A Liberal View of Health Policy

“In 1999/2000, health spending accounted for 35.4% of provincial and territorial program spending compared to 28% in 1974 to 1978. There are a number of reasons why health care spending is taking up an increasing share of governments’ budgets and the reasons vary among provinces and territories. However, three reasons are common to all provinces:

  • The impact of cost-cutting in the early 1990s compromised public confidence in the system and created the need to reinvest in recent years (Tuohy 2002);
  • The growing cost of prescription drugs, home care and other health care expenses is constantly driving up provincial spending on health care even though hospital and physician care may be growing at a more acceptable rate (Evans 2002b); and
  • The cost of recent large increases in health care provider remuneration following years of restraint in the 1990s.

– “Building on Values: The Future of Health Care in Canada”, Roy J. Romanow, Q.C., Commissioner (2002) (also known as the Romanow Report)

Over the last week, I have been seeing more and more information about our health care system. The Calgary Herald published a piece by Mark Milke and Mark Rovere of the Fraser Institute. They argued that greed and self-interest are not incompatible with the needs of our publicly funded health care system. In their words, “requiring multiple providers for services and financing must also be wrapped in universal access, this so no one goes broke, or, as is too often the case in Canada and our quasi-monopolistic system, has pain-saving or life-saving treatment delayed.” From their point of view, multiple providers – or some form of market – is the only way to go. These multiple players will provide competition. Competition, in their mind, is a required tool. It in itself will break-up any particular concentration of power, money and influence.

However, I have also heard from Diana Gibson of the Parkland Institute. She is on the other end of the spectrum advocating for “more”:  more doctors, more money and more care. In Diana’s mind, a larger system is required. At a panel on November 10, 2011, she was one of a number of panellists who harkened back to Tommy Douglas’ original vision. Of a system that was both publicly funded and publicly administered. There was discussion of the need for a pharmacare programme and a proper long term care system. Instead of the death by a million cuts, the system should be funded with more corporate taxes and a larger and renewed social commitment. As you can tell this week has been full of left and right wing idealists.

Each point of view did give me pause. It begs the question: what should our health care system look like? Do we as Liberals feel there is a responsibility to care for our fellow citizens or is it just an economic decision with economic parameters? Furthermore, if a duty to care exists, how far does it extend. For example, in Canada, we have a wait list problem.  As pointed out by the Fraser Institute Fellows, “unlike Canada, most of Europe ranks higher in the availability of medical goods and services.” So this begs another question: how big a problem is this and should government spending time solving it? Europeans, for example, solve the problem by allowing patients to “choose between several insurer and healthcare providers.” So “no purchaser of health care (government, non-profit or private) is held hostage to one service provider, either on insurance or delivery”.

While, Diana Gibson has noted, the use of private sector or multiple market players is a problem. Health outcomes seem to be worse when private sector counterparts are compared to public sector providers. Furthermore, as pointed out by the OECD, Europe has very strict price control measures in many places where multiple market players exist.  Or put differently, there are no simple choices when it comes to health care policy.

So where do we start? One might suggest that we start from the beginning. From 1867 to 1962, the story is the same. 60% to 70% of Canadians could afford private health care. Sometimes, this meant paying for the doctor directly. While, other times this meant finding a pooled solution such as membership in a hospital or private insurance. Some Canadians would go into debt to pay medical bills. While the loss of the farm, chattel or other property due to prolonged illness was not unheard of.

Doctors, on the other hand, had to try to collect fees for healing people. Sometimes, they were successful and other times they were not. One can only imagine a patient walking into a clinic and being turned away because they did cover their last bill. We have all heard of stories in the Great Depression where doctors bartered their services for other tradable items because their clients could not pay. This is a story that is repeated throughout the Western World. For unlike, dishes, cars, phones and/or cameras, health care is a product that we cannot do without. Without good health, nothing else is possible. Our social, economic or political ambitions are all predicated on the fact that our health will be good. This is why doctors are so highly valued in all cultures. This rule was true in Aboriginal cultures in Australia, North American and Africa. It was true in Ancient Greece, Ancient Rome and Medieval Europe. Some of the oldest manuscripts in from the Near East or the Far East revolve around cures and medical conditions. As the old saying goes “you are nothing without your health”.

