A Conversation with David Gratzer

Media Appearances, Healthcare & Welfare, Frontier Centre

Frontier Centre: In your book, you paint a very dismal picture of the state of Canada’s healthcare industry. Is it that bad? Is it getting worse?

David Gratzer: Increasingly people have angst about the system. Eight out of ten Canadians in a recent Angus Reid Poll thought the system was in crisis. Of course, there is always a difference between what people perceive and what is the case, but I think that there is plenty of anecdotal evidence that there are significant problems with the system and perhaps, more significantly, studies are showing time and again that our waiting lists are having an impact on people’s health and the care they receive. Now, the big question is, is this going to get better with time and most policy analysts try and argue that we are in some sort of an awkward public policy adolescence and if we just wait a little bit longer all the problems will be resolved. The demographics are such that that won’t be the case. Couple that with the continuing high expense, high tech medical revolution, without significant changes to the system, Medicare is going to be crushed under the weight of rising expenditures.

FC: You are just as critical of politicians as the system itself. Why has no political party been able to come up with a sensible solution to the healthcare crisis?

DG: Canadian politicians aren’t exactly known for their risk taking and certainly on public policy issues our politicians seem to be much more conservative in a non-political sense. I find it a little bit astonishing that so many people are concerned about the system and so many people favour alternatives – certainly not a majority – but a good voting block and yet it doesn’t much matter if you are talking about the Canadian Alliance or the New Democratic Party – every one is on the same page federally and provincial politicians are the same. Why is no one really willing to take on the system? It is a good question, but as time progresses more and more politicians are going to have to choose something innovative because the status quo won’t last. In fairness to politicians, in some senses we get what we elect and for the better part of thirty years we have defined ourselves as being a country with a good healthcare system and it is very difficult to break away from this thinking and so, if our politicians are guilty of it – maybe that is a little bit understandable given that we are guilty of the same.

FC: Your views on the industry have not just been based on research, but on hands-on-experience as a medical student. How disenchanted are healthcare workers with the system? Have they become so demoralized that they are unable to provide effective medical care?

DG: There is definitely certain professionalism. Nurses and doctors are very frustrated but many of them still try exceptionally hard, still it is difficult not to be impressed with how frustrated people are. Let me give you an example, people often speak about young physicians looking South but they very seldom quantify it. There was a study done by the former Registrar of the Canadian Association of Medical Colleges looking at young “docs” and where they set up practice – for every two doctors graduated in this country, one will eventually set up practice south of the border. So, if doctors are frustrated and not particularly vocal about it, they certainly do vote with their feet. One gets the sense from news reports that nurses feel just as frustrated and that is part of the problem when you have a government system. As well, government mechanisms for saving money try to squeeze doctor’s contracts. That creates a lot of animosity towards the entire system and it results in unhappy practitioners.

FC: What is your opinion of the reforms underway in Alberta, where private clinics are going to be allowed to compete in a limited way with government facilities? Isn’t healthcare too important to allow the profit motive in hospitals and clinics?

DG: There is nothing I would love to do more today than talk about why Ralph Klein is doing something imaginative and innovative in Alberta. The fact of the matter is, he isn’t. Bill 11 is pretty much pushing ahead with things that are going on in every single province – we contract out for basic things like laboratory work and home care as well as surgeries. It doesn’t much matter whether you are in conservative Alberta or socialist Saskatchewan. Bill 11 would allow overnight stays – it is an extremely modest step and not particularly significant and really doesn’t give consumers any more choice and freedom but does give some government bureaucrats a bit more flexibility. With the final amendments I have to disagree with your assertion that private facilities would compete with government clinics. With the final amendments that won’t even be the case. It is only when government clinics are completely “maxxed out ” that they can contract out to private clinics.

As for the profit motive -one of the deep tragedies of Alberta is that we are now against profit in healthcare. It is as though every single doctor and nurse worked out of the goodness of their heart. I think profit is an extremely important aspect to any sector of the economy and, despite what policy analysts and health economists might maintain the laws of economics to a plan of healthcare. Just to give you one example, the big revolution in healthcare in the last twenty years has been pharmaceuticals that are able to do so much more. Twenty years ago, if you had arthritis you would have to suffer through it, today with COXII inhibitors, people can actually hold down jobs. With Risperidol and other such drugs, more people with schizophrenia are able to hold full-time employment. Why have pharmaceutical companies managed to develop all of these goods? They have a profit incentive. I think profit is important and should be a part of our healthcare system and so does every doctor and nurse and orderly who shows up for work and expects to collect a pay cheque.

FC: You advocate Medical Savings Accounts as one solution for the healthcare crisis. How do they work?

DG: I would suggest that for a very good summary of Medical savings accounts that you check out the paper that your think tank has just put forward.

I think Medical Savings Accounts would be a way of addressing this concern. Basically we have corrupted the doctor/patient relationship in our healthcare system and when you do that you open up a “Pandora’s Box” of perverse incentives – most importantly, for the patient to over-consume health resources and for the doctor to over-provide them. The only way you can really get around that is to re-attach some financial consequences to the doctor/patient relationship. MSA’s do it; MSA’s are the way of providing universal care in Singapore since 1984. The Chinese government has been experimenting with this idea as well and you can see some experiments additionally in the private/public sector of the United States. It is the number one insurance option in South Africa. I think this model maintains universality and accessibility but gets rid of the need for government micro-management and the need for waiting lists.

FC: Wouldn’t they mean the privatization of healthcare?

