Professional judgment and the rationing of medical care.

• Author: Mechanic, David
• Position: The Law and Policy of Health Care Rationing: Models and Accountability

Changes in knowledge and technology, the growth of the elderly population, and rising public expectations will continue to increase medical care costs. Due to these trends, more stringent rationing of medical care is inevitable. Future rationing must involve a blend of approaches, including: cost-sharing with patients (price rationing); administrative limits on technological expansion, reimbursable services, and provider remuneration (explicit rationing); and discretionary allocation of services within the constraints of established budgets (implicit rationing).(1) Each approach has advantages as well as liabilities. The health care rationing debate focuses on what relative weight each of these approaches should receive.

Dependence on price rationing approaches is likely to deter appropriate as well as inappropriate medical care procedures with a larger deterrent effect on the poor. Also, while some explicit administrative constraints are essential to set the parameters of care and to avoid uncontrollable escalation of costs, dependence on explicit rationing approaches is likely to result in insensitivity to the complexity of clinical care, to the rapidly changing character of medical knowledge, to the uncertainties of the care process, and to the wide range of situations, needs, and preferences of patients.

In contrast, an implicit rationing approach offers the most realistic and appropriate way to allocate services. Because patient populations are heterogeneous, many medical interventions involve uncertainty, and the clinical decisionmaking process is iterative (using information obtained from the relationship between professional and patient), an effective health care rationing system must take into account the need for flexible physician response to numerous unprovided-for circumstances. Implicit rationing allows for needed sensitivity to variance by relying on clinical discretion, thus strengthening the potential for professional/patient interaction and making unwarranted withholding of efficacious services less likely. Implicit rationing can be strengthened by appropriate grievance procedures, professional peer review, and the ultimate threat of malpractice to provide deterrents to an inappropriate decision to withhold medical care.

1. THE CONTEXT OF THE RATIONING DEBATE

   As medical care costs in the United States escalate and account for a growing proportion of gross national product, health care rationing, once commonly viewed as unthinkable, has become an increasingly respectable response. The popular conception of rationing is based on the American experience of food and gasoline rationing during World War II, in which specified shares of a limited resource were distributed. Fixation on such an extreme example obscures the fact that substantial rationing occurs every day in the distribution of the limited resources of all publicly supported services.(2) This de facto rationing is so common in everyday reality that it is hardly thought of as rationing at all.(3)

   1. Background of Rationing

      Throughout most of medical history, the availability of medical services was substantially rationed by the ability to pay, by the availability of number and types of practitioners and facilities in different geographic areas, and by patient compatibility with physicians' research needs and practice inclinations.(4) To the extent that the market for medical care was primarily private, the ability of people to pay for medical care set strict constraints on its consumption. Although many physicians provided considerable charity care to patients who lacked resources, financial concerns constrained the extent of such charity efforts.(5)

      The growth of health insurance and large government programs--particularly Medicare and Medicaid--in the post World War II period has fundamentally changed health care utilization by separating the patient's ability to pay from the availability of medical services. Once one gains eligibility or pays health insurance premiums, the received entitlements are only tangentially related to out-of-pocket expenditures, if at all. This change has weakened the influence of economic constraints on patient behavior, skewing the consumption of certain medical services.

      Currently, rationing occurs mostly through the design of health insurance coverage and reimbursable providers, rather than by the patient's ability to pay. Individual and administrative choices are made among coverage options for competing service benefits, types of facilities and practitioners, and contexts of care, including hospitals, nursing homes, outpatient settings, and the home. Initially, most insurance covered hospital care and only a limited scope of possible health care needs. While these insurance programs expanded, they generally continued to limit coverage in such areas as mental health, dentistry, outpatient prescription drugs, and podiatry.(6) For instance, less than half of the elderly's health care costs are covered by Medicare despite the magnitude of Medicare expenditures as a percentage of national health care expenditures.(7)

      Rationing also results from how care is organized. The structural organization of medical care has inherent imbalances, such as the unequal availability and distribution of tertiary care facilities, specialized hospitals, nursing homes, outpatient programs, rehabilitation facilities, and various types of reimbursable practitioners. These imbalances limit the services available to persons in some geographic areas.(8) Such constraints are further reinforced in most insurance programs by cost-sharing, through co-insurance and deductibles, limits on the frequency and intervals within which certain services can be utilized, and maximum allowable expenditures on various types of benefits.

      These methods of rationing had been obscured by the rapid growth of health insurance and health expenditures during the post-World War II period. Financial incentives created by Medicare reimbursement and tax policies stimulated the expansion of hospitals and development of new nursing homes.(9) The number of nursing home beds, for example, grew from fewer than 570,000 in 1963 to approximately 1.4 million by 1976.(10) As medical knowledge and new technologies expanded, public expectations of the quality of health care increased.(11) Because most people had greater access to care than previously, and certainly more than earlier generations, access inequalities and limitations on the services available were not generally recognized. Moreover, because insurance mechanisms were separate from the supply of facilities, programs, and practitioners, the public did not see an obvious link between the theoretical availability of entitlements and difficulties in obtaining them. Despite the public's ignorance, rationing was in fact occurring.

      New medical care financing made available by Medicare, Medicaid, and other government programs altered the supply of services. These programs were biased toward the reimbursement of technical procedures, in contrast to providing cognitive and counseling services characteristic of primary care.(12) Large inequalities in access persisted by geography, urban or rural residence, and the demographic characteristics of varying population groups.(13) Thus, resource limitations moderated the pace of growth, but not to the extent of requiring "tragic choices."(14)

      Today the need for rationing is clear. Medical expenditures have escalated dramatically since federal Medicare and Medicaid programs were initiated in 1965, and they will continue to grow due to rapid advances in science and technology,(15) a growing population of elderly with a high prevalence of chronic disease,(16) increasing patient expectations,(17) and an expanding population of health professionals and physicians, who to some degree create demand for their own services.(18) The crux of the current debate is not whether we should ration care. Rather, having recognized rationing is inevitable, the debate focuses on the appropriate mix of rationing devices to constrain supply and allocate it fairly, in a manner consistent with an acceptable quality of care.

      This debate does not exist in a vacuum; health care in the United States is a public endeavor to a significant degree. The government, in some form, directly pays for more than 40 percent of all health care costs and an even larger proportion of the costs for inpatient care and the uses of expensive technology.(19) Through its tax and reimbursement policies, the government substantially subsidizes the purchase of health insurance and the capacity of nonprofit and private institutions.(20) Future health care reforms may require employers to provide health insurance to their workers, a form of indirect taxation. Thus, government has a large and growing stake in the shaping of future constraints and an examination of possible approaches to rationing becomes necessary.

   2. Approaches to Rationing

      One alternative strategy for rationing health care is to increase the proportion of the cost paid by the patient, thus reducing the cost borne by government (price rationing). With the emphasis on competition during the 1980s, substantial increases in cost sharing were introduced across the entire health care sector.(21) One obvious advantage of price rationing is that it reduces the financial burden on government or insurer by requiring patients to share an increased part of the cost. Additionally, price rationing is motivated by the theoretical belief that if individuals are required to pay part of the costs of their medical care, they will consider the need for care more carefully and choose services more selectively, thus reducing trivial and inappropriate demands for care.(22) General support for this proposition comes not only from economic theory, but also from early results of the RAND Health Insurance Experiment (HIE), which demonstrated that copayment significantly...