Making Medical Spending Decisions: The Law, Ethics, and Economics of Rationing Mechanisms.

• Author: Agrawal, Gail B.

Making Medical Spending Decisions: The Law, Etching, and Economics of Rationing Mechanics. By Mark A. Hall. New York: Oxford University Press. 1997. Pp. xii, 300. $35.

Twenty-five years after the enactment of the Federal Health Maintenance Organization Act(1) and nearly five years after the failure of proposed federal health care reform, managed care(2) has come to dominate the medical marketplace. As a result, the relationships among patients, payers, and physicians have changed fundamentally and dramatically. In this market-driven environment, health care -- how much it costs, who receives treatment, and who pays for it -- may have surpassed the weather as a topic of everyday conversation at dinner tables and water coolers, across the country. In the popular press, reports concerning managed care, usually derogatory, are surpassed in number only by news of the latest political scandals.(3) Scholars, too, find health care a rich topic for discussion.(4)

Professor Mark Hall's(5) new book, Making Medical Spending Decisions: The Law, Ethics, and Economics of Rationing Mechanisms, is the culmination of many years of his work(6) on the "fundamental question" (p. 8) of who should make cost-based rationing decisions for health care services. Proceeding from the generally, although not universally,(7) accepted premise that rationing of health care resources is inevitable, Professor Hall begins his analysis considering the role of three categories of potential decisionmakers for medical spending decisions:(8) consumers of health care services, third parties external to the patient-physician relationship,(9) and physicians at the bedside.(10)

After concluding that neither consumers nor any of the third parties are ideally suited for all types of medical spending decisions, Professor Hall turns to the role of the attending physician at the bedsides of individual patients.(11) Bringing together legal, political, economic, and philosophical thinking on the role of cost in clinical decisionmaking in the current market-based health care delivery system,(12) he ably establishes his thesis that a physician may in some circumstances and to some degree make cost-conscious clinical decisions at the bedside.

Professor Hall then turns to the next logical step in the analysis: the circumstances under which physicians may act as rationing agents to withhold "marginally beneficial" care (p. 118). Here, he relies extensively on conclusions he draws from a consumer's decision to obtain health care coverage through a limited insurance plan. A consumer's selection of a health plan benefit design dictates the allocation of spending authority for that consumer.(13) The collective decisions of consumers about insurance coverage operate as market mechanisms to select the "best mix" of medical decisionmakers (p. 246). Under Professor Hall's theory of economic informed consent,(14) HMO enrollees, if properly informed of the economic underpinnings of that form of coverage, are deemed either to consent, or to waive their right to give informed consent, to their physicians' cost-based clinical decisions to withhold some beneficial medical care (p. 211).

Although I disagree that insurance selection fulfills all the purposes assigned to it in this book,(15) this is a self-contained limitation that warrants further thought, and not a fatal flaw in a sound analysis. In the final paragraph of this work, Professor Hall states that his "objective [in writing this book] will be met if the reader is convinced to avoid the attraction of absolutist taboos and simplistic-sounding solutions and instead is motivated to give this intractable problem hard thought" (p. 262). After reading Professor Hall's cogent analysis of this critical issue, the reader is unlikely to find any arguments left for the proposition that physicians must be entirely "cost blind" in their clinical decisionmaking. Professor Hall has thus taken an important step toward resolving the problem of allocating health care resources.

Yet the book also leaves me wanting more. While ably pointing out the weak underpinnings of an absolute prohibition on cost consideration, the discussion offers little positive analytical support in favor of physician bedside rationing. The book acknowledges the need for (p. 155), but does not provide, practical guidance on how the physician is to assume this new role as society's rationing agent at the bedside of individual patients or on what will replace the former ethical dictate that the physician be committed solely to the patient's medical well-being.(16) Combining the physician's role as rationing agent with the proposed theory of economic informed consent for HMO enrollees has profound implications for the relationship between patient and physician. But these issues, too, go largely unexplored. In short, I wish that Professor Hall's book offered more to facilitate the translation of sound scholarly suggestion into practical health care reform. One book, however, cannot answer all questions. The desire for more should be seen as a tribute to the success of this work in convincing the reader of its basic premise that physicians are not bound to ignore cost in clinical decisionmaking.

