Don’t emulate the US on health

2011-04-13

in Canada, Economics, Politics, Rants

On CBC’s The Current the other day, there was a panel discussion about health care costs and Canada’s system. Partly, it was a response to a recent article by David Dodge and Richard Dion. They basically say that health care in Canada is going to get too expensive, and lists some possible actions to respond to that.

One action that is mentioned by them and others is to more closely emulate the United States by having more of a private health care system. It seems to me that the point that should be stressed in response to that is that the United States has a poor health care system, particularly when it comes to value for money. Private insurers paying private health care providers does little to reduce the serious economic externalities that exist in relation to health care. The US system also does poorly on objective measures like life expectancy and infant mortality, especially when considered in terms of outcomes per dollars spent. The weird hybrid character of the US system – with insurance tied to jobs and adults with pre-existing conditions barred from new coverage – also produces significant economic inefficiencies, as people risk losing the health care along with their jobs and never being able to secure coverage again.

Ultimately, the mechanism for controlling health care costs is rationing. We cannot afford to give every drug and treatment to everybody, since we could theoretically spend an infinite amount of money on each citizen. What we can do is fund those interventions that are justified by the degree to which they extend and improve a person’s life. The super rich will always be able to afford to buy a superior quality of care out of pocket – and they can do so perfectly easily outside Canada. For our society as a whole, however, our health system should be focused on producing the best outcome possible for the greatest number of people at a reasonable cost.

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{ 22 comments… read them below or add one }

Padraic April 13, 2011 at 8:32 am

This is more narrow-minded of an argument than I usually expect from you.

1. You know that most of the OECD has some element of private insurance in their health care systems, right? Including lots of European countries that do much better than both Canada and the US, both in terms of cost and outcomes.

2. Life expectancy is a poor indicator of health care system quality. If you take out gun deaths and car accidents (which the US health care system can’t be blamed for), American life expectancy is in the middle of the pack.

Maybe you have good reason to be against privatization – but please don’t base this on a single data point!

Milan April 13, 2011 at 8:42 am

It’s not just a matter of life expectancy.

Private insurers don’t have interests aligned with those of the general public, so they must be constantly regulated to be prevented from doing unethical but profitable things. Of course, they are always trying to lobby their way out from regulation.

There is also a strong case to be made that single-payer systems can take better advantage of economies of scale.

The U.S. system is also problematic in that insurance is usually tied to your job, access to medical care is not universally available, and that adults with pre-existing conditions may be unable to get coverage.

There are certainly problems with the Canadian system as well, but I think it would be counterproductive to try to contain costs by emulating the US – especially given how the US spends more than anybody on health care and gets ‘middle of the pack’ results for it, at best.

Milan April 13, 2011 at 8:44 am

Private insurance might be a good way for people with money to top up their state-provided coverage, but it seems like a poor foundation for a nation’s overall health care system.

Padraic April 13, 2011 at 8:51 am

I can agree with you that the US is a bad model. All I’m asking you to do is consider more data points (i.e. the health care systems of the OECD) instead of just arguing from first principles when considering privatization. “It’s either Canada or America” is a terrible way to make policy.

I would recommend the work of Colleen Flood as providing a good survey on this issue. Her article “Is Canada odd? A comparison of European and Canadian approaches to choice and regulation
of the public/private divide in health care”, for example, lays out how the Dutch and German health care systems have much more private elements than Canada.

. April 13, 2011 at 9:00 am

This American Life
391: More Is Less
Originally aired 10.09.2009

An hour explaining the American health care system, specifically, why it is that costs keep rising. One story looks at the doctors, one at the patients and one at the insurance industry.

This American Life
392: Someone Else’s Money
Originally aired 10.16.2009

This week, we bring you a deeper look inside the health insurance industry. The dark side of prescription drug coupons. A story about Pet Health Insurance, which is in its infancy, and how it is changing human behaviors—for example, if you have the pet health insurance, you bring your pet to the vet more often, and the vet makes more money and…well, you can see the parallels.

Milan April 13, 2011 at 9:04 am

There are certainly good reasons to look at the experiences of other countries.

Still, if the worry is that Canada is getting poor quality health care and spending too much for it, it seems non-nonsensical to seek to emulate a country that gets even worse outcomes while spending even more.

U.S.-style privatization seems unlikely to improve the health outcomes experienced by Canadians, or reduce the amount they pay for the outcomes they get. It is likely that such a switch would just produce temporary reductions in government spending that are eventually more than offset by direct spending by individuals on health care services and insurance premiums.

Padraic April 13, 2011 at 9:06 am

What is the difference between US-style privatization and non-US-style privatization? You seem loathe to admit the latter exists.

