Lack of Competition Plagues Health System

Worth A Look, Healthcare & Welfare, Frontier Centre

Why are medicare costs in Canada escalating out of control?

In a study published last week by the Institute for Research on Public Policy, Senators Michael Kirby and Dr. Wilbert Keon pinpoint the essence of the problem as a lack of competition among health-care providers.

Kirby and Keon cannot be written off as a pair of doctrinaire conservatives. Kirby is a prominent Liberal and former adviser to prime minister Pierre Trudeau, while Keon is an internationally renowned surgeon who founded the University of Ottawa Heart Institute.

Together, Kirby and Keon point out: “Within each province, associations representing health-care professionals hold monopoly power, in that each is the sole source of health care providers in its respective area of expertise (doctors, nurses and so on).” In negotiating agreements on wages, salaries and other benefits with these associations, provincial governments habitually cave in to avoid crippling, province-wide, medicare strikes.

This system has paid off handsomely for health-care workers. During the 1990s, their median annual earnings rose twice as much as those of non-health workers.

For taxpayers, the burden is enormous. In British Columbia, the minister of health planning reports that $685 million out of the $1.1-billion increase in the province’s health-care budget in 2002 was absorbed by rising wages, fees and other benefits paid to health-care workers.

While British Columbia physicians are currently the best remunerated in the country, their colleagues in other provinces are determined to catch up. For example, the Coalition of Family Physicians in Ontario is now demanding a 40-per-cent increase in the provincial fee schedule.

So long as the monopoly power of unions and professional associations representing health-care workers remains intact, there can be no hope of saving, let alone improving, the medicare system.

What, then, can be done?

Kirby and Keon propose that the provincial governments retain a single-payer, publicly funded medicare plan, while contracting out the delivery of health-care services to competing public- and private-sector providers.

This is neither a radical nor a new proposal.

In testimony before the Commons health committee last spring, former federal health minister Pierre Pettigrew pointed that “the Canada Health Act does not preclude delivery of services by private elements, as long as there is a single public payer.”

However, under pressure from Prime Minister Paul Martin, he promptly issued a clarifying statement: “The ambition of the federal government is not to encourage private delivery, even within the terms of the Canada Health Act,” he assured. “Quite the contrary, our ambition is to expand public delivery, because public delivery provides Canadians with the best system possible.”

Ontario Premier Dalton McGuinty agrees. Earlier this year, his government announced plans to purchase three private, for-profit clinics licensed by the previous Conservative government to provide MRI services for OHIP patients.

Kirby and Keon contend that such doctrinaire opposition to private medicare clinics is a mistake. They observe that most physicians are in private practice and that almost all hospitals are private, albeit non-profit, organizations.

The problem is that most health-care providers do not compete, because they are paid to provide services at fixed rates determined by the provincial health ministry. Under the Kirby and Keon plan, hospitals and clinics would be invited to bid on the provision of health-care services. This system would empower smaller, more specialized facilities, such as Toronto’s Shouldice Clinic, which is renowned for hernia repairs, to take over the delivery of many procedures from larger, more expensive hospitals.

But could this approach succeed in enhancing the overall efficiency and affordability of Canada’s single-payer, publicly funded medicare system? Not likely. Most of the unions and associations representing health-care workers oppose the reform and can be counted upon to use their monopoly powers to combat any concerted attempt to inject some competition into the monolithic medicare system.

There is only one solution: That monolith must be broken up. So long as Canada remains the only democratic country in the world that prohibits private insurance companies from offering comprehensive medicare coverage in competition with the public system, there can be no hope of assuring the provision of universal, efficient and affordable medicare for Canada’s rapidly aging population.