Monday, February 23, 2009

Hidden Rationing

If you are following the news about the President's stimulus plan you may have heard about extra money for comparative effectiveness. Then, you will undoubtedly hear about whether this creates rationing in the health care system. Certainly this would create a different type of rationing than we have had in the past but if I were to claim that our health care system does not ration at present I'd be missing some an important aspect of the way our system operates at present.

Some people have more generous insurance than others. Care is implicitly rationed for those who have the less generous insurance.

Some people live further away from health care providers than others. Care is implicitly rationed for those who live further away.

Getting back to the issue of pre-existing conditions that was mentioned a couple days ago, some people find it more difficult to get insurance. That makes it more difficult to obtain needed care. So, another aspect of rationing.

Assessing comparative effectiveness and making decisions about what should be covered--this would be rationing too. It would just be more explicit. However, we should notice that however decisions are being made at present, some insurers do not cover some services already. So, those services are rationed.

Suppose, as the President's health care agenda suggests, we were to cover those who had pre-existing conditions more generously than we do now. Somebody will end up paying more--either the taxpayers under a government subsidized system, the individual who gets insurance but has a higher premium, or everyone who is insured as the premium is spread around. When all is said and done, that may make it less rationing for the individual with the pre-existing condition, but more rationing for others. Even if the government ends up paying for it--either more taxes get collected now (and we ration what we can spend on other things), more taxes get collected later to pay it back (and our kids and grandkids ration), or we don't get other government services.

So, in one form or another care will be rationed. We just have to decide what works best while trying to improve our health. As always in economics--tradeoffs.

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