[Congressional Record Volume 142, Number 100 (Tuesday, July 9, 1996)]
[Extensions of Remarks]
[Pages E1225-E1226]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                RATIONING LIFE AND DEATH BY INCOME CLASS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, July 9, 1996

  Mr. STARK. Mr. Speaker, once again, Professor Uwe Reinhardt, cuts to 
the heart of the matter with his June 19, 1996, essay in the Journal of 
the American Medical Association entitled ``Economics.''
  His short article is reprinted below. It is blunt. Americans have 
decided to ration health care by income class. The poor will die 
earlier than the rich. The poor will suffer more. Their children will 
be doomed to less healthy lives. That's the truth. We try to hide from 
that truth behind ideologies and high-flown talk of ``market-based'' 
health care systems. We pretend to be a Christian nation, but we 
violate all of Christ's teachings in our health care system, and hide 
our hypocrisy behind economic jargon about efficiency and competition 
and free markets.
  For a conscience-challenging essay, read on:

                               Economics

           (By Uwe E. Reinhardt, Ph.D., Princeton University)

       Breakthroughs in the sciences often take the form of 
     replacing 1 hitherto held hypothesis with another. In the 
     social sciences, that process tends to be controversial, 
     because hypotheses usually can be tested only on crude, 
     nonexperimental data that tend to be compatible with numerous 
     rival hypotheses (theories). More often than not, the 
     individual social scientist's allegiance to this or that 
     theory is dictated by that individual's personal 
     predilections.\1\ A ``breakthrough'' in the social sciences, 
     therefore, may be nothing more than the triumph of 1 ideology 
     over another.
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     Footnotes at end of article.
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       During the past decade or so, economics experienced such a 
     breakthrough. Certain theories favored by large segments of 
     the profession, the ideology they embodied, and the 
     felicitious jargon they inspired came to dominate the thrust 
     of American health care policy. Goaded in good part by the 
     writings, teaching, and punditry of economists, American 
     politicians increasingly treated health care as just another 
     private consumer good--certainly no different from food, 
     clothes, and shelter--and physicians and hospitals as mere 
     purveyors of that good. Hand in hand with that notion came 
     the proposition that a free market can produce and distribute 
     health care more ``efficiently'' than can any other 
     imaginable arrangement. Hand in hand with that proposition, 
     in turn, came the social ethic that the quantity and quality 
     of health care received by individuals can properly vary with 
     their ability to pay for that care.
       It is imperative to hedge this assertion at the outset. 
     First, by no means all American economists subscribe to this 
     distributive ethic for health care. Second, by no means all 
     American economists play politics thus in the guide of 
     science. Many of them scrupulously apply scientific methods 
     to identify the trade-offs that require moral choice on the 
     part of policy-makers without packaging their own moral 
     values into their analyses.
       Scrupulous economists are mindful that the term 
     ``efficiency'' has a quite technical meaning that severely 
     limits its proper use in practical applications.2,3 
     Every freshman in economics, for example, is or ought to be 
     taught that the more efficient of 2 alternative policies is 
     not necessarily more preferred, unless both policies achieve 
     exactly the same outcome. To illustrate, a cost-minimizing 
     (efficient) policy that succeeds in immunizing only, say, 80% 
     of a target population is not necessarily superior to a more 
     wasteful (inefficient) policy that succeeds in immunizing the 
     entire population. Similarly, one cannot meaningfully compare 
     2 nation's health care systems in terms of their relative 
     efficiency, if these 2 nations pursue different standards of 
     equity across socioeconomic classes.
       Srupulous economists know that virtually all benefit-cost 
     analyses performed by economists are highly suspect if the 
     benefits and costs in question do not accrue to the same 
     persons.\4\ The explanation is simple: If we measure benefits 
     and costs in dollars, then a dollar of benefit (or cost) 
     accruing to a poor person represents a quite different 
     intensity of pleasure (or pain) than a dollar of benefit or 
     cost accruing to a rich person. Following a dogma first 
     proposed by the British economist Nicholas Kaldor,\5\ 
     economists have tried to escape this conundrum with the tenet 
     that, if those who benefit from a social policy gain enough 
     to be able to bribe the losers into accepting that policy, 
     then that policy enhances social welfare even if the bribe 
     never is paid. It is a preposterous sleight of hand.\4\ Yet 
     without it, many benefit-cost analyses sold by economists 
     lose their legitimacy.
       Economists ought to protest loudly the canard repeated with 
     such distressing frequency during the health system reform 
     debate of 1993 and 1994 that only a ``market approach'' to 
     health care can avoid ``rationing.'' \6\ Every freshman knows 
     that markets are just 1 of many methods of rationing goods 
     and services. Markets do it by price and ability to pay.\7\
       Finally, properly trained economists know that when person 
     A derives satisfaction from knowing that individual B 
     consumes a particular commodity (which tends to be true for 
     much of health care), then the prices generated in free 
     markets systematically underestimate the social value of such 
     commodities.8,9 That important insight is forgotten by 
     economists who model health care simply as just another 
     private consumption good \10\ and who would blithely and 
     quite illegitimately impute to, say, a physician visit by a 
     baby from a low-income family a social value equal to the 
     maximum price the baby's parents would be willing (and able) 
     to pay for that visit.
       In short, properly trained and scrupulously practicing 
     economists appreciate that their ability to offer normative 
     pronouncement on health policy is much more limited than 
     seems widely supposed among policymakers. Normative economics 
     seeks to prescribe what ``ought'' to be done. Because public 
     health policy almost always redistributes economic privilege 
     among members of society, such prescriptions almost always 
     involve moral judgments best left to then political arena.
       Economists are at their professional best when they offer 
     purely positive, value-free analysis--for example, when they 
     estimate empirically the responses of physicians, in terms of 
     patients seen or hours worked, to ceilings on their fees or 
     to increases in their malpractice premiums. Economists can 
     also produce useful positive analyses by using their 
     empirical estimates to simulate likely responses to proposed 
     policies--for example, the imposition of a mandate on 
     employers to provide their employees with health 
     insurance.\11\ Alas, even here ideology may creep in. During 
     the health system reform debate of 1993 and 1994, for 
     example, the opponents of such a mandate had no trouble 
     finding respected economists who imputed to that mandate 
     large losses in employment. These economists assumed that, 
     over time, the cost of the mandate would be passed to 
     employees through lower take-home pay, and that the supply of 
     labor is highly sensitive to changes in take-home pay. On the 
     other hand, policymakers who favored the employer mandate had 
     no trouble finding equally respectable economists who assumed 
     the supply of labor to be rather insensitive to take-home 
     pay, in which case the mandate would lead to only a modest 
     reduction in employment.\12\
       As Victor Fuchs \13\ has argued, the school of scrupulous 
     economists did not carry the day during the health system 
     reform debate of 1993 and 1994. That debate may have come 
     across to the media and the laity as merely a giant exercise 
     in accounting. In fact, it was the culmination of a decades-
     old battle over the proper distributive ethic for American 
     health care. The issue can be crystalized in the following 
     pointed question: To the extent that our health system can 
     make it possible,

