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Talking Dirty Is the Only Way

June 17th, 2009 . by economistmom

Just like the bad T-word, “Taxes” (i.e., raising them), I’ve been caught using another dirty word when I give talks on the fiscal outlook and what it will take to get back on a sustainable path:  “Rationing.”  In today’s New York Times, David Leonhardt explains why it has to be said, but also why it’s not as nasty as it sounds:

The r-word has become a rejoinder to anyone who says that this country must reduce its runaway health spending, especially anyone who favors cutting back on treatments that don’t have scientific evidence behind them. You can expect to hear a lot more about rationing as health care becomes the dominant issue in Washington this summer.

Today, I want to try to explain why the case against rationing isn’t really a substantive argument. It’s a clever set of buzzwords that tries to hide the fact that societies must make choices.

In truth, rationing is an inescapable part of economic life. It is the process of allocating scarce resources. Even in the United States, the richest society in human history, we are constantly rationing. We ration spots in good public high schools. We ration lakefront homes. We ration the best cuts of steak and wild-caught salmon.

Health care, I realize, seems as if it should be different. But it isn’t. Already, we cannot afford every form of medical care that we might like. So we ration…

The choice isn’t between rationing and not rationing. It’s between rationing well and rationing badly. Given that the United States devotes far more of its economy to health care than other rich countries, and gets worse results by many measures, it’s hard to argue that we are now rationing very rationally…

David argues that there are three main ways that the health care system already imposes “rationing” on us:  (i) by its high costs squeezing out other things in the family budget (e.g., housing, college tuition); (ii) by its high costs making health care insurance unaffordable to employers and individuals, forcing families to go without coverage; and (iii) by the inefficiencies in health care provision (that lead to those high costs) diverting resources away from what would be more appropriate, better care.  David’s conclusion:

[F]lat-out opposition to comparative effectiveness is, in the end, opposition to making good choices. And all the noise about rationing is not really a courageous stand against less medical care. It’s a utopian stand against better medical care.

The point is that those of us who emphasize getting back to “living within our means” want the “living” part to thrive as much as we want the “means” part to be honored.  One thing binding budget constraints do is force us to more carefully make the best of what we’ve got, rather than take a careless “what have we got to lose” attitude.

And yesterday the Congressional Budget Office issued an analysis letter to Senate Budget Committee leaders Kent Conrad and Judd Gregg which backs up the notion that avoiding that dirty word “Rationing” will only dig us deeper into the fiscal hole.  From CBO Director Doug Elmendorf’s blog:

[L]arge reductions in spending will not actually be achieved without fundamental changes in the financing and delivery of health care. The government could spur those changes by transforming payment policies in federal health care programs and by significantly limiting the current tax subsidy for health insurance. Those approaches could directly lower federal spending on health care and indirectly lower private spending on it as well. Yet, many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning. Modest versions of such efforts—which would have the desirable effect of allowing policymakers to gauge their impact—would probably yield only modest results in the short term…

At this point, experts do not know exactly how to structure such reforms so as to reduce federal spending on health care significantly in the long run without harming people’s health…

That path [to future health cost savings] would require tough choices to be made, and its effectiveness would depend ultimately on the willingness of federal policymakers to maintain significant and systemic pressure over time. Without meaningful reforms, the significant costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.

Oh, Doug– you dirty skunk!

3 Responses to “Talking Dirty Is the Only Way”

  1. comment number 1 by: Larry

    Isn’t the key issue to put the payment decision and the treatment decision in the same place? Whoever pays is in the best position to decide whether spending money on the proposed treatment is the best choice, versus spending the money elsewhere. (There’s always an elsehwere!)

    You can put the (single) payer in charge by having the bureaucrats decide what to pay for (using a commission or whatever) or you can put the patient in charge (with enabling subsidies) but leaving the apart is a disaster.

    It’s a little like how California manages its budget. It takes 50%+1 to stop spending, but only 33% + 1 to stop taxes. No wonder they face disaster.

  2. comment number 2 by: Brooks

    Re: rhetorical use of the “R” word, no need to actually think about this issue rationally, because Rep. Mike Pence has summed it up and provided an easy-to-swallow position and rationale in a simple, four-word headline at http://spectator.org/archives/2009/06/18/freedom-cant-be-rationed

  3. comment number 3 by: B Davis

    David argues that there are three main ways that the health care system already imposes “rationing” on us: (i) by its high costs squeezing out other things in the family budget (e.g., housing, college tuition); (ii) by its high costs making health care insurance unaffordable to employers and individuals, forcing families to go without coverage; and (iii) by the inefficiencies in health care provision (that lead to those high costs) diverting resources away from what would be more appropriate, better care.

    Agreed. I think that there are also numerous subtle ways in which rationing is achieved. One of the purposes of a per-visit copay is likely to discourage unnecessary visits without creating a major roadblock to necessary visits. Also, every time I have visited my doctor, he seems to be carefully rationing his time. If I have questions, I need to make a list and go through them quickly.

    I think that our tendency to practice only indirect and subtle rationing likely adds a great deal to the cost of healthcare. If a patient is determined, he can ignore that subtle rationing and demand too much care and too many expensive tests. An example is a recent story in the June 1 AARP Bulletin about just nine residents who made a combined 2,678 visits to the ER over the last six years. Hence, we can basically ration openly by carefully considered policies or ration indirectly by default. I would propose that the former is by far the better and more cost-effective form of rationing.