Sunday, December 12, 2010

The coming health care rationing

Unequal access to health care is hardly a new phenomenon in the United States, but the country is moving toward rationing on a scale that is unprecedented here. Wealthy people will always be able to buy most of what they want. But for everyone else, if we stay on the current course, the lines are likely to get longer and longer.

The underlying problem is that doctors are reimbursed at different rates... Depending on the state and on the malady, it is common for Medicaid to reimburse at only 40 percent to 80 percent the rate of Medicare. Private insurance pays more than either.

A result is that physicians often make Medicaid patients wait or refuse to see them altogether. Medicare patients are also beginning to face lines, as doctors increasingly prefer patients with private insurance. ...

Unfortunately, the new health care legislation is likely to speed this process. Under the new law, tens of millions of additional Americans will receive coverage, through Medicaid or private insurance. The new recipients of private insurance will gain the most, but people previously covered through Medicaid will lose.

Ideally, higher demand for medical care would prompt increases in supply, which in turn would lower prices and expand access. But the health care sector does not always work this way.

Doctors are highly regulated and in that manner restricted in supply. ...

We could go further by giving greater scope to nurse practitioners, admitting more immigrant doctors, reforming malpractice law and allowing cheap, retail “Wal-Mart style” medical care, all to increase access and affordability. Yet these changes do not seem to be in the offing, so access is likely to decline.

The health care bill will further privilege private insurance coverage by offering many individuals new subsidies for its purchase. That will create incentives for employers to game the system, dropping or discouraging coverage and sending their workers to buy health insurance on the more expensive federally subsidized exchanges. That will strain the federal health care budget.
--Tyler Cowen, NYT, on how rationing happens when prices aren't allowed to clear the market

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