Cover image for What's your life worth? : health care rationing-- who lives? who dies? who decides?
What's your life worth? : health care rationing-- who lives? who dies? who decides?
Dranove, David.
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Publication Information:
Upper Saddle River, NJ : FT Prentice Hall, [2003]

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xvi, 191 pages ; 24 cm
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RA410.5 .D73 2003 Adult Non-Fiction Central Closed Stacks

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Healthcare rationing is coming -- with a vengeance. What's Your Life Worth? previews tomorrow's healthcare system, showing what it'll feel like to be at the mercy of a system that might choose not to cure you. Right now, experts are calculating which diseases are worth curing, which treatments are worth paying for, and which aren't. This book tells you who they are, what they're up to, what they think you're worth -- and what to do about it.

Author Notes

David Dranove is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University's Kellogg Graduate School of Management, as well as Director of the Center for Health Industry Market Economics there.

Reviews 1

Choice Review

The subtitle of this book underscores one of the central issues of health care, i.e., the allocative and distributive functions of a health care system for which the market and the government vie for appropriate roles. These roles or functions involve relating scarcity of resources and, hence, some rationing either by the market (implicit rationing by price and market mechanisms) or by the government (explicit rationing). Economist Dranove (Northwestern Univ.) examines the issue of rationing including its concept, examples of rationing around the world and in the US, cost-effectiveness and cost-benefit research, quality and value of life issues, the Oregon Plan, and costs and "rational rationing." The book is written in excellent prose and is devoid of high-level quantitative analysis or technical jargon; however, the economic analysis is well done and understandable for readers who want the economics expressed clearly. Dranove uses an impressive list of journal and other economic studies, which he summaries and explains. He also makes good use of the news and other print media to provide current applications. This provocative analysis of an important issue is a welcome addition to the health economics/politics literature. ^BSumming Up: Highly recommended. General readers; students, lower-division undergraduate and up; and faculty and professionals. F. W. Musgrave Ithaca College



Introduction You may not know it, but the people who pay for yourhealth care have decided that enough is enough. They haveplaced a limit on how much they are willing to spend to saveyour life. In the United States, the keepers of the Medicare andMedicaid programs have capped spending growth, forcing providersto cut back on care. At the same time, U.S. employersare getting fed up with rising health insurance costs, and theyare giving managed care organizations the go-ahead to cutback on prescription drug benefits and other services. Suchrestrictions are old news in the rest of the world, where governmentpayers have been limiting access to costly medicaltechnologies for over three decades. This is rationing, plain and simple. Rationing is a dirtyword in health care, but it is not necessarily a bad thing, providedthe cost savings are large enough to justify any resultingharm. For the most part, rationing has been ad hoc, withoutcareful weighing of the benefits and costs. But in the last fewyears, a few payers have taken baby steps toward rationalizingrationing--making sure that they get biggest bang out of theirhealth care bucks. This book is about the many ways in which health care isrationed, and the transition toward rational rationing. AsChapter 1 details, rational rationing has already been institutionalizedby the British and Australian national health systems.The outcomes have been mixed. Government decisionmakers seem obligated to balance scientific principles withpolitical considerations. The outcomes are not always pretty,and government health officials remain crippled by budgetceilings that force them to place an unrealistically low valueon life. Chapters 2 through 4 provide the theoretical justificationfor rationing health care and demonstrate the disconnectbetween theory and practice in Europe and the United States.At least for now, any careful weighing of lives and dollarsseems to be mere happenstance. Chapters 5 and 6 describerational rationing. Chapter 6 also explains how to numericallyscore different diseases to determine which are most worthcuring. These methods appear to be relatively simple to implement.In fact, they were central to a rationing plan implementeda decade ago in the state of Oregon, as described inChapter 7. But, as I show, appearances are deceiving. Proponentsof rational rationing have yet to overcome numerousobjections based on methodological, economic, ethical, andpolitical grounds. Even if supporters of rational rationing can overcome themyriad objections to it, their schemes will not fully succeedunless they can grapple with the most challenging obstacle ofall. At some point, payers must decide where to draw the lineand declare that one particular health care service is "worthit" whereas another, slightly less cost-effective service is not.To do this, payers will have to explicitly determine how muchlife is worth. Chapter 8 tackles this question head-on and evenshows you how to compute the value of your own life. One question remains: Who should implement rationalrationing? Chapter 9 describes the global imperative to containcosts in the public and private sector. I argue that rationalrationing is better left to the market, where individuals candecide for themselves how much their lives are worth. I concludethat if payers fully embrace rational rationing, they mayno longer fear spending money to save lives. Excerpted from What's Your Life Worth?: Health Care Rationing... Who Lives? Who Dies? and Who Decides? by David Dranove All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

