Rationing Medical Care for the Poor

Guest Blogger

Anne Alstott

There is another sleazy game afoot in Washington, but this time both parties are complicit. The open secret is that Medicaid, the federal-state program that promises medical and dental care to poor children (among others), predictably fails to deliver promised services, because payment rates for providers are set at below-market levels.

I have a piece in Slate discussing the horrific case of Deamonte Driver, a twelve-year-old Maryland boy who died for lack of dental care. Medicaid dental care is just one example of a formal entitlement that is undercut by below-market pricing. Economics 101 teaches that setting a price below the market-clearing level will produce a shortage. In that sense, the shortage of Medicaid dental care is not accidental – it is engineered. The Medicaid law uses the language of entitlement, and indeed, Deamonte was formally covered by Medicaid. But there is a disconnect between the concept of entitlement and the use of a market mechanism for allocating services. Markets don't understand entitlements; they understand pricing.

My point isn't that rationing in any form should be condemned. Scarcity is omnipresent, and while I'd contend that redistributing resources to provide medical care to children is a social good, society has to fund other social goods as well. But hidden rationing permits political elites to engage in hypocrisy.

The cynical corollary, of course, is that hidden rationing is pervasive in social welfare programs precisely because it has advantages for politicians. My visiting colleague, David Super, has an excellent 2004 article on hidden rationing in TANF and related programs. As he points out, "[s]ystems that lead to procedural denials of substantively eligible claimants, that discourage claimants from seeking or continuing to receive benefits, or that give third parties influence over whether a claimant will receive benefits also have a rationing effect."

David's theme is that rationing in these ways shifts blame to individuals and makes their failure to access benefits a matter of personal choice: she didn't show up prepared for her fair hearing; he failed to submit his lease in triplicate by the first of the month; they refused to miss a day of work to wait in line all day to see a caseworker; and so on. Rationing in this way could in theory be benign, if the people who are filtered out are those for whom the benefits at stake are minimally valuable. But hidden rationing can also, perversely, screen out the most vulnerable – those unable to articulate their case at a hearing, or unable to understand complicated English paperwork, or frightened of being fired if they leave work for a day. In such cases it is the least advantaged who lose out.

As I discuss briefly in the Slate piece, there are a number of possible solutions to the Medicaid dental coverage issue, including (obviously) setting payment rates at market levels. But thinking more broadly, one of the contributing pathologies is that government budgeting takes a libertarian form. The budget for Medicaid, TANF, or any other government program focuses on the outflow of "taxpayers' dollars." Politicians on all sides struggle to minimize budgetary cost, with the focus squarely on dollars spent and taxes raised.

There is no reason to privilege the libertarian budget. An alternative form of budgeting might focus instead on services actually received by poor children in TANF or Medicaid. A services budget could reveal the level of care poor children actually receive (meals provided, trips to the doctor and dentist, and so on). To make the information intelligible, the measures might focus on gaps in the services received by poor children relative to a baseline of appropriate care. For instance, reading that fewer than a third of Medicaid children received any dental care at all in 2005 is a statistic that leaps out for any middle-class parent, who knows that their dentists expect to see every child twice a year. Today, this kind of information may or may not be available, but even when it is, it is left to advocacy groups to dig out the data and make their case.

I am not naïve enough to suppose that a services budget could magically transform the libertarianism that underlies American social policy. But an alternative presentation could help disclose the gaps between nominal entitlements and real services.