Consequently, an economist would say that health services are inelastic products. This means that people will pay almost any price to get whatever little bit of a product they can. So if given a choice, you will provide your loved ones with the best doctor that money could buy. Health care is not something that allows for bargain basement treatments. Accordingly, it is not surprising that health care services drive general price inflation.  The US provides us a prime example of this phenomenon.

Health Care Inflation for 2011 is almost the same as General Price Inflation in around 3.8%. However, what is interesting is looking at which sectors of the industry are bucking the trend. Doctors have only been able to raise rates by 3.2%. For as a primary health care provider, they have to be able to collect fees on an ongoing basis. However, those providing one-time and complex medical services – like hospitals – have been able to increase their rates by 5.9%.

However, during a good time, we can see the usual disparity. In 2010, price or general inflation increased by less than 2%, while health care inflation was 6.3%. It is no wonder why the one of the leader reasons in the US for bankruptcy is illness. And please do not get the idea that Canada is better. In 2002, the Romanow Report indicated that Health Care Inflation in Canada is likely 8%. If the Harper Government is to be believed, the Health Transfer Payments will increase by 6%, likely triggering a similar rise in health care costs. Or if the Provinces are to be believed, health care inflation will be more like 4.5%. Either way, those costs will be well above the Bank of Canada’s target inflation rate of between 1 and 3%.

These costs are one reason why Tommy Douglas’ Government acted in 1961-2. For in 1961, Mr. Douglas introduced legislation to bring a public health care system. The story is a well-known one in Canadian History. Legislation was introduced and opposition mounted. The Doctors of Saskatchewan went on strike for 23 days for the right to practice medicine without government control and through all of this a compromise was found. This is the compromise that we know as the Canadian ’single-payor’ health care model.

Doctors would remain private market actors. Yet they had to make a choice: either they could contract with the public health insurance system or ask the public to pay the full cost of their fees. 50 years later, we know what happened. Almost every doctor came under the provincial health insurance regime because the public would not pay for the full cost of Medicare. This is the system we live with today, this is the compromise that we call Public Health Insurance in Canada. Mr. Douglas would get his bill and imperfect solution.

For all of its benefits, our system has one problem: cost containment. As Diana Gibson points out, our system does not correct for technological improvements. Ophthalmologists, over the last 40 years, have seen amazing improvements to their equipment. Surgeries are faster. They are more successful and less invasive. So Ophthalmologist can see more patients in a day. Given that they are paid per appointment/operation, they have probably seen a huge increase in their revenue since their piece rate has not been adjust downward.

Cost containment is further aggravated by the collective action of doctors and other health professions. They have been known to demand for preferential rights or pay. In 1985, in Ontario and Alberta, animosity against the federal legislation ran high. The Federal Government was trying to eliminate extra billing or asking a client to pay a fee or premium for a service that was already covered under the provincial health insurance system. Doctors in both provinces rejected what they saw as attempts to “dictate how medicine should be practiced” (Health Insurance and Canadian Public Policy, p. 451). So in 1985, the new government in Ontario laid out its plan for implementing the ban on extra-billing.  The Peterson Government eventually passed the law but they had to endure a long doctor’s strike.

In 2000, the Government of British Columbia recalled its legislature to try to resolve a dispute with rural doctors, who had been complaining about money and workloads. Specialists and family doctors withdrew all but emergency services at local hospitals in several places over a couple of months.  While in 2010, Doctors in Newfoundland and Labrador received almost $88 million in pay hikes — up from the previous offer of $81 million — plus a one-time $12 million payment for physicians still in the province at the end of the deal. During that debate, at least thirteen doctors in Newfoundland and Labrador resigned to pressure the government. Furthermore, in this deal, Doctors from Newfoundland would get paid on par with their Atlantic counterparts and a contentious wage gap was approved. This meant that oncologists and pathologists were paid more than other salaried specialists. Subsequently, doctors were able to receive increases in pay which were out of line with their economy through political pressure. Accordingly, one can see that cost containment within our system is a pickle.