With some trepidation, I accept Professor Hall's invitation to give this difficult problem "hard thought" and will add to Professor Hall's self-styled "analytical musings of an academic lawyer" (p. 261) the musings of a long-time practicing health care lawyer and student of the health care delivery system who has recently entered the legal academy.(17) Before I comment further on our areas of disagreement or on what Professor Hall does not address, I will describe the wealth of ideas and insights he shares with us in this book.

1. WHO SHALL DECIDE?(18)

   1. Patients, Payers, and Third Parties

      Chapters Two and Three are devoted to a discussion of potential nonphysician decisionmakers and their medical spending decisions. The analysis begins with the intuitively most obvious choice, the consumer-patient. Covering now-familiar territory, Professor Hall points out that in a perfectly functioning market for health care services, consumers making discrete decisions about their own medical care would lead to the optimal allocation of medical resources (pp. 20-22). Of course, observers of the health care delivery system have long known that the market for health care services is not perfect. Regulatory interventions such as mandated benefits and comprehensive health care insurance shield health care consumers from the actual costs of their decisions. Since health care insurance is itself subsidized through taxation, consumers who obtain health coverage through employer-based plans are likewise shielded from the full cost of their insurance choices. The advent of managed care has exacerbated consumers' insensitivity to the cost of care by eliminating the patient's financial responsibility for deductibles and coinsurance and requiring in their stead only modest copayments.(19)

      Although some economists and policy analysts have argued that the market for health care services would properly allocate medical resources if consumers' price sensitivity could be enhanced through insurance reform,(20) Professor Hall explains that consumers will still not be ideal decisionmakers (pp. 23-34). First, even cost-sensitive consumers will not be ideal decisionmakers because when the more costly purchasing decisions must be made, patients are ill and, as a result, not well-suited or personally inclined to make cost-conscious medical decisions. Second, patients are uninformed decisionmakers, as they generally lack technical medical knowledge.(21) Finally, putting a patient in a bargaining relationship with her physician about the cost of care is not conducive to the documented healing effects of the trust-based patient-physician relationship.(22)

      Having concluded that the seemingly obvious choice for making medical spending decisions is not always the optimal choice, Professor Hall turns to third parties external to the patient-physician relationship as potential medical spending decisionmakers. He divides these third parties into three categories: the "bureaucrats," the "technocrats," and the "democrats" (pp. 64, 73, 91). The category of bureaucrats includes those who are currently the decisionmakers in many instances: insurers, government regulators, and judges (pp. 64-73). Technocrats are yet-nonexistent panels of disinterested scientists and physicians armed, with yet-to-be-developed comprehensive medical outcome measures and clinical protocols tied to hypothetical insurance contract language.(23) Democrats are another largely hypothetical category of representative citizen groups (pp. 91-99). Each category has its limitations as potential decisionmakers for medical spending decisions.

      Professor Hall posits that insurers and regulators are reluctant decisionmakers (pp. 64-67). I might be inclined to quibble about any reluctance of insurers to assume this role; managing cost is an essential element of the product that managed care organizations sell to their employer-customers. That said, the current popular press makes abundantly clear that neither the general public nor the medical establishment is comfortable with the current system of payer as medical decisionmaker.(24) Regulators fear the wrath of the electorate or special interest groups for unpopular, difficult decisions.(25) Insurers fear a hostile judicial system when their decisions are challenged.(26) The judicial system, in turn, is time-consuming, expensive, reactive, driven by fact-specific precedent, and ill-equipped to investigate scientific questions.(27)

      Nonetheless, each of these groups makes some medical spending decisions. When developing health benefit designs, insurers decide which medical treatments will be included under the terms of coverage (p. 68). Legislators override insurers' coverage decisions that are...