The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Rationing and Other Realities of America’s Health Care System

Posted by Alan on September 28, 2009

Later this week the Senate Finance Committee will likely vote out a health care reform bill. With this action, all five committees of jurisdiction in the House and Senate. Speaker Nancy Pelosi and her leadership colleagues will begin the arduous process of combining the various flavor of reforms pass by three House committees into a single package the full House can consider. Senate Majority Leader Harry Reid and his colleagues will be doing something similar with the two reform bills passed by Senate committees. This process will unfold as an even greater storm of bombast and hyperbole is unleashed than the public has already been forced to endure.  Before the debate gets too loud, I thought it might be helpful to put a few of the issues in perspective.


Health care in America is rationed. yes, rationed. This being America, it looks different than the rationing available in Canada, Great Britain, and elsewhere. In America, rationing is based primarily on ability to pay. If you have money and/or insurance coverage, you have more options concerning what health care you get, when you get it and where you get your health care than if don’t. Anyone who says otherwise is trying to sell you something.

Because we ration health care in America, it does not follow that anyone goes without some coverage. We have a safety net. But the quality, timeliness and convenience of your care in America depends on your ability to pay for the cost of the care you receive – or to have a third party (i.e., an insurance company or government health plan) pay the cost for you. Sharon Begley, a Senior Editor at Newsweek makes this same point, calling the rationing debate “ignorant and duplicitous.” Every health care system in the world rations care in some way. (Another recent Newsweek story describes how a country’s health care system – and approach to rationing – reflects the countries’ culture). America is no exception. And it won’t be after reform is passed.

Someone is Always Between You and Your Doctor:

Apparently, in heaven or somewhere nearby, the health care you receive is determined solely and exclusively by your wise, cost-effective physician. No outside factors intervene. And certainly, no one is looking over doctors’ shoulders, second guessing decisions or, heaven (or somewhere nearby) forbid, denying coverage. That this is not the way it works in America’s health care system today – or the way it will work tomorrow regardless of what reforms are enacted – does not stop lawmakers from declaring this heavenly dream is their goal.

Liberals and conservatives are united in their defense of keeping the space between doctors and their patients interference-free. The only difference between ideologues is who they accuse of intruding. Liberals claim insurance company bean counters are the culprit; conservatives warn against granny-killing, unfeeling government bureaucrats getting in the way. The fact is someone always has been, and always will be, between patients and doctors.

Both are correct to a point. Both carriers and the government come between you and your doctor. A tragic case that became political fodder for former Senator John Edwards brought this reality to light. An insurer denied a liver transplant for a California teenager because the procedure was considered experimental given her circumstances. Without assurance they would be paid, medical providers would not perform the transplant. After intense public pressure the carrier relented, but before the operation could take place the patient died. As I said, a tragic story used by Senator Edwards to castigate the insurance industry. What he never mentioned it, but the Sacramento Bee did, it that Medicare and Medicaid – public health programs – would also have denied the treatment as experimental. Not every treatment, procedure, service or medication requested is safe, necessary or effective. There will always be an umpire determining what care is responsible and what is not, reform or no reform.

Not all umpiring is bad, however. Nor does applying comparative effectiveness research to medical care (and, consequently, eliminating waste and unnecessary treatment) require handcuffing doctors or forcing them to treat patients from a menu. The experience of the Geisinger Health System in Pennsylvania, among others, has demonstrated that sharing knowledge concerning effective protocols for treating conditions can lower costs while still allowing doctors to determine appropriate care.

Increasing Medical Costs Cause Increasing Premiums

Health insurance premiums increase far faster than general inflation or wages. As USA Today reported recently, since 1999, health insurance premiums for families rose 131 percent. Inflation during that time increased by just 28 percent.

Many politicians and pundits place the blame for this disparity at the feet of greedy health insurance executives. Never mind that profits and administrative costs, as a percentage of premium have remained roughly constant over time. Apparently health insurance premiums are set by stock brokers, not actuaries.

The reality is medical costs drive health insurance costs. And unless Congress address this dynamic with more than rhetoric, their reforms – whatever they may be – will flounder. What can Congress do about it? There’s no shortage of ideas.

Kaiser Permanent CEO George Halvorson, wrote a book “Health Care Reform Now!” that examines the elements of medical care costs and what can be done to restrain them.  Among Mr. Halvorson’s recommendations: create a medical care delivery system that allows for quality measurements, an appropriate approach for the treatment of the five chronic diseases that account for more than 50 percent of medical spending in the country; and change the motivation for medical providers to provide more care rather than the right care.

Similar recommendations for reducing medical inflation are offered by Dr. Albert Waxman, a CEO of a venture capital firm focusing on health care related enterprises. In a guest blog posting on, Dr. Waxman calls for replacing “fee for service” payment models with performance-based reimbursement and providing incentives for healthier lifestyles. (Full disclosure: Dr. Waxman’s VC firm is funding a client of my consulting firm).

The challenge in cutting costs in medical care is that opponents of reform – or of the reformer – will claim such changes will lead to rationing and put government (or the insurance companies) between doctors and their patients. When listening to these charges, however, it might be useful to remember: it’s not whether there will be rationing of medical care in America, but how we will ration care. And it’s not whether someone will evaluate whether the treatment our doctors recommend or not, it’s what this evaluation will be based upon and how it is applied.

We can have health care reform that reduces costs and increases access. Doing so will require facing facts concerning the status quo, not ignoring them.


4 Responses to “Rationing and Other Realities of America’s Health Care System”

  1. Maguire said

    Regarding the cost issues within health care right now, you couldn’t be more right. The insurance companies have no control over the cost of medical expenses and are constantly trying to both pay for services rendered as well as make a profit.
    In an interview, Dr Eva Mor, author of ‘Making the Golden Years Golden’, states that “What we need in a health system is uniformity in pricing for procedures and services and modalities of provision of testing and procedures for diagnosis and treatment. By providing coverage to the uninsured, which initially will cost the taxpayer, it eventually will save us hundreds of millions of dollars.”,com_sectionex/Itemid,200076/id,8/view,category/#catid107
    Without some sort of regulation over procedural costs, there is no uniformity or stability to the system. Reigning in profiteering within the industry could save in the long run and lower costs across the board.

  2. Paul said

    The description of the liver transplant case perpetuates a misconception about what the carrier did. As the plan was self funded by the employer, the insurance company had no financial interest in whether the transplant occured or not. The carrier did not reverse its decision in administering the plan terms. Instead, the carrier after determining that the transplant was not covered by the plan, made an offer to pay for it directly, which it had no obligation to do. This was perceived as a ‘reversal’ but it was not. It was merely an attempt at goodwill given the tragic circumstances. Had they ‘reversed’ the decision, the employer would have been on the hook to pay for it.

  3. If you have a few minutes to watch and listen to this online video, you will come away with an understanding of the difficulty of controlling health care costs. Basically, we have to move away from the fee-for-service method of paying providers.

    The Cost of Health Care – a panel discussion posted by NEJM • September 23rd, 2009 • features Atul A. Gawande, MD as moderator.

  4. Mark Goodman said

    This post should be in front of every member of congress who is shaping a final bill. The “how to” is the issue and I have yet to see Washington have a clue in how to address it.

    Great post!!

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