The real costs of ‘free’ health care

NationalPost.com – fullcomment/canada
January 24, 2011.   Shaun Francis

Have Canadians forgotten how to take care of themselves? What are the limits of the nanny state — and how should we enforce them? In a week-long series devoted to these questions, National Post writers examine that endangered concept known as “personal responsibility.”

Earlier in January I attended the biggest event in the business of medicine — the 29th annual JP Morgan health-care conference in San Francisco. The conference was a gathering place for just about every major public health-care company in the world, as well as many private companies.

Included among its attendees were hospital chains and specialty service providers, as well as technology, drug and device firms in nearly every market imaginable.

This year, for the first time, the conference included its own separate track for Chinese presenters. Many remarked on the high profile enjoyed by nominally communist China at such a major gathering of health-care capitalists. Something else was notable: Canada’s absence of any profile whatsoever.

There’s a reason for that. Canada’s health-care system encourages our citizens to abdicate responsibility for their own health. Our near-total absence of user fees, for example, encourages people to schedule doctor’s visits or visit emergency rooms without any awareness of the true costs to the system. In economic terminology this is known as moral hazard. Our insulation from the consequences of our actions causes us to behave differently than we would if we had to bear the actual costs (or even, perhaps, were simply aware of them). The moral hazard explains why many of us fail to consider the health consequences of our lifestyles. Because there is no financial penalty to unhealthy living. We can smoke, eat or drink excessively in Canada and receive the same “free” health care as those non-smokers who run marathons.

A consequence of this is the overburdened health-care system that I and many others have criticized. But in San Francisco I became aware of another consequence. You could sense a real energy in the air at the conference, as well as a hunger for innovation. Most of my meetings happened with people who weren’t even attending the official proceedings. They were booked into one-on-one meetings with other investment banking firms and investors at adjacent hotels. I was told that more than 8,000 meetings were happening in the span of only five days. Within that span, companies were started, sold and re-capitalized in the shifting but growing sands of the world’s largest industry.

In Canada, we don’t often think about health care as an industry. In the minds of most, it’s simply another government service, running itself quietly in the

background while we go about our daily lives. Yet it is an industry, and one set for rapid growth as the Western world’s baby boomers age and as billions in China and elsewhere in the developing world come to expect more from their health-care systems.

Here is an example of Canada lagging behind the rest of the world. The highest visibility Canadian content at the conference was the BlackBerry, the integral component in the arsenal of the international deal maker. This year Canada will spend about $192-billion on health care — yet our entire corporate presence at the conference was perhaps a dozen executives.

Sure, you could find the odd investor from Toronto or Montreal. And occasionally one happened upon a Canadian biotech firm. But those biotech firms were discussing which American or European company would swallow them, once they grew big enough to attract global attention. When it comes to investing in health-care science and innovation, Canada is a virtual dead zone.

Our tax credits and subsidies may help incubate some neat technology now and then. But is there a chance those companies actually will become large employers of Canadian talent? No way. Because the management talent and capital for innovative health-care companies does not exist in Canada.

They’ve been smothered by the public system. You can count the folks who invest in health care in Canada on one hand. All will tell you that, save a few exceptions, any serious company or management team in our sector is either in the United States or Europe — or planning its departure.

Whether we’re talking services or technology, Canada should have a thriving and exportable health-care economy. The problem is our national antipathy to capitalism in health care — just one more consequence of our single-payer system stifling innovation and initiative at every level. Many have written about the way our system fails to instill personal responsibility for healthy living. In San Francisco, it became clear to me that our innovation-averse system also is doing something else: Endangering any chance we have to compete in a thriving and still growing sector of the global economy.

Shaun Francis is chairman and CEO of The Medcan Clinic, North America’s largest preventive health-care clinic.

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