Romanow Rx may be worse than expected

Worth A Look, Healthcare & Welfare, Frontier Centre

Tuesday, October 22, 2002

Judging by Roy Romanow’s comments to a group at Harvard last week, his health-care report will be even worse than expected. Here’s how, in just a few sentences, he justifies extending — yes, extending! — the single-payer model for health care into new areas of coverage:

“If we were to compare cost increases in the publicly funded, privately funded, and mixed groups of services … it is the publicly funded group — hospital and physician services — that wins, hands down. Indeed, per capita spending on these publicly funded hospital and physician services is the same today as it was in 1991.

“[A] principal [reason] why hospital and physician service costs have not grown … is that single-payer insurance systems have lower administrative costs … Private insurance systems spend a lot of money on the extensive infrastructure required to deal with multiple insurance companies, assess risk, set premiums, design benefit packages, review claims and reimburse beneficiaries.

“By contrast, a single insurer is spared a lot of these administrative outlays. However, more than half of all health-care activity remains outside the single-payer system.”

How is this thinking wrong? Let us count the ways.

First, controlling costs is not the be-all and end-all of health care. What Canadians really care about is whether they can get the service they need when they need it. Keeping costs from rising is easy. You just clamp down on budgets, as Canadian governments have been doing since the early 1990s. Service may go to hell — as increasing numbers of Canadians think it has — but your costs don’t rise. Canadian bureaucrats attending international conventions of health-cost controllers can be proud. The rest of us can simply wait longer for care.

Second, the fact that private providers of health care may have — may have — higher administrative costs does not say anything about the growth of such costs over any particular period. Private providers always have these extra costs. What Mr. Romanow has to show is that increases in such costs over the 1990s explain all of the cost increases he’s so worried about. I’ll bet he can’t.

And I doubt the premise. If you dragged a fine-toothed comb through the country’s ministries of health and education, I bet you’d come up with more time-servers, paper-shufflers, and spin-doctors than if you performed the same exercise in the country’s top 20 firms.

Yes, private providers do have costs that public providers don’t. They are the costs of competition. What Mr. Romanow ignores is that competition brings benefits as well as costs. With competition, consumers can tell competitors who are not delivering good service at a reasonable price to get stuffed.

If reducing the wasteful costs of competition is so important, why don’t we do it in all industries? Why don’t we merge McDonald’s and Burger King and Wendy’s and Tim Hortons and all the other fast-food franchises and let them save billions and billions of dollars on competitive advertising and differentiated packaging, mascots and, indeed, products. And why stop with fast food? We could save ourselves the same kinds of costs in all the country’s industries. Make every leading firm an Air Canada and we’d save several percentage points of GDP that currently go to competition costs.

For a time, that is. But of course we all know that before long we’d be getting lousy, uncaring service at inflated prices. In fast food, we wouldn’t get it our way, we’d get it their way. And pretty soon the administrative costs would be just as big as they were before.

Mr. Romanow doubtless would respond that health care isn’t a monopoly, that in the current health-care system Canadians have lots of choice. But that’s just not true. In another part of his speech, he talks about how we need to manage waiting lists better, and he decries the fact that people with money can currently go to the head of the line by, for instance, using private diagnostic clinics, as Canadian Alliance MP John Reynolds recently did when his knee was badly smashed by a passing car. Mr. Romanow would prefer that Mr. Reynolds not jump the queue but wait along with the rest of us, albeit in a “better-managed” queue. But when you’re in a centrally managed queue, and you don’t have any way of leaving the queue, then you’re the victim of monopoly. Which, in health care, is exactly what more and more Canadians are.

Saying that we need public health care because that way we save ourselves the costs of competition is like saying that because private industry has to earn a profit it must charge excessive prices, so all industry should be publicly owned. It made sense to the British Labour Party in 1950. It hasn’t made sense to anyone since.

Reread Mr. Romanow’s most ominous sentence: Public care is more efficient, “however, more than half of all health-care activity remains outside the single-payer system.” Message? Bring the rest under the medicare umbrella and it will be just as efficient as the current system


Heaven help us.

(c) Copyright 2002 National Post