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Health Care Disparities: Deregulation First, Redistribution Last



March 13th, 2008

Editor’s Note: This is the second in a series of posts on health and health care disparities that Health Affairs Blog is publishing in conjunction with the new March/April issue of Health Affairs on Disparities: Expanding The Focus, published with support from the Robert Wood Johnson Foundation. Brian Smedley contributed the first post in the series, which will also feature Dora Hughes, Tom Miller, and Robin Weinick and Nancy Kressin.

The Persistence of Disparities. There is an immense volume of literature that expresses an abiding concern with the evident and persistent disparities in access to health care. These disparities are typically a function of race, sex, disability, or income. Once disparities have been documented, the usual approach to reform proposes some new form of intervention that is intended to smooth them out, usually by various kinds of forced access or subsidies regime. Just recently, the Robert Wood Johnson Foundation announced, for example, a nonpartisan commission “to identify and recommend practical solutions to eliminate health disparities and improve health for all Americans.” Unfortunately, the chief consequence of these proposals will be, as it has usually been, to make a health system balkier and less responsive than it had been before. The identified disparities doggedly persist in spite of the best efforts to counter them.

In examining these disparities, it is very difficult to find the culprit in any supposed hard-boiled political indifference of modern physicians and other health care personnel. My own impressions are that most physicians have been socialized into a profession that profoundly dislikes the large disparities unearthed in the empirical research. Certainly, the profession operates under powerful and enduring social norms against any form of discrimination in health care services on the grounds of race or sex. The increasing disparities in health care cannot be laid at the doorstep of a profession that has transformed itself in the last two generations.

If intentions have not gone awry, then why have the results become more skewed then ever before? On this score, there is much reason to start with two propositions. The first is that some disparities in the provision of health care make sense from a social point of view. The second is that these disparities are greater, perhaps, than they ought to be because of the inveterate tendency to put redistribution ahead of deregulation in all phases of medical care. 

Why Disparities Are Needed. Turning to the first point, what is the normative case for insisting that all persons should have equal access to care regardless of income or wealth? Clearly, this proposition cannot be sensibly defended as the simple outgrowth of a policy that defends equal incomes for all persons, regardless of how much they contribute to society writ large. That equal-incomes policy might — although only with difficulty — be defended on the grounds of the diminishing marginal utility of wealth, whereby the next dollar to the poor person is always worth more than the last dollar taken from the rich person. But any preoccupation with distribution ignores the critical importance that incentives play in wealth creation. Imposing what amounts to a 100 percent tax on the income of the most productive members of society will stifle innovation and production, impoverishing everyone from top to bottom. Some redistribution may be defensible. An equal-incomes policy is not. 

So why then is, as one likes to say, health care “special,” as opposed to food, clothing, and shelter, where disparities are routinely tolerated? I know of no suitable answer to that question, because the consequences of any egalitarian health care policy are equally indefensible. One reason to allow, indeed encourage, successful people to spend money on their own health care is that on average they contribute more to society when healthy. A second reason is that the only way to eliminate disparities in health outcomes is to equalize services outside the health care area. Health depends on the education we have, the food we eat, the cars we drive, and the friends we make. Equalization in all these areas sends us once again down an egalitarian sinkhole. RWJ is on the wrong mission. 

Controlling Costs, Increasing Access. One response to this objection is to give up on the equalization of health care resources and move more modestly toward the reduction in disparities by targeted forms of government intervention. But again that more modest approach misconceives the real problem. The recent direction of virtually all proposals for universal (or nearly universal) health care are directed toward mandates on individuals, which are then supplemented with additional resources from the public fisc. 

The great failing of this approach is that it takes as given the huge regulatory apparatus that now places a hammerlock on the sensible provision of health care. Better it be started at the other side of the problem, by asking which of our myriad forms of regulation are justified on efficiency grounds. Our state-based medical licensing system imposes sharp restriction on the free flow of labor across state lines. The Health Insurance Portability and Accountability Act (HIPAA) imposes numerous restrictions on the use and transfer of information that drive up the cost of medical care in the name of the protection of patient privacy. A costly and unreliable medical malpractice system leads to the closure of desperately needed facilities that serve marginal communities. Medicare offers huge subsidies for affluent seniors on the backs of people with a fraction of those affluent seniors’ come. Most importantly, perhaps, constant barriers are thrown in the path of nonmedical firms entering the market to supply health care. Why not let people pay for their own health care at a Walgreens clinic instead of waiting in an emergency room, which is the worst place to provide medical care for indigent patients? 

The first order of business in my view is to resist any plea for a direct attack on disparities in health care. Put any consideration of new schemes of redistribution last. Put first a relentless reexamination of every single regulatory structure now in place, in the hope that it could be either shrunk or dismantled. The anticipated consequence of this approach to reform is that lower costs across the board will yield in turn greater access to health care, which will do much to eliminate the major disparities at the bottom. This indirect attack on health disparities will do more to improve health care than will larding new programs on top of existing ones. Open competition will do more to lower costs and increase access than will the next generation of health care gimmicks that have such enormous, if unjustified, appeal, especially in an election year. 

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4 Trackbacks for “Health Care Disparities: Deregulation First, Redistribution Last”

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