Rationing as a Response to Supply Side Constraints

Rationing as a Response to Supply Side Constraints

NHI NOTE 5, JANUARY 2010

The previous two research notes in this series highlighted the nearly unlimited demand for healthcare in South Africa, as well as the very limited supply thereof. In this note we consider various responses to the supply constraint of limited resources and examine the issue of rationing within the context of the proposed NHI. As is the case for nearly all other industries, in the health sector the fundamental question of economics also has to be solved: how can the scarce resources be allocated in the most efficient and equitable way?

Scarce resources in the South African healthcare system introduce the need for rationing demand and/or supply. In most sectors goods are allocated via the market price. Allocation of healthcare by price amounts to bidding based on income, and is expected to result in an overprovision of healthcare to the affluent and under-provision of healthcare to the poor. It is widely accepted that rationing the demand for healthcare via price only is not desirable – presumably because of its association with the principle of the right to life and also potentially harsh consequences of denying access to healthcare. As Maynard eloquently described it, the scarcity in healthcare means that “choices have to be made about who will be given the ‘right’ of access to care and who, as a result of denial, will be left in pain and discomfort, and, in the limit, to die.”

Thus, in most instances there is some degree of government intervention and free service provision in healthcare. In markets where the price is determined by the government or where there is no price (as would be the case if comprehensive healthcare benefits were available to all citizens free of charge), other ways of allocating the scarce resources have to be found. In the healthcare sector many different words are used for the allocation of scarce resources: managed care, priority setting, cost containment, preauthorisation, gatekeeping, clinical guidelines, waiting lists, benefit design and so forth.

Although the methods whereby rationing occurs are manifold and controversial, rationing is an unavoidable part of any healthcare system, as is summarised by the extract below:

“Priorities have to be set in all healthcare systems whatever their level of expenditure and regardless of the methods of financing and delivery that are adopted. The nature of the choices that have to be made and the locus of these choices do vary between systems, but the inevitability of priority setting is universal.”

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