Nova workboard

a blog from young economists at Nova SBE


“(…) while it is always a misfortune to die when one wants to go on living, it is not a tragedy to die in old age; but it is on the other hand both a tragedy and a misfortune to be cut off prematurely.”

John Harris, The Value of Life (1985)

While the end of September was approaching, the country was confronted by somewhat controversial headlines.[i] This time, surprisingly or not, we did not have an announcement from the Finance Minister, regarding the implementation of new austerity measures. So, what happened?

Answering a request from the Health Minister, the National Ethics Council for the Life Sciences (CNECV) produced a report, proposing a decision model for financing the costs of medicines in three specific areas: HIV/AIDS, oncology and rheumatoid arthritis.[ii] The main conclusion taken from the report is the existence of ethical arguments supporting healthcare rationing – indeed, a conclusion that might harm the most delicate sensibilities.

Within this line, I think it is of utmost importance to reveal the most inconvenient truth: it is not possible to have everyone having access to everything. Moreover, the situation is even more complicated when there is a tight budget constraint. The MoU mentions that reforms in healthcare system should aim at improving efficiency and effectiveness, inducing a more rational use of services and control of expenditures. The constraint is even clearer in the area of pharmaceuticals, where it is expected to reduce public spending to 1.25% of GDP by the end of 2012 and to about 1% of GDP in 2013.[iii]

The growing cost of healthcare services jointly with increased costs arising from technological innovation are causing expenditures to overshoot. Since there are limited resources and theoretically unlimited needs, these cost-drivers are creating new challenges to health professionals, scientific investigators and policymakers. In this sense, knowing the social preferences is crucial for priority setting. However, the answer to whether an efficient allocation is better or worse than an equitable one cannot be given directly by economic analysis, requiring a value judgment that weights equity and efficiency. On the other hand, there is also no consensus about the adequate form of the Social Welfare Function. Nevertheless, as we have seen, today it is very unreasonable to adopt a Rawlsian Welfare Function (pure egalitarian), despite the attractiveness of the justice argument of choosing under a “veil of ignorance”.

In fact, setting priorities accordingly to social preferences is a very difficult task. For instance, at a first stage, we can often recognize that some groups may have priority against the others. However, at a second stage, when we attach the opportunity costs, it can well be the case that we do not detect evidence towards any social preference.[iv]

Most people tend to believe in the idyllic picture that if a given treatment is available, regardless of what it costs and no matter the chances of success (i.e. surviving), it should be made available to us. But let me ask: is it ethical to spend thousands of Euros in treatments with modest or null effects, when they are consuming large amounts of resources that could be used with better outcomes, including saving lives? Let me put it concretely: do 20,000€ justify two additional months of life, especially when it can be painful for the patient? It seems clear to me that some equity should be traded-off by efficiency when prioritizing in healthcare. The question is not if there should be rationing or not. Rationing does already exist and, currently, it is decided by the doctor when treating the patient. The focus should be instead in what type of rationing we want to have. And, in this context, I think it should be clear, explicit and responsible in order to avoid the so called “random rationing”.

Finally, some notes are worth to be mention, due to the introductory quotation by John Harris. Throughout this text, we have been discussing priority setting in healthcare. Let us now assume that there is only one medicine available and two patients to be treated: one aged 22 and the other aged 82. What to do? From my point of view, the “fair innings argument”, as exposed by Alan Williams, seems to be very attractive, implying greater discrimination against the elderly.[v] However, it is also subject to some criticism. What about those who consider that an individual has a greater right to enjoy additional life years the fewer life years he has already had? Moreover, what about the growing population above 65 and the possibility of lobbying in order to change government priorities?

The discussion will surely not end here. This issue is far from being consensual. Curiously, one of the thorniest issues is a question of semantics, that is, the negative connotation associated to the word “rationing”, which reminds us of times that we do not want to live again.

[ii] The report produced by the National Ethics Council for the Life Sciences (CNECV) can be found here:

[iv] For an interesting example:

Desser et al., Societal views on orphan drugs: cross sectional survey of Norwegians aged 40 to 67, British Medical Journal (2010).

[v] Williams, Alan, Intergenerational equity: an exploration of the ‘fair innings’ argument, Health Economics, Vol. 6: 117-132 (1997).

By Tiago Silva