Unhealthy Rations

Policy makers, politicians, and editorialists seem so desperate for solutions to the problems of health care in America that they are now willing to consider, and are even hailing, proposals that ought to cause shame and disgust. How else can one explain the serious and respectful attention given in the past year to Oregon's proposed system for rationing medical care for the poor? Despite obvious and overwhelming flaws, Oregon's policy -- still in need of congressional approval -- has received widespread praise from leading members of Congress, health policy experts, and newspapers such as The New York Times.

Every state struggles to balance budgetary pressures, the medical needs of the poor, and the demand of hospitals, physicians, and other providers to receive minimally adequate payment. Some states do it better than others; none does it perfectly. Striking the right balance is hard, especially because Medicaid is a joint federal-state program, for which the federal government makes all the basic rules. In the past decade, just to make matters more complex, the executive branch has shown concern only with limiting federal expenditures, regardless of the effects on recipients or providers, while Congress increasingly requires the states to provide broader coverage to the poor without appropriating any money to pay the bills. It's enough to drive a governor crazy. Still, that's no excuse.

Oregon already ranked forty-fifth among the fifty states in the proportion of its budget devoted to Medicaid when it apparently decided that it was unwilling to continue the balancing act and decided to play a new game. Put simply, the Oregon legislature voted in 1989 to expand Medicaid coverage for the poor to thousands of Oregonians below the federal poverty level who are not now insured. While expanding coverage, however, the legislature, like Congress, refused to appropriate adequate additional funds.

To accomplish this fiscal sleight-of-hand, Oregon established a Health Services Commission, dominated by health professionals, to provide a comprehensive ranking of more than 2,000 types of medical interventions. Under the plan, everything an insurance program might be asked to cover is listed in order of presumed cost-benefit. Then an independent actuary determines the cost of each category of service, a budget limit is established, and a simple calculation suffices to draw the line that limits the kinds of procedures that Oregon will pay for. Thus, hypothetically, Oregon Medicaid would pay for measles immunizations but not for transplants.

The Oregon program might have gone into effect quickly if its managers could have gotten that list-making procedure to work. After extensive work and great expense, however, the computers spit out a preliminary list that was so ridiculous on its face that the program's technicians were immediately sent back to the drawing board. Treatment of thumb-sucking and acute headaches ranked much higher than treatment of cystic fibrosis; care of AIDS patients was at the very bottom of the list; and childhood immunizations were omitted altogether. The program's proponents claimed these glitches would be easily fixed. But, for fundamental reasons, perfecting the system is logically impossible.

The feasibility of interpersonal utility comparisons was, I thought, a dead letter even before Wittgenstein demolished the idea entirely. Even the most sophisticated modern cost-benefit analysts will acknowledge the difficulty posed by non-comparable benefits: there is no way to measure the relative value of the relief of suffering against the restoration of partial physical function. More important, the Oregon methodology, like any similar calculus, presumes that curing disease and improving functional outcomes are the only expected benefits of medical care, which is palpably not so. Else why pay for nursing homes at all, when, in fact, Medicaid pays more for that service than any other. We expect a health system to take care of sick people whether or not they are going to get better, as much for our benefit as theirs.

These conceptual arguments, however compelling, pale in comparison to the fundamental injustice at the heart of the Oregon system. Oregon's refusal to pay for certain procedures of demonstrated medical efficacy will not apply to elderly, disabled, or blind Medicaid recipients -- categories that account for more than 70 percent of Medicaid expenditures, in Oregon as elsewhere. The elderly, disabled, and blind, however, are far more influential politically, and contain a far smaller proportion of nonwhites, than the mothers and children in poverty who will be affected by rationing in Oregon. In short, the very people who stand to benefit the most from more health care expenditures will be the only ones subject to the new limits on spending.


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Even more astonishing, while refusing to pay for a whole list of accepted medical procedures, the Oregon Medicaid program will be forbidden from reducing payments to hospitals or physicians. Many states have sought to balance Medicaid budgets through unreasonably low provider payments, with the frequent consequence that providers refuse to serve Medicaid recipients. None of those states, however, wilfully denies life-saving services to Medicaid recipients. It would seem, at the least, to be in bad taste for the physician who sponsored the Oregon legislation to be so careful to protect physician incomes when he is so willing to sacrifice the health of poor people. Health economics, after all, comes down to a very simple equation: total expenditures equal the number of people served times the volume of services times the payment for unit of services. If one wants to increase the number of people served while still containing expenditures, and one is being honest about it, one should weigh the availability of services against the incomes of providers on one's scale of moral worth.

In fact, critically ill poor people in Oregon will be worse off under the new law. Now, if they show up in an emergency room with a life-threatening condition, the hospital and physician are required by federal law to treat them. Under Oregon's new system, if their condition does not appear on the index of approved procedures, both hospital and physician are explicitly excused from the legal obligation to provide care -- a telling and horrifying watershed in the evolution of health care ethics.

Proponents of the Oregon plan argue that much of what insurance programs, both public and private, pay for is demonstrably wasteful, and that, given finite economic resources, we can afford health insurance for the uncovered only by eliminating the waste. Certainly, some poor Oregonians will be better off with insurance that excludes coverage of hemorrhoidectomies than they would be with no insurance at all. It is true that as many as half of all prostatectomies, hysterectomies, and back surgery may be of only marginal benefit, or outright harm, to patients, but that means that the other half does have demonstrated benefit. The notion that medical care can be made affordable if we simply eliminate all medical practices that are ineffective or inappropriate is a precise analogy to the argument that we can balance the federal budget if we only eliminate all the fraud and abuse. Twenty-twenty hindsight is a powerful tool, but one of limited use in the design of public policy.

Programs to reduce or eliminate unnecessary or inappropriate procedures are springing up among both private and public insurance plans all over the country. Those programs work, but they require exactly the sort of patience, administrative creativity, and attention to detail that the Oregonians are apparently unwilling to give. They are also hardly panaceas; like governmental budget-balancing, health care cost containment requires politically difficult allocative decisions as well as technocratic hocus-pocus.

The Oregonians argue that health care is already rationed, by ability to pay, and that their method of assuring access to approved procedures for all is inherently fairer. Apart from the numerous technical and procedural difficulties with their rationing system, however, theirs will be the first system in memory to plan explicitly that poor people alone with treatable illness will die if Medicaid has not budgeted correctly, or runs out of money, and providers will be excused from liability for failing to treat them. No one except poor kids and their mothers will be subject to the procedures index. The Oregonians argue that it is healthier for society to make such choices explicitly, but it is hardly healthy to establish rules of the game that require such choices, and it seems to me hardly ethical for affluent physicians and legislators to make those choices for poor people.

For more than a decade, politicians throughout the United States have told their constituents that they can have the services they want and not pay more taxes. By surrounding the half a loaf they are extending the poor with a superstructure of pseudoscientific rigmarole, the Oregon legislature is telling its constituents that they can appease their consciences for a fixed price. Even more alarmingly, they are telling the rest of us that they have found the way to square the circle of health care policy. Given the propensity of our political system to seek technological fixes for hard redistributive problems, it is not surprising they have found so many takers. Medical care, after all, is where we got the notion of "magic bullets" in the first place.

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