How Healthcare Rationing in the U.S. Affects Even You

Although many Americans fear that healthcare rationing would accompany a switch to a universal coverage or single-payer health care system, some are unaware that healthcare rationing has been taking place quietly in the United States for years.

This is not something new, brought on by the Affordable Care Act (aka Obamacare). It’s not a liberal plot to trick us into opting for socialized medicine or universal coverage.

On the contrary, capitalism has slowly and quietly led the United States down the path of healthcare rationing. This article will explain what rationing looks like in the current American health care system.

How Has Capitalism Encouraged Health Care Rationing in the U.S.?

As healthcare costs in the U.S. increased, the cost of providing health insurance to employees and their families became increasingly burdensome to U.S. businesses. Even the federal government felt the pinch of increasing healthcare costs as it saw Medicare spending increase.

Businesses looked for less expensive employee health insurance options. Health insurance companies innovated to fill the need for health insurance that kept healthcare costs in check while delivering quality care. Health insurers used several techniques to control costs, creating a whole new genre of health insurance products and healthcare delivery methods known collectively as managed care.

The idea was that, by managing the care that was provided, the insurer would also be managing the cost of care. If the insurer could keep the cost of providing health care down, it could sell its health insurance product for a lower price than the competition. Insurers that managed to offer quality health insurance coverage with reasonable premiums prospered.

Consumers (in this case, businesses, the government, and individual citizens) demanded a product at reasonable rates. America’s health insurance companies responded with innovation and competition. That’s capitalism in action. But, the innovative methods health insurers used to keep costs in check were quietly weaving healthcare rationing techniques into the mainstream of United States health care.

How Healthcare Rationing Affects You

Most people with private health insurance in the United States have a managed care health plan like an HMO, EPO, or PPO.

And managed care plans are also becoming increasingly common among enrollees in government-run programs like Medicare and Medicaid:

• Private Medicare Advantage enrollment has been steadily growing, and more than half of all enrollees with both Medicare Part A and Part B are enrolled in Medicare Advantage plans as of 2023.
• Medicaid managed care plans cover the majority of Medicaid enrollees.

So most Americans have experienced some form of healthcare rationing due to the managed care approach.

Healthcare rationing in the United States isn’t as blatant as saying “No, you’re not allowed to have this healthcare service.” Instead, U.S. healthcare rationing is more subtle and usually presents in one of two forms:

1. Limiting access to certain types of health care or healthcare providers.
2. Increasing barriers to health care in order to discourage frivolous use, expensive care when a less expensive alternative exists, or care that isn’t medically necessary.

Examples of how health care is rationed in the U.S. by limiting access to certain types of care or providers include:

• Pre-authorization requirements. In this case, your health insurer will refuse to pay for non-emergency health care if you didn’t get the health insurer’s permission before getting the care.
• Requiring a referral from your primary care physician before seeing a specialist. In this case, your health insurer will refuse to pay the bill for a specialist if your PCP didn’t refer you to the specialist. This is common in HMOs and POS plans.
• Drug formularies. Most managed care health plans restrict coverage to a list of certain drugs. If your physician prescribes a drug that’s not on your health plan’s drug formulary, your health plan typically won’t pay for it. But there is an appeals process and you and your physician can use if no other medication will work.
• Step therapy. Usually used with prescription drug coverage, particularly for higher-tier or specialty medications, step therapy means that the insurance company requires you to try the lowest-cost option first, and will only pay for a higher-cost option after the lower-cost alternative failed to work.
• Restrictive provider networks that require you to use only in-network providers for your health care if you want your health insurance company to pay for your care. This is common in HMOs and EPOs.
• The waiting list for an organ transplant. Health insurance companies aren’t the source of all healthcare rationing in the United States. For example, donated organs are a precious and limited commodity; not everyone who needs one can get on the waiting list for a chance to receive an organ, and many people die while on the waiting lists. Organs are rationed. 

Examples of how health care is rationed in the U.S. by increasing barriers to care include:

• Cost-sharing. Increasing deductibles, coinsurance rates, and copayment requirements all make it harder for healthcare consumers to access care because the consumer must have enough money to pay for their share of the cost. Cost-sharing requirements are in addition to the monthly premium consumers pay to buy health insurance. Every dollar someone must pay to get care increases the chance that he or she will be unable to afford the care. Likewise, each dollar of cost-sharing decreases the number of people who will access that particular healthcare service. As the cost of health care increases, cost-sharing amounts have been steadily increasing over time, across both employer-sponsored and self-purchased health plans.

