Rationing Healthcare

During medical school, we were often challenged to write about our thoughts pertaining to the current state of healthcare or ethical dilemmas. These were great thought-provoking exercises because they forced us, future doctors, to think about the problems plaguing the healthcare system. This kind of preparation would hopefully, one day, give us the tools we need to fix what is wrong with the system once we become full-fledged doctors.

I often wrote these papers late at night around 3am as quickly as I could. Here is one I stumbled upon in which we had to write about rationing healthcare. So… enjoy my 3am, cursory thoughts on the ideas surrounding the rationing of health care…

Rationing Healthcare

                As the cost of healthcare rises in the United States, it has become increasingly obvious that we cannot afford all medical care that is beneficial to every patient.  Due to a limited number of resources, healthcare has always been rationed.  It has been provided to those who can afford it themselves or those who can find funding through various government programs.  Fast approaching changes to the laws governing healthcare will provide universal healthcare to all citizens of the United States.  While this will give everyone access to healthcare, it will not solve the underlying problem of limited resources.  If funding is no longer the deciding factor, we will have to ration healthcare according to some other principle.  It has been suggested that healthcare should be rationed based on level of sickness (1).  While this is a realistic and seemingly fair way to ration healthcare, I believe universal healthcare will do very little to nullify rationing based on funding.  We recently had a patient who had repeated admissions to the hospital every 1.5-2 weeks for symptomatic hypercalcemia.  She did not have medical insurance, and she did not qualify for Medicaid or Medicare; therefore, we could not perform a parathyroidectomy on her to relieve her hypercalcemia.  Instead, we treated her pharmacologically to reduce her calcium levels to within the reference range.  As soon as her calcium was stable at a normal level, we discharged her.  I would bet that she returns with the same symptoms in a few weeks.  She knew it too.  This was her 4th admission for the same problem. 

                In a perfect world, the patient would have healthcare insurance and this would never be a problem.  In an efficient world, administration would recognize that performing this women’s surgery would be cheaper than repeated admissions, and she would have surgery.  In a highly regulated healthcare market world, the system would spend about 4-5x as much money as it should on this patient.  This is the world we live in.  This patient’s medical history represents a gross misallocation of resources.  But notice that her healthcare was rationed on the basis of sickness and funding.  Had her life been threatened by her sickness then she would have received considerably more resources, or if she had more funding, she would have received considerably more resources.  This patient fell into a grey area of mild sickness and no funding. 

Unfortunately, this example highlights why rationing by level of sickness would be nearly impossible.  Everyone would agree that in the short term, this symptomatic hypercalcemia is a mild sickness.  However, this was a middle aged woman with the majority of her life ahead of her.  A lifetime of symptomatic hypercalcemia will greatly decrease her quality of life, and she will spend a lot of time in the hospital.  This would be horribly taxing on anyone, and anyone standing in her shoes wouldn’t dare call it a mild sickness.  Likewise, psychological problems have been shown to be unfairly discriminated against when rationing healthcare.  They are just as real as diabetes or coronary artery disease, but psych problems sometimes receive a lower priority in rationing (2).  The Americans with Disabilities Act of 1990 and The Rehabilitation Act of 1973 have been put in place to prevent unfair discrimination such as this and in doing so society has agreed to treat everyone “fairly.”  This system has been hit hard in the face by simple economics.  We would love to have a scenario in which there is ample money available and ample treatment of patients.  However, on a simple production possibility frontier curve you would find that a point of production containing both high availability of resources and number of patients treated would exist beyond the PPF curve.  Society has agreed to treat as many patients as possible at the expense of our resources.  This is a great thing and countless lives have been saved.  However, on most PPF’s as you increase the production of one variable it is at an increasing marginal rate of transformation.  This could theoretically represent a huge opportunity cost to future generations.  Healthcare may be the only billion dollar industry that is mainly run by professionals with no financial background and thus opportunity cost, one of the most important concepts in economics, is often ignored. 

One creative solution to inject more resources into the system is to mandate universal healthcare insurance by implementing a healthcare tax on citizens.  The basic principle of insurance of course is to spread the risk out over a large population including both high risk and low risk individuals.  The low risk individuals’ insurance premium covers the cost of the high risk individuals.  Because insurance is the transfer of a risk to an entity for a fee, an insurance mandate would place too much risk on many entities.  To mitigate this risk liability, policies would have to be limited in what resources are provided for universal government coverage.  At this point we may as well no longer call it “insurance.”  Also worth mentioning is that the existence of different health care insurance policies will lead to rationing based on implicit funding.  The supply side of healthcare is doing all it can to keep costs down, and the government is forcing regulations to make the demand side do its part of providing appropriate funding for supplies.  The government has made healthcare one of the most regulated markets in the world in attempt to keep prices down in the only market in the world where supply and demand are on a complete disconnect.  There is an infinite demand for healthcare, yet a very limited supply.  I firmly believe that this simple truth alone will constrain any rationing to the availability of funding. 

There is no doubt that the healthcare industry has numerous inefficiencies, free riders, and other sources that syphon off resources.  My belief is that even if one were to release many of these resources back into the system it would not be enough.  While more patients would be treated objectively, people would still view the system as broken subjectively.  There is no price at which people will not pay for their own life, and this creates an infinite demand.  Unless society can create an infinite supply of healthcare, it will have to be happy with the best balance that we can create between rationing resources and providing care just as many molecular processes in nature are wildly inefficient yet good enough.  It is to my dismay that the healthcare system will always be viewed for its flaws rather than the amazing network it is capable of providing care to millions of people.  I suppose it has to be critiqued intensely because at the rate of increase of costs and decrease of funding from the government, rationing by funding will leave many patients without care in the future. 


  1.  Orentlicher, D.  Destructuring disability: rationing of healthcare and unfair discrimination against the sick.  Harvard Civil Rights-Civil Liberties Law Review.  1996. 31: 49-87. 
  2. Evans, R.  Need, Demand, and supply in organ transplantation.  Transplantation Proceedings.  1992. 24: 2152. 

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