RH - week 1

Question 1

rationing health care

Answer 1

somehow limiting the amount of care provided and consumed often in order to control / optimize healthcare expenditures

Question 2

when does rationing takes place?

Answer 2

• “Rationing takes place when an individual is deprived of care which is of benefit (in terms of improving health status, or the length and quality of life) and which is desired by the patient.”

Question 3

2 ways of rationing

Answer 3

1. restricting the health care professional
2. restricting the patient

Question 4

equity

Answer 4

relates to notions of fair distributions

Question 5

efficiency

Answer 5

relates to maximizing of welfare

Question 6

core assumptions

Answer 6

desires/needs are infinite, yet resources are limited

Question 7

scarcity

Answer 7

never enough resources to satisfy all human wants and needs

Question 8

health care is different than optimality of perfect marktet

Answer 8

• Markets do not result in optimal (efficient) outcomes in health care due to specific characteristics (See Arrow, 1963)
  1. Uncertainty and consequences of insurance
  2. Information asymmetry between consumers and suppliers
  3. Existence of externalities
• Moreover, strong concerns for equity in relation to health can make efficient outcomes unacceptable (i.e. inequitable)

Question 9

what is rationing health care?

Answer 9

• Health care costs and demands increasing – pressure on budgets
• How to allocate scarce health care resources optimally?
• That means choose what to do and hence what not to do (rationing)
• Scarcity in health care denied: ‘The first lesson of economics is scarcity…’ … “… the first lesson of politics is to disregard the first lesson of economics…”
• All systems deal with scarcity, balancing goals of efficiency, equity, …
• Setting priorities/rationing, implicitly or explicitly, through coverage, budgets, (co)payments, incentives, waiting times, formal vs informal care, quality, … => the core of this course!

Question 10

why is health care rationing such an issue?

Answer 10

• Health (care) is a special good
• Central to human flourishing, capabilities and utility
• Strong feelings of solidarity (esp. in Europe) regarding health
• In many countries much health care is available ‘free’
• Setting limits (esp. by others) to access/coverage seen as indefensible
• ‘If it works, we should reimburse it’…
• Rationing shows a tension around fundamental aim of many systems

Question 11

Why ration? Value forgone!

Answer 11

• Saving money rather than lives? No, saving other uses of resources
• Opportunity costs of spending more on health
• Outside health care: less education, safety, infrastructure, culture…
• Average Dutch family ~25% of income spent on health, costs 1 year police < costs 1 month HC, primary education < 2 months HC
• Inside health care: displacement – price of health is health foregone – more for some patients means less for others – efficiency & equity
• We ration because of opportunity costs; the same resources can produce more health/wellbeing elsewhere!!!!!

Question 12

price rationing

Answer 12

no government interference at all

Question 13

explicit rationing

Answer 13

not only setting the rules. Explicitly telling what is being provided. You make the choices; however you can be attacked for every choice you make

• Explicit rationing sets limits to resources available in combination with choices on how the scarce resources should be allocated
• To explicitly limit the beneficial health care an individual desires by any means
• Making explicitly clear who gets what (and when, how and from whom)

“Here society enacts precise and transparent rules that determine the circumstances under which certain persons can claim certain medical services. All services that are claimed must be financed so that, at least in the short run, total healthcare expenditure and hence tax rates cannot be fixed a priori.” (i.e. given rules, budget follows)
* Example: Limiting basic benefits package based on clear criteria

It doesn’t make the rules

Question 14

implicit rationing

Answer 14

you set the budget. The healthcare system will make the right choices. You leave the tough choices to a lower level to make healthcare choices. You leave unspecified what to do with the money

• Implicit rationing sets limits to resources (i.e. sets the level of scarcity) but does not indicate (in detail) how the scarce resources should be allocated
• To implicitly limit the beneficial health care an individual desires by any means
• In some ways it resembles cost-containment – we limit the resources available without worrying about the difficult choices that follow
• These tough choices left to the ‘system’ – often lower-level decision makers (“bedside rationing”) – POTENTIAL DIFFERENCES (variation) and implies that implicit rationing high in the system might lead to explicit rationing on lower levels
• “Besides a global budget for the healthcare system as a whole, individual budgets for healthcare providers like hospitals are a typical instrument in this type of rationing.”
• Also: limiting number of beds, doctors, hospitals, etc… AND: (unintended) consequences of system (cultural barriers, undocumented people, lack of knowledge about certain groups, …)

The only thing to worry about is the total amount of money that can be spend. It is not going to take away the difficult choices.
Because the hospitals can choose where they are going to spend it, some better treatments are not offered to patients.

