Rationing Health Care: It’s a Matter of the Health Care System’s Structure

Abstract:     
As policy experts have long recognized, rationing of health care is inevitable. Not even the wealthiest society can provide every medical treatment that might provide some benefit to some patients. Nor should a society try to provide any and all treatments that would provide some benefit. Countries face competing demands for their resources, and dollars spent on marginally-beneficial health care might yield greater benefits when spent on education, economic development or housing.
Although the need for rationing may be clear, it is far less obvious how a society should allocate its limited health care dollars. Should priority go to the sickest patients, or should it go to the patients who would derive the most benefit from treatment? To what extent should we rely on the free market to allocate health care (as we do, say, with automobiles), and to what extent should the government guarantee some level of access for people who are too poor to afford necessary care?

In answering these questions, writers have advocated two important models for rationing – a centralized model in which a commission establishes rationing guidelines for widespread use, and a decentralized model in which rationing decisions are made by health care providers on a case-by-case basis. This article takes the view that effective rationing policy will depend on a combination of centrally-determined policy and decentralized decision making. Rationing can be best implemented with a centrally-established structure that delegates rationing decisions to physicians but channels those decisions in a cost-effective manner (e.g., with salary or capitation-based compensation and caps on hospital beds and other capital resources).

Number of Pages in PDF File: 14

Keywords: health care reform, health care rationing

JEL Classification: I11, I18

Accepted Paper Series