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“Rationing”: An Interview with David Orentlicher

David Orentlicher is the Samuel R. Rosen Professor of Law and Co-director of the William S. and Christine S. Hall Center for Law and Health at Indiana University School of Law.

Lester Feder: Let me start by asking you what do you think has not been adequately discussed about the health reform law?

David Orentlicher: Some aspects have not gotten as much emphasis as I’d like. There are two big problems with our health care system: inadequate access and unaffordable costs. The cost part was really left much more to another day. While there was much more done about the access problem and the projections are that more than 30 million more people will be covered, we’re still going to have more than 20 million uninsured after the legislation is fully implemented.

As long as we try to maintain the framework of our current system, we’re never going to solve either problem. We have a defective system. We really need to fix the problems with the current system rather than put more people into a defective system.

Lester Feder: Let’s go back to the cost piece. You recently wrote about rationing, and that’s obviously part of the difficulty of taking steps towards real cost control because the politics and the rhetoric around rationing make it very difficult to have a responsible conversation. What would you like to see happen? And do you see a way to turn that into politics that could get that into place?

David Orentlicher: I think the “tragic choices” argument, which Calabresi and Bobbitt made in their book, is very important. As a society—and we’re not unique in this way—it’s very hard for us to make rationing choices, life and death decisions, in an open way. When you have to disclose when and how you’re favoring some people at the expense of others, the public doesn’t like that. Who wants to accept the fact that we’re not meeting the needs of everyone? We’re a rich society and we like to believe that we take care of everybody in need. That’s why I think that although proposals about open transparent processes make sense in some ways, they’re doomed to failure.

It’s not hard to find examples. Going back to the late ‘60s, when dialysis was rationed: People tried to do it through committee deliberations, but once the public understood the kind of decisions the committees were making, it fell apart and Congress authorized funding for anyone who needs dialysis. And when Oregon tried to contain Medicaid spending, they did it in exactly the way the proceduralists say you should do it: they went out and had town hall meetings, invited public input, and created a ranking based on benefits and costs. It worked for a while, but it really only worked because they increased funding. They really didn’t make the difficult choices. Once the economy turned in Oregon, the plan didn’t keep up with its promises and the percentage of uninsured was back where it started within about a decade.

So my view is, and that’s the argument I make in this recent piece, how do you restructure the way we deliver health care—and it’s really how we finance health care—so that doctors implicitly act in a more cost-effective way? Doctors sort of understand what their cost constraints are and they incorporate that in their practices. They don’t have to sit down with a calculator and say, “How much money do I have to care for my patients?” They know what the reimbursement system allows and doesn’t allow and they adapt to their financial environment.

There are two problems with the current system: one is the rightly criticized fee-for-service system, where if you get paid more for bypass surgeries, you’re going to do more bypass surgeries. The second is the tremendous capacity that we have. You need an MRI, you can get it tomorrow, maybe this afternoon. We have plenty of hospital beds and plenty of operating suites.  Supply creates its own demand, as it’s often said, in medicine.

An important study of intensive care unit use is really illustrative: Back in the ‘80s, there was a nursing shortage so they had to close intensive care beds. It varied from day to day, but there was as much as a 50 percent reduction in beds in the hospital that was studied. So of course fewer patients got intensive care because they didn’t have room in the unit. We learned a couple of important things: One, the patients did not suffer from the lack of intensive care. Two, the doctors were able to make prudent allocation decisions without formal guidance.  The hospitals didn’t give doctors rationing guidelines. They just relied on the doctors to make the triage decisions.

This is exactly what I think we need to do: give doctors a different financial structure by reducing capacity and changing the way they’re reimbursed, and they will adjust to a more cost-effective level of care. It won’t be perfect, mistakes will be made. But we have to always remember we’re talking about the least-harmful approach,  Also, we don’t get into the tragic choices problem because the doctors will allocate resources in some implicit fashion.

Lester Feder: Do you have any hope that the pilot programs in payment reform might produce a system that could be put in place?

David Orentlicher: That’s the hope. The hard part is how well will they be funded—it’s not like we haven’t had pilot programs in the past, and we already have models out there. The bigger problem seems to be the willingness to make the major changes we need in the system we have. I think change will happen not because we’re doing the pilots, but because we’ll be forced to change as costs continue to become unaffordable. Necessity is the mother of invention.

Lester Feder: In some ways, does reducing the number of uninsured through this legislation but not getting all the way to universal coverage make it harder to address the needs of those uninsured populations down the line?

David Orentlicher: That’s a good point. The fewer the people that are left behind, where is their political voice? As the most marginalized of the marginalized, they don’t wield a lot of influence. Right now we’re at 85 percent coverage, and if you get up to 94 or 95 percent, and the costs get even higher, it certainly does make it harder to find funding for the remaining uninsured. On the other hand, if costs become a problem for everybody, maybe then we can get the real overhaul that we need.

I’m a big believer in a single system. The only way the powerless in society are looked after is when their fates are tied to everybody else’s. That’s why Social Security and Medicare work for the poor—they’re programs for everybody.

Lester Feder: Do you think the legislation is a framework that can be strengthened to provide the kind of overhaul you’re describing? Or do you think the scope of change needed is so large that you’d have to redo the whole thing?

David Orentlicher: I think what we did here is that we maintained the current system, and we just provided more money to get more people into the system. Medicaid should be an entirely federal program—these federal/state partnerships just don’t work. Food stamps are an important example of that. Until we federalized eligibility for food stamps, it wasn’t a universal program.

Lester Feder: So take the food stamp analogy: you passed something, there were problems with it, it became federalized and it worked better. Do you think the same could follow from this health reform law, or do you think the tradeoffs that are inherent in making it better are so difficult that it can’t happen that way?

David Orentlicher: If you really want universal coverage, I think you have to have a single system. I think food stamps illustrate that too. Eligibility is nationalized, and that’s good. But what you see is that only two-thirds of people who are eligible actually enroll because any time you have a program that’s means tested, there’s a stigma, there’s the hurdle of producing the paperwork. Nobody has a problem enrolling in Medicare, but lots of people have difficulty enrolling in Medicaid or food stamps. If you want universal coverage, you have to have a single system.

That doesn’t mean it has to be British, or even Medicare-for-all like in Canada. You could do the voucher-for-all, a workable version of the McCain plan.

How you fund the system also really matters. There’s a broad sentiment in America (and I’m not suggesting it’s universally shared), that you have to be “deserving” if you’re going to get a government benefit. Either you’re an innocent victim like a child, you’re elderly, or you’ve paid into the system. That’s Medicare and Social Security. I understand the politics—since Obama said he would not raise taxes on those who earn less than $250,000, he couldn’t propose a payroll tax. But to sustain a public program, you have to have people pay in so that it creates the perception that people have earned their benefits.