Consumer-Controlled Universal Access

Commentary, Education, Frontier Centre, Public Sector, Uncategorized

While certainly welcome, the minor tax reductions promised in the new federal budget do little to relieve the expensive burden of government.

We still spend about half our incomes on government services. Since much of this money goes into health care and education, one might hope these industries sparkle with efficiency.

Not true.

Standardized test scores in public schools continue to shock parents. Each new round of testing confirms the bad news, that just over half of Manitoba’s students manage to pass at all. Our universities now consign an astonishing proportion of high school graduates to University 101, a remedial program designed to bring their academic skills up to a bare minimum.

Daily newspapers provide a running account of the deepening crisis in health care. Waiting lists for non-emergency services grew longer in 1998, so the average Canadian now has a three-month delay between the onset of symptoms and eventual treatment. Hospitals across the country have lines of beds in hallways; luckier patients are shoved into broom closets.

How can we spend so much for these services and get so little in return? The problem lies in how we organize spending.

Few disagree with the concept of government funded universal access for basic services like education and health care. Yet few also realize that there are two ways of maintaining universal access. The government can take the money involved in education, for example, and give it to thousands of consumers who use the service. Or it can give the same pile of cash to a single organization that produces the service.

Consumer-controlled universal access is straightforward. Give the parents the money for schooling directly, or simpler yet, let them deduct the amount off their taxes. The advantage is that the consumer is in control. Excellent schools, for example, will attract more customers. Bad schools, on the other hand, will lose customers and close down. This method of universal access encourages innovation and the efficient use of resources. It also saves the politicians the grief of making complicated and controversial resource allocation decisions.

However, the traditional way has been to take the same cash and give it directly to a single government service provider. The single provider model of universal access to services confers advantages like simplicity and lower transaction costs. You don’t have to choose between different brands or worry about paying invoices. But the negatives overwhelm the positives.

Without competition and a need to please customers little effort is made to calculate unit costs of service or benchmark them against objective standards. What do you compare them with when there are no alternatives? Without a consistent consumer focus, the monopoly model also falls prey to the phenomenon of provider capture. Teachers and health care providers have the backing of well organized, powerful professional associations unlike the average taxpayer, student or patient. Their demands, plus the absence of incentives to control spending on bureaucracy, balloon costs to the detriment of the customer.

The inevitable consequence is unnecessarily high costs and low overall performance. The public’s only means to express unhappiness about it, at election time, occurs too infrequently to offer much relief. And in Manitoba the choices are limited. Both the Conservative government and the NDP alternative remain wedded to the single provider model of universal access.

Most people agree that healthcare and education should be universally funded and accessible. But wouldn’t things be more interesting if there was a choice between a consumer-controlled model and the traditional producer-controlled model?