Consequences of rationing healthcare

By DAVID MOON, Moon Capital Management
July 31, 2005

One evening last week, my kids decided that their father needed a physical, so they got out their home made physician tools and proceeded to doctor me. Using a blood pressure kit fashioned from Barbie blender, a Spiderman toy and a silver hair band, they took my blood pressure. My five-year-old son looked worried. 'It's not good,' the slightly underage general practitioner warned. 'Your blood pressure is 100. 100 percent bad. You're going to be in the hospital 100 years.' I had a meeting the next morning and wasn't real excited at the prospect of spending the next 100 years lying in my kids' playroom. I asked 'is there anything I can do to get out of the hospital any sooner?' My son's partner, his sister, fielded this question. 'I'll have to check your debit card and see how much money there is on it.'

Blue Cross can go ahead and print her business cards; my little girl is destined to be an insurance executive.

Product rationing isn't new. If there is a service or product that is both valuable and limited in supply, there is some system in place to ration it. We've been doing it with healthcare since the beginning of time. In 500 BC Egypt, there were only so many leeches to go around. Who got the biggest bloodsucker? Was it the guy who owned the most camels or the person with the biggest tumor? Someone had to decide.

Fast forward 2,500 years. We're still rationing healthcare. But now we've ceded that responsibility to third parties. My pre-school daughter knows that both the quality and quantity of healthcare a person receives is greatly influenced by money. Of course, money also influences the quantity and quality of food, housing and jewelry we purchase. But third parties don't make rationing decisions about vegetables or diamond rings; buyers and sellers do. In almost all other situations, we allow the buyers and sellers to self-ration scarce resources. With respect to healthcare, however, we have allowed a system to develop that encourages overutilization of products and services ' whether they are needed or not.

Between 27 and 30 percent of the Medicare budget is spent on services rendered in the last year of a patient's life. Nearly 40 percent of that figure is spent in the last 30 days. What if a $100,000 procedure might extend someone's life three months? Who should decide whether or not to spend that money? The patient, doctor or insurance company?

When my wife was pregnant with our budding young physician and insurance executive, it seems like she had an ultrasound every week. By contrast, TennCare patients might have a single ultrasound in nine months. We obviously have more money on our debit card than those TennCare patients.

Who should make decisions about funding expensive experimental procedures or medicines that have a low or unknown probability of success? If my father or wife or child is the patient, I say spend whatever amount of money it takes to have any chance of improving either quality or length of life. I don't want the government making this decision.

Commentators often look at the ethical dilemmas presented by a reduction in funding for TennCare. 'If we cut TennCare, this many people will die.' But don't forget the law of unintended consequences. He with the gold makes the rules. As a government-financed system of healthcare financing becomes more well-funded, expect other complicated, yet unintended ethical conflicts.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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