Improving health care without crushing taxpayers

Posted on September 17, 2010 in Health Debates

Source: — Authors: – Opinion/Editorial
Thursday, Sept. 16, 2010.

The Organization for Economic Cooperation and Development (OECD) this week recommended that Canada consider user fees for doctor and hospital visits to control health-care costs, and increased private delivery options to inject much needed competition and efficiency into our health system. Predictably, supporters of the current government health monopoly have charged that the OECD is off base, while our politicians– always reluctant to touch the “third rail of Canadian politics” — have been mostly silent. Both reactions are unfortunate, because the reforms proposed by the Paris-based organization are the kind of small first steps needed to improve health care in Canada without crushing taxpayers.

According to the OECD, Canada already devotes more of its GDP to health care than all but five of 32 industrialized nations– the United States, France, Switzerland, Austria and Germany — all of which allow substantial private expenditure on care. Overall, Canada’s health-care spending is 12% above the OECD average. Yet wait times to see physicians and specialists are “endemic,” according to the OECD, and service rationing is widely used by health bureaucrats to control demand and costs. Despite all the public money pumped into health care in the past decade, an earlier OECD report ranks our health outcomes in the bottom half of member countries.

Without more competition and some way, such as user fees, to make patients more responsible for their health choices, the problems will only get worse. Next year the first of the Baby Boomers turn 65. Health Canada has already determined that nearly half of medicare expenditures (45%) are made for care of seniors. Given that fact, the surge in seniors over the next 30 to 40 years will explode federal and provincial budgets unless politicians change the incentives in our health system to encourage innovation, while minimizing the bloat inherent in any public bureaucracy that has little, if any, private competition.

To make matters worse, as Boomers retire, their incomes will decrease by about 30%, meaning they will be contributing less in taxes at the very time they are ramping up their consumption of public medical services. So that the resulting increased taxes on working-age Canadians do not become a drag on the economy, the OECD wisely urges Canadian governments to act boldly to contain public costs now.

The OECD misses the mark in one area, though — urging a nationwide public drug plan as a way to control prescription costs for governments. More often than not such efforts drive up health-care costs by encouraging patients to think of their prescriptions as free — or nearly so. It’s the same principle that caused the number of doctor visits to shoot up in the 1980s after the Liberal government of the day forbade the charging of user fees by physicians.

Attempts in B.C. to use so-called pharmacare to control costs ended up raising expenditures on the drugs covered by as much as 37%. And in the United States, where there has been some coverage of prescriptions under Medicare since 2006, the costs have turned out to be double the original projections and at least 20% higher than if the status quo had been left in place.

It seems odd that in a report trumpeting the benefits of privatization and competition, the OECD could convince itself that the path to cost containment on drugs lies through increased public control.

Nonetheless, the overall message is clear: Competition and privatization help improve public care. They may even preserve medicare by lowering costs and siphoning off patients prepared to spend their own money, leaving more space in the public system for those who cannot afford to do the same.

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