Rationing health care: what it is, what it is not, and why we cannot avoid it

The word "rationing" has come to play a central role in the national health policy debate. Alas, it is also one of the most misunderstood of words. Its injection into the debate has generated far more heat than light. This chapter reviews the definition of "rationing" preferred by the profession that takes as its task the study of how individuals and society respond to and deal with scarcity, namely, the economics profession. It will be shown that economists usually consider all limits on the distribution of a scarce good or services to be "rationing," whether that limit takes the form of a price barrier or some method of non-price allocation--for example, queues or allocation by lottery. To make a distinction between allocation through freely competitive markets and other forms of resource allocation, economists distinguish between "price rationing" and "non-price rationing." This is a meaningful distinction. Adoption of the economist's definition of "rationing" would greatly clarify the national health policy debate. Next, the discussion turns to the controversial proposition, commonly made by most economists and a handful of their allies in the medical profession, that an economically efficient health care system will inevitably engage in the pervasive withholding of services that may be sought by patients and their physicians, and that it will do so to enhance the quality and efficiency of the health care system overall. If managed competition lives up to its current billing, it will entail rationing of precisely that sort. Unfortunately, the individualist tradition of the United States, as it expresses itself in the tort system, may seriously hinder managed competition from achieving its stated goal. Finally, this chapter offers some conjectures on the approach to rationing likely to be taken by the United States health care system in the twenty-first century. It is argued that, far from having been inconclusive, the most recent congressional debate on health care reform actually gave official sanction to a three-tiered health system, with fairly severe rationing in the bottom tier and virtually none in the top tier. While such tiering has always been present in the U.S. health care system, the phenomenon has hitherto been treated as a blemish to be removed by government--now it will probably remain a permanent fixture.