The Plan was fatally flawed A debate on the Oregon health-care plan


ORDINARILY, I am not enamored of the Bush administration's health policies. But the administration did a good deed when it vetoed Oregon's proposed system of rationed care under that state's Medicaid program.

The Oregon plan sought simultaneously to expand coverage to some 120,000 Oregonians who are currently uninsured, while holding down costs through aggressive case management and a novel system of automatic rationing. The system thus appealed to liberals who wanted to broaden medical coverage, and to conservatives who hoped to hold down costs.

But the plan was fatally flawed, in at least four respects. First, Oregon proposed medical rationing only for the poor. While poor people could be denied treatment for a wide variety of conditions ranging from viral pneumonia to slipped disks to terminal AIDS, middle class people with private health insurance would go right on consuming scarce medical resources for treatment of the very same conditions.

Rationing, like other harsh medicine, is always politically easier when applied only to the needy. Had this same approach been proposed for the middle class, it would have produced a revolt.

Second, Oregon's particular brand of rationing was impossibly rigid. Oregon health authorities devised a list of 709 "conditions," which it paired with appropriate "treatments." It then ranked each condition, based on the "net benefit" treatment would provide, and drew an arbitrary budget line at condition number 587.

Conditions above the line would be covered by Medicaid; those below the line would not. And doctors who refused to treat the sick with uncovered conditions would be held immune from any legal liability.

But medical conditions and treatments do not always fall into such neat categories. Treatments that are effective for one patient and one variation of an illness may be ineffective for another. Oregon tried to give priority to "acute" illnesses rather than chronic conditions. But some conditions -- skin problems, for example -- fall midway between chronic and acute because they involve recurrent flare-ups. It's not always possible to practice medicine by the numbers.

In some cases, according to a study by the federal Office of Technology Assessment (OTA), Oregon inexplicably ranked medical therapies, which are usually tried first, below more costly and invasive surgical therapies, which are ordinarily a last resort.

Third, Oregon's ranking of covered medical conditions was based on consumer surveys as well as medical expertise. These surveys revealed a public bias against treatment of chronic disabilities, which carried over into the rankings. Oregon also tried to punish people with conditions that were arguably self-inflicted. For example, liver transplants were covered -- except when associated with alcoholism. Lung cancer, however, was covered without exception.

Finally, Oregon proposed to lower the eligibility hurdle over time. At the beginning, illnesses up to condition number 587 would be covered. But if medical costs outstripped inflation, the bar could be lowered. Spina bifida is currently covered, but might not be covered in five years.

But let's be clear about what is really wrong with the Oregon plan. The problem is not something called "rationing" -- because we already have medical rationing. Every time somebody is denied treatment because a condition is not covered by a particular insurance policy, or because health coverage was terminated when a breadwinner lost her job -- that is a form of rationing. What was invidious about Oregon's approach is that it used the poor as guinea pigs, and for a particularly harsh brand of rationing that the middle class would never tolerate.

Also, let's not be too lavish in our praise of the Bush administration. When the administration denied the necessary federal waiver for the Oregon plan, officials cited possible violations of the recently enacted Americans with Disabilities Act. Health and Human Services Secretary Louis Sullivan declared that Oregon's ranking of conditions presumed that "the value of the life of a person with a disability is less than the value of the life of a person without a disability."

That certainly sounds high-minded. But the Bush administration also had a baser motive. The liberal part of the Oregon plan involved broadening health coverage to the uninsured, and the federal share would have cost Washington an additional $110 million over five years.

Well-placed sources say the administration was unwilling to associate itself with mandated universal coverage, or to set the precedent of paying part of the cost. Rather than citing its opposition to universal coverage, the administration chose to wrap itself in solicitude for the disabled.

This is ironic, of course, because the only way Americans will get comprehensive access to health care without harsh forms of rationing is through a universal approach. But universal health care has been opposed by the Bush administration as overly bureaucratic. In truth, the arbitrariness and inefficiency of our current patchwork system of health care are the fault of the private sector, not the government.

For now, the administration has headed off one particularly grim brand of rationing -- but that is precisely where we are headed in the absence of comprehensive health care.

Robert Kuttner writes a column on economic matters.

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