The Canadian Healthcare System

First Published: 2003-09-09

In a recent public address (see www.nassauinstitute.org) a health insurer has recommended the Canadian system as a possible form of national healthcare for the Bahamas. Is this really a good idea??

Forty years ago when Canada nationalized healthcare, the intellectual climate of opinion was very different than it is now. Socialist thinking dominated and healthcare easily became a nationalized program of that era.

Today the Canadian government continues trying to maintain an inherently flawed system of absolute state control, the nature of which is a complete absence of market signals that provide the information required for quick and efficient response at the best price.

By the 21st century the climate of opinion has changed and socialist ideology is no longer widely accepted. Nevertheless in practice, resistance to free markets persists, and the old structures – such as in healthcare continue. This is the case in spite of the fact that the mostly free market has so successfully demonstrated its capacity to provide astonishing supplies of goods and services, while at the same time adding to the wealth and well-being of us all.

How the Canadian Healthcare System works – or doesn’t work

In November The Health Minister R. Romanow will report to the Canadian Prime Minister on the findings of an eighteen-month commission of Inquiry (cost 15 Million dollars). He calls for expansion of the system, and more tax dollars to make it work. This is classic government bureaucratic socialism that Dr. Milton Friedman has described as follows:

“If you start a program that is a failure and you are in the private market, the only way you can keep it going is by digging into your own pocket. That is your bottom line. However, if you are in the government, you have another recourse. With perfectly good intentions and good will nobody likes to say ‘I was wrong’ you can say, ‘Oh, the only reason it is a failure is because we haven't done enough.’

In addition to expansion and injections of more money, Mr. Romanow hopes to discourage growth in the few areas where the private market is concerned. He also states “confidence in the existing system must be restored”. This lack of confidence is confirmed in an independent national poll of 3,300 Canadians showing that:

– 80 % want reform of the current system

– 66 % support user fees

– 45% want market reform

– a majority do not want an increase in taxes for healthcare.

– a majority deem the system to be in a state of crisis.

Canadians are falling out of love for their system, and the Health minister’s solutions for the crisis are not likely to win them back.

A Lesson for The Bahamas

Before considering legislation in the Bahamas that would make government the sole provider of “free” healthcare it is well to understand a fundamental law of economics:

“Legislation cannot repeal the non-legislated law of demand and supply. The lower the price, the greater the quantity demanded, and at a zero price, the quantity demanded becomes infinite. It follows that some method of rationing must be substituted for price and that invariably means administrative rationing”. (Milton Friedman)

The Canadian system is noted for its long waiting lists for specialist attention that grow longer each year. When care is rationed, individuals waiting their turn still incur costs even though they may not be recognized. Lost work time and decreased productivity due to physical impairment are costs as well as psychological and physical pain and suffering. Individuals adapt to non-price rationing in different ways. As an example use of a system of triage, the three-way classification developed by Florence Nightingale for sorting the wounded on the battlefield. Under such a system the physician sorts patients into three groups: those who are beyond help, those who benefit greatly from immediate care and those who can wait.

The Fraser Institute has been producing research and analysis on health care since 1978. A goldmine of information and research is available from the Institute. Even though “equal access” is one of the “buzz-words” of the government, examples of discrimination have been exposed in the Fraser Studies. For example “cardiovascular surgery queues are routinely jumped by the favoured and politically connected, suburban and rural residents confront barriers to access not encountered by their counterparts in urban centers and low income Canadians have less access to certain kinds of treatments and have lower survival rates than their higher income neighbours”.

Increasing spending, Increasing demand

In the U.S. and Canada healthcare is a sizeable and growing part of these economies. Probably true also for The Bahamas. The U.S. spends 14% of economic output on healthcare or 1.4 Trillion dollars annually, and Canada spends 9.4% or 102 billion dollars. In about ten years at the current rate of growth healthcare will represent one third of the U. S. economy and a similar percentage for Canada.

As healthcare is a growth industry, innovative healthcare insurers and suppliers may find market solutions for the expanding opportunity rather than recommending a government run system. Efficiencies and reliability are critical factors in the delivery of healthcare and are not characteristic of any government run programs, either in the Bahamas or Canada. Nevertheless there is reluctance to have healthcare delivered by the private market. This is a curious phenomena when considering that the free market supplies the equally essential products and services like food, transportation, housing, communications, and so on.

In this century technