It is all about values. If one’s value system is that you require money to access basic health care, then money is a basic defining value of a person. Hmmm. Not sure everyone wants to define themself according to the almightly dollar.

“…Why shouldn’t price be used to ration such scarce goods?” Because money then defines one’s health. Are we not a more advanced community than this?

“…The alternative – rationing by central planners – has met with success … where?”

Depends on what you define as success. Is 40+ Million Americans without insurance or the money to pay for health care a successful system? Is the Canadian system where access for basic health is provided with waiting lists (or varying time periods) for selected procedures a better alternative? Two different alternatives with pros and cons for each. To a certain extent, it depends on one’s value system as noted above. Certainly not a black and white issue as conveyed by the author of this blog.

Spending for food, shelter, clothing, and higher education also disproportionately favor the rich. We cannot all enjoy gourmet meals of the nation’s finest chefs – the homes with the Pacific oceanfront views – the services of the world’s most talented plastic surgeons. Some form of rationing is necessary. Why shouldn’t price be used to ration such scarce goods? The alternative – rationing by central planners – has met with success … where?

This is (one of the reasons) why the per capita spending on health care in the US is one of the highest in the world…not a bad thing…actually a good thing EXCEPT that the spending disproportionately favours the rich. Health care is great in the US if you have money or a very rich benefit plan…heaven help the 40+ million Americans who have neither.

Table 8

A 2002 paper by Fiche, Secure, and White vividly illustrates the differences in care that result when management is private rather than governmental. The authors compared costs and quality for California’s Kaiser Permanente and Britain’s National Health Service. After carefully adjusting for differences in benefits, special activities, populations and the cost environment, the authors concluded that although the per capita costs incurred by the two organizations were within 10% of one another, but that “Kaiser members experience more comprehensive and convenient primary care services and much more rapid access to specialist services and hospital admissions.” They also concluded that the “widely held beliefs that the NHS is efficient and that poor performance in certain areas is largely explained by underinvestment are not supported by this analysis. Kaiser achieved better performance at roughly the same cost as the NHS…”[2] Kaiser simply managed its resources better, allocating hospital beds more efficiently, making better use of highly trained specialists, and providing well equipped physicians who could do what was needed in a single visit. As a tangential concern, I don’t think enough attention has been paid to time series results particularly in the pre and post DRG results in the 1980s. There are a couple of papers from the 1980s that seem to indicate that DRGS simply caused hospitals to discharge patients to skilled nursing earlier. Now that prospective payment has been extended to nursing homes, the outlook could be pretty grim for the elderly even with APR-DRGs, CMS’s GOSPLAN solution to the problem. As far as I can tell, the feds aren’t paying epidemiologists to compare global outcomes pre and post DRGs. It also probably affects ER use. If Medicare patients are going out sicker, it might help explain why they make up a large fraction of frequent ER users. But given the problems of technological change, price change and so on, this is a dissertation, not think tank fodder. It is also interesting that the private sector insurers use experience rating not risk adjustment. As far as I can tell, the government does the opposite. Had a bunch of people looking at me like I had two heads when I pointed this out to the happy central planners on the Colorado Health Care Reform Commission. They were set to argue. Finally the guy who is a health plan lawyer said that yes, this was true. In any case, thanks so much for keeping those of us on the periphery informed.

Linda Gorman

Independence Institute

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[1] A. Andrew Ray et al. 2001. “Waiting for Cardiac Surgery: Results of a Risk-Stratified Queuing Process,” Circulation, 104, p.97.

[2] Richard G. Feachem, Neelam K. Sekhri, and Karen L. White. January 19, 2002. “Getting More for Their Dollar: A Comparison of the NHS with California’s Kaiser Permanente,” BMJ, 324, p.135.