Saturday, June 27, 2009

The Rationing Scare

Frank Pasquale

The opposition to real health reform boils down to two lines of attack: 1) the government will spend too much money and bankrupt us or 2) the government will spend too little money and ration our care. To the extent I can find people who make the first point while also opposing the many recent tax giveaways to the very wealthy, I'll try to engage them. The rationing point is more interesting, but needs to compare reform proposals to the status quo--not some big rock candy mountain of free and fabulous care for all.

As Christopher Beam at Slate has helpfully pointed out, in the US, there "already is rationing—it's just rationing by income instead of by efficiency." In a devastating commentary on Scott Gottlieb's Wall St. Journal opinion piece describing reform as rationing, Nathan Cortez, a professor of health law at SMU, describes the many misconceptions behind the recent rationing scares:

[Gottlieb] warns that rationing is “a European import,” as if no health insurer in the United States has ever had to draw the line somewhere and decide what not to pay for. . . . [Moreover,] we’re not exactly strangers to these organizations in the United States. Gottlieb . . . [ignores] our home grown organizations, like the Agency for Healthcare Research and Quality (AHRQ), which makes new technology assessments for Gottlieb’s old agency, CMS, and supports comparative effectiveness research. Or the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC), which also performs new technology assessments.

In fact, it’s no secret in Washington that Medicare has long considered some amalgam of cost effectiveness and comparative effectiveness in its coverage decisions, even if nothing in the Medicare statute explicitly allows it to do so. (CMS has long stretched the definition of “reasonable and necessary” in section 1862(a)(1)(A) of the Social Security Act to fit its fiscal realities, even if CMS or its precursor, HCFA, haven’t been successful in cementing cost effectiveness as a formal criterion, as evidenced through failed rulemaking in 1989 (54 Fed. Reg. 4,302) and 2000 (65 Fed. Reg. 31,124)). And just as importantly, private insurers make cost and comparative effectiveness determinations too[.]

As I've described before, private insurers' cost-effectiveness determinations can be a valuable service. However, Wendell Potter's recent testimony on Capitol Hill indicated that such determinations are often eclipsed by a more profitable strategy: dropping unprofitable customers.

[E]xecutives of three of the nation’s largest health insurers [have] refused to end the practice of cancelling policies for sick enrollees. Why? Because dumping a small number of enrollees can have a big effect on the bottom line. Ten percent of the population accounts for two-thirds of all health care spending. The Energy and Commerce Committee’s investigation into three insurers found that they canceled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims.

They also dump small businesses whose employees’ medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether. . . . The purging of less profitable accounts through intentionally unrealistic rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent to 38 percent since 1993, according to the National Small Business Association.

My colleague John Jacobi sheds light on another aspect of private insurer rationing--running away from covering the chronically ill.

We ought not rely on self-interested market participants and expect them, all else being equal, to act contrary to their own self-interest. . . . [Purely] private markets for health coverage might make sense if health costs were homogeneously spread, or even if high costs occurred unpredictably. In a world where a large number of Americans are predictably poor bargains for insurers due to known chronic conditions, we need, as an option, an entity whose sustainable, reliable mission is to provide good, economical coverage for those who most need care, and who incidentally represent a substantial portion of our health care budget.

Health reform that does not address "rationing as risk selection"--and that does not encourage evidence-based medicine based on cost-effectiveness analysis--is no health reform at all. I just hope the blogosphere can help us avert the "triumph of misinformation" that derailed reform during the Clinton administration.

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