Let’s take a step back from the day-to-day battle on health care reform battle to focus on a core question. As I wrote earlier, I believe most of the health care debate boils down to the following:

Resources are constrained, and so someone has to make the cost-benefit decision, either by creating a rule or making decisions on a case-by-case basis. Many of those decisions are now made by insurers and employers. The House and Senate bills would move some of those decisions into the government. Changing the locus of the decision does not relax the resource constraint. It just changes who has power and control.

The value decision that underlies most of this debate flows from the question: Who should decide whether additional medical care is worth the cost?

Unfortunately, some high-level rhetoric has obscured this question.

Former Governor Sarah Palin highlighted one extreme. She created an image of government bureaucrats on “death panels”denying sick seniors life-saving and affordable treatment. By focusing on the possible denial of low-cost high-value care, it’s easy to inflame passions.

The President spent much of August rebutting this straw man. While doing so he highlighted the other extreme: when a chemically identical generic drug can be substituted for a more expensive brand name drug, one can save money without any medical downside. His “red pill – blue pill” example is less provocative but equally unconstructive. If there are cost savings with no medical difference, then it doesn’t matter who makes the decision, because the decision is a no-brainer. His reassurance is a false one.

Both leaders ducked the harder questions. Today I will illustrate the hard choices with two examples. In a follow-up post I will discuss your policy options for who should make these hard choices.

Example 1: You break your wrist (the one you write and type with). You have a doctor visit and an x-ray, which combined cost $300. There are two treatments available:

  • The first is a traditional cast. Healing time = 6 weeks. Additional cost = $100.
  • The second is a[n imaginary] new pain-free version of a high-tech treatment called Skele-Gro, which causes bones to heal rapidly. Healing time = 1 day, and the healed bone will be 10% stronger than one healed with a traditional cast. Additional cost = $5,000.

Is the second treatment worth the additional cost? Who should make this decision?

Who gets to decide whether 6 weeks of healed wrist and a 10% stronger result for you are worth an additional $4,900?

Example 2: A[n imaginary] new treatment for heart attacks increases the probability of survival by 1%, at an additional cost of $5 million per use.

There are a lot of heart attacks each year. Assume that if insurance covers this, your premiums will increase by $400 per year.

Who should decide whether you buy the $400 more expensive insurance that includes this treatment, or the $400 less expensive insurance that does not? Who gets to make the call about whether it’s worth a certain additional premium cost of $400 per year to increase your probability of survival, if you get a heart attack, by 1%?

I constructed example one to be medically significant but far from life-threatening or even life-altering. It’s a moderate-consequence example, and it’s about the tradeoff when you’re getting the care.

I constructed example two to illustrate a tradeoff of a small but consequential medical benefit at a high financial cost. It’s only an additional 1%, but a 1% greater chance of not dying. Then again, you only get this 1% benefit if you have a heart attack, so it might never apply to you. And since this is a decision about buying insurance, you don’t have to pay the $5 m, but only the $400 incremental cost in your insurance premium, if you want this treatment to be covered. This example is about the tradeoff when you’re buying insurance.

In both examples, one treatment is medically superior and more expensive than the other. That’s what makes these hard decisions, and better demonstrations of the true tradeoffs, than either Governor Palin’s or President Obama’s examples.

Many chafe at being confronted with these kinds of choices. They argue that, if we confront these choices, then we need to devote more resources to health care.

The problem is that there is always a resource constraint. Maybe yours is 10% or 15% higher than mine, or maybe you would redistribute funds from other people to make someone’s pie bigger. But a bigger pie does not allow you to avoid these tradeoffs. It just means you confront them at a different cost level. The question of who gets to decide is unavoidable, no matter where you fall on the policy or political spectrum.

Elected officials are particularly vulnerable to this trap. The President has fallen into it, perhaps unwittingly. No elected official wants to explain to voters that ultimately someone will have to say no to medically beneficial treatments that are expensive, so they fall back to trivial cases like the President’s chemically identical generic drug example, which ducks the tradeoff.

In my next post I will take these two examples and relate them to the pending legislative debate by focusing on the who should decide question. For now I leave you with a simple thought experiment.

  1. In example 1, assume that your insurance covers the cast but not the Skele-Gro. Given your financial resources, would you spend an additional $4,900 out of your own pocket for the Skele-Gro treatment? If not, how much would you be willing to pay out-of-pocket for the additional medical benefit?
  2. If you could design your own insurance policy, would it include the new heart attack treatment? Assume you would pay the full $300 premium increase (each year) out of your after-tax wages. If not, how much more would you be willing to pay to have this new treatment covered?

To be continued…

(photo credit: Shelly T.)