What Everyone Should Know About Rationing By Waiting

By John C. Goodman

Originally posted on Forbes, October 2015

Americans like to think that our health care system is very different from “socialized medicine” in Canada. In fact, the two health care systems are far more similar than they are different. In Canada, when people go to the doctor the visit is free. In America, it’s almost free.

On the average, every time Americans spend a dollar at a doctor’s office only 10 cents is coming out of our own pockets. The rest is paid by an employer, an insurance company or government. Like the Canadians, we do not primarily pay for health care with money. We pay with time.

According to a Merritt Hawkins survey:

  • The average wait time to see a primary care doctor in the United States is almost three weeks.
  • In Boston (where we are told there was universal coverage even before there was Obamacare), the average wait is more than two months.

Compare that with how long you have to wait to get your cellphone repaired.

Waiting in the US is becoming more like waiting in Canada and in some cases it can be worse. For example:

  • In Winnipeg, one in ten patients leave the emergency rooms without ever seeing a doctor – because they get tired of waited.
  • The average in California is much lower, but at some hospitals one in five leave without being seen.

Health care in both countries is dominated by the idea that people should never have to choose between money and other goods and services. As a result, we have completely suppressed the market for medical care – year after year, decade after decade. Ideal health insurance, we have been told, is insurance with no deductible or copayment. Ideal insurance is insurance that makes health care free at the point of consumption.

Yet when you suppress the market, you elevate the importance of non-market barriers to care. When you suppress prices, you elevate the importance of non-price barriers.

How long does it take you to make an appointment with a doctor? How many days or weeks must you wait before the visit takes place? How long does it take to get from your home or place of work to the doctor’s office and back again? How long do you have to wait once you get there?

These are all non-price or non-market barriers to care. And there is ample evidence that even for the poor these barriers are more important obstacles to care than the fee the doctor charges.

The conventional assumption by health policy commentators is that the rich have money and the poor have time. This assumption turns out to be wrong – at least as far as time is concerned. The rich can buy nannies and housekeepers and drivers. They can hire lawyers, accountants and other professionals to advise them. They can generally take off from work without losing pay.

For the poor, things are different. In a fascinating article in The New York Times, Maria Konnikova reports that lack of time may be even more important than lack of money for people at the bottom of the income ladder:

The poor are under a deadline that never lifts, pressure that can’t be relieved. If I am poor, I work or I churn until decisions like buying lottery tickets begin to seem like attractive alternatives. I lack the time to calculate the odds and think of alternative uses for my money.

Konnikova quotes Eldar Shafir, a psychologist at Princeton who has been studying poverty for over a decade, as saying:

When people are juggling time, they are doing something very similar to when they’re juggling finances. It is all scarcity juggling. You borrow from tomorrow, and tomorrow you have less time than you have today, and tomorrow becomes more costly. It’s a very costly loan.

Which is a bigger barrier to health care for low-income patients: time or money?

One piece of evidence comes from a study of the North Carolina Medicaid program. (See my commentary here.) Although most states try to limit Medicaid expenses by restricting patients to a one-month supply of drugs, North Carolina for a period of time allowed patients to have a three-month supply. Then the state reduced the allowable one-stop supply from 100 days of medication to 34 days and at various times and places the state raised the copayment on some drugs from $1 to $3. Think of the first change as raising the time price of care (the number of required pharmacy visits tripled) and the second as raising the money price of care (which also tripled).

The result: A tripling of the time price of care led to a much greater reduction in needed drugs obtained by chronically ill patients than a tripling of the money price, all other things remaining equal.

Another piece of evidence comes from a report from the Center for Studying Health System Change on the effects of the Great Recession on access to care. (See my commentary here.) The study found that middle class families responded to bad economic times by cutting back on their consumption of health care. They postponed elective surgery, avoided care of marginal value, and made more cost-conscious choices when they did get care. This reduction in demand freed up resources which were apparently redirected to meet the needs of people who faced price and non-price barriers to care. From 2007 to 2010:

  • The percent of the population experiencing an unmet health care need actually fell from 7.8% to 6.5%.
  • The percent of people who say they delayed care fell from 12.1% to 10.7% over the same period.

And this is in the middle of one of our worst recessions! (See the graphic here.)

During the recession, the money price barrier to care actually rose among the uninsured, although the increase was not statistically significant. The number of uninsured people reporting access problems because they were “worried about cost” rose from 91.5% to 95.3%. (Translation: virtually everybody who is uninsured worries about cost.) Yet over the same period, the number of people experiencing access problems because of waiting and other non-price barriers was almost cut in half (falling from 40.3% to 24.1%).

A third study illustrates the role of paying higher prices in expanding access to care. The study found that enrolling children in the Children’s Health Insurance Program (CHIP) does not result in their receiving more medical care. But when CHIP pays higher fees to doctors, the children do get more care. Suppose the state is strapped for money and can’t afford to pay higher fees? A common sense answer is to let the parents add to the CHIP reimbursement rate and pay a higher price. There is an obstacle to common sense, however — it’s illegal for parents to do this. (See my commentary here.)

Lack of time is not just a problem for the poor. Time constraints are also burdensome for the middle class. A Pew Research Center study finds that in almost half of two-parent households, both parents are working full time. And the stress from having too little time seems highest for white, college educated parents.

Some of the most interesting innovations in health care (reported from time to time by yours truly) are time conserving: telephone and email consultations, video consultations, walk-in clinics, Uber-like house calls, etc. Interestingly, the walk-in clinics in CVS pharmacies are called MinuteClinics.

The market understands that you value your time as well as your money.

This article originally appeared on Forbes on November 9, 2015.