Cost effectiveness is not the problem — government control of health care is.
December 15, 2014
In today's "The Upshot" in The New York Times, economist Aaron E. Carroll bemoans the fact that health policymakers, regulators, and spokespeople are reluctant, and sometimes even forbidden, to discuss and make use of information regarding the cost effectiveness of particular treatments. The fear is that they will invoke the spectres of rationing and "death panels," or more generally, medical decisions made on the basis of money alone and not the needs or interests of patients and their loved ones.
I agree with Carroll that cost effectiveness is an essential and necessary topic for discussion; after all, health care has to be paid for by someone, who is responsible for making sure that scarce resources are used in the most beneficial way possible. And I think most people understand this principle as well, even if they don't want to acknowledge it at times of tragedy and impending loss.
If people are afraid of calculations of cost effectiveness, it's because they don't want some distant, faceless, bureaucracy using cold data to make decisions that affect such an intensely personal aspect of their lives. But the problem isn't the numbers themselves—it's who is using them to make the critical decisions.
If health care decisions had not been centralized under the Affordable Care Act (or a similar plan), and health care decisions were left in the hands of doctors, patients, and insurance companies unbound by government mandates regarding coverage, these parties together could use cost effectiveness numbers in a way that worked with each patients based on his or her interests, coverage, and resources. Each patient, together with his or her doctor and loved ones, could balance these various factors in a way that furthered his or her overall interests within available resources and insurance coverage. They could use cost effectiveness information as one input into a specific decision in a way that furthers that patient's interests.
I wrote about this aspect of private health care in "Markets and Dignity: The Essential Link (With an Application to Health Care)," my chapter in my edited volume Accepting the Invisible Hand: Market-Based Approaches to Social-Economic Problems (Palgrave Macmillan), on pp. 13-14:
The possibility of making private decisions regarding the benefits and costs of various treatment options, whether for minor illness or chronic disease, puts the choice in the patient’s hands (as well as with her doctor and whomever else the patient wants to join the process, such as family or friends). In consultation with her doctor, the patient can assess the value of various treatments, considering the merits compared not only to their costs, and the benefits and costs of alternative options, but also other uses towards which those resources can be devoted, which are all subjective valuations. Perhaps she will choose not to undergo the premium treatment, even if she could afford it, because she wants to leave the money for her children, or take a cruise in the final months of her life; or perhaps she will sell her house to pay for a little more time on life support and with her grandchildren. In a market setting, this choice is hers, along with its benefits, costs, and other consequences.
I am not denying that the patient may not be able to afford the premium treatment because she does not have the resources for it; this is tragic, to be sure, but unavoidable in a world of scarcity. If she is not making these decisions, someone else is; an insurance company or HMO may also refuse her the premium treatment based on costs, and a government-run health plan may do the same. But in these cases, the decision would be made for her, according to someone else’s calculation of whether the treatment was “worthwhile” in terms of costs and benefits for the hospital, insurance company, or government health program, all of whom have scarce resources that must be allocated somehow. In a market context, the decision would be hers, even if it seemed she had no decision at all because she does not possess the resources, either due to bad luck or bad planning, or other choices made through her life.
All is not lost, necessarily; just because the premium treatment is out of reach does not mean there are not lesser, more inexpensive treatments that will also be of benefit. In a market system, this is the patient’s choice, just as she can choose what size house to buy, what model car to lease, what size TV to own. Every person prioritizes the various interests on her life; some forego the large house to take frequent vacations, some do the opposite. Some may opt for the cheaper treatment option to retain more resources for another goal in life, or to give more to others rather than spend it on premium care for herself. And certainly, past choices will constrain or expand her present options; one who spends her income on lavish toys throughout life should not expect sympathy when she cannot afford top-line treatment at the end of it. But these are her choices, while in any other system, this decision may be made for her, according to calculations based on the imputed value of her life and her well-being compared to other persons. Not every person can afford to have the premium treatment, but this fact is due to scarcity of resources, not the way in which they are allocated or distributed, and it will be true under a state-controlled system as well as a market system. A state system focused on efficiency cannot allow everyone to have the premium treatment either, and the choice of who (if anybody) undergoes it will be truly arbitrary, with no role for choice on the part of the patient or her family. Choices that so closely affect a person’s life should be made by that person alone (or other persons to whom she delegates—or sells—that authority); they should not be made by another party that either presumes to know her “true interests” or serves the collective weal in the name of efficiency.