July 6, 2009 10:09AM

Uwe Reinhardt on Health Care Rationing

Health care analyst Uwe Reinhardt takes on critics of the Obama administration effort to "reform" health care, pointing out that the free market is a form of rationing.  He adds:

As I read it, the main thrust of the health care reforms espoused by President Obama and his allies in Congress is first of all to reduce rationing on the basis of price and ability to pay in our health system.

An important allied goal is to seek greater value for the dollar in health care, through comparative effectiveness analysis and payment reform. As I reported in an earlier post on this blog, even the Business Roundtable, once a staunch defender of the American health system, now laments that relative to citizens in other developed countries, Americans receive an estimated 23 percent less value than they should, given our high health care spending.

To suggest that the main goal of the health reform efforts is to cram rationing down the throat of hapless, nonelite Americans reflects either woeful ignorance or of utter cynicism. Take your pick.

Fair 'nuff.  In a world of infinite wants but finite resources, some form of "rationing" is inevitable.

But Reinhardt leaves liberty out of the equation.  The health care system is a mess, largely because of perverse government incentives through its big health care programs, Medicare and Medicaid, and its tax break for employer-provided insurance.   As a result, we now have a third party payment-dominated system which simultaneously encourages excessive spending and pushes insurers and providers to decide how to "ration" (i.e., limit) care.

What people need is a medical system that allows them to make the basic rationing decisions:  what kind of insurance to buy, what kind of coverage to choose, what kind of trade-offs to make between spending on medicine and spending on other goods and services. 

Such decisions are complex and people with little means will need assistance.  But the specific "rationing" decisions--i.e., the inevitable trade-offs--vary dramatically by individual and family preference and circumstance.  Even today's system allows many people some choice between plans and providers.  The rise in consumer-directed care is a positive development which is expanding the choices available to Americans.

The worst strategy would be to increase the government's authority.  Washington already has to "ration" care through its own programs.  Politicizing everyone's care by increasing federal control would override the differences in preferences and circumstances which are so important for all of us.  It doesn't matter how bright or thoughtful or well-intentioned the legislators and regulators would be.  They would end up getting it wrong for most Americans.

Is rationing inevitable?  Yes.  Is government rationing inevitable or desirable?  Neither.  The bottom line is:  who should control people's and families' medical futures?  Not Uncle Sam.