Health Care Rationing Is Coming

The debate about health care continues, but there is one thing that’s certain: there will be rationing of health care in our future.  Whether the rationing happens through government intervention, insurance companies’ policies, or individual rationing, there will be rationing.

Health Care

In a statement that most everyone knows by now, health care costs are increasing faster than most other sectors in the American economy.  Health care costs for American families have doubled since 2002, and there’s no sign of prices plateauing.

Since health care costs cannot continue to rise indefinitely (and continue to gobble up a greater and greater portion of GDP), there are three ways in which health care costs will be brought under control:

  1. Government will ration care (which may take form as price controls)
  2. Insurance companies will ration care
  3. Individuals will ration care

Each of these solutions has an advocate in government, and each has a visible proposal.

Government Rationing
President Obama’s proposal for saving Medicare is a study in the government rationing health care.  When Medicare began, nearly half of seniors had no health insurance and many others had inadequate coverage.  There are two problems with the current system: (1) government is paying a larger and larger portion of health care costs, so seniors have no incentive to ration their own treatment/procedures; and (2) government is fixing rates at a lower and lower reimbursement rate (i.e. price controls), which leads to scarcity, and doctors dropping out of Medicare altogether.

President Obama has proposed that, in order to bring costs under control, a 15-person board will be appointed by the President for 6-year terms, supplemented by 3 officials representing the Department of Health and Human Services (DHHS).  This board will be called the Independent Payment Advisory Board (IPAB).  This will not be a death panel.  The purpose of this board will be to develop “specific detailed proposals to reduce per capita Medicare spending in years when spending is expected to exceed target levels.”  In order to do this, they may not do the following (this is so they won’t be called a “death panel”):

  • Raise costs to beneficiaries
  • Restrict benefits
  • Modify eligibility criteria

They may, however, offer solutions that are the following:

  • Target the rates of specific providers–hospitals and hospices (after 2020)
  • Cutting payments for physicians

So, the government doesn’t want to do rationing, but they’re OK with running providers and physicians out of the Medicare market, which accomplishes the same thing.

Insurance Rationing
The Republicans have another proposal: decide how much money we can afford to spend (as a country) on health care, give that money to states/individuals (in the form of a voucher), and then have them go out and get an insurance plan that meets their specific needs.  If they have the money that allows them to buy a “Cadillac” health care plan, then they can buy one that covers every conceivable need.  If they don’t have as much money, then they can buy the Chevy health care plan.

This is rationing at the middle-man level.  Basically, instead of giving a 15-person board the power to decide who gets what procedure (or if they get it), we’re giving this power to a 15-person board at EACH insurance company.  So, perhaps instead of 15 people having the power, we’re talking maybe 500 people.  And, people have a little bit more choice about the level of care that’s provided.

The insurance companies LOVE this proposal, because it keeps them in control and making money.

Individual Rationing
Ultimately, whatever proposal is taken, in order for overall health care costs to come down, individuals will have to “self-ration.”  Price will stop rising when individuals say, “You know what?  I don’t have the money to go to the doctor anymore.  So, I won’t go.”  They will say, “I can’t afford to have that procedure done.  We will have to get rid of our mentality that, “It’s OK if I go and see the doctor every time I have any ache in my body; someone else is paying for it.”  When we do away with that mentality, health care costs will stabilize.

So, we have to decide: are we ready to have government ration our health care?  Or do we want to have some control over our health care?  That’s the ultimate question in the health care debate.

Questions: What do you want?  Do you think that the government should step in and take control?  Or will individuals sort it out?  You can leave your comments by clicking here.

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  • Robert Ewoldt

    UPDATE: I guess there’s one way that health care rationing wouldn’t have to happen, and that’s if there’s a large influx of doctors.  If there’s more doctors, then the cost of health care goes down.  But I don’t see that happening…

    • TNeal

      In Russia, at least when we lived there in the 90’s, most doctors were women. The reason was the financial incentive–since the medical field was government run, the pay was low. The medical field in general was half a century behind the U. S.

      I’m not saying women don’t make good doctors. But in the Russian culture, doctors and teachers tended to be seen as women’s work. The incentive for becoming a doctor wasn’t very strong.

