Private Healthcare and Market Failure - Why Single-Payer is the most effiecient

With Ralph Klein's recent pronouncements, a new CPC government and the Healthcare Debate up over at BPOC, the issue of healthcare is back on national agenda. There is a growing push for more privatization and the indroduction of private insurance to "fix" the perceived shortcomings of the system. Problem is, most of the people making these assertions fail to understand the nature of our system and the nature of market failure.

First, despite what many of the more vocal pundits on the right would have you believe, we do not have a "socialist" or purely socialized medical system. In Canada, the vast majority of health services are delivered through the private sector. What we have is a monopoly on health insurance - that is, your provincial government is your health insurance company and your doctor, or diagnostic clinic, which are private businesses, bills them for the services rendered. Our goverment provides such insurance services to its citizens because left to market, private insurance would result in a condition of market failure - high costs for services that are not needed while services that are needed are unfufilled (people unable to get medical treatment). This is what truly differs us from the US and also what differs us from Europe. Ironically, Europe, oft cited by conservatives as the model we should follow, is more socialist than we are - they deliver healthcare directly to citizens, rather than via public insurance, and doctors and medical professionals are employees of the state.

Insurance is a curious business, prone to market failure and plagued by the twin demons of "moral hazzard" and "adverse selection." Insurance often attracts customers that most need the insurance and who think that they will get more out of the insurance than they pay in via premiums and deductables. These are the last customers an insurance company wants because they will lose money servicing them. The customers they want are those that don't need their insurance. This is adverse selection - automatically attracting the type of customer you don't want.

"Moral hazzard" occurs even after the insurance company attracts the "right" kind of customer. Now that they are covered, formerly careful people have no incentive to remain careful because they can externalize the costs rather than pay it themselves. They become more reckless, causing more "accidents" to happen, resulting in more claims and payouts, driving up premiums and rates.

Insurance companies try to mitigate these issues and remain profitable by refusing to ensure certain people, raising premiums or simply not entering into insurance for an entire class of risks. In health, that means things like pre-existing conditions, age, or sex can be used to refuse coverage, pay only partially or charge much higher rates. It is this that produced one of the bitterest ironies of the Chaoulli case - George Zeliotis, the plantiff in the case that sought private insurance for his hip replacement, would not have qualified for the coverage he sought. The only winners in that case would have been the insurance companies, who would make profit selling insurance and collecting premiums, and Dr. Chaoulli, who would get the money. In the US this has led directly to the market failure in private insurance - very few people get coverage and procedures cost too much. For instance, a colonoscopy in 2001 cost $150 in doctor's fees in Canada, while in the US the same operation cost $475 for the government and $885 through private insurance. This is from both the higher administrative overhead in the private system and the fact doctors can charge insurance companies any rate they choose and for sometimes unnescesary procedures. Health consumers in this system are further encouraged to go along with this because of the "use it or lose it" prisoner's dilemna they find themselves in. The result is an innefficient and expensive system that benefits very few consumers yet generates profit and wealth for doctors and insurers - a market failure.

In Canada, we mitigate these issues by having a single insurer, with a single bureaucracy to reduce administrative overhead and reduce purchasing costs (for instance, vaccines cost less when purchased in bulk by a government, either federal or provincial, and given out to anyone, rather than by smaller firms or clinics that have the overhead of needing to track each dose for billing purposes). Our system removes the insurer's profit motive, allowing coverage to be universal and accssible to those that actually need it. Costs are kept down by negotiation fee schedules with medical associations, where they must justify the need to raise fees. Doctors are still paid on a "fee for service" but the government is able to provide much better supervison and auditing than private insurers, preventing much or the above mention moral hazzard problems. Even in the US, the idea of a central bureaucracy along these lines is quite popular - the HMO is the US corporate version of this bureaucracy. The HMO is even more bureaucratic than the government though, because they still need to account for the extended overhead of billing. For instance, Kiaser Pernmanete has a health care bureacracy larger than most of Canadian government run healthcare systems for its 6 million subscribers in California alone. And it is only one of the providers. Also, it has a single monolithic, centralized bureaucracy rather than a decentrialized one as we do in Canada.

Clearly then, our single-payer system is more efficient and delivers quality healthcare at lest cost than a private system. But what of a mixed system? Won't allowing private insurance along side the public system help?

