Prospective self-denial: can consumers contract today to accept health care rationing tomorrow?

Author:Havighurst, Clark C.
Position:The Law and Policy of Health Care Rationing: Models and Accountability

Health care can best be rationed with insurance contracts of 'prospective self-denial' in which people agree to conditions limiting the range of their insurance claims. Enabling consumers to tell medical providers through their insurance plans the extent of medical care they are interested in and their desire that treatments be cost-effective would reestablish medical care as a consumer good... (see full summary)


Rationing is a common buzz word in the American health policy debate, conjuring up visions of officious interference in private choices and arbitrary limitations on the freedom of physicians to prescribe for their patients. The sensitiveness of the "R-word" is significant because it illustrates the extraordinary difficulty of ensuring that the nation's scarce resources are efficiently allocated between health care and other uses. In our political and legal culture, a powerful taboo inhibits any efforts, private as well as public, to economize in the provision of health care by withholding any arguably beneficial service.

Eliminating cultural, practical, and legal obstacles to responsible economizing in the purchasing and provision of personal health care should be a primary objective of national health policy reform. An unrecognized reason why the nation is feeling so impoverished these days despite its immense wealth is that purchasers of health care--individuals, employers, and even government itself-lack proven and acceptable methods for ensuring that marginal dollars spent on health services yield at least as much benefit as could be gotten by equivalent spending on other things.(1) Until the nation finds ways to curb the health care sector's propensity to squander substantial resources--perhaps whole percentage points of GNP--on low-priority services, it will continue to neglect such needs as improved education and job-creating capital investment. At the moment, the nation is finding it nearly impossible to pay for existing public and private health care programs. Without better methods of implementing priorities in health care spending,(2) it is hard to see how health coverage can be extended to the thirty-six million Americans who currently lack it.(3)

This Article explores whether "prospective self-denial"--that is, voluntary decisions by consumers to economize by accepting substantial restrictions on their freedom to draw upon a common fund for future medical needs--can be useful in rationalizing societal spending on health services. One question is whether the rationing label applies to such voluntary restrictions on the availability of financing. More substantively, the Article will address practical questions having to do with the writing and administration of private contracts, legal questions having to do with the enforceability of such contracts, and policy questions having to do with ethics and equity. An overriding question is whether the legal and political culture can tolerate such private economizing or would interfere with it so much that the only allocational mechanism remaining as a health policy option is implicit or explicit rationing by public authorities. At issue ultimately may be the long-run viability of a market-oriented health policy in the United States--for, if consumers cannot effectively exercise choice concerning the level of their spending on health services, some public decision maker will almost certainly have to step in and set priorities for them.(4)


    The health policy debate in the United States frequently goes like this:

    First debater: Your plan would lead to the rationing of care!

    Second debater: We are rationing care already!

    Because such discussions deteriorate so easily into semantic quibbles, they are apt to be unproductive. Obviously, however, both parties to this conversation have something serious to discuss. The first wants to talk about the effects of reform on those who currently benefit from mainstream medical care (either as patients or as providers), while the other is principally concerned about the underserved. Although the concerns of each are legitimate, it would be preferable if they could be considered separately, using terms about which there is more agreement. A good case could be made for banning the emotive term rationing from such discussions altogether.(5)

    Broadly understood, however, some rationing of health care is inevitable in any responsible kind of financial protection against unpredictable health care costs. Third-party financing is notorious for relieving physicians and patients--the primary makers of consumption decisions--of the need to consider costs in diagnosing and treating disease. The resulting propensity to overspend, which economists label "moral hazard," makes it imperative that there be some rules to limit the freedom of individuals to draw upon the payer's resources.(6) Such rules should not, however, be characterized as rationing in any pejorative sense. Although criticism may fairly be directed at the content of the rules themselves and at the fairness and accuracy with which they are administered, there should be no question about the need for some limits on patient entitlements.

    Despite the basic legitimacy of rules restricting the availability of health care financing, their invocation in close cases will inevitably be characterized as rationing. Such rules, however, ration only health care financing, not medical care itself.(7) Thus, a service that is deemed to fall outside a patient's coverage is not necessarily denied to the patient. It may still be provided at the patient's personal expense or at the expense of the provider--as in the case of cross-subsidized or charitable care.(8) Although a coverage limit may often cause a service not to be provided, the constraint on consumption that ultimately produces this result is not any term of the financing plan but the unwillingness (or inability) of the patient to pay for the service out of pocket. Rationing is not a helpful term for capturing the reality of such situations. Payers would seem to have an affirmative obligation to curb the incidence of moral hazard by throwing the choice back on the insured whenever there is serious doubt concerning a service's net benefit.(9) Although this and other cost-sharing strategies should not be used extensively in health plans covering low-income persons, such plans need not cover every desirable service. To characterize as rationing every exclusion from coverage that makes income a potentially decisive determinant of consumption is to imply the existence of an entitlement to receive even marginally beneficial care. Although egalitarians would like to proclaim such a "right to health care,"(10) it remains wholly suppositional in the American context.(11)

    The controls on health care financing that are most threatening to patients are those that threaten to deny payment for specific services on economic rather than purely medical grounds. Although most public and private financing plans currently employ some form of utilization management, these cost-containment programs are tolerable because, ostensibly at least, they seek only to eliminate care that is inappropriate by medical standards or to ensure that lower-cost methods are used when medically equivalent.(12) A charge of rationing begins to sound plausible, however, if the plan goes beyond the enforcement of medically validated criteria and threatens to deny patients increments of medical benefit on the ground that the cost is excessive. Nevertheless, as long as the patient remains free to purchase noncovered care out of pocket, the charge that care itself is being rationed should not finally stick. Moreover, there is increasing appreciation that health care cost containment cannot stop at curbing only nonefficacious, "flat-of-the-curve" spending but must enter the treacherous territory of benefit/cost trade-offs.(13) Although it is very easy to criticize coverage limits that are designed to wage the battle in the benefit/cost no-man's-land, the sensitiveness of such limits alone does not establish their illegitimacy or arbitrariness.

    As the foregoing discussion shows, the ultimate issue in appraising refusals by payers to pay for physician-prescribed health services is not their similarity to rationing but whether they are consistent with legitimate, pre-established rules. In a public program providing coverage for persons generally unable to finance their own care, the legitimacy of restrictive rules cannot be questioned; the public has a clear right to limit any entitlements it democratically creates.(14) Legitimacy is in doubt, however, in any program that limits the freedom of individuals to spend their own resources as they wish, and it is infringements on this freedom that are most plausibly challenged as rationing. Thus, true rationing would be salient in any government program that precluded persons from buying for themselves either fuller coverage or more or better care than the public program undertook to finance or provide directly.(15)

    In today's health policy debates, the rationing specter is most pertinent to proposals to create either a fixed budget for the health care system as a whole or a single public payer to serve all citizens under centrally determined rules and resource constraints. Implicit in such proposals is the threat that cost controls will go well beyond anything yet tried in the United States. If an American program were based on the popular Canadian model, for example, one would have to forgo public financing altogether in order to jump any queues created by the public system. Thus, Canadian patients going to the United States for quicker or better treatment usually must pay their own way entirely, not just the added cost of immediate treatment. American consumers of health care might fairly question the legitimacy of similar restrictions on their freedom to provide for themselves and their families.

    Such rationing concerns are most likely to be voiced, of course, only by those who are relatively well cared for under the existing system. Although not unworthy of consideration, rationing fears expressed by such privileged persons may not always be sincere or well founded. Instead, they may simply be rationalizations for opposing a fixed-budget or single-payer health care...

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