Invest more in healthcare?
By Marcel Côté
Healthcare funding is back in the spotlight. Given that Canada currently spends 10% of its GDP on healthcare, could additional investments improve the situation? Nothing is less certain. Would a 10% increase in spending change anything? Undeniably there would be a short-term impact, but longer term the shortage and service quality problems would not disappear. They're caused by structural deficiencies not underfunding. Money is not the answer to everything that is wrong with the sector.
The market for healthcare service is atypical. Both the supply side and the demand side have their peculiarities, leading easily to huge cost increases. It is important to un-derstand just how the system works. Most people will go to any length to maintain their health, even when there's no miracle cure. A woman will want to give birth under the best of conditions. Someone suffering from chronic back pain will readily go doctor shopping. AIDS patients do not flinch at medication costing thousands of dollars per year. We as a society expect the best emergency care for serious accident victims. cancer patients generally seek the latest treatment. Demand for quality care is limitless: money is seldom a consideration on the demand side.
Where cost isn't an issue, modern medicine will deliver the goods. Doctors will order additional tests if there is the slightest doubt about a diagnosis. Medical equipment is increasingly expensive; a modern hospital bed requires an investment of more than $1 million. New drugs are expensive because phar-maceutical firms rely on them to recover research costs. What's more, medical accidents or errors bring lawyers into the picture, adding costs. There is no limit to what modern medicine can offer, but at a price.
If left unchecked, market forces lead to a cost explosion. Everyone tries to pass the costs to some-one else, leading to inflated prices and unaffordable healthcare for those in low-income brackets. That's why everywhere, governments intervene to structure healthcare, more specifically to ensure minimum access and control the passing on of costs. Before investing more into the Canadian healthcare system, we should review its structure. Incidentally, Roy Romanow's report was a failure in this regard as it failed to challenge the status quo. It's the rules of the game that need to be changed. Here are a few suggestions.
Single-payer system: the main feature of the Canadian system is its single-payer structure in each province. All Canadians are covered by a universal plan funded by government. The advantages of such a system include lower administrative costs (typically 1% of GDP), universal access and basic care standards. Its major flaw is the monopoly given to service providers (doctors, hospitals). The problems of this unregulated government monopoly are familiar: arrogance, lack of responsiveness, waiting lists, poor service. But these failings can be mitigated while maintaining the benefits of a universal access system. Canada should not do away with the efficiency and social benefits of the single-payer system pro-viding universal access to quality healthcare.
Privatize service delivery: in the 1960s in Canada, govern-ments took over the control of hospitals. The time to denationalize has come. Hospitals should be privatized or converted into independent not-for-profit organizations. Free from government shackles, hospitals should have to compete for customers. Their investments should be funded from their own cash flows.
The fee-for-service system should be changed. It encourages doctors to maximize the number of medical acts, clogging the system. The fee-for-service monopoly should be torn down. We need an in-depth national debate about improving healthcare delivery through changes in the role of public and the private sectors.
A private system: should we go further and bypass the uni-versal access system, letting people buy healthcare services on the private market? Those willing to pay for superior services should have access to them. But we should make sure this private sector competition does not penalize the universal access system and take funding away from it. But what better mechanism than competition from the private sector to ensure the public-payer system sheds its monopolistic drawbacks. Managing a healthy competition between our cherished universal access system and private providers is the best way to keep Canada's healthcare system in good shape.
Marcel Côté is a partner at SECOR Inc. in Montreal |