The biggest problem with this is the shortage of doctors, especially GPs. If doctors are forbidden to practice in both a public and private system, many will move to the higher paying private system, leaving the doctor shortage more acute in the public system further makeing wait times grow.. If doctors are allowed to practice in both systems, they will be "perversely incented" to keep wait times long in the public system in order to move patients to the private system, where they can charge more and earn more. This is actually what happened in England and Australia .

Those who need faster service, like Mr. Zeliotis, or specialized services, or long-term care, will not receive coverage or make the wait times any faster. Insurance companies will make profits, doctors in the private system will make profits. Private clinics like the Copeman will make a great deal of money off of the "low hanging fruit" of easy to perform procedures that only the wealthy can afford, leaving the public system to care for the high-risk, expensive procedures. But Canadians in general will not be any better off and indeed, there is a case to be made that they will find themselves in a far worse situation.

That is not to say our system is perfect, far from it. But private insurance and for-profit private delivery are not the answer. Clearly some of the organizational efficiencies of the private system can help when applied to the public system - specialized clinics, case management, better queue management. The study from Alberta in December shows what is possible. GP's are facing higher costs and thus lower wages. These can be mitigated by sharing adminsitrative resources in a walk-in clinic like setting, as Ontario is in the process of implementing.

Our single-payer system is the most efficient and fair system in healthcare, but as the Chaoulli descision shows, it requires proper stewardship and cannot be subjected to haphazard cuts in funding. It works when properly funded. Combining better funding with better organizational effiecincies, it is possible that our system can once again be on of our points of pride. The system can be fixed without resorting to privatization and private insurance. All that is needed is real political will.

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Resources:

Beyond the links above, please read "The Efficient Society" by Joseph Heath, the The Canadian Health Sciences Reseach Foundation Mythbuster page, the testimoiny of Dr. Arnold Relman and the video series from CBC about the birth of our health care system.

And there you have it...

My Conservative friends got their wish - sort of.

While I am sure there are those out there that are still worried about the new CPC government, I am not. With the balance of seats, I am actually quite opptomistic.

Things that will likely get done (if I may be permitted to dust off my crystal ball):

- A federal Accountability Act will be passed.
- In order for the above, our next election will be based on Proportional Representation
- We will all get a tax cut. It will only be negotiated how we get it - will it be the tax cuts delivered in the mini-budget (as supported by the NDP and the Liberals) or GST cuts? Somewhere in between.
- Families will recieve an extra $1000 to $1200 per year for childcare as part of their child tax credit
- Mandatory Minimum sentences will introduced.
- In order for the above to happen, more federal money will be used for programs to prevent youth from entering the gang and crime cultrue in the first place
- The Ports police will be re-instated.
- Border Guards will be armed.

That's pretty productive if you ask me.

Now, I am definitely not afraid of the so-called "so-con agenda" rearing its head. Firstly, the numbers are too slim and many things the social conservative wing of the party would like to do simply will not pass. Also, the inclusion of some of the new Quebec and Ontario members (like John Baird) will have a moderating affect on the party. There are simply more "Red Tories" now - fiscal conservatives rather than social conservatives. That combined with the CPC loses in BC, which removed some social conservatives from caucus and defeated most of the fundementalist religious elements that were running for the CPC, means that the fiscal conservatives now hold sway.

Basically Canadians voted for changes but not radical change. And that is what I believe the next parliament will deliver. While stumping for my local NDP candidate, I saw in most of the all-candiates meetings that the candidates agreed with each other more often than they differed. I honestly think that that will translate into a good working parliament.

Change is niether good nor bad, but constant. It is not the change that is important but how we deal with it. Lets be postive about this change and even though we may disagree with eachother, we can certainly find consensus and make this work.

Update:

Unbelievers, go to the BPOC and see how Dippers, Cons and even the occasional Liberal can come together and actually come up with good policy. Dazz's site is the example the government and the opposition should follow.

Much Ado About Nothing

Well, it appears various Conservatives and Liberals are all giddy over the fact that 10 years ago, Jack Layton had hernia surgery in a private clinic in Toronto.

They all seem to be stuck on the word "private" and missing the point. "Hypocricy!" they scream.

No, not really.