I don’t think that market solutions will solve our particular problem. The US has a similar cost containment issue and they spend more of the GDP on health care. At present, the US spends 15.3% of GDP on health care, while Canada spends about 10.0%.  Consequently, let us look to European solutions.

One of the easiest solutions would be to ’de-doctorize’ our system. At present, one of the driving costs of health care is specialized labour. Or put differently, we use highly qualified doctors and nurses for everything. Obstetric care, for example, traditionally used midwives. In the 1800’s, doctors increasingly took their place. So much so that by the 1950’s, in North America, mid-wives were rarely if ever used. They lost their place in the medical pantheon and were seen as a medical anomaly.

While Doctors saved more lives and quickened the birth process, they also added medical procedures that were unnecessary. Or put differently, while a Caesarean section, elective or not, is faster than a normal birth, it requires a surgical room, a number of nurses, an anaesthesiologist and one or two gynaecologists. One can see how quickly the costs can add up. If we were to simply use a nurse or two and a midwife in a hospital setting, one could see that costs could be cut without endangering safety.

The Addition of nurse practitioners could do the same. For example, instead of worrying about having a network of family physicians in each community, provinces could set up nurse practitioner networks throughout a province. Such a network would lower costs and could deal with most of the basic health needs of a community. It is true that nurse practitioners could not do full physicals but they could deal with stitches, flus and infections. They could do manual breast exams and provide referrals to various doctors including general practitioners and specialists. On the same track, we could provide chiropractors and physiotherapists a much bigger role in our system. Reducing the role of doctors for less expensive health care professionals also has another benefit.

This reduces the cost curve of the system. By having a larger role for non-invasive medical specialists like midwives, nurse practitioners, chiropractors and physiotherapists, physicians would be put into direct competition with other medical professionals. For example, Sandwich Community Health Centre, in the Windsor Ontario area, has recently advertised a position for a Nurse Practitioner. They are paying $85,320.00 for the job. Compare that to the Gross or Net Income payments of an average Ontario Doctor. For the Record, when working a typical 54.7 hour week the Gross in Ontario is $168,300 a year and the net is $99,300 according to the Ontario Medical Association. Imagine if doctors faced competition from someone who is paid less than they are. They would have no choice but to lessen their demands.

Lastly, we can look at having some doctors work for the province. This too will reduce the cost curve of the system. In this scenario, these doctors would be employees hired by public health offices. Unlike doctors who bill the province through the public health insurance system, these employees would see patients regularly without concern. They would likely get paid less but doctor-employees would not have to worry about maintaining a practice. They would not have to hire staff or worry about succession planning. All doctor-employees would have to do is show up, work and go home.

If 10 to 25% of doctors worked in a publicly owned and publicly administered network, as employees,  provinces could again find a way of bending the cost curve. Unlike a private competitive system, a publicly administered system could be run at cost. Its inflation could be 2 to 4% as opposed to Canadian Health Inflation of 6 to 8%, as noted earlier. Furthermore, unlike a private market player, there would be no requirement to give 5 to 10% of revenues to a shareholder – as is the case with the few private players in Canada or the many players in the states.

A prescription for improved medical care does exist. However, it does mean that structural change will come. It is not about health regions, government bureaucracy, joint acquisition of equipment and medical supplies or tampering on the edges of the system. Our system requires a fundamental rethink, one that does not apply the outmoded thinking of the left or the right but a solution that confronts vested interests and deals with what is. Robert White, former President of the Canadian Auto Workers Union, – as quoted in the Health Insurance and Canadian Public Policy, p. 453- said “[t]he health care system of this province does not belong to the doctors. It belongs to the people of this province who pay for it with their taxes and premiums”. I believe him. The question is which party has the guts to make the necessary changes. I believe provincially and federally, the Liberal Party can.

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