Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.

Rationing Pharmaceuticals in Medicaid: Putting a Price on Human Life?

Michelle Crotwell Kirtley


By Michelle Crotwell Kirtley

March 16, 2015


The recent pace of innovation in the pharmaceutical industry is staggering. Emerging technologies have facilitated the production of a new generation of cancer drugs, have resulted in life-saving therapies for debilitating infectious diseases such as Hepatitis C, and have produced novel treatments for genetic diseases such as cystic fibrosis. Although welcome news for many patients, the steep prices of these new pharmaceuticals have forced payers (insurance companies, Medicare, Medicaid) to face complex ethical dilemmas about how to allocate scarce resources among patients.

These health care resource allocation decisions are not new– transplant organs are routinely rationed using wait-lists that are prioritized using strict criteria. But these decisions are becoming more difficult as both the price of pharmaceuticals and the number of patients needing treatment continues to increase. And although the need to ration health care has attracted public attention from time to time, our society has yet to develop any consensus as to how such decisions should be made. Because these dilemmas expose our most basic underlying assumptions about what it means to be human, the nature of justice, and the role of government, broad consensus may be elusive. 

Consider this dated, yet telling example. When dialysis was first introduced as a treatment for chronic kidney failure, a lay committee was established to decide who would be granted access to the scarce, life-saving treatment. A 1962 LIFE magazine article exposed the social criteria used by the Committee (net worth, marital status, educational status, occupation, number of dependents), which sparked public outrage at the use of these social metrics to determine, as LIFE magazine put it, “who lives or who dies.” A decade later, as dialysis treatment became more widespread, Congress finally felt the need to weigh in. But instead of engaging in a robust debate about how to allocate dialysis treatment justly, Congress solved the problem by eliminating the scarcity, granting universal funding for dialysis through Medicare.

With the US national debt over $18 trillion and counting, funding every individual needing treatment just isn’t an option. Rationing health care is inevitable. All payers, including private insurance companies, routinely make difficult coverage decisions in light of available resources. Allocation decisions are arguably most acute in the Medicaid program, the federal-state safety net that covers the poor and disabled. Unlike Medicare, whose ballooning costs can be added to the national debt, Medicaid is funded by individual states and then supplemented by the federal government. Because states cannot borrow to cover shortfalls, breakthrough pharmaceuticals are putting intense pressure on already tight budgets.

Medicaid’s Difficult Choices.

Three poignant examples illustrate the difficult choices that Medicaid faces. In 2012, Vertex Pharmaceuticals released the groundbreaking drug Kalydeco for the treatment of a small subset of individuals with cystic fibrosis, a genetic lung disease that usually kills its victims before they reach the age of forty. But one year’s worth of Kalydeco costs $300,000 per patient, $239,000 with the Medicaid discount. For one patient, for one year. Yes, you counted the zeros correctly. Arkansas’s Medicaid program originally decided that patients had to prove that they were no longer benefiting from less expensive therapies before they would be eligible for Kalydeco, but three cystic fibrosis patients sued the state’s Medicaid system. Arkansas ultimately settled the suit by agreeing to relax its criteria, a decision made feasible financially only because the patient population for Kalydeco is so small. But although the drug helps correct the fundamental physical defect that causes cystic fibrosis in these patients, it does not permanently fix the problem, and thus is not a cure. This means cystic fibrosis patients will require this expensive treatment for the rest of their (now-extended) lives.

Several of the most promising new oral cancer drugs (as opposed to traditional chemotherapy which is given intravenously) also carry a hefty price tag. A number of states have passed “parity” laws requiring private health insurers to swallow the significant price difference between the two forms of treatment without passing along any extra cost-sharing (co-pays, etc) to their clients. But in most states, Medicaid can’t afford to offer these drugs to the thousands of cancer patients who need them. Mortality rates from cancer are higher in Medicaid patients than in the general population, raising the moral stakes for the coverage of these expensive pills, several of which cost $100,000 or more for a course of treatment.

These moral dilemmas become even more challenging in the case of new drugs that virtually cure Hepatitis C. Over four million Americans are infected with Hepatitis C today, and over 75 percent of these will develop a chronic infection that can lead to liver cirrhosis, liver failure, and liver cancer. Each year, at least 15,000 people in the United States die from Hepatitis C. Because Hepatitis C is a blood-borne disease, intravenous drug use is the most common risk factor for new infections, and some studies estimate that between 65 and 90 percent of IV drug users are infected with Hepatitis C. The new Hepatitis C drugs Solvadi and Harvoni cost over $90,000 per course of treatment but reliably cure 90-99 percent of patients. Given the number of Hepatitis C patients on Medicaid, providing the drugs to every infected Medicaid patient would break most state budgets. States have set a variety of criteria to determine eligibility for these expensive Hepatitis C drugs. Many only cover the drug for patients who have end-stage liver failure and who are not currently using IV drugs or who are actively in rehabilitation. This, of course, excludes many infected individuals who are at risk for continuing to transmit the infection to others.

So how, then, should states allocate scarce health care resources among Medicaid recipients?

Principles to Guide Allocation Decisions.

First, allocation decisions must always seek to affirm the dignity of each individual, regardless of their social position or medical condition. The intrinsic worth of every person is derived from their status as an image bearer of God and remains constant, regardless of their age or ability to contribute to society. Government has a responsibility to care for vulnerable people who may be falling through the cracks; as the Center for Public Justice Guideline on Welfare indicates, “people in dire poverty [or any other state of social vulnerability] need help even when their neighbors are not generous or when economic conditions restrict private charity.” Medicaid in particular exists to care for people who would not otherwise have access to health care services.

Second, because rights (in this case access to health care) come with responsibilities, allocation decisions must, where possible, encourage personal responsibility. Medicaid should incentivize and encourage healthy behaviors that will increase the likely benefit of the treatment, reduce costs to the program, and promote dignity and self-sufficiency, while recognizing that many health conditions are beyond personal control.

Third, rationing decisions must reflect the biblical principle of stewardship. At the level of individual patients, this means that treatments must be applied wisely and not wasted. Embedded in the principle of stewardship is the idea of allocating based on need. Need is a reflection of both how ill patients are (to include not only how near death but also measures of pain and suffering), and how likely they are to benefit from the treatment. As one academic put it: “No matter how ill a patient is, it is hard to see how she can “need” health care that does no good.”  Need also encompasses estimates of harm from not treating and potential harms from treatment. At the systems level, coverage decisions that maximize the potential reach of the finite resources available should be encouraged.

Fourth, allocation decisions should be made in the context of an individual’s whole health—mental, emotional, spiritual, and physical—and, where possible, in conjunction with other social services and institutions available to help the vulnerable. Because of their established and trusted roles in local communities, faith-based and other community based non-profits often have unparalleled access to marginalized populations and a unique ability to offer holistic solutions to their clients. Medicaid-covered treatments should be coupled with services, including those that are not directly provided by the government, that will enable compliance or improve the benefit of the treatment. The government should encourage and cooperate with non-governmental institutions seeking to improve the health of the poor and marginalized at various levels—whether through treatment for addiction for Hepatitis C-infected drug users or education on diet and nutrition for patients struggling with diabetes and heart disease. Government, churches, and non-profit institutions should work together to ensure that all are compassionately cared for even if all cannot be treated.

Fifth, allocation decisions must be made with an appropriate view of death. Death is an evil, unnatural effect of the fall, but as Christians, we also know that death is not the greatest evil and is not the end. We have a unique opportunity to imitate and work alongside our Savior when we work to heal the sick, and an appropriate view of death will help us guard against vitalism, a view that life must be preserved “at all costs.” While it is human nature to expend enormous resources to save an individual life (called the “rule of rescue” by bioethicists), systems, and governments in particular, cannot afford to treat or prevent every life-threatening illness. A multifaceted assessment of need, as described above, along with an appropriate view of suffering and death in the context of a high view of human dignity, can help allocate resources appropriately. This may mean, for example, that an expensive drug with severe side effects that may only extend life by a few months is denied to a terminal cancer patient.

Applying the Principles.

Taken together then, how can these principles help navigate the ethical dilemmas state Medicaid programs are facing? While it is beyond the scope of this article to methodically apply these principles to the examples above, a few conclusions are possible.

In the case of the Hepatitis C drugs, it is reasonable for state Medicaid managers to limit access to the new costly therapies to patients who are the most needy (whose livers are already failing) and who are also drug-free (and therefore most likely to comply with the treatment protocol). Similar rules already exist for liver transplants. These decisions are not a reflection on the worth of the active drug user but rather are a way to steward a limited resource well and consider the whole health of the IV drug user. Arguably, treatment for Hepatitis C is not the drug user’s greatest need. Importantly, Medicaid covers less expensive Hepatitis C treatments even for IV drug users, and Christians can answer the call to love their neighbor by helping IV drug users conquer their addiction so that they can become eligible for the more effective therapies.

Many Christians are uncomfortable with the idea of rationing because it has often been approached from a purely utilitarian perspective. The U.K.’s health system, for example, uses such an approach to allocate its resources, measuring health benefits through “quality-adjusted life-years” or QALYs. The QALY formula assigns a year of perfect health a value of 1 and death a value of 0 and some states of health a negative value. Costs of various interventions are factored in to produce a “cost-utility ratio” which allows health fund managers to make decisions about which treatments to cover. Under this rubric, curing an otherwise healthy twenty-five-year-old woman of breast cancer would be of more value than a similarly priced intervention for a fifty-five-year-old obese diabetic. Christians have rightly opposed purely utilitarian forms of resource allocation because these approaches fail to adequately affirm the dignity of all human beings and ignore Scripture’s explicit call to care for the elderly, the poor, and the otherwise vulnerable. Nonetheless, measuring the “utility” of a given therapy is not wrong per se and may play an important role in exercising good stewardship.

Finally, although scarcity cannot be eliminated, it can be marginally mitigated. One way to reduce scarcity in Medicaid is to raise state taxes, which may or may not be just or prudent public policy, depending on the state. Even with additional tax revenue, Medicaid must compete with other state budget priorities such as education, vocational training, and infrastructure. Resources could also go further if some drugs simply cost less.  Some economists believe that while the market is the best tool available for bringing innovative medical technology to patients, distortions in the market have led pharmaceutical companies to price some drugs too high.

In the case of an expensive colorectal cancer drug, oncologists at Sloan-Kettering publicly protested the high prices, leading the manufacturer to cut the price in half. Oncologists have also protested the price of Gleevec, a highly effective leukemia drug, although it remains to be seen how the manufacturer will respond. Due, in part, to the release of an even newer competitor and to shrewd negotiating by payers, the manufacturers of the high-priced Hepatitis C drugs may offer significant discounts next year. In the case of the cystic fibrosis drug Kalydeco, the manufacturer defends the steep price on the basis of the small size of the eligible patient pool.

There is clearly work to be done in devising a framework for pricing pharmaceuticals that will do justice to shareholders, payers, and patients, while continuing to encourage medical breakthroughs. Christians in positions of influence should advocate for the vulnerable, arguing for lower prices where appropriate. Christians should also be actively supporting civil society efforts to improve access to expensive therapies through charitable foundations and other non-profit health care organizations.

Of course, in our pluralistic society not everyone will agree on the principles I have offered here. Robust, transparent public debate not only among medical professionals—who are currently grappling with the Hepatitis C dilemma—but also among average citizens will help build consensus about the kinds of principles we want used to make these often heartrending allocation choices. As costly personalized medicine and customized therapies become more widespread, the allocation decisions will become even more difficult. As Christians, we must concede that rationing health care is a sad but inevitable consequence of this fallen world and live up to our calling as citizens to help ensure that rationing is done justly for the good of all.


Questions for Reflection:

1. Where have you seen rationing occur in the health systems you have been a part of, either as a patient, a caregiver, or a medical professional? Did those allocation decisions follow the above principles? 

2. Have you ever been in a situation where a treatment or test has been denied by an insurance company, Medicare, or Medicaid, or other payer for you or a loved one? Did you feel that denial was just? Why or why not? How do the principles outlined above influence your perspective on that situation?

3. In what ways can you advocate for a just approach to health care rationing? What unique role or opportunity has God given you to urge our society towards a more compassionate, communal, and just perspective on allocating scarce health care resources?


- Michelle Crotwell Kirtley is the Bioethics & Public Policy Associate at the Center for Bioethics & Human Dignity and a former health and science policy advisor on Capitol Hill.  She is also a Trustee of the Center for Public Justice and a 2003 alumnae of the Center’s Civitas program in faith and public affairs. 


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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”