Charging for health insurance and health care is perhaps the most basic example of healthcare rationing. In effect, charging for health care and health insurance is paramount to rationing health care based on whether or not someone can afford to pay. Those that can pay for it get care; those who can’t pay don’t get care. It’s economic rationing.

Note that the Affordable Care Act’s health insurance premium subsidies and cost-sharing reductions have decreased this form of rationing by giving financial aid to those who need to purchase their own health insurance but would struggle financially to cover the premium and/or out-of-pocket costs on their own.

And the American Rescue Plan and Inflation Reduction Act have temporarily made the ACA’s premium subsidies larger and more widely available. This increases the number of people who can afford health coverage and care.

The Affordable Care Act also included a provision to expand Medicaid to cover millions of additional low-income Americans, enabling them to have health coverage with no monthly premium and very low out-of-pocket costs. But some states have refused to expand their Medicaid programs, creating a coverage gap for their poorest residents.

From March 2020 through March 2023, due to the COVID pandemic, states did not disenroll anyone from Medicaid unless they moved out of the state, passed away, or requested a disenrollment. So even if a person no longer met the eligibility guidelines, their coverage was allowed to continue. That ended as of April 2023, and states are once again disenrolling people who are no longer eligible or who don’t respond to renewal paperwork from the state.

Is Health Care Rationing Bad, Good, or a Necessary Evil?

Although we’ve rationed health care in the U.S. for years, the idea of healthcare rationing is still objectionable in the United States. Sarah Palin tapped into that sentiment when she claimed in 2009 that the Affordable Care Act would create “death panels” that would decide who would get care and who would be left to die without care.

It would be nice if the world had unlimited resources and everyone could have everything they want. However, that’s not the world we live in. The tough fact is that health care is a commodity; money is a commodity.

Doctors and nurses provide health care as a way to earn money, to support their families, to pay their bills. Pharmaceutical companies make drugs that they can sell at a profit. If a company doesn’t make a profit, it will go out of business and won’t be there to make any drugs next year.

Many people feel health care should be the exception to capitalism, it should be a basic human right provided to everyone because people cannot live without health care. However, in the United States many things people cannot live without are rationed economically.

People cannot live without food, yet we must pay for food in the grocery store. Those who receive SNAP benefits (previously referred to as food stamps) must carefully ration the funds the government provides so they don’t run out of food. People cannot live without shelter from the elements, yet we must pay for housing and for clothing. Those who can’t pay suffer.

Is healthcare rationing bad? In some ways, yes. People suffer when they postpone care they can’t afford or when they go without health care.

Is healthcare rationing good? In some ways, yes. Rationing care helps us to use our limited resources more wisely, picking and choosing among options and trying to get only the care that’s truly necessary.

Ultimately, healthcare rationing is a necessary evil. We’ve been living with it since our ancestors paid the town doctor with chickens. We live with it now when we have to get our MRI scan pre-authorized by our health plan. We’ll live with it in the future as long as time and money are finite resources.

Summary

The concept of healthcare rationing is often portrayed as something that would come to pass if the U.S. were to reform its healthcare system to make it more universal or to adopt a single-payer approach.

But healthcare rationing is already very much a part of the American healthcare system. Managed care plans have rules that include only paying for in-network care (or paying a reduced amount for out-of-network care), limited drug formularies, step therapy, prior authorization, and referrals. And the cost-sharing (deductibles, copays, and coinsurance) on most health plans also serves as a form of healthcare rationing, as people who can’t afford their cost-sharing may delay or avoid necessary care.

A Word From Verywell

The good news is that the existing rationing helps to keep medical costs lower than they would otherwise be, and prevents overutilization of medical services (ie, receiving care when it’s not actually necessary).

But in order to protect yourself, you’ll want to understand exactly what your health plan requires in order to provide coverage, and how much you can expect to spend on the care you might need. You may find that you’re able to utilize an FSA or an HSA to plan ahead for these costs, making it less likely that you’ll avoid necessary care for financial reasons.