The NDP position is pretty clear - we are against the expansion of private, for-profit, American-style medicine and are for the enforcement of the Canada Health Act.

"Public funds to support the public system. In the next Parliament, we will
introduce tough new rules in the legislation and agreements that govern federal
transfers to provinces for health care. We will make stable, long-term federal
transfers for health care contingent on a commitment from provinces and
territories that no federal money, directly or indirectly, will be used to
subsidize a new, separate, profit-making private insurance
system covering medically necessary services." (empahsis mine)

The Canadian Health Coalition, a public healthcare advocacy group, has no problem with the Shouldice Clinic due to its non-profit status. Further, it indicates that its model of specialization can be emulated by public clinics, as Alberta has done sucessfully and as has been recommended by the The Canadian Centre for Policy Alternatives and Dr. Michael Rachlis this past December, to drastically alleviate wait times.

"The Shouldice Hospital is not an example of private health care as an
alternative to public health. It does not pose the same threat under NAFTA that
Bill 11 in Alberta poses. Neither does it pose the same threat to public
medicare that Bill 11 poses." from the Canadian Health Coalition.

In short, Jack has nothing to be ashamed of and non-profit clinics like the Shouldice are part of the solution, not part of the problem. They are the model for streamlining the system, when emulated by the public system, as Dr. Rachlis and (unwittingly) the Government of Alberta have shown.

The NDP defends public healthcare not against allies that happened to be private, but against for-profit privatized healthcare such as the Copeman Clinics, which take your money, allow you to jump the queue and drive up the costs of healthcare because they bill provincial health insurance plans higher rates.

And before we get stuck on the semantics of "privatization", lets not forget that when Ralph Klein talks about private options, and muses about violating the Canada Health Act, he isn't talking about non-profit private clinics like the Shouldice either.

Conservative Vision of Law and Order - Close but needs some polish

Following on PM the PM promising to ban handguns or crime or something else he can't really deliver after the tragic shootings in Toronto, the Conservatives have come out, in Toronto, with their version of a revamped justice system.

Given that it looks like the NDP might just hold the balance of power in a Conservative minority, let me help out my Conservative friends by indicating the stuff we could go for and the stuff we think is silly.

From the article:

"The Tories' security platform also includes proposals to:

1. Shut down the federal gun registry. - Well, it has cost way too much money, but it might be better just to implement a cheaper alternative within CPIC. Some police forces still think this is a good idea.

2. Raise the age of consent to 16 from 14 years old to prevent the sexual exploitation of children. - We already have laws in place to prevent adults from sexually exploiting teens. The Mulroney Conservatives dropped the age because young offender facilities were filling up with 17-year-olds whose only crime was having sex with or getting a blow-job from their 14 and 15 year old girlfriends. Have we had a spate of 14 and 15 year old being sexually exploited since then? You realize we can pass laws that protect these teens from exploitation while still allowing them to consent to sexual activity, right? If you don't want your 14-year-old to have sex, try education and parenting. Or prove our current criminal santions against sexual exploitations aren't working. This is nothing more than pandering to the social conservative, religious right. It is not good social policy.

3. Sentence anyone 14 years old convicted of a serious violent crime or repeat offence as an adult. - Wait a minute, didn't you guys just say that a 14-year-old was not mature enough to consent to sex? But they are somehow mature enough to be liable to adult criminal sanctions? This is another case of "we already got one" - the Young Offenders Act already has (and always had, actually) provisions for transfering to adult court in cases where the offender had the maturity, determined on a case-by-case basis. Its even been used. Sending every 14-year-old who commits a serious offence to adult jail is enrolling them in crime school (read "Go Boy!" by Roger Caron for a shining example) and will seriously raise our crime rate in years to come. This was the effect of the old Juvenille Delinquents Act and was one of the reasons it was replaced. Sorry, again this is pandering to the so-con, religious base. Make up your mind - either they are mature enough or they aren't.

4. Re-establish the Canada Ports Police to combat drug smuggling. - Good idea.

5. Allow border guards to carry sidearms. - As long as Canada Customs and the officers themselves are good with that, go for it. Keeping in mind when I worked for a summer as a border guard in Sarnia, these guys were more about taxes and duties than security. The Mounties did the security stuff. Times change, of course.