Table of Contents

Introductionp. xv
Chapter 1 Is It Nice to Ration?p. 1
Putting a Price on Your Lifep. 1
The Pressure to Rationp. 3
Cutting to the Chasep. 4
Rationing Drugs Down Underp. 8
The National Institute for Clinical Excellence (Nice)p. 10
The Beta-Interferon Controversyp. 15
Medicine Versus Economicsp. 17
Endnotesp. 19
Chapter 2 Defending Rationing in Principlep. 23
Rationing and Toy Shoppingp. 25
Are We Wasting Money on Health Care?p. 28
Moral Hazardp. 29
The Rand Studyp. 32
Demand Inducementp. 33
Bad Buys in Health Carep. 35
The Wennberg Variationsp. 37
Defending Rationingp. 38
Endnotesp. 39
Chapter 3 Rationing Around the Worldp. 41
Rationing in Germanyp. 44
Controlling Drug Costs in Germanyp. 46
If It Looks Like Rationingp. 48
Rationing in Canadap. 49
The Consequences of Waiting Listsp. 50
The Future of Rationing in Canadap. 51
Rationing in Englandp. 52
Rationing Elsewhere in the Worldp. 54
Endnotesp. 55
Chapter 4 Rationing in the U.S. Health Care Marketplacep. 59
Rationing Through the Market Mechanism: The Uninsured in the United Statesp. 60
Attempts to Provide Universal Coveragep. 61
Rationing Among Insured Americansp. 62
Government-Sponsored Rationing in the United Statesp. 64
A Brief History of Managed Carep. 66
MCO Strategies for Containing Costsp. 67
Whither Rationing in America?p. 76
Enough Is Enoughp. 77
Endnotesp. 78
Chapter 5 Doing Cost-Effectiveness and Cost-Benefit Researchp. 81
Some Background on CEAp. 83
Is It Valid to Use CEA for Health Care?p. 83
Doing CEA/CBAp. 85
Measuring Costsp. 87
Discountingp. 90
Is CEA/CBA Research Valid?p. 92
CBA/CEA in Practicep. 93
Endnotesp. 96
Chapter 6 Measuring the Quality of Lifep. 97
Using Rating Scales to Measure Health Statesp. 98
Working with QALYsp. 99
Putting QALYs into Practicep. 102
All QALYs Are Equalp. 102
Measuring QALYsp. 103
How Do Your QALY Scores Measure Up?p. 108
The Quality of Well-Being (QWB) Scalep. 110
Concerns about QALYsp. 111
Discrimination and QALYsp. 112
Limitations of QALY Surveysp. 112
Summing Up CEA/CBA Methodsp. 113
What about the PSA Test?p. 114
Endnotesp. 115
Chapter 7 The Oregon Planp. 117
Rationing in Oregonp. 117
The Story of Coby Howardp. 120
Toward a Rational Rationing Planp. 121
The Creation of the Oregon Health Planp. 122
The Oregon Plan and HMOsp. 123
Creating the Listp. 124
The New Listp. 126
More Protestsp. 128
The Performance of the Rationing Planp. 131
Oregon Ten Years Laterp. 133
Where Do We Draw the Line?p. 135
Endnotesp. 136
Chapter 8 What Is Your Life Worth?p. 139
Willingness to Pay, Human Capital, and Intrinsic Valuep. 140
Pricing Life in the Real Worldp. 142
The Cost-of-Illness (COI) Approachp. 143
Using Surveys to Put a Price on Good Healthp. 145
Some WTP Measuresp. 147
Willingness to Pay for Lifep. 148
How Useful Are WTP Measures?p. 150
Statistical Versus Identifed Livesp. 151
The Economic Approach to Valuing Statistical Livesp. 151
Other Evidence on the Value of Lifep. 155
What Is Your Life Worth?p. 156
Value of a QALYp. 157
Responding to Mr. Mortimerp. 158
The Bottom Linep. 159
Endnotesp. 160
Chapter 9 Rising Costs and Rational Rationingp. 163
The Health Care Budget "Crisis"p. 164
The Drain on the U.S. Economyp. 165
Targeting Technologyp. 167
The Fallacy of Cost Containmentp. 169
The Steady Drumbeat of Rational Rationingp. 170
Can Patients Be Rational?p. 172
Who Should Ration?p. 174
Rational Rationing in the Public Sectorp. 175
Rational Rationing and Managed Carep. 177
The Real Obstaclesp. 179
Rational Rationing in the 21st Centuryp. 181
Endnotesp. 181
Indexp. 183