      In the U. S., why go through 8 years of college and med school to be underpaid and overworked? That’s why I don’t see an influx of doctors if the government gets more heavily involved in the process.

      • Robert Ewoldt

        Yes, there are huge impediments to getting into medicine, not the least of
        which is the limited number of positions at schools, and cost, and time.

  • Broc

     Leaving seniors alone to negotiate with Insurance companies is a losing battle for seniors, they are not good investments for insurers but they need medical coverage this put them in a terrible position to get screwed by the private sector. However things can not simply remain the status quo.  Let’s get on the same page upfront and agree…there is no silver bullet, no single proposal or idea that will solve the healthcare problem. To truly solve the healthcare problem changes need to come in all aspects of our society.
    Fraud waste and abuse – There are no hard numbers for how much fraud/waste/abuse (FWA) is truly going on because if they knew what was FWA then it would not be approved and payments would be halted, however between the CBO report and others there is consensus that FWA cost the US Billions of dollars every years. 
    Obesity and diabetes – America is too fat…plain and simple. The center for disease control stated
    “The medical care costs of obesity in the United States are staggering. In 2008, these costs totaled about $147 billion”
    These numbers are not getting smaller and neither are Americans, healthier living is vital to our national healthcare recovery.   Childhood obesity and diabetes is rising as well, these completely preventable diseases are killing our healthcare system and killing our nations young people.
    Tort reform – Tort is the system in getting compensation for wrongs or harms done by one party to another.  In the medical field its basically lawsuits filed by patients against doctors for “malpractice.” There is bipartisan acknowledgment that there are far too many frivolous lawsuits filed and reform is need to curb those numbers because of the added cost to the court system, doctors, and insurances companies is more wasted dollars
    Number of uninsured – Uninsured Americans drive up hospital cost and insurance premiums because they are not contributing to the system but they are taking from it. Most estimates put the number of uninsured people at around 40-50 million people but nearly 37 million were employment-age adults (ages 18 to 64), and more than 27 million worked at least part time. About 38% of the uninsured live in households with incomes of $50,000 or more. According to the Census Bureau, nearly 36 million of the uninsured are legal U.S citizens. Another 9.7 million are non-citizens, but the Census Bureau does not distinguish in its estimate between legal non-citizens and illegal immigrants.  Nearly one fifth of the uninsured population is able to afford insurance, almost one quarter is eligible for public coverage, and the remaining 56% need financial assistance.  There needs to be improvement for the numbers of uninsured Americans.  Let get people who CAN help themselves to do so, that will make it easier to assist those who really need it.

    These are just a few of the factors that need to change to solve of healthcare crisis. 

    • Robert Ewoldt

      Broc, I love it that I agree with you on every point here! In terms of the
      uninsured, I think that one of the best ways to encourage the uninsured to
      get insurance would be to enact an individual tax credit for insurance, just
      like the government gives to employers. If a person gets a tax credit for
      health insurance, that would be an incentive to get insurance. What do you

      • Broc

        I would like to see some bipartisan data or study showing that the tax credit incentive would be paid for with the savings created in the system by the incentive (in other words that the tax incentive would create an economic net gain), however once that theory has some numbers and creditability behind it, I would not see any problem with that type of tax incentive.

  • TNeal

    Excellent information. I appreciate your voice in the realm of politics and economics.

    I recognize that if I’m paying for something directly I evaluate two things–my ability to pay and my desire to purchase. Can I afford this home, car, surround sound system (current dilemma), or not? Interesting to put that thinking toward my health care. I know I have more power in the process if I’m directly involved in the decision and its resultant consequences.

  • Jeremy Ellis

    I don’t think we have a choice between rationing health care and not rationing health care. Right now insurance companies do it. Maybe the government will do it in the future. The choice will be between who do we trust more to ration it – big corporate insurance companies or big government.

    • Robert Ewoldt

      I think that there’s a third option… we can redesign our health care
      system so that it puts the onus on the individual to ration their own care.
      It will come when we stop masking the cost of care through insurance
      providers and the government. Once people have to choose whether to pay for
      something or to not get it, then they will self-ration.

      • Jeremy Ellis

        Good point. For some reason what seems to be the biggest increaser of health insurance – that Americans are just unhealthy people – seems to get lost. The more healthy we are, the less we have to worry about rationing because there would be less problems to worry about.