Lecture 1.2 Introduction to rationing health care
Rationing Health care
- Rationing Somehow limiting the amount of care provided and consumed
often in order to control/ optimize heathcare expenditures
- “Rationing takes place when an individual is deprived (onthouden) of care
which is of benefit (in terms of improving health status, or the length and
quality of life) and which is desired by the patient
- To limit the beneficial health care and individual desires by any means –
Price of non-price, direct or indirect, explicit or implicit (Breyer, 2013)
- Universal theme, relevant across the world – The type of rationing is
different in every country
- Level and intensity of rationing differs given levels of health care spending
Rationing evokes images of war/ crisis in which the limited supply of essentials
was distributed. In relation to ownership of and willingness to trade a ‘coupon’ or
certificate of ‘right’ to access the market.
- Might we be exaggerating the problem of rationing in health care?
World Wide Worries (WWW)
- In some countries, people suffer or die while waiting for appropriate care
- In some countries, substantial copayments are charged to patients, leading
to discussions of accessibility of care
- In some countries, certain types of care are not covered under collectively
financed health insurance (basic benefits package) – financial access
limited
- For many people in low income countries, essential medicines are
unaffordable
- People waiting for surgery wait longer due to COVID patients
How open we are about the rationing questions is a cultural difference. And
solidarity is also a cultural difference. We have a mandatory solidarity. But this is
not the case in all countries/society.
Resistance
- People typically do not like Rationing, some think rationing can be avoided
but economists might say that there are always limits to what we can do
- This is more difficult in the context of health care; because of nature of
health and health care and the way health care systems are financed
- The difficulty comes in deciding how to limit health care, on what basis, in
general and in individual cases, and how to make it work in practice
Economics (equity = eigen vermogen)
- Economics concerned with the efficient allocation of scare resources over
alternative uses and the equity implications
- Efficiency relates to maximizing of welfare (happiness)
- Equity relates to notions of fair destributions (of welfare)
- Equity and efficiency issues cannot be solved independently (Arrow, 1963)
- Both very important when it comes to health and health care
Opportunity costs = the costs of not choosing the best alternative option instead
of the chosen option.
,Dismal science (bevolking zal altijd sneller groeien dan de hoeveelheid zorg)
- Core assumptions; desires/ needs are infinite, yet resources are limited
- Scarcity Never enough resources to satisfy all human wants and needs
- Available resources used to maximize outcomes/ goal (happiness, welfare,
health)
- In decisions with effects across people, equity plays a role as well
o Rationing at core of economics – a dismal science?
o Rationing is inevitable due to scarcity
Perfect market -> demand line also has to do with income.
So
- For economists the fact that we need to ration is unsurprising
- We always need to ration in all sectors of public and private life
- There are never enough resources to fulfil all our wishes and needs
- Normally, preferences, prices and budget restrictions determine outcomes
- Individuals maximize utility and make own choices about own consumption
and take income and prices as given
- Utility is gained by buying and consuming goods at a price at or below
what they are willing to pay from profit-maximizing firms without market
power selling at a price that are willing to accept (equal to marginal costs)
‘Perfect market’; Many buyers and many suppliers
Optimality
- Markets steer, through price mechanism, towards an equilibrium
- Equilibrium equals supply and demand
- Under a number of (strict) assumptions, such an equilibrium can be seen
as optimal (i.e. welfare maximizing, Pareto optimal)
- Individuals maximize own utility, are best judges of own welfare, have
perfect knowledge about prices and characteristics of all available goods
- Income distribution is not questioned and determines purchasing power
Health care is different
- The assumptions underlying economic textbooks are not valid for health
care
- Many deviating characteristics cause that leaving health care provision to
market forces will not lead to optimal outcomes
- That implies that government intervention in the health care sector may
be necessary to attain “better” results
, - This holds both for reasons of efficiency and for reasons of equity
- Markets do not result in (efficient) outcomes in health care due to specific
characteristics
1. Uncertainty and consequences of insurance
2. Information asymmetry between consumers and suppliers (doctor can
steer the demand of the patient, in normal markets this is not the case,
‘I know best which trousers I want to buy’, in the health care the doctor
knows better)
3. Existence of externalities (my actions have consequences for others)
- Moreover, strong concerns for equity in relation to health can make
efficient outcomes unacceptable (i.e. inequitable)
Statement on NHS in UK
- The government … wants to ensure that in the future every man, woman
and child can rely on getting …. The best medical and other facilities
available; that their getting them shall not depend on whether they can
pay for them or any other factor irrelevant to real need.