Zhu April 13, 2011 at 10:42 am

The U.S health care system is hardly a model, Canada should look elsewhere for solutions!

Milan April 13, 2011 at 11:14 am

Padraic,

What do you see as the advantages of privatization?

Padraic April 13, 2011 at 11:20 am

This is a complex policy area that I don’t know enough about to give you an intuitively appealing argument.

My only point is that you should consider more data points when coming to a position, and that many of the OECD data points include elements of privatization – so privatization can’t be rejected out of hand based on the US example. Think of all your posts on climate science – consider the evidence instead of reasoning through climatology in one’s head.

I look forward to a future blog post on the health care systems of the Netherlands and Germany :)

Milan April 13, 2011 at 12:22 pm

Surely you can name at least one benefit of the policy you are at least partially endorsing…

If I had to research the arguments of all my readers myself, I would have little time for other tasks.

Tristan April 13, 2011 at 5:04 pm

I don’t want to de-value the level at which you are approaching this problem, Milan, but I think we should also look at this discourse in the context of feelings towards taxes and the relation of taxation to social equity more generally.

Since the 1980s average worker efficiency has increased massively, and yet those gains have not been represented in increased wages for the lower 80% of earners. It would be rational to use taxation as a way to re-distribute income according to productivity, but during this same period a hatred of taxes has been cultivated amongst the population. If you listen to Stephen Harper, we’re actually supposed to believe that raising corporate taxes will cost the government money – why has no one recognized the return of “voodoo economics”?

I think it’s questionable to talk about the costs of social programs as if they are something which we all pay for together without acknowledging how “we” all pay for them together, what the “we” is, how it is differentiated, and how some of that “we” has used its power to decrease its share. In other words, talk about how expensive a program is, especially an essential program like health care, can’t really be understood without talking about the changes in the tax structure over the last 20 years. When we say we can’t afford health care, we mean with today’s tax base – what would the numbers look like if we had, say, the taxes we had in 1980?

oleh April 14, 2011 at 11:48 am

One point Milan makes is the need to control health costs through rationing. A reality is that medical costs are very expensive. There is no end to the potential cost if we use the criteria of whether a particular expense could constitute effective treatment. Our entire tax revenue could be used for this purpose (with nothing left for anything else) and we could still spend more.

In particular we have technologies that would allow the extension of life at terminal stages which maintain life without an ability to provide for quality of life.

For Canada, the challenge is to recognize and accept this situation. We are trying to do that. One of the barriers to doing so effectively is that we as people find it hard to accept that means we cannot have a particular treatment or test because we do not qualify. That me the area where privately funded health care can step in. Rejection of that in Canada means that Canadians that can afford to do so then go elsewhere to do so. That generates income outside of Canada that could be generated in Canada. If it had been spent in Canada, there would be more income tax earned to pay for public programs.

I believe shutting off the debate on private health care on matters of principle ignores the reality that we simply cannot afford to pay for the medical services that we have learned to expect from our public system. This will become even worse as more of us boomers retire and look to the Milans, Padraic, and Tristans to fund our public medical system.

Therefore I suggest that we introduce rationing into the public debate. We have already probably reached a maximum as to how much of our tax revenue should be spent on medical care. Rationing is a way to save our public care system.

oleh April 14, 2011 at 11:53 am

Oregon as an example: I recall that about 20 years ago, Oregon undertook a risk – utility analysis to increase the number of people that could avail themselves of public health care. The bean counters determined that if certain expensive treatments were eliminated, the number of people who could be covered by public health care could double . Oregon did that. e most expensive treatments.

In Canada we already have universal health coverage. The example of Oregon could be used to justify a risk – utility review of treatments and stop funding those that are the least effective on a risk-utility basis.

alena April 14, 2011 at 12:24 pm

I have been told that in England, rationing is also used. A friend of mine who was a public health nurse in the Lake district told me that health care is provided quite differently to the elderly there than it is in Canada. Much more effort is made to keep the elderly in their homes by providing home support, pain medication in case of terminal illness, but it is rare to carry out bypass surgeries and to order expensive diagnostic procedures such as MRI’s. Visits by the elderly to emergency rooms in hospitals are also not as common there. I would suggest that we expand home care for the elderly in Canada and reduce the need for visits to the hospital which are not beneficial to the patient and cost a lot of money for the tax payers.

oleh April 14, 2011 at 4:02 pm

Alena’s example is a good one. The goal is to improve quality of life rather than necessarily extend it. Support for the elderly in their home environment can be a higher quality of life and less expensive that in a chronic care facility or as often is done in Canada in an acute care bed.

