Healthcare Problems We Share

Book Review, Canada, Healthcare, Rebecca Walberg (historic), Uncategorized

Healthy, Wealthy and Wise: Five Steps to a Better Health Care System, by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler, AEI Press, 139 pages,$18

No politician campaigning in January’s federal election would have dared to recommend that Canada adopt American-style healthcare. A recent overview of the most glaring flaws in the U.S. delivery system from the American Enterprise Institute, a prominent think tank, illustrates why. What Canadians might find instructive, though, are the details. Many of the problems reported in the study are common to both countries.

Healthy, Wealthy and Wise: Five Steps to a Better Health Care System notes that American medical research and innovation are without equal in the world. But the authors point to the millions of uninsured, skyrocketing costs of care without commensurate improvements in outcomes and a labyrinthine maze of laws dealing with insurance coverage and taxation as proof that healthcare in the U.S. is neither as effective nor as efficient as it ought to be.

A major U.S. problem is the tight link between employment and health insurance. The tax code makes it much cheaper to insure and consume services through employers rather than directly. For the unemployed and for many self-employed or part-time workers, that discrimination means that insurance is simply unaffordable. A subtler, but equally devastating an effect is the inability of workers to change employers or move between states without the risk of being at least temporarily uninsured. A major reform suggested by authors John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler would simply change the tax code to make all health and insurance expenditures deductible. That would make it easier for all Americans to acquire coverage and force insurance companies to compete more rigorously for the neglected part of the market.

For the chronically ill, who have predictable and sustained medical expenses vastly higher than average, obtaining coverage can be impossible. In Canada, where all risk is pooled, this problem does not arise with regard to primary medical care. Even in the U.S., however, most such people are insured by government, either through Medicare provisions that kick in for the permanently disabled or through assistance provided to the unemployable as an element of welfare benefits. For those who fall between the cracks—uninsurable by normal standards and yet not eligible for public coverage—the authors propose a subsidy that would enable them to participate in the mainstream medical system without facing bankruptcy from steep insurance premiums.

In comparison, Canada’s system has advantages. Because insurance is provided to all through provincial governments, changing or losing employment does not result in a loss of coverage for basic care (although it often does for drug, vision and dental). While not all provinces insure the same services, in general Canadians may move between provinces and enjoy comparable care wherever they choose to live. Such portability is a major advantage of the Canadian health care structure. Since the chronically and severely ill do not pay premiums for their entire coverage but rather through taxation, they are not faced with exorbitant costs in order to retain coverage. It is a significant accomplishment of our system that all Canadians have access to coverage, regardless of their employment, place of residence or current health.

But that’s where the advantage ends and similar troubles creep in. Another barrier to effective and efficient care in the U.S., the authors point out, is the existence in many locations of virtual monopolies by providers of healthcare. When local hospitals face no pressure to compete, they have no incentives to focus on outcomes, as opposed to finances, and the needs of doctors and patients in such circumstances come in second to the desires of the institution. In fact, in hospitals that face no market pressure, clinical outcomes of care are noticeably worse and costs are significantly higher than in hospitals that must compete with local institutions for patients and staff.

That issue ought to resonate with Canadian taxpayers and healthcare consumers. If monopoly or near-monopoly market power increases costs while worsening medical care, what are the implications for Canada, where each province has only one system, currently guaranteed a monopoly by governments? If money is wasted and patients are harmed when one provider dominates a small area, how much more is that the case when all Canadian healthcare is provided only by such monopolies? If Canadian hospitals and doctors faced market pressure, and if Canadian patients had viable alternatives, the overall cost of health care might decrease sharply while clinical outcomes improve.

In one final, but very important respect, Canadian and American systems share an identical problem cited by the authors as responsible for inefficiencies in care. It has to do with the predominance of “first dollar” insurance plans in the U.S., where no deductibles are charged and consumers pay no more whether they have a yearly checkup or ongoing care for multiple conditions. This creates the illusion of “free” healthcare and such plans leads to cost unconsciousness on the part of consumers and wasteful practices with no proven benefit on the part of practitioners. Even nominal co-payments, which encourage consumers to consider both the cost and the value of the care they receive, have been demonstrated to reduce consumption and costs without worsening outcomes. The authors therefore recommend policy changes that promote insurance with higher deductibles, at least high enough so that those who suffer serious illness or injury are not ruined financially, while those who require minimal care are encouraged to consider the true price and worth of the health care they choose.

If “first dollar” coverage promotes irresponsible and unnecessary consumption of healthcare, how much worse is the current Canadian system, which most consumers are wont to describe as “free,” and “zero price” stampedes the system? A combination of minimal co-payments, itemized reports of cost of care provided to consumers, and report cards with which consumers can evaluate the services, outcomes and options provided could all effect a radical change in how Canadians consume health care. In a system with better consumer understanding of the costs of care, patients are empowered to demand higher levels of accountability and better outcomes, and would not tolerate waste and inefficiency for long.

Healthcare is the fastest growing area of expenditure in Canada today, and the issue of controlling costs while improving outcomes is relevant to all citizens and all political parties. We are fortunate to live in a country in which access to health care is not contingent upon employment, residence or current health. Healthy, Wealthy and Wise is a useful reminder to Canadians of those advantages. We should not, however, wallow in self-congratulation to the point where we can’t learn about mistakes made on both sides of the border.