- This goes beyond correcting some market failures
- Allocation and rationing no longer ‘up to the market’
Rationing
- Breyer (2013) distinguishes general rationing and the type central in this
course; “These methods can be devided into those that make use of the
price mechanism (“price rationing”) and those that to not (“non-price
rationing”), the latter being synonymous with rationing in its narrow sense.
More specifically, this latter concept can be defined as the allocation of
limited amounts below market price, which often means “free of charge”.
- Rationing in this course thus often presupposes (the possibility of) some
kind of collective financing of the good in question, but can still result in
types of rationing that leave allocation to market (e.g. no coverage).
Allocation and rationing
- Individual markets people “ration own comsumption”
- In government regulated markets without (full) price mechanisms, also
decisions regarding allocations/ priority setting / rationing need to be made
somehow
- I may not be able to afford a drug that costs 30000 dollar and would give
me some additional health, but a collectively financed system could still
enable me to get it (for free or e.g. a copayment of 30000)
- How do we now determine which care should be available for specific
groups (and when and under which circumstances)? Or should there be
no limit?
The great escape; Ethics
“at least as long I am Minister of Health, I shall never lead a debate on rationing
or prioritization, for ethical reasons” – Philipp Rosler 2010
Ethical position
- “There is a large group of objectors against health economics who believe
it is contrary to medical ethics. In the extreme, these people believe that it
is the doctor’s duty to do everything possible for the patient in front of
him, no matter what the costs. But in a resource-constraint system, ‘costs’
, means ‘sacrifice’ (in this case the value of benefits foregone by the person
who did not get treated)
- Thus ‘no matter what the costs’ means ‘no matter what sacrifice borne by
others’. This does not sound to me like a very ethical position to be in.
Health care rationing
- Health care costs and demands increasing – pressure on budgets
- How to allocate scare health care resources optimally?
That means choose what to do and hence what not to do (rationing)
- Scarcity in health care denied; “The first lesson of economics is scarcity..”
“… the first lesson of politics is to desregaard the first lesson of
economics…”
- All systems deal with scarcity, balancing goals of efficiency, equity….
- Setting priorities/ rationing, implicitly or explicitly, through coverage,
budgets, (co)payments, incentives, waiting times, formal vs informal care,
quality
Why is health care rationing such an issue?
- Health (care) is a special good
- Central to human flourishing, capabilities and utility
- Strong feelings of solidarity (especially in Europe) regarding to health
- In many countries much health care is available ‘free’
- Setting limits (especially by others) to access/ coverage seen as
indefensible
- “If it works, we should reimburse it”
- Rationing shows a tension around fundamental aim of many systems
Health care as a right – many citizens consider health care to be a right
- The plurality shows that while many people will not like rationing, they also
do not agree on which basis to do so (if at all permitted)
- So, rationing inescapable and for many unacceptable at the same time
Why ration? Value forgone!
- Opportunity costs of spending more on health
- Outside health care; less education, safety, infrastructure
- Inside health care; displacement – price of health is health foregone – more
for some patients means less for others – efficiency & equity
We ration because of opportunity costs; the same resource can produce
more health/ wellbeing elsewhere
Inconsistent triad
- Weale (1998); basic principle of many health care systems is to offer
comprehensive, high quality medical care, to all citizens
- Given scarcity, these three basic wishes represent what logicians call an
inconsistent triad; you cannot fulfil all three wishes at the same time
- Rationing means (partly) giving up on one or more wishes… which one?
- More funds only means rationing at a different level
Norheim (2017)
- Now, a new generation of academics should explore the challenges of
priority setting. Despite all the positive developments in health and the
institutionalization of priority setting, the elusive challenge of priority
setting will not disappear.
