Straight out of Central Planning

Worth A Look, Healthcare & Welfare, Frontier Centre

National Post

Friday, November 29, 2002

How could he have got it so wrong?

If you were predisposed to dismiss the Romanow commission from the start, you might have predicted that his recommendations would amount to “leave everything as it is, but spend more money on it.” And people like me would have accused you of indulging in caricature, based on a stereotype of how a former NDP premier might think. He’s not like that, we would have said. He’s one of those Prairie New Democrats — you know, sensible, pragmatic, not wedded to bureaucratic solutions.

How wrong we were. Mr. Romanow’s report is an astonishing tour de force of ideological rigidity. It seems to have been written in a dream-state — we have heard much about how “emotional” and “exhausted” its author has been in recent weeks — without reference to either economic rationality or political possibility. That few of its recommendations are ever likely to be enacted we may count as a blessing. But it is sad to see such an opportunity go to waste, and a puzzle to think how the commission could have gone so far off the rails.

Let us take his central recommendation — more money — first. There is no chance that Ottawa will agree to raise transfers to the provinces by the $6.5-billion per year that Mr. Romanow suggests, plus the billions more it would cost to expand medicare to cover drugs and home care.

Mr. Romanow asserts it can be funded out of projected surpluses, but there is no guarantee that such surpluses will materialize, and in the meantime there are many other equally pressing claims on surplus funds, from the military to the national debt. Something has to give.

Mr. Romanow waves this concern away with a slogan. The system, he says, “is as sustainable as we want it to be.” This is another way of saying that we can spend as much as we like, which is nonsense. Either it means starving other programs of funds, or it means raising taxes. And whatever the commissioner may think, we cannot tax ourselves as much as we like.

Mr. Romanow offers two defences for this proposal. One, that provinces will be held “accountable” for the increased transfers, at the very least to ensure that they are actually spent on health, as they have not been in the past. This, too, is nonsense, and not only because the provinces, or some of them at any rate, have already announced they have no intention of being so constrained (though they are always ready to take the cash).

It is true that under existing arrangements, federal transfers are not earmarked for health, but rather can be spent to any purpose the provinces see fit: It is called the Canada Health and Social Transfer, but it all goes into general revenues. That does not change, just because you change the name of the transfer to the Canada Health Transfer. It would not change if you delivered the money in a suitcase full of hundred-dollar bills, each one marked “Health,” with a team of UN inspectors to follow them as they were spent.

You have only to look at the public accounts to see that the primary determinant of how much the provinces spend on health is not federal transfers, but their own decisions as to how to allocate scarce resources among competing ends. Cuts in federal transfers did not prevent them from raising health spending to record levels, and increases in federal transfers in recent years have not prevented them from cutting taxes. You can say that the federal cash all went to health, leaving them with more room to cut taxes out of their own revenues. Or you can say that it went to tax cuts, leaving them more of their own money to spend on health.

Even if increases in provincial spending on health happen to match increased federal transfers, that proves nothing, since there is no way of knowing whether the provinces might have raised spending by that amount anyway. Indeed, even if the federal government spent the money itself, it could not be guaranteed of raising spending in the aggregate: As experience with the Millennium Scholarships showed, the provinces may well respond to increases in federal spending (in this case, on higher education) by cutting back on their own.

That leaves the other defence: that rather than throwing money at problems as of old, Mr. Romanow is, in the vogue phrase, “buying change.” He acknowledges that “Canada spends $100-billion a year on health care, but no one really knows if that money is used effectively.” Yet what does he propose to improve that situation? Does he advocate the creation of internal markets, as in the report of the Kirby committee? Would he revamp the way hospitals are funded, breaking out the costs of different services in order that competing providers might bid for government contracts? Would he experiment with medical savings accounts, allowing consumers to purchase less expensive forms of care out of their share of public funds?

No, nyet, and nein. To the suggestion that private providers, in particular, might have any role to play, even within a 100% publicly funded system, Mr. Romanow is as emphatic as he is closed-minded. “No!” the report shouts. “Not now, not ever.” And why? Because medicare is “a moral enterprise, not a business venture.”

I was wrong: it’s not ideology so much as theology. Mr. Romanow might have maintained a principled insistence on certain social objectives, while showing some flexibility about the means by which these were to be achieved. He might have excluded certain means, for example user fees or a parallel private system, as being incompatible with the goal of accessibility. He might have even argued persuasively for public funding of home care and catastrophic drug costs, as Kirby does — both would save money, overall, by keeping people out of hospitals — if it were clear this was part of a market-oriented reform of the system as a whole.

But by his flat-out hostility to any involvement of private for-profit providers at any point in the health care system (the most he will allow is that they might be allowed to clean the towels or cook the meals) he reveals himself as a doctrinaire of the old school, obsessed as much with means as ends. He does not actually propose to nationalize the doctors — private, for-profit providers of health care — but his report is abundantly clear that no further incursions of private enterprise should be allowed.

“Where is the evidence,” he asks, that private care is cheaper? But that is not the question. No one is proposing to turn the whole system over to private providers — only that they should be allowed to compete. If they aren’t cheaper, they won’t win much business.

He isn’t buying change, in other words: he’s buying stasis. All that money for the provinces is to bribe them into banning private care, and otherwise keeping the system just the way it is, only more so. In place of market disciplines, costs are to be controlled by bureaucratic edict: a Health Care Council here, a Health Covenant there, greater use of information technology throughout. And for those suffering and dying waiting for treatment, he offers the ultimate in central-planning solutions: better-managed waiting lists!

How could he have got it so wrong? And how could I have been so wrong about him?

(c) Copyright 2002 National Post