources, because the aging process even in the best of circumstances is accompanied by health problems. The population of the United States has been gradually aging for decades, both because of simple demographics and because (thanks in part to all that technology) people are living longer. The increased costs incurred by our aging population dwarf the costs accounted for by waste and fraud in the healthcare system. While economists can argue about whether the aging population or medical technology accounts for the bulk of the increase in medical spending, the fact remains that technology won’t cost much if there aren’t a lot of patients who need it. Since the elderly will always need more healthcare technology than the young, a rapidly aging population acts as a potent multiplier of the cost of that technology. These two factors go hand in hand.
We will soon have a lot more old people than we have ever had before. The baby boomer generation, of which I am a proud member, is 76 million strong, 50% larger than the previous generation. As we boomers start to retire, American society will be transformed, and the magnitude of the transformation will be wondrous to behold. By 2020, when you walk the streets of an American city you won’t know if you’re in Tampa or Denver, because the proportion of old people across the entire United States will be the same as it is in Florida today. By that time one in five Americans will be over 65. And the number of “super-old” individuals, those 85 and older, is skyrocketing. It has been predicted that, by 2040, there may be as many of the super-old as there will be preschoolers.
Such demographics will have a profound impact on our healthcare spending. Taking into account both the absolute number of old people that will be alive, and the fact that so many of them will be in the super-consuming super-old category, by the year 2030 the cost of healthcare has been projected to be as high as $12,000 per capita (in 1994 dollars). This figure, which doesn’t even take into account the massive new Medicare drug entitlement, is even more alarming when you consider that Medicare is already going bankrupt – at a time when we’re spending “only” about $6000 per capita, when the number of retired elderly is still relatively small, and when most of the huge boomer generation is still in its productive, tax-paying years.
It has been estimated from Social Security actuarial data that paying for Medicare and other federal healthcare programs in the year 2040 will require nearly 50% of the nation’s taxable payroll. If you add Social Security payroll taxes to the mix, then more than two-thirds of every working person’s paycheck will be confiscated in payroll deductions just to cover federal entitlements to the elderly. While there is always some degree of speculation in these sorts of calculations, in this case the speculation seems relatively minimal. After all, everybody who has been promised these entitlements for the next 50 years is alive today. You can count them.
Add to this one final fact. By 2030, it is expected that more than 25% of younger working Americans will be members of non-white minorities. This means that our present plan is to confiscate two thirds of each paycheck from vast numbers of minorities in order to buy Winnebago’s and artificial hips for a bunch of retired, middle-class white people.
I don’t think so. It won’t happen. The only question is how it won’t happen. In some manner federal entitlements to the elderly, especially the healthcare entitlements that account for a major portion of our looming fiscal burden, will be significantly reduced. They can be reduced through violent revolution or through some more civilized process, but one way or another they will be reduced. How Can We Reduce the Cost of Health Care?Now that we have surveyed the causes for the high cost of our healthcare, we should examine whether there’s some method to bring those costs down that would allow us to avoid rationing.
The entire public discussion on healthcare spending in the United States to date has rested on the assertion that the high cost of healthcare can be explained almost entirely by waste in the healthcare system, such as administrative overhead and suboptimal utilization of resources, or outright malfeasance. This argument, which allows us to imagine that we can control healthcare costs simply by eliminating all those unneeded expenditures, is the only politically feasible one that can be made today (since, if this argument were not true, our only remaining alternative would be to ration healthcare). Therefore, virtually all the methods that have been proposed for dealing with the high cost of healthcare are based on the assumption that improving inefficiencies in the system is all that is needed. (It is worth noting here that such an argument is only for public consumption. Experts in the field of healthcare economics, in their scholarly writings, generally accept the need for rationing as a starting premise.)
Nobody denies that there are plenty of inefficiencies in the healthcare system. And nobody disagrees with the notion that we should make every effort to eliminate unneeded expenditures. The problem with relying on a reduction in inefficiencies as the primary means of controlling the rising cost of healthcare, however, is that it won’t work.
David Eddy, in his 1996 book, Clinical Decision Making, examines the feasibility of reducing inefficiencies as a means of controlling the cost of healthcare. Suppose, he says, that in 1970 a severe austerity program had been initiated within the healthcare system that accomplished all the following things: 1) cut all administrative costs by 50%; 2) cut the costs of all prescription and nonprescription drugs, plus the costs of all other consumable medical goods, by 50%; 3) cut physician services by 20%; 4) eliminate all government public health programs; 5) eliminate all construction of healthcare facilities; and 6) eliminate all medical research. Further, assume that these cuts had been maintained, at the same levels, for the next 21 years.
Obviously, one would expect such a drastic program of cuts to significantly reduce national healthcare expenditures. And in fact, it would. The following table compares actual U.S. healthcare expenditures for that 21-year period to the expenditures that would have occurred under Eddy’s austerity program (values are reported in billions of dollars). (Derived with permission from Eddy DM. Clinical Decision Making,1996: Jones and Bartlett Publishers, Sudbury, MA;1996.)
Actual spending Eddy’s austerity spending 1970 74.4 59.2 1980 250.1 206.4 1989 604.3 499.5 1991 751.8 623.6
Notice that this austerity program saves a lot of money right away. In 1970, the first year of the cuts, only $59.2 billion would have been spent, compared to the actual expenditures of $74.4 billion. Further, the significant savings persist over time. In 1991, only $623.6 billion would have been spent under the austerity program compared to $751.8 billion in actual spending.
