On Health-Care Rationing

Including Death Panels

As a fellow who is a student of economics, one  of my pet peeves is the confusion that often arises when economic concepts are misused out of context to justify political ends.  In the discussion and debate leading up to the passage of Obama-care, it was famously noted by Sarah Palin that “death panels” are a feature of that plan.  In short, the death panels would make “ethical decisions” based not on what was ethical with respect to individuals, but with respect to what was ethical in choosing on behalf of society at large, i.e, the government. The supporters of the Obama-care program maintained that “there were already death panels” imposed by insurers, and that in any event, rationing would always take place as a matter of economics.  In this last point, they were correct in the strictest terms, but they were wrong to compare government actions to the actions of individuals and private businesses in the free market.  This is one example of the abuse of economics by politicians, so let us examine it more closely.

In economics, everything is rationed, because it is assumed that there is a basic unlimited demand for all goods and services.  Since there exists no infinite supply of anything, it is necessarily true that all things are rationed in some fashion.  Gasoline is rationed.  It’s happening right this moment.  Food is rationed.  Housing is rationed.  There is no good or service that isn’t rationed, and the primary instrument for determining the allocation of the limited supply in a free market is money.  The smaller the supply of a thing, relative to the quantity demanded by the market, the greater will be the price.  This is the manner in which everything is rationed:  There is a only so much money, and he who possesses enough of it can tap into the limited supply.  This form of rationing is natural, or free market-based, meaning that this happens organically with or without formal rules, and always has, even before the notion of money as a medium of exchange had occurred to primitive cultures and barter systems still dominated commerce and trade.  Strictly speaking, in economic terms, it is true to say that all things are rationed somehow. This is how we reconcile the basic premise underlying modern economics as the study of an unlimited wishes in pursuit of finite supplies.

The question then arises whether natural allocation(or rationing) is “fair.”  Since fairness is a wholly subjective term, it cannot be answered in the realm of economics, but instead becomes a matter of politics.  This is where the trouble begins, because what politicians most frequently do is to apply their own subjective notions of what is fair in place of the much more objective standard of a natural market.   They concoct these notions to satisfy political constituencies, but the twist and turn in order to define the question as a matter of economics.  Inevitably, they do so by reducing the question to the subjective grounds of a particular individual, or group, and ask whether it is “fair” that so-and-so cannot afford such-and-such.  In this sense, the economics they are discussing are applicable to small groups, but not to the whole market.

What government schemers for socialized medicine have done is to insert government coercion into the place of the natural market allocation.  If you say to me, “It is sad that Johnny cannot get his surgery because he has not the money,” if my answer is based on the free market, I must say “it may be sad, but it is fair because he could have obtained the money by previous work, insurance, charity, or even credit.”  The fact that Johnny hadn’t the money for the surgery is not a justification to disclaim the objective fairness of the free market system, but sadly, that is how it is used by politicians.  Enter the statist, and he will proclaim that he can reintroduce “human fairness” or “social justice” or some such enfeebling concept by virtue of government coercion.  If Johnny hasn’t the money, the politician will take it from somebody else at gunpoint to pay for Johnny’s surgery, provided Johnny meets any requirements they may have enacted.

Perhaps the surgery Johnny needs is a kidney transplant, but rather than expend the resources, since Johnny is also a wheelchair-bound, elderly man, the government may say “You’re not worth saving.”  Worse, if the government denies Johnny the ability to obtain his own health-care by his own means outside the government system, what the government is doing is to pronounce a sentence of death on Johnny.  If Johnny happens to be a recent college graduate in his twenties, in otherwise good health, the government will view it as a good investment in many cases since he will pay much more in taxes over his expected lifetime than the surgery may cost.  Notice that the decision criteria is entirely social, and based on the economics of government expenditures, which actually means: Political considerations.  It is also the reason that every system of socialized medicine ultimately leads to many more people dying prematurely as they are denied treatments of which they would have availed themselves in an open market. If this were not true, we would not see so many from around the socialized world flocking here to pay cash for treatments they cannot obtain by any means in their home countries.

You might contend, as the leftists do, that this is done by private insurers routinely.  There is some truth to this, but it is also substantially dishonest.  As a participant in a free market system, you are free to choose an insurer and pay such premiums as you are willing and able, to cover everything to some gargantuan limit, or you may choose a policy less expensive, but also less thorough.  In this manner, the rationing occurs because you have enough money, or you don’t, but that is up to your own resourcefulness and diligence and all the factors that frequently make the difference between relative poverty and relative affluence.  You might decide at this point to take me back to the argument of the “unfairness of money,” but as I’ve already explained, in a free market, fairness is measured differently than in your subjective wishes.