I think there is a realization of that benefit. One stakeholder that could be supported in that effort is the actual caregiver.

Tristan April 14, 2011 at 5:05 pm

All medical systems ration service. The question is whether we want to ration according to need, utility, public good, or according to an individual’s access to wealth.

BuddyRich April 15, 2011 at 7:18 am

Canada (Ontario in this case ) is no different. Ontario maintains a list of insured services under OHIP. Services that are not insured are not paid for. So we already ration in our own way. We do this for drugs as well. The expensive cutting edge treatments are not covered. Perhaps we should change the criteria for what makes that list.

I required surgery 3 years ago and I was given a choice, the OHIP insured tried and true method via anesthesia and scalpel or a non-invasive laser surgery alternative, which would have cost me $4K out of pocket but had me back on my feet a the next day or at worst the day after instead of a week or two later.

That said, Tristan brings up a good point, what was the tax base in 1980, what is our tax base today in 1980 dollars, and to complete the picture how much has the system expenses inflated since 1980?

With the boomers aging and retiring the pyramid will be inverted on itself in how we pay for these things, with a simultaneous increase in demand for service and fewer workers generating taxes to pay for it.

Its all kind of depressing really. Perhaps we should just adopt the Soylent Green approach and solve the hunger problem as well?

oleh April 15, 2011 at 7:27 am

I think the rationing needs continuous tweeking. I think in general in Canada we do a good job with this.

One area of cost saving is the use of generic drugs over brand names. In British Columbia the costs of generic drugs is mandated and over the next two years will drop to 35% of the brand names.

There is always the challenge between encouraging innovation which in health is expensive but also important and cost-savings

Ontario’s decision not to insure on the cutting edge appears prudent, especially within a public health model that needs to be sustained. I was disappointed that the Romanow Comission on health care in Canada did not focus on that option but instead opted for a recommendation for more spending.

A key spending consideration is to spend on preventative health care rather than illness care. This is an area of potential improvement. Basically the goal is to keep people healthy and out of expensive hospitals.

dot April 19, 2011 at 2:40 pm

The right way to reform health care A credible royal commission could force us to have a serious discussion of serious issues the next time we’re asked to go to the polls
MICHAEL BLISS
 
   Historian and author of The Making of Modern Medicine
 
   Everyone knows that action must be taken in the next few years to reform Canada’s health-care system. No one knows how to do it. As we are seeing, an election campaign is not the time to try to begin the discussion. Timid vote-seeking politicians are terrified of becoming off-side with public opinion, so they duck and weave and make impossible promises, and nothing happens. What we ought to be doing is thinking about how to get a credible process in place that could lead to serious reform in the next electoral cycle. The government that emerges after May 2 should sponsor a major national inquiry into the future of Canadian health care and health insurance. That inquiry, in the form of a royal commission, would make recommendations that the government would use as the basis for a reform program that could become the central issue in the next election. With concrete proposals for change in front of them, the voters could then decide yea or nay.
 
   Canada has a tradition of making major reforms in public policy based on the recommendations of royal commissions, a tradition that goes as far back as the Rowell-Sirois Commission on federal-provincial relations in the late 1930s. It also includes the recommendations of the Royal Commission on Bilingualism and Biculturalism in the 1960s, the Carter Commission on taxation in the same decade, the Royal Commission on the Status of Women, the Macdonald Commission on the Economic Union (which, in 1985, laid the foundation for the free-trade initiative) and, most obviously, Emmett Hall’s Royal Commission on Health Services, which, in the 1960s, provided the fundamental approach that became Canadian medicare.

. April 20, 2011 at 11:21 pm

TORONTO – — Premier Dalton McGuinty called on hospitals Wednesday not to shred documents after The Free Press reported a law firm was advising hospitals to avoid scandal by “cleansing” files of damning records.

Hospitals shouldn’t destroy documents in advance of records becoming subject to access requests by citizens on Jan. 1, he said.

“It’s wrong . . . you shouldn’t be doing that,” he said. “There’s the letter of the law, and there’s the spirit. I would ask that people who work in our hospitals respect both. There’s a legitimate expectation on the part of Ontarians that we get a better understanding of what is happening inside our hospitals. That does not justify, it does not authorize, it does not give licence to people working in our hospitals to start destroying documents.”

The Free Press broke the story this week about a law firm that recommended Ontario hospitals avoid an eHealth-like scandal by “cleansing” files of anything that might embarrass them before the access law takes effect — the firm mentions the eHealth fiasco that cost taxpayers $1 billion.

Milan April 24, 2011 at 10:17 pm

To me, this seems like a good basic principle for health care policy: everyone who is sick should be given cost-effective help.

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