BEST IN THE WORLD

Our Health Care System is the Best in the World?
By Jeff Boddez, Faculty of Education, University of Alberta

Since 1968, when the Medical Care Act was enacted due to the work of the Hall Commission, Canadian citizens have relied solely on their federal and provincial governments to provide them with insured health services. In 1984, the federal government passed the Canada Health Act (CHA), which promised to deliver portable, universal, accessible, comprehensive, and publicly administered health care. Today, it has become clear that governments across the country have had great difficulty in successfully living up to the criteria laid out in the CHA. Although most politicians in Canada have consistently maintained that “our health care system is the best in the world,” major problems and concerns remain. Single-payer funding and provision, large waiting lists for medical procedures, and the rationing of health services are all major symptoms of the ailing Medicare system.

When it comes to health care, as with most other public policy issues, there are predominantly two processes that can be used to find solutions that will enhance the general welfare of society: government and the market. Currently, Canadians are forced to depend on the government for their health care services. According to the Canada Health Act, it is literally illegal for anyone to purchase health insurance from a private provider. This situation severely limits the choices Canadians have regarding their own health and well being.

Medical savings accounts are an innovative, cost-sharing product designed to maximize the incentives of consumers to spend their health care dollars wisely.

Certainly, there are choices available for consumers within the Medicare system itself. Everyone can go to the doctor of their choice in much the same way as they can go to the dentist of their choice. Although it may seem like doctors are competing with one another, this perception is often illusory because doctors do not have complete freedom over their work and property, whereas dentists do, for the most part. In fact, doctors in Canada are all funded, regulated, licensed, organized and administered through one source: the government. Whether a patient chooses to go to a family physician downtown, or to one in the suburbs, there is no assurance that one or the other will offer better service. Both physicians end up getting the same fee for the same work from the same bureaucracy.

The real issue here is not so much the lack of choice within the health care system as it is the lack of choice between health care systems. Patients have no other option in Canada if they want to get more timely health services, except to travel to the United States, where private providers are readily available. Doctors in Canada have no other option if they want to escape salary cutbacks, high overhead costs, and bureaucratic meddling, except to move to the United States or to a jurisdiction that will allow them to practice freely. The emergence of a private health care sector would give Canadians an immediate choice to remain in or opt out of Medicare. It would force the federal and provincial governments to compete for health care resources that were previously in their monopoly control.

Before looking at how the free market can increase health care choices, the question of why it is important should be addressed. When the government allocates health care resources, consumers must rely exclusively on political and interest group pressures in order to have their demands met. This allows politicians to effectively conceal from their constituents exactly what the true costs are. In contrast, the market process creates incentives for producers, resulting from their competition with other producers, to provide what consumers demand. Market-based pricing makes the true costs of health care more visible when patients are in direct control of their own purchasing decisions.

A prime example of a benefit resulting from greater choice would be the implementation of medical savings accounts (MSAs). Medical savings accounts are an innovative, cost-sharing product designed to maximize the incentives of consumers to spend their health care dollars wisely. Individuals, employers, or the government could contribute to the funding of MSAs. In the Canadian situation, MSAs could be funded from tax revenues already allocated for health care. High deductible, catastrophic health insurance policies could then be purchased for every Canadian individual and family, and any money saved would be immediately deposited into individual MSAs. If and when all funds in the account are spent on medical expenses (i.e. once the deductible level is reached), full policy coverage of subsequent medical services would commence. However, if any funds were left in the MSA at the end of the usage period, they would remain the property of the account holder and could be carried forward to the next period or used as savings for investment.¹

Reliance on the government to guarantee quality health care services that are accessible to every Canadian has been a dismal failure.

The potential advantage of medical savings accounts over more conventional cost sharing arrangements would be the reduction of any barrier to health care that lower income or chronically-ill individuals may face. MSAs do not have a co-insurance requirement, meaning that only individuals who could afford to contribute to their accounts would be required to do so. Either setting the maximum deductible as a function of income or direct subsidization would be two ways to greatly reduce or eliminate any cost sharing for those less fortunate. However, both of these methods may provide disincentives for individuals to earn incomes beyond their relatively low levels.² An even better way for the poor to benefit might be to fund medical savings accounts through the use of private charities or mutual aid societies.³ Employing the private or mutual aid approach would ensure that all funding is voluntary, leading to greater welfare enhancement, since both the donor and the recipient would mutually benefit from the arrangement.

Reliance on the government to guarantee quality health care services that are accessible to every Canadian has been a dismal failure. Policy makers must now give serious attention to the potential benefits that can come from using markets to provide and fund the health care system. Free markets are absolutely crucial to the future of health care in Canada because they allow for more competition between providers for the consumers’ business. As a result, the potential for the creation of more customized and innovative health care products, such as medical savings accounts, is tremendous.