Thousand Tier Healthcare

Commentary, Healthcare & Welfare, Frontier Centre

The wrangling over “two-tier” medicine has reached a fever pitch. One view has it that, if the private system is allowed to poach off the public one, medicare will be destabilized. Destabilized? The system is falling down around our ears while we obsess over means and ignore unaccomplished ends.

The diminished quality of Canadian healthcare — thousands heading south for an MRI or radiation therapy, long line-ups and waiting lists, patients sleeping in hallways and dying in emergency rooms — is apparent to all but the slowest of the slow. Most of us have to bear these costs; others with the means head to the Mayo Clinic. Both in hard dollars and as a percent of national resources, per capita health-care spending has gone up continuously every year but one of the last 25. But the problems persist and deepen.

Why don’t these augmented resources bring better results? Consider the money’s arduous trail. First, it flows through a series of bureaucracies, each of which demands its due in overheads. Health Canada gets its money from the federal budget and transfers it to the provinces. The provinces then remit the cash to regional authorities, which pay hospitals and other providers to deliver services. Since we simply assume that universal monopoly models lowball administrative costs, we don’t track them. We have so little information that we can’t measure what the public is getting.

That’s not the last of it. Healthcare resources are subject to the whims of political budgets. Out of money this year? Don’t hire any more nurses for a few years and stiff the doctors with price controls. Got the money this year, and running for re-election? Throw more cash into the system. Does this fiscal whipsaw lead nurses and doctors to leave the country? Spend more for training. But by the time the new graduates hit the workforce, will there be money in the budget to hire them? No one knows. So they move to other places that pay higher, market rates and offer stable working conditions.

Even if, miraculously, supply balanced with demand, the problems wouldn’t go away. Once a patient arrives at the hospital door, he has no idea how much it costs for treatment because the up-front price is zero. Having paid for his care through an arcane maze, the patient justifiably demands nothing but the best. The mission of healthcare workers — to heal the patient — prompts them to explore every possible remedy. Neither party has the tools to calculate costs and benefits, so the patient over-demands and the provider overtreats. Once the vicious circle closes, budgets are again depleted. The waiting lists grow longer and frustrated providers stack patients in hallways and closets.

The dialogue around healthcare from all party leaders and their platforms remains hopelessly constrained by what hard core policy wonks call “resource reforms.” The solution in this simple paradigm, where consumers stampede the “free” one-tier system, is to pour more money into the monopoly. No party wants to say the emperor has no clothes. Trouble is, we know it doesn’t work well anymore.

The alternative to this politically convenient but intellectually lazy approach is called “structural reform,” or changing the way Medicare operates. We can preserve the ideal of universal access but try new models that require smarter use of existing resources. We need to drive the “one-size-fits-all” bee out of our bonnet and separate the purchaser from the providers, thereby splitting the service side of the equation into thousands of tiers. That is, let the government continue to pay, but leave service provision to a decentralized market in which competition compels excellence and controls costs.

Canadians use governments to achieve many worthy goals, but we have to learn more effective ways to do it. Ask yourself: why don’t we rely on governments to combat hunger through direct ownership and operation of supermarkets? We know they would do a miserable job — that, on the contrary, thousands of grocery stores vying for customers’ grace and patronage will always work better than one big free grocery store with customers lined up at the door with no other place to go. Ask any Russian. The same lesson applies to health care.

We can fix Medicare and preserve the ideal of universal access. Thinking outside the box is the first step. Funding a competitive system that offers choices and responds to customer desires works better than funding a single provider monopoly that has no incentives to use resources effectively. The following mantra of 21st century public policy is worth repeating over and over. Government should make sure services are in place, but not fuss about providing them directly. Sweden has done this with healthcare and various other public services. The ultimate solution, of course, would be to put public money directly into the hands of customers through some form of medical saving account and get out of the central planning model for good — as they have done in Singapore and Nelson Mandela’s South Africa.

Either option is preferable to the sterile dialogue that permeates the discussion of Medicare. Allocating resources in a political system to win votes is not working, at least by the standard of providing timely and effective service. Demagoguery about “two tiers” won’t change that.

Or, with apologies to Mao Zedong: let a thousand tiers bloom; let a thousand tiers of health care contend.