Question 15

hard rationing

Answer 15

this pill is not in the bbp, no one can have it (example donor organs, but if you bring your own organ you can get higher on the list)

Question 16

soft rationing

Answer 16

this pill is not in the bbp, but if you want to pay, you can have it

Question 17

primary rationing

Answer 17

• involves limiting (collectively financed) health care
• it involves determining (directly or indirectly) the budget available for health care

Question 18

secondary rationing

Answer 18

• Once the budget has been set, there is scarcity in the system
• (Note – ideally other way around)
• Then, rationing procedures need to be in place (e.g. prioritization on waiting lists or choices regarding which interventions to fund)
• Also allocating resources associated with ‘natural’ scarcity is labelled secondary rationing: e.g. transplantable organs
• This latter scarcity is not (or less) directly based on policy choices

Question 19

supply and demand and implicit and explicit rationing

Answer 19

• Limiting the final use of health care can be done through restricting supply of care and/or restricting the demand of care
• Implicit rationing often associated with Supply side rationing (leaving demand in a direct sense unaffected)
• Important consequence: waiting lists
• Explicit rationing often associated with Demand side rationing (leaving supply in a direct sense unaffected)
• Important consequences: limited entitlements / coverage and own payments

Question 20

implicit or explicit?

Answer 20

Both have pros and cons, e.g.:
Implicit: no rules so potential harm, potential differences between hospitals / professionals, difficult choices left to lower levels.
Explicit: resistance in society, difficulty of specifying general rules, manageable to judge all elements of a system?

Question 21

hard and soft rationing

Answer 21

• Final interesting point is the difference between ‘hard’ and ‘soft’ rationing
• If the public system does not offer a specific treatment (at all, timely, at the right place or with the right quality) should we allow the market (e.g. private suppliers) to offer those treatments?
• No? Hard rationing: If you cannot have it publicly, you cannot have it at all (e.g. organs)
• Yes? Soft rationing: If you cannot have it publicly, you may be able to buy it elsewhere (e.g. quicker care, dental care)

Question 22

health care goals

Answer 22

1. Quality of care
2. Access: financial and physical
3. Efficiency
4. Affordability
   Sometimes abbreviated as twin goal: efficiency and equity

Question 23

rationing and health care goals

Answer 23

• Implicit rationing (without rules or proof the ‘system’ makes choices in line with this goals) helps to increase affordability
• Explicit rationing can help to make choices in line with health system goals while attempting to preserve affordability
• Important in rationing is to avoid damage (to efficiency or equity) as much as possible (and monitor the effects of any policy!)
• Many cost-containment strategies do not consider damage…

Question 24

Voluntary insurance

Answer 24

• Problems with equity: Low incomes and high risks have difficulties buying insurance
• Premiums often risk-related or community-rated
• Adverse selection & cream skimming
• Given strong support for equity in health care and ensuring universal access to health care European countries normally (partly) rely on mandatory insurance (financed through premiums or taxes)

Question 25

Mandatory insurance:

Answer 25

• The reimbursement model is vulnerable to failures of cost containment (consumer & producer moral hazard);
• The integrated model is vulnerable to failures of microeconomic efficiency (queues, quality gaps);
• The contract model seems to have the potential for combining macro-economic efficiency with micro-economic efficiency.

