User Fees Really Work

Frontier Centre, Healthcare, Media Appearances, Uncategorized


When it comes to changing consumer behaviour, few recent legislative acts have been more successful than the city of Toronto’s tax on the plastic bag, which "celebrates" its one-year anniversary on the first of June. Since it took effect, many shoppers have purchased reusable cotton or nylon bags to use when purchasing groceries or other items. And similarly, most of us, at one time or another, have forgotten these bags, leading to the familiar stab of guilt experienced when one steps up to the cashier to be confronted with the usual question: "Do you need plastic bags?"
That guilt is fascinating. It exists because the bag tax has helped to create an ethic of personal responsibility around one’s effect on the environment. In effect, the bag tax is a user fee — one that charges a consumer for the harm to the environment represented by the plastic bag. Or overcharges, some might say. In any event, the effects of the tax have been spectacular. Retailers report reductions in plastic bag use on the order of 70% — a decrease from 5 million to 1.2 million bags a week for one major grocery chain. I’d also argue the tax has prompted behavioural changes that have little to do with the bags themselves. It’s encouraged city residents to feel more personally responsible about their consumption patterns, encouraging them to reduce their environmental footprints by storing water in reusable containers, for example, or drinking coffee from reusable mugs.
Another social sector besides the environment is in dire need of an ethic of personal responsibility, and that’s health care. In Ontario, if current trends persist, the sector stands to consume half the provincial budget by 2014; in some other provinces the halfway mark already has been passed. As the Fraser Institute notes, Canada spends more on health care than any other industrialized country with universal coverage, save Iceland and Switzerland.
Many people realize these trends are unsustainable. Less discussed is the central cause of the problem, which has similarities to the reason environmental sustainability is such a challenge. In both cases, the effects of consumption are too distant from the people doing the consuming. Canada’s health budgets are growing as fast as they are in part because the services are free. Nothing exists to remind consumers the services they’re using cost money.
But what if there was? What if it was as fashionable to feel responsible for one’s effect on health care as it currently is fashionable to feel responsible for one’s effect on the environment? At this point we can only imagine such a world. We attach no stigma to those who engage in health-harmful behaviour. Perhaps smoking already earns some disapproving looks for those who do it, but if we felt as responsible for our own health as we currently do about the environment, then other practices might earn similar rebukes — the purchase of potato chips, Big Macs or grande Mocha Frappuccinos with whipped cream. Corporations that encourage environmental responsibility might expend the same resources on encouraging preventive medicine, physical fitness or knowledge of nutrition. 
One possible health care equivalent to the bag tax is a nominal user fee for doctor visits — a small charge that might also encourage us to be more conscious of the burden we’re placing on the health system each time we make an appointment. A recent Fraser Institute survey found that such a fee already is used by more than three-quarters of the OECD countries with universal coverage systems like Canada’s. For example, Germany — which ranked second to our 25th in a recent survey of European and Canadian health care systems by the Frontier Centre — charges a fee of €10 for the first doctor visit. 
With much controversy, the Charest government in Quebec has proposed a user fee of $25 per doctor’s visit, one that would be waived for low-income earners. Critics claim such fees would wreak devastation on the equity of our social fabric. What if someone were to think twice about going to a physician? Not in Canada, they say. How ironic that the same groups that howl with outrage at healthcare user fees lobby for the very same style of fees in the environmental sphere; carbon taxes, gas taxes, garbage taxes and yes, bag taxes.
But problems exist in the mechanics of the Charest proposal. The consumer wouldn’t pay the fee at the doctor’s office. Rather, the government would track the number of visits, charging the consumer for a year’s worth at tax time. Toronto’s experience with the bag tax suggests the Charest government’s proposal is correct in concept but not in implementation. The bag tax worked because the effect on the pocketbook was immediate. Although the fee was only five cents, that five cents was payable simultaneous to the use of the product. The immediacy of the effect on the pocketbook, not the size of the effect, was the secret to the tax’s efficacy. Perhaps, the bag tax suggests, the Charest government would be better served by reducing the proposed user fee to something like $10 — so long as the fee was payable to the doctor’s receptionist.
At the one-year anniversary of Toronto’s bag tax, what can health care learn from the legislation’s success? One, a small fee can have powerful effects. Two, the size of the fee is less important than the immediacy of its burden on the pocket book. But perhaps the most important lesson about such nominal fees also is the most succinct: They work.