But the truly amazing outcomes of this exercise are twofold. First is the astounding increase in expenditures over the 21-year period, even had the austerity program been instituted. And second, the amount of money actually spent in 1989 is roughly the same as the amount that would have been spent under the austerity program only two years later, in 1991. In other words, all that one would ultimately gain after 21 years of an austerity program even as improbable and severe as this one would be a little time; in this example, a little less than 2 years.
Why is this? It is because the rate of increase in healthcare expenditures is largely unrelated to anything that was cut under Eddy’s austerity program. So when the cuts were made, society got a one-time savings, but then healthcare costs continued rising at the same rate as before – they simply started from a lower baseline. The rate of growth – the chief determinant of economic instability – did not change. So the only thing that was saved with this draconian effort was time, and not all that much time at that.
Now, while Eddy, rightfully so, is highly regarded as an expert in healthcare policy and healthcare economics, one might nonetheless quibble with his analysis. Who’s to say that his math was correct, or that his underlying assumptions were reasonable? His exercise, when you get right down to it, really boils down to simple conjecture. We don’t really know what would have happen if such an austerity program had been followed.
But in fact, in many ways we do know. In western countries like Canada and Great Britain, countries that have tightly-controlled, strictly budgeted, single-payer healthcare systems with overt rationing measures in full view, while overall healthcare spending is significantly lower than in the U.S., the rate of growth in healthcare spending is very similar to the double-digit rate we’re seeing here. The economic crisis we are experiencing is shared, and recognized, by most developed countries around the world, despite tightly managed healthcare systems in many of those countries.
This same phenomenon – a one-time-only savings from drastic reform efforts – has been seen in the U.S. itself. The wholesale move to managed care, and the subsequent “reforms” that managed care organizations put into place in the mid-1990s, brought the annual rate of growth in healthcare to below 5% for a few years. However, the growth rate rapidly returned to its former double-digit pace. So, as Eddy’s analysis predicted, administrative reforms of the sort that managed care can institute may significantly reduce the cost of healthcare, but that does not change the underlying rate of growth.
Therefore, the basic assumption made by virtually every party in the great healthcare debate (i.e., that centralizing control and thereby reducing inefficiencies is all that is needed), is wrong. Inefficiencies certainly account for a substantial proportion of healthcare costs, but cannot possibly account for the underlying double-digit rate of growth. And this unrelenting growth rate is the real problem. If we are to gain control of healthcare costs, somehow we must deal with this rate of growth.
What is responsible for this unrelenting growth in the cost of healthcare? If it’s not waste and inefficiency, the only possible answer is that it’s due to an increasing volume of actual, useful healthcare consumed per capita. And this, as we have seen, is due both to advancing technologies (which is potentially controllable, but, practically speaking, only with rationing), and to an ever-aging population (which is not potentially controllable at all, save by completely uncivilized methods).
To cut into that growth rate, then, we have to find ways to reduce not just waste and inefficiency, but also ways to reduce the volume of healthcare services being delivered per capita – even though many of those healthcare services are apparently useful. In other words, to reduce the rate of increase in healthcare spending, we have to ration care.
And as we have seen, we must reduce the growth in healthcare spending. The economic pressures that will predictably occur in the next few decades will dwarf any pressure we are experiencing today. We need to gain control of these costs not just for our own near-term economic health, and not just to be fair to our children and grandchildren. Controlling healthcare costs is what we must do in order to avoid societal chaos. And since rationing is the only way to truly gain that control, rationing is what we must do. It is an economic imperative. It will happen (and is happening) whether we accept its necessity or not. What this meansWhat this means is that the unrelenting growth in healthcare expenditures is not due to waste and fraud (the usual explanation). It is due to something else. It is due to the rapid increase in the number of individuals who need complex healthcare (the elderly and those with chronic or debilitating diseases that modern medicine is now helping to survive) and the explosion in healthcare technologies and services that can be applied to these people. We cannot control the rate of growth in healthcare expenditures by eliminating waste and fraud, but only by controlling the growth of medical services and technology (which can only be done by rationing), or by controlling the number of people who need those services (which can only be done by completely uncivilized methods). The bottom line on rationingTo reiterate, the essential problem is not that a substantial proportion of healthcare spending is wasted due to inefficiencies in the system (though there are plenty of inefficiencies). The essential problem, the one we cannot escape, is that the rate of growth of healthcare spending is too high, is unrelenting, and is unrelated to those systematic inefficiencies. If we are to gain control of healthcare costs, somehow we must deal with this rate of growth.
What is responsible for this unrelenting growth in the cost of healthcare? Since it is not due to waste and inefficiency, the only possible answer is that it is due to an increasing volume of actual healthcare being delivered per capita. And this, as we have seen, is due both to advancing technologies (which is potentially controllable, but, practically speaking, only with rationing), and to an ever-aging population (which is not potentially controllable, save by completely uncivilized methods).
To cut into that growth rate, then, we have to find ways to reduce not just waste and inefficiency, but more importantly, ways to reduce the volume of healthcare services being delivered per capita – even though many of those healthcare services are apparently useful. In other words, to reduce the rate of increase in healthcare spending, we have to ration care.
And as we have seen, we must reduce the growth in healthcare spending, and not just because we have a present-day healthcare crisis. The economic pressures that will predictably occur in the next few decades will dwarf any pressures we are experiencing today. We need to gain control of these costs not just for our own near-term economic health, and not just to be fair to our children and grandchildren. Controlling healthcare costs is what we must do in order to avoid societal chaos. And since rationing is the only way to truly gain that control, rationing is what we must do. It is an economic imperative. It will happen (and is happening) whether we accept its necessity or not.
The only real choice we have, then, is whether to ration openly, or whether to do it covertly. In the next section we'll consider why we have chosen the latter method - and what that means. |