Question 26

Supply side rationing

Answer 26

• (Primarily) restricts the supply of care
• Important examples: budget constraints, limiting numbers of doctors (trained or hired), limiting number of hospital beds, etc.
• Supply-side rationing associated with (mandatory) integrated systems like NHS
• By leaving demand (in direct sense) unaffected, a mismatch between demand and supply typically occurs
• Waiting lists as common consequence (with health damage)

Question 27

Demand side rationing

Answer 27

• (Primarily) restricts the demand of care
• Important examples: limiting the types of health care interventions covered by health insurance (e.g. limiting basic benefits package) or some form of own payments
• Demand-side rationing associated with (mandatory) contract and reimbursement systems
• By leaving supply (in direct sense) unaffected, a mismatch between demand and supply could occur (with incentives for SID, etc.)
• Own choices may lead to health damage

Question 28

why is rationing unavoidable?

Answer 28

• rationing is inevitable due to scarcity
• scarcity - never enough resources to satisfy all human wants and needs
• economics are concerned with the efficient allocation of scarce resources over alternative uses and the equity implications

Question 29

conclusion rationing - economists

Answer 29

• For economists the fact that we need to ration is unsurprising
• We always need to ration in all sectors of public and private life
• There are never enough resources to fulfil all our wishes and needs
• Normally, preferences, prices and budget restrictions determine outcomes
• Individuals maximize utility and make own choices about own consumption and take income and prices as given
• Utility is gained by buying and consuming goods at a price at or below what they are willing to pay from profit-maximizing firms without market power selling at a price they are willing to accept (equal to marginal costs)

Question 30

what implies “no matter the costs”?

Answer 30

But in a resource-constraint system, ‘costs’ means ‘sacrifice’ (in this case the value of benefits foregone by the person who did not get treated).

Thus, ‘no matter what the costs’ means ‘no matter what sacrifice borne by others’. This does not sound to me like a very ethical position to be in.”

Question 31

Health care as a right?

Answer 31

• Many citizens consider health care to be a right (Van Exel et al., SSM )
• Recent Q methodology study elicited shared views in the general public (n=294) across ten European countries on appropriate principles for prioritizing health care.
• Five distinct viewpoints were identified, (I) “Egalitarianism, entitlement and equality of access”; (II) “Severity and the magnitude of health gains”; (III) “Fair innings, young people and maximizing health benefits”; (IV) “The intrinsic value of life and healthy living”; (V) “Quality of life is more important than simply staying alive”.
• The plurality shows that while many people will not like rationing, they also do not agree on which basis to do so (if at all permitted)
• So, rationing inescapable and for many unacceptable at the same time…
• Who wants to be a health policy maker?

Question 32

weale discribes 3 things a health care system must offer

Answer 32

(i) comprehensive,
(ii) high quality medical care,
(iii) to all citizens.

Question 33

concluding 1.1

Answer 33

• Scarcity implies choices, rationing is inevitable.
• Never enough to fulfil all human needs and wants - only the rationing mechanisms differ!
• To limit the beneficial health care an individual desires by any means – price or non-price, direct or indirect, explicit or implicit
• Very difficult task – doing it ‘right’ very important!

Question 34

definitions rationing central in this course (IMPORTANT)

Answer 34

To limit the beneficial health care an individual desires by any means – price or non-price, direct or indirect, explicit or implicit (Breyer, 2013)

Question 35

Rationing

Answer 35

• Has a rationale (limiting expenditures, optimizing allocation of resources)
• Involves a policy action (e.g. limiting supply through budget)
• Has direct and indirect (intended and unintended) consequences
• E.g. waiting times, health losses, demand for ‘private care’, less referrals, socio-economic differences in care, …
• Can take place in different ways and at different levels

Question 36

Consequences of rationing

Answer 36

• Patient: Health / wellbeing => continued problems, deterioration (reversible or irreversible), death, …
• Social environment: ‘family effect’, informal caregiving, increased costs/reduced income, …
• Health system: dissatisfaction, though choices in system, pressure and burden (waiting lists), …
• Society: inequities, higher costs of ultimate medical treatments, more absenteeism / presenteeism, justice/safety (mental health), less financial / health protection, …