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Is health care rationing our only hope?

Robert Pearl, MD
Policy
March 6, 2017
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Rationing of health care services according to an individual’s ability to pay — or, as the case may be, the inability to do so — is becoming more prevalent in the United States, both in the public and private insurance spheres. Commercial payers, for example, increasingly require doctors to follow a complex and time-consuming authorization process. Recent surveys show that 75 percent of doctors complain about this often unnecessary step.

Insurance companies know that, given all the time the process consumes, some physicians will choose the path of least resistance and just skip ordering a test or referral they might otherwise have pursued. In response, a coalition of 16 organizations — including the American Hospital Association, the American Medical Association and the American Academy of Family Physicians — banded together last week to try to force insurance companies to eliminate this practice, except in rare situations.

The word “rationing” denotes a process for allocating essential resources in situations of scarcity. Rationing happens during an absolute limitation in supply, or when high production costs or excessive demand for consumption limits supply. In the poorest countries of the world, health care rationing exists explicitly and people have no choice but to accept it.

In some of these poorer countries, individuals face limited access to needed services unless they have the resources to pay high fees at “private clinics” owned by individual doctors. And the inevitable delays in accessing necessary care for urgent and emergent problems lead to higher mortality and complication rates.

In a visit to India in the fall of 2016, I had the opportunity to meet with physicians, hospital leaders and representatives from the Bill & Melinda Gates Foundation about perinatal mortality, both for mothers and their unborn children. When I learned that mortality was 10 times more than that of the United States, I was not surprised by the statistics but caught unaware of the reason these mothers and their unborn children were dying. It had nothing to do with poor prenatal services, inferior medical education or lack of skilled midwives. Rather, it was simply a matter of distance and time — too much distance and too little time.

The reason so many women in India die unnecessarily in childbirth is that more than 90% of births take place at home without ready access to emergency-type treatment. As a result, when complications arise that threaten the life of the mother and/or baby that could be addressed through a Cesarean (C-section), the woman simply can’t reach a facility to have the procedure in time.

What the numbers tell us

In the United States, the maternal death rate in 1987 was 7.2 per 100,000 live births, according to the Centers for Disease Control (CDC). But by 2011, the mortality rate rose to 17.8 per 100,000, and by 2015, the World Bank estimates climbed to 15 per 100,000. (In a future post, I plan to address the reasons for increased mortality in the United States over the past 25 years and the risks going forward). In contrast, the maternal death rate in India in 2015 was 174 deaths per 100,000 live births, or approximately 10 times higher.

About 30% of births in the United States are by C-section, according to the CDC. Some of these deliveries would be fine without a C-section, but a significant fraction are necessary to protect the lives of the mother and child. Some estimate that as many as 8% to 15% of C-sections are life-saving. And with this background, the approximately tenfold difference in mortality between the United States and India begins to make sense.

Build enough places in India to perform C-sections, and you could save tens of thousands of lives. But, of course, the problem is much too complex for such a solution. You would also need to expand the entire delivery infrastructure to bring people close enough to facilities to get care quickly and be able to identify when they and/or their babies are at risk. And that’s a cost the health care system in India can’t afford, at least not today.

Most people understand the need for rationing in countries like India. What they don’t realize is that it exists in economically advanced nations, including the United States. But it’s less visible. It’s also much more insidious. The mechanism in almost all cases is, in one form or another, the ability — or inability —to pay.

Rationing comes in many forms

One approach to rationing, common in government-funded health systems in other countries, is through a two-tier system with two “lines:” one private and the other public. In these nations, medical care is either delayed or simply unavailable under public programs, while individuals who buy private coverage have rapid access to these same operations and tests. If patients get better during a delay or simply decide to forgo medical care for the problem in the future, there is a cost reduction. But it comes at the expense of quality and the overall health of the individuals affected. For this reason, most of the savings are illusory.

Medicaid, a publicly funded program that provides insurance coverage to low-income individuals, is another example. In states where reimbursements are significantly lower than those from other payers, many doctors refuse to participate. They know that caring for these patients will simply cost them more than they will receive in reimbursement from the government. As such, having coverage under Medicaid does not in itself guarantee access to care. And as a result, when the supply of willing providers is substantially lower than the number needed to treat the population enrolled, the total amount of care delivered may decrease, but once again, the reduction happens at the expense of the health and well-being of the individuals served. The process is haphazard. It’s neither a rational nor satisfactory way to lower the cost of entitlements.

For people over 65, coverage is also provided by the government via Medicare, although at the federal, not the state, level. Over the past few years, payments to doctors and hospitals have been flat or even declining. As a result, we run the risk that seniors covered through this important and successful program could face difficulties similar to those in Medicaid in gaining access to care in the future.

A third approach, tried in the Medicaid program in Oregon, was to analyze the efficacy of every treatment and to stratify services from the most to the least cost-effective and then determine how many interventions in a given year the state would be able to fund. The program was deemed a highly rational approach, informed by a transparent process involving substantial community input. But awareness of services that wound up excluded doomed it almost from the start.

Finally, rationing happens through the ever-higher growth in health insurance deductibles. Today these first-dollar, out-of-pocket payments frequently exceed $5,000 per year. For many families, $5,000 a year is unaffordable except under rare, life-threatening circumstances. Once again, the result is rationing by ability — or inability — to pay.

The solution most likely to succeed

As the cost of medical care rises more rapidly than our nation’s ability to pay, pressure to keep those costs down is inevitable. Unfortunately, none of the solutions tried to date have proven rational, effective or in the best interests of the health of Americans. Rationing by ability to pay may be relatively easy to implement, but it fails to address the underlying drivers of health care costs, including operational inefficiencies, medical error, excess drug costs and excess regulation.

The right approach is to reform the delivery system and, specifically, increase collaboration and base reimbursement on value rather than volume. That approach will allow groups of physicians and hospitals to leverage modern technology, decrease medical error and invest in physician leadership. The result: higher performance at lower cost.

Organizations that have carried out these improvements in structure, reimbursement and leadership have achieved a nation-leading quality of care with not only significantly lower costs than their local competitors but also higher patient satisfaction. As the new Congress and President struggle to improve health care in this country, it will be essential to look to the most successful organizations as a model, and to help the more fragmented, paper-based, fee-for-service models of the past to change.

Again, if the goal of health care reform is merely to lower costs, then rationing according to an ability to pay can succeed, but it will be at the expense of people’s health and quality of life. If, however, the real goal is to improve both our health as a nation and our economy, a more holistic solution will be necessary. With data on outcomes becoming more available, we’re learning that the design of the delivery system makes more of a difference than the insurance vehicles involved. And we are learning the powerful consequences of the social determinants of disease, whether diabetes from lack of exercise and excess weight in the United States or paucity of proximate facilities in India capable of providing C-sections.

Transforming American medicine will be more difficult and complex than these other approaches, but it’s the only path that can provide a long and healthy life for every one of us.

Robert Pearl is a physician and CEO, Permanente Medical Groups. This article originally appeared in Forbes.

Image credit: Shutterstock.com

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Is health care rationing our only hope?
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