Academic journal article The Hastings Center Report

Allocating Health Resources

Academic journal article The Hastings Center Report

Allocating Health Resources

Article excerpt

Allocating Health Resources

I have spent many months now trying to answer a simply stated, reasonable question: How can the United States devise a health policy that provides adequate care at an affordable price? To ask such a question is not an indicatable offense. But it is also, I conclude, a question designed by a specialist in exotic forms of torture. The American health care system, and the public attitudes that support it, are a vast arena of confusion, contradictions, and conundrums. Imagine that some muddled cook once conflated the recipes for beef stew, bouillabaisse, and chocolate cake. Your task is now to take that concoction and make of it an edible dish. Imagine further that you have been assigned numerous subchefs not of your choosing, each of whom has different tastes, some of whom are allegedly on the payroll of the beef, or fish, or chocolate industries, and all of whom are strong-willed and prone to state their convictions in the language of high morality. If that analogy seems strained, a scanning of some recent headlines, an examination of some new public opinion surveys, and a tour through a number of recent books may give it more credibility.

The Failure of Cost Containment

These are the headlines, all from the New York Times and all in early 1988:

* "Prepaid Programs for Health Care Encounter Snags--H.M.O. Shakeout is Seen"

* "Outpatient Strategy Fails to Cut Health Costs"

* "Hospitals' Medicare Profits Drop; Decline May Curb Access to Care"

* "Insurance rates for Health Care Increase Sharply...Premiums Rise 10-70%, with Medicare up by 38.5%--Setback Seen on Costs" is

That last, wonderfully understand phrase "Setback Seen on Costs" is worth a closer look. Consider that beginning in 1970 with the Nixon administration and continuing into the Carter and Reagan eras, "cost containment" has been the health care crusade. In that context, these headlines tell us something of great importance about many of the most prominent strategies to control costs. They tell us, for instance, that the H.M.O. movement is having trouble controlling costs and is, as a consequence, not growing as originally hoped. They indicate that the rising hospital costs of Medicare patients are undermining efforts to keep hospitals solvent. They show us that the belief in lower outpatient costs has been confounded. And they tell us, most ominously, that general health care costs remain on the rise and uncontrolled.

Those headlines, moreover, are not isolated items. A strong consensus has emerged among health economists over the past couple of years that the cost-containment effort is in general a failure. Not one of the major cost-containment initiatives has yet succeeded--or shows any serious promise that it will eventually succeed. Not even the slightest downward dip of any significance has appeared on those economic charts that measure the ever-rising cost of health care. Relative to the pace of inflation in general, the rise in health care costs has actually increased in the past few years.

The failure of cost-containment efforts has some important implications. One is that further loose talk about the simple feasibility of "cutting the fat" in the health care system should cease. The logical possibility that waste can be controlled should not be confused with the pragmatic probability that it will be. Nor should it be assumed that a reduction of waste and inefficiency can proceed more rapidly than the cost-escalating power of constant technological innovation. What economists call an "intensification of services"--a greater use of technology with individual patients--accounts for 20 to 25 percent of annual cost inflation.

Another implication is that it would be utterly naive to continue invoking "efficiency" as a way of denying that we must openly discuss the coming need for rationing and limits. "Cutting the fat" was meant to be the economic magic bullet to save us from painful choices. …

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