5. Expand the mandate of the Canadian Security Intelligence Service to allow it to spy overseas. - This one is going to need a little more explanation. Given the CSIS gaffes with Air India and Mahar Arar case, there had better be some damn good oversite before we let these guys do this. And I'd sure like some costing to make sure this is worth it.

Harper also said

"...the Conservatives would invest in programs to help at-risk youth avoid
getting involved in gangs and drugs...mandatory minimum prison terms of
between five and 10 years for major firearms offences, and a minimum sentence of
five years for people convicted of possessing a loaded restricted or prohibited
weapon, such as a handgun. There would be no more conditional sentences, or
so-called house arrest, for serious gun crimes, he said. "

That's good and, escept where I have indicated some issues above, this matches what Jack Layton said after the shooting on boxing day:

"These crimes remind us that we must get illegal handguns off our streets
in Toronto and across Canada. To do that we need tougher border controls,
tougher sentencing for weapons offenses, and tougher anti-gang policing,
prosecutions and sentencing.
We need more effective witness protection
programs, and more compassionate victim assistance. We also need to get tougher
- much tougher - on poverty, unemployment and social exclusion"

In otherwords, except for a few glaring points, the NDP can probably work with the Conservatives on this. We may have to debate 'aggrevating circumstance' versus 'mandatory minimums', but the idea of tougher sentences is still there. Add that to the Accountability Act and Electoral Reform and we might have a pretty productive session.

Hell, I'll bet some of the Liberals could back this stuff.

Update:

The NDP has released their crime and justice plaform as well. Kinda familiar, eh? What do you think? I know Candace is impressed and she is not usually that impressed with us lefties.

Upper Date:

For the record, the one part of my own party's platform I don't agree with is the reverse onus legislation. This is a clear violation of the Charter, as per R. v Oak. Despite the hysteria and concern around gun crime, I firmly believe you are innocent until proven guilty and I can't agree with imposing that kind of rule, even for bail. I don't think that kind of limit can be justified in a free and democratic society. Sorry if this upsets my fellow Dippers, but there it is.

The rest of the platform, of course, is very well done.

Upper Upper Date:

Amber Jones from the Progressive Bloggers has an excellent, well reseached piece that warns against increasing sentences as the solution to crime. While I think in the instance of gun crime, we need to boost sentences, she is right for crime in general. And this piece further shows the need to have the right social programs in place to really prevent crime - support for the poor, well-paying jobs and real prospects will prevent far more crime than a few extra years in jail. My hope is that the program's Jack Layton and the NDP call for as part of this platform make it so the sentences never need to be used.

Of scurvy dogs and blogging memes...

Damn.

Damn. Damn. Damn. Skippy the Wonderdog has tagged me.

So I have to tell you 5 wierd things about me. Not too wierd I hope. So here they are:

1) For a snack, I like to eat raw pasta. Its crunch, yet tasteless. The elbow variety are the best, though in a pinch even old lasagna noodles will do. Don't ask, I don't know why I do this I just do.

2) Along the lines of my oral fixation in #1, I also have been known to eat between 5 and 10 lbs of raw carrots a week. I've cut back on this one, after I turned an orangy yellow in front of my family one Christmas dinner. I hope that all that Vitamin A hasn't damaged my liver, or the liquor will have nothing to do.

3) When my hand is flat, the ring finger on my right hand is as long as my middle finger. When my hands are together, as if in prayer, this finger springs over the top of its counterpart almost to the first knuckle. Everyone on my mother's side of the family has it, as well as my siblings and our children. I tell my wife that this will allow us to reclaim the throne of Scotland one day, but she just rolls her eyes at me.

4) I have the ability to "turn off" my ticklishness in mid tickle. This drives my children nuts, as they can't do it and somehow this is "not fair" in a tickle fight.

5) I am 6'2", 260 lbs. A former football player. A martial artist in Northern Praying Mantis kung fu. Yet when frightened or stressed I scream like an angry Minnie Mouse, going off on Mickey for speeding - "Jesus Christ, Mickey!" My wife thinks that is hilarious. I try not to get surprised or frightened at kung fu, for obvious reasons.

Now, I will call on the following to join me in this silliness:

Balbulican
Andrew at BBG
Dazzlin Dino
Greg Bester
and Robert at MyBlahg (since he really has nothing else to write about)