Pricing life Notes for November 7

Main points

Menzel wants to ration care using presumed prior consent. That means that he thinks we should make decisions about when to withhold beneficial care based on decisions that people would have made about what insurance to buy against risks to their health. If they would not have bought insurance against the prospect of needing an artificial heart to stay alive, there is nothing wrong with failing to provide artificial hearts to them. That’s the idea.

But the project faces an objection. This method of rationing looks at the cost of various treatments and asks if people would rather spend the resources on something else, either in health care or elsewhere.

We could ration by some other less economic measure. We could spend on avoiding deaths that we regard as horrible or unfortunate and not spend on avoiding deaths that strike us as normal or appropriate.** Both Martin and Alex suggested something like that.

One apparent disadvantage of Menzel’s way of doing it is that it seems to put a price on life. Could we ever do such a thing at all? Even if we could, why think that it is best done well in advance of a person’s need for care? Can we think seriously about how much our life is worth to us until we face losing it?

Rationing is good for even for the selfish

My little argument (1.3 on the handout) is meant to present what I take to be Menzel’s best case for his side.

The first premise is the hardest one to get used to. We think of rationing as involving a conflict between the individual who wants care and the broader society whose members want to save money.

But Menzel’s case rests on the value of rationing to the individual. If Kyle were choosing an insurance policy to cover the risk of dying from heart disease, he should choose one that does not offer to provide artificial hearts to those who need them. Why? Because it doesn’t improve his chances of living but it does cost a lot, meaning that Kyle would have to spend more on his insurance premiums for this policy that he couldn’t spend either on other health insurance policies or on other valuable things.

One term that I wanted to introduce is “pre-commitment”. We want to have mechanisms for pre-commitment in order to lock us into doing things that, at the time it comes to do them, we would be better off not doing. Promises are an informal version of pre-commitment: I promise that I will mow your lawn on Tuesday so that you will pay me and you pay me only because I have committed myself to doing what I won’t want to do on Tuesday. Or I might employ an agent: I ask you to take away my cigarettes or castigate me if I reach for a second cookie at lunch. I want not to smoke or eat so much but I know that I will have moments of weakness so I commit myself by asking you to frustrate me in those moments. Contracts formalize these behaviors. They often bring the legal system to bear as an enforcement mechanism as well.

Menzel thinks of prior consent to rationing as a kind of pre-commitment. We agree to frustrate our (possible) future desires in order to live better overall lives.

Politics, dirty politics

Ah, but what if you don’t think you will get the benefits of rationing? That was Michael Stout’s question. It’s a darn good one that brings politics into our nice clean theoretical world.

The rich don’t think they’ll benefit because they have surplus resources even with more health insurance than they would get under a rationing scheme. The poor don’t think they’ll benefit because they don’t think the savings from rationing will ever make it back to them. They think the rich will simply pocket the tax savings rather than allowing it to go towards providing better services for the poor.

The critical audience is the middle.

In addition, you might say, rationing decisions happen far more often than we realize. Public budgets are limited, so care under Medicaid is effectively rationed when its administrators decide to cover, say, organ transplants rather than prenatal care. We subsidize health insurance by allowing people to pay for it with pre-tax dollars, thus lowering their taxable income. In allowing this subsidy for insurance plans that cover very expensive care, we’re helping to drive up the cost of health insurance and reducing its coverage to those who have trouble affording it.

That said, Michael’s point is still valid. Rationing is only in the interests of those people who have good reason to believe that they’ll get the savings from rationing back in some way.

This page was written by Eleanor Brown and Michael Green for Freedom, Markets, and Well-Being, PPE 160, Fall 2007.
Freedom, Markets, and Well-Being