[[Page E1226]]

     should the child of, say, a waitress or a gas station 
     attendant have the same chance of avoiding a given illness 
     and, if afflicted by it, of surviving and fully recuperating 
     from it as, say, the child of a corporate executive?
       Evidently, the dominant decision makers in this nation have 
     now concluded that our health system can properly offer the 
     executive's child a higher probability of avoiding illness, 
     or of surviving and fully recovering from a given illness, 
     than it offers the child of a gas station attendant or 
     waitress--that our health system can properly be tiered by 
     income class.
       That is purely a moral judgment. As such, it is not wrong. 
     But it would have been appropriate, in a democracy, to debate 
     this important question more explicitly than it was. Instead, 
     the proponents of this distributional ethic cloaked their 
     case in the jargon and normative theories willingly supplied, 
     without proper warnings, by the economics profession. Thus, 
     the new ethic was sold to the public by the argument that a 
     ``market-based'' health system in which individuals are 
     granted ``responsibility'' for their own health care (and 
     their own health status!), and in which individual 
     ``consumers'' are ``empowered'' to exercise ``free choice'' 
     of the ``consumer good'' health care, would be more 
     ``efficient'' (and hence ``better'') than any alternative 
     system, and that it would obviate the need for ``rationing'' 
     health care. But to tell an uninsured single mother of 
     several possibly sickly children that she is henceforth 
     empowered to exercise free choice in health care with her 
     meager budget is not necessarily a form of liberation, nor is 
     it efficient in any meaningful sense of that term. It is 
     rationing by income class.
       To have one's professional jargon, hypotheses, and embedded 
     ideology dominate in this way may be a triumph of sorts. 
     Readers will judge whether it was a genuine accomplishment.


                               footnotes

     \1\ Nelson R. The Moon and the Ghetto. New York, NY: WW 
     Norton & Co Inc; 1977: lt 23.
     \2\ Bator FM. The simple economics of welfare maximization. 
     Am Econ Rev. 1958; 72:351-379.
     \3\ Reinhardt UE. Reflections on the meaning of efficiency: 
     can efficiency be separated from equity? Yale Law Policy Rev. 
     1992;10:302-315.
     \4\ Baumol WJ. Economic Theory and Operations Analysis. 4th 
     ed. Englewood Cliffs, NJ: Prentice-Hall International Inc; 
     1977:chap 21.
     \5\ Kaldor N. Welfare propositions of economists and 
     interpersonal comparisons of utility Econ J. September 
     1939:549-552.
     \6\ Reinhardt UE. Rationing in health care: what it is, and 
     what it is not. In: Altman EH, Reinhardt UE, eds. Strategic 
     Choices for a Changing Health System. Chicago, Ill: Health 
     Administration Press; 1996.
     \7\ Rosen HS, Katz ML. Microeconomics. Homewood, Ill: Richard 
     D Irwin Inc; 1991:15-16.
     \8\ Kearl JR. Principles of Microeconomics. Lexington, Mass: 
     DC Heath & Co; 1993:chap 16, especially p 418.
     \9\ Friendman LS. Microeconomic Policy Analysis. New York, 
     NY: McGraw-Hill International Book Co; 1984:64-70.
     \10\ Phelps CE. Health Economics. New York, NY: Harper 
     Collins Publishers Inc; 1992:chap 4.
     \11\ Clinton W. President Clinton's Health Care Reform 
     Proposal and Health Security Act, as Presented to Congress on 
     October 27, 1993. Chicago, Ill: Commerce Clearing House Inc; 
     1993.
     \12\ Krueger AB, Reinhardt UE. The economics of employer 
     versus individual mandates. Health Aff (Millwood). Spring 
     1994:34-53.
     \13\ Fuchs VR. Economics, values and health care reform. An 
     Econ Rev. 1996;86:1-24.

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