The Underfunding Myth

Commentary, Frontier Centre, Healthcare, Manitoba, Uncategorized

Hospital waiting lists continue to grow. Rationing access to facilities and treatment has become our primary method of controlling constantly increasing health care costs.

In 1996 the average Manitoba patient waited 3.8 weeks to see a specialist after referral from a family doctor; in 1997 the delay grew to 4.4 weeks. After finally getting in to see the specialist, he or she had to wait another 5.9 weeks for treatment in 1996; in 1997 it took 7.1 weeks. The lineup includes people with cancer and heart disease, where speed of treatment makes the difference between life and death. When surveyed, doctors agree that these delays are much longer than is medically safe.

The solution offered by the organized stakeholders in Medicare — doctors, nurses and hospital administrators — has a familiar ring: give us more money. In its recent budget, the federal government obliged with its five-year, $11.5 billion "reinvestment". Will it work? Not likely.

The popular myth that Medicare’s problems stem from a lack of funding is a political perception, not an economic fact. The perpetual fight over budget share obscures the reality, which is that government spending on health care has never been reduced. It has risen steadily.

The Canadian Institute for Health Information, an Ottawa organization that has been crunching healthcare statistics since 1995 tells us the following:

  • From 1975 to 1996, total expenditure, unadjusted for inflation, rose five-fold from about $500 to $2,513 per capita. If we remove inflation, real spending rose from a base line of 100 to 190. In other words, it nearly doubled over 21 years.
  • In 1990 total expenditure in Canada amounted to $61 billion. In 1998 that figure stood at $80 billion, over 30% more. Adjusted for inflation, i.e. in real terms, the country’s medical system has received 10% more money over the last eight years.

Where does Manitoba stand among the provinces? Our government spent $1,741 per citizen in 1998, behind only British Columbia, Saskatchewan and Newfoundland. In 1996 Canada dedicated 9.2% of its Gross Domestic Product to health care. Manitoba came in significantly higher at 10.4%. The argument that the Filmon Government has been stingier than others is quite simply false.

We have spent more, yet the shortages have grown. Why?

In a recent issue of the Fraser Forum, William McArthur, a B.C. physician, explains it: "Hospitals receive periodic block payments from government, a method known as global funding. Instead of getting paid for the service they provide to individual patients, they get their money in lump sums at agreed-upon intervals."

Welcome to a system that disconnects performance from payment. Result? There are no incentives to increase product quality for captive customers. Whom do you have to please to keep the dollars flowing? The bureaucracy that operates and funds the system, the workers or the patients? Under Medicare, the priorities are clearly one-two-three in that order.

The system is a classic case study in low-performance government. In a cost-plus monopoly, consumers have to take whatever the "producer" gives them. Since information about costs doesn’t exist, we can’t track the declining results. Last, our politicians are not much help. They should be policy-makers, not policy-implementers. They fail miserably by involving themselves in operations, where they can not reasonably be expected to have skill or experience. Deciding wage levels is an obvious example of inappropriate involvement. No surprise that the nurses’ union is negotiating in the media for big pay increases just as an election looms.

Next week an alternative that simplifies life for our politicians while creating incentives to maximize value to you, the customer.