DG: It depends what you mean by privatization? If what you want is a government monopoly with no private sector role whatsoever, we have already failed. Governments contract out for a variety of services. If what you want is a strong healthcare system, with public funding but with private options, MSAs are a way of doing it. MSAs offer a useful blurring of the line between the private sector and the public sector.

FC: The single-payer model is touted as more efficient than a competitive framework because it eliminates unnecessary spending on billing and administration. Do you agree?

DG: I always find it amazing when we talk about healthcare in Canada that all of the Medicare cultists marvel at our low administrative costs. Sometimes they throw out figures that tend to get more spectacular with the years. When I started doing research on the book, Americans spent three time what we do on administrative costs – by the time I had finished doing the research for my book, they were spending eight times more on administrative costs so, obviously, this is a sensational point but I also think it misses the larger picture. We don’t spend much on administration, unfortunately, we also don’t track health outcomes and we don’t have very good information. Americans tend to over do it and I could give you a very long technical explanation as to why Americans spend too much on administration. We probably spend too little and if we introduced an MSA system, undoubtedly there would be some initial start-up costs as we tried to figure out how much hospitals actually spend on different areas. I think that would be both useful and important.

FC: A key component of MSAs is the provision of long-term and catastrophic coverage by private insurance companies. Wouldn’t they have an incentive to cherry-pick people with the lowest risk and leave the sickest people without coverage?

DG: Cherry-picking, or to use a more technical phrase, “risk selection”, is something that comes up often in the debate about MSA’s in the United States. It is not actually an unreasonable point to make whenever you are talking about insurance and healthcare. There are certain people with underlying conditions that make them more susceptible to higher health care costs. Just to give an example, if somebody has had three heart attacks and seeks out catastrophic insurance, obviously he is at a higher risk of some sort of coronary event than somebody who is healthy and fit. That being said, that is a role for government to play – either to directly provide the catastrophic coverage for those people or to give them extra money in order to purchase catastrophic insurance. Another idea that has come up is that they simply make it illegal for companies to exercise “risk selection”. Any of those options would be reasonable. The question is how are we going to handle the poor and the chronically ill. With Medical Savings Accounts that is a role for government but pretty much the only role for government. People get antsy about that but let’s look at another need – like food. There are some people that can’t pay for food in our society and I think it is a legitimate role for government to provide them with monies to pay for things. On the other hand what we ought not do is nationalize agriculture and nationalize food distribution because, you know what? – the government would do a pretty rotten job trying to run the local Safeway or the local Westfair Foods. Should we be sensitive about issues regarding the chronically ill? Yes, is that a role for government to help them out either through some form of regulation or some subsidization? Absolutely. Does that mean that government should run 10% of our economy in order to accommodate two percent of the population? I don’t think so.

FC: In the MSA model, what role should the government retain in accrediting medical facilities and treatments? Wouldn’t a narrow definition of what’s acceptable leave too much power in the hands of professional associations?

DG: The question is how should we deal with private clinics. It is a question we have to deal with right now actually. I think in the simplest model of Medical Savings Accounts we won’t change any of the definitions and provincial regulatory boards will just continuing doing the jobs they do now. But I am not overly concerned with standards and regulations because very quickly in an environment where consumers have power to make decisions for themselves you will find consumer advocacy groups developing and consumer publications working to hold people accountable for their actions. Of course, wrong decisions lead to litigation. So I am not overly concerned with government over-regulating but it is obviously a sensitive issue and it would be a challenge for a government to hold that role. On the other hand, that is one of the very few legitimate roles government should have in our healthcare system. Rather than trying to micro-manage our entire healthcare system, they ought to be there to regulate to ensure that the patients get good care. In terms of professional associations dominating the issue of a medical monopoly which you are kind of alluding to, is a big one, I don’t touch it in the book but obviously as our healthcare system continues to evolve, it is clear that there are more roles for Nurse Practitioners and so on. That is a political issue and a topic for another book, another day.

FC: Have your views on Medicare reform provoked any constructive responses from inside the industry, from colleagues or others?

DG:DG: I get many speaking invitations from doctors’ groups and citizens’ groups that look at healthcare issues. Unfortunately, big bodies such as the Canadian Medical Association, have in recent years decided to play it safe and advocate fairly modest changes – throw more money at the system, so to speak. So, we haven’t seen anything particularly radical come of my book in terms of political parties or professional bodies advocating these ideas. But, hopefully, putting some new ideas forward will inspire to tell others about such things and we will see what happens.

FC: How quickly do you believe that Medical Savings Accounts would work to restore our healthcare system?

DG: MSA’s would have a fairly profound effect on things right away. Sir Roger Douglas tells very nice stories about what happens when there is competition in other aspects of the economy in the context of New Zealand of the late 1980’s and so on and I think you would see very quick changes. Right now, patients are users of the system; they don’t pay any money for the services they receive. As a result, there satisfaction isn’t particularly important. With an MSA system, from day one on patients would be payers of the system. To give one very brief example, I had a friend who had a gall bladder attack and the doctor sent her to the emergency room to get an ultrasound to confirm that she had gallstones and she showed up at 9 in the morning and she waited on a stretcher in the emergency room in paid til 3:30 in the afternoon at which point in time she was told that the technician went home for the day. And they said why don’t you just wait on the stretcher all night long and we will do you first thing the next day? Why is that? Since she is a user of the system, it doesn’t much matter whether she feels great about the care she got – the hospital will get the same block grant. On the other hand, if she was a payer of the system, she would be treated with a little more respect because her dollar would be the taken to another CT facility.

That’s why I think MSA’s are important and useful from day one on.