Today's NY Times featured a piece by Economic Scene writer David Leonhardt on the issue of rationing relative to health reform.  He argues that rationing is part of life in these United States, whether we are talking about healthcare, vacation spots, or prime steaks.  He notes that the key is to "ration well", as opposed to simply rationing. 

That, I would agree, does make good sense, but to achieve this, we must have a system that is more market-based than government-run.  The government certainly hasn't proven itself an rationing arbiter extraordinaire, whereas effective markets do self-regulate in a way that should lead to economic fairness. 

Perhaps I expected more from an economist on the topic of rationing, as it does not stand alone, but rather is one part of an extremely complex economic puzzle.  So from a bigger picture perspective, I offered the following in my letter to the NY Times, published this morning:

Author David Leonhardt makes some good points about rationing in his piece on health reform.  As the rhetoric and position-building in Washington grow in intensity, we should actually hope to hear a whole lot more in the way of rational economic perspectives about health reform.  A few thoughts:

• A basic tenet of economics is the law of supply and demand.  But why then, is there so little discussion of the demand side?  Nearly all the storyline we hear out of Washington relates to ways of adjusting, expanding or re-pricing the supply side.  We know that some 70% of healthcare costs are behavior-related, yet there is very little emphasis on the role of individuals to take greater personal responsibility for their own health.

• A basic lever in economic theory is incentives.  But why then, are so many of the incentives based on tests and procedures the physician performs, and not related to the outcomes they achieve with proper care?  We do not pay accountants, auto mechanics, butchers or barbers for the steps they take in their work, we pay them for results.  And to the point of the demand side of the equation, where are the consumer incentives that can actually drive better behavior? 

• Critics continually cite the amount spent on healthcare in the US versus other counties, but fail to note that this spending is actually a powerful economic engine.  Not that it’s all well spent, but that it does support a variety of industry subgroups and thousands of companies.  The US is more of a market-driven economy than any other nation on the planet, which by the way, suggests that the way to improve on the inefficiencies of the health system is with market-based strategies.

• Mr. Leonhardt makes the point about employers having to pay higher insurance premiums which often lead to minimal pay raises.  This is true for corporations that are not proactive in addressing health in the workplace.  On the other hand, there is substantial documentation about the return on investment for companies that have made employee health a priority, instituted disease management and wellness programs, provided incentives for health behavior change and focused on individual personal responsibility.

He’s correct that we will continue to hear about “rationing” as a key issue from critics of socialized medicine.   That concern can be set right with more effective use of demand-side approaches and incentives, attention to improving health behavior, and allowing the market to work by promoting price transparency, greater choice and broader access.

Frank Hone
Author, Why Healthcare Matters
Naples, FL