If it was my choice as to which system I would endure, I would prefer to take my chances in the free market system, because I believe I can manage to afford the coverage I might need, but in a government system, no matter how diligent and efficacious had been my own labors, I might be told “sorry, you’re outside the limits established for this procedure,” and be denied treatment irrespective of my ability to pay.  I would always choose this latter option, because it affords me the greater measure of freedom, and if it winds up that I was unable to provide the coverage I actually wound up needing, at least I will have nobody else to blame. That’s where the politicians come in, again.

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  • http://alwaysonwatch2.blogspot.com/ Always On Watch

    Thorny topic!

    Let me personalize this….

    One of my students, a fourteen-year-old boy, will be needing a kidney transplant before he reaches age 30. In fact, he may need the transplant at any time; it is a given that he will, at some point, go into total renal failure.

    The parents' family health-insurance policy doesn't cover dialysis or transplant (or else, the copays and/or deductibles are out of range of the family's means — I can't recall which). The parents will, of course, sell everything they have and throw away their other three children's college education to save one child's life. There is no way that these parents are going to let one child die if they possibly can help it.

    Now, if this child with the failing kidneys can manage to reach adulthood, Medicaid will likely intervene — if the powers that be deem that this person's life is worth saving.

    Now, here's the conundrum…..Financially speaking, is this child's life worth saving? At this point in time, he shows no academic promise; furthermore, he has such a severe speech impediment and is so lazy that it seems highly unlikely that he'll ever be much of an asset to the state with regard to tax revenue. It also remains to be seen if he can ever become a "productive member of society."

    In the long run, it won't matter a whit to the parents if their child is denied a kidney because of private health insurance's limitations or because of a governmental bureaucracy's decision. They still have a dead child.

    This family has already been through the denial of treatment of one of their other children when that particular child contracted spinal meningitis and maxxed out the parameters of the health insurance policy. However, that child did live — albeit with lifelong disabilities that clearly result in reduced possibilities for earning capacity.

    There is no fair solution, so maybe fairness shouldn't even be a consideration.

  • eyetooth tom

    "There is only so much money,…" and I've thought about that for a long while…and if each time it changes hands the government gets 15%…how many transactions before government has all?
    "There is no good or service that isn't rationed…" There was a joke circulating along the Gulf Coast during the oil spill about the spewing well…"Put a wedding band on it…it'll stop putting out."
    You better do life with tongue in cheek and don't bite down…if you still got teeth. And I've experienced loss of child at child's age 19, been lots of years now, but still yesterday. No sympathy need…just realize gonna happen to many, many more before it's all over. Stiff upper lip required.

  • CPB

    Appreciate the great article Mark. Just wish more people would get this education. The MSM sure isn't doing their part.

    Part of the free choice involved in the type (and price) of insurance we purchase is that we, as individuals, are free to decide priorities. If it is more important, for example, for my family to have super-duper-expensive-cover-everything insurance than for us to have a second car, we are free to do that. If the government is involved in making that choice for me, it is THEIR priorities that "win", not mine.

    Also – the effect of charity in this issue is sometimes overlooked. I choose to be affiliated with a church (or school or other organization) who sometimes uses their donated funds to help members that they choose. When the government is supposedly taking care of people, churches and other charitable organizations tend to back off of those kind of responsibilities. It's kind of chicken and egg – if people are being taxed very heavily in order to support government social programs, they probably aren't giving as much as they otherwise could to charity and therefore those groups don't have the funds to dole out. Vicious circle. Bottom line – get the government out of our lives!!

  • eyetooth tom

    Why should we be surprised at rationing? John Holdren as science and tech czar! Ruth Bader Ginsburg, court czar …"Frankly I had thought that at the time [Roe v. Wade] was decided, there was concern about population growth and particularly growth in populations that we don’t want to have too many of.”
    You and me? Easy to find quote on google.

  • http://rebintexas.wordpress.com RebinTexas

    As someone who has worked in health care the great majority of my career, I agree with you totally Mark – especially your summary. We cannot allow the government to take over more and more of OUR decisions – or we will lose it all in the end.

    Thanks
    Reb