Expanding medicare to include drugs could save money

TheStar.com – News/Canada
Published On Wed Sep 15 2010.  By Thomas Walkom, National Affairs Columnist

With governments under pressure to cut health care costs, a familiar – and wrong-headed – prescription is again making the rounds.That prescription is the medicare user fee, a charge levied on patients each time they see a doctor.

The prescriber this time is the Paris-based Organization for Economic Co-operation and Development which, in its just-released annual report on Canada, includes a chapter on health care.

It’s an intriguing and sometimes internally contradictory chapter, as if the research had been done by one team while the conclusions were written by another.

With one crucial exception (which I’ll get to later), its recommendations are boiler-plate OECD orthodoxy: user fees aimed at putting so-called price signals into medicare, plus privatization to encourage efficiency.

All of this may give some succour to Quebec Premier Jean Charest whose government this spring, in a deeply unpopular move, raised the idea of charging patients $25 for each medical visit.

But elsewhere, talk of user fees has an eerie retro quality. Even Alberta has abandoned the idea.

That’s in large part because Canadians have endured this same tired debate before, most recently in 2002 when a special Senate committee looked into the issue.

The committee began by assuming that user fees made sense but – after studying the evidence – concluded that they didn’t.

The reason? If such fees are low enough to be affordable they cost more to collect than they produce in revenue. But if they are set any higher, they prevent the sick from seeking care.

Perhaps the most curious element of the OECD report is the divergence between the evidence it presents and the conclusions it draws.

In particular, costs for physician and hospital care – the portions of Canada’s health system covered by medicare – are not spiralling out of control.

As the report notes, medicare represents roughly the same proportion of the economy that it did in 1975 – about 5 per cent. In other words, visits to the doctor are not bankrupting the country.

What has shot up disproportionately is the cost of drugs. And much of that cost is publicly subsidized, through tax breaks for privately insured employee health plans as well as a host of provincial and territorial programs aimed at the old, poor and very sick.

This crazy-quilt system is a particularly inefficient way to provide the population with necessary drugs. And to their credit, the authors of the OECD report understand this.

They recommend that Canada set up a national, public pharmacare plan–but only when it is affordable.

In this, they fail to recognize a point made by another health care study released this week, which is that expanding medicare to cover drugs could actually save money.

The authors of that report, published by the Canadian Centre for Policy Alternatives, estimate that Canadian governments could save more than $10 billion a year by creating a New Zealand-style national pharmacare program – one that did away with sweetheart deals to drug companies, eliminated costly tax breaks and rationalized an inefficient system based on multiple private insurers.

While the scale of those estimates can be debated, this second study at least has its focus right.

If health care spending is to be scaled back, the answer does not lie in nickel-and-diming patients through user fees. The biggest cost drivers have to be tackled head on.

And that – as even Dalton McGuinty’s Ontario government seems to recognize in its own, cautious way –means dealing with drugs.

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