With hospital emergency rooms overflowing this summer, the latest distress signal from a health care system that was already in crisis, the air is thick with dire warnings of the imminent “privatization” of Canadian health care.
Not that anyone has actually proposed such a thing, you understand. Indeed, it’s hard to grasp what it even means. Privatize … what? Most of the system is already private. Doctors are, overwhelmingly, private business proprietors. Most hospitals, especially in Ontario, remain nominally private operations, albeit non-profit. What’s there to privatize?
This is a particular instance of a more general problem. When people talk about “private” health care in Canada, whether they are for it or against it, they almost never spell out exactly what they mean. The system is a mix of public and private now. How would the mix change in the system they envisage? What part would be private, and what part public? How would the two work together?
Broadly speaking, “private” health care can mean one of three things:
Private provision. Which is what we have now: The system is described as “public” because it is publicly funded, and publicly administered. But the people who work within it are not, for the most part, public employees. When people talk about expanding public provision, they mean allowing different types of private providers to join them: namely, private for-profit clinics. Provided the system remained publicly funded – the clinics billing the government, rather than patients – I see no particular reason to oppose this. On the other hand, there’s …
Private payment. Or in other words: user fees. Again, these are legal now, for services that are not covered by medicare, or where a doctor has opted out from the public system. The controversy, where it arises, is over whether to allow providers to charge a fee to the patient on top of the amount they receive from the government.
This remains a bad idea, no matter how often it comes up. In effect, it allows those who can afford the fees to buy their way to the front of the line for publicly funded care. But the whole point of having a publicly funded system is to make health care equally available to all, regardless of income.
Even as a deterrent to overuse of the system, it fails. The idea is that user fees should act as a kind of lie-detector test, with a single question: Are you a hypochondriac? But lie-detector tests, as we know, are subject to two types of errors: false positives, and false negatives. In the user-fee context, that means: Some people who really were sick would be deterred by the fees – that would be the poor – while some people who weren’t sick at all would simply pay the fees and keep going – that would be the better off.
Of course, if that were your only concern, you could always exempt or reimburse the fees to those on lower incomes. But then you run into the second, more powerful argument against user fees: on efficiency grounds. In most markets consumers are “sovereign” – their choices dictate which goods get made at what price.
Generally that works pretty well: By choosing between competing providers, consumers allocate resources to their most efficient use. But consumers of health care are not in a position to make such choices. They simply don’t have access to the same information, either about their own medical conditions or the most cost-effective way to treat them, as providers. Finally, there’s …
Private insurance. This is potentially a very bad idea. Insurance markets are notoriously prone to failure, especially in a market like health care. Insurers might refuse to insure people with a history of serious illness; consumers, for their part, might decline to buy insurance until they got sick. One solution to that dilemma is the Canadian “single-payer” model, where the government assumes the role of monopoly insurer.
But it’s not the only one. The other answer many countries have adopted is “managed competition.” Consumers are required to take out insurance; insurers are required to take all comers. There are perils to this, but there are perils, as we have seen, to single payer: notably, the impossibility of reforming it.
So: private health care? It depends what you mean. To the three definitions listed above, I’d answer yes, no and maybe. But there’s a larger answer, which is that private care, as such, is not the issue.
Suppose it were decided to make greater use of private, for-profit clinics for certain types of surgery. Fine. How would that be done? Would they simply be handed a bigger piece of the action, as of right? Or would they have to compete for the business, with existing hospitals and with other clinics? If the former, there would be no necessary reason to expect much in the way of savings. But if the latter, there might be.
But for such a competition to work, you need a couple of things. You need to know, first, the price each bidder would charge to perform a given surgery. That’s hard under traditional “global” hospital budgets – there was no reason to calculate how much it cost to perform a given surgery because funding did not depend on it – but it becomes possible under so-called “activity-based funding.”
But second, you need a demanding purchaser, with a strong interest in getting the most value for money. That was supposed to be the role of provincial governments, under medicare: They’d use their monopoly purchasing power to get the best deal. But it hasn’t worked out that way – not when the system is overseen by politicians who have to get elected in the short term, and not when any surplus costs can be passed on, either to future generations or another level of government.
So as much as we need more competition on the provider side, we also need more competition on the purchasing side. If it isn’t going to be consumers themselves, then we need a sort of surrogate consumer to make these purchases on their behalf.
Elsewhere I’ve suggested that groups of primary-care physicians might play this role, much as in Britain. They would compete to enroll patients, and the per-capita share of public funds that went with them. But there’s room for debate on the particular model.
The point is to make a market in health care – an internal market, within the envelope of public funding – to decentralize decision making, informed by competitive options and subject to competitive discipline, rather than trying to run everything out of the minister’s office.
That’s the real issue in health care: not public versus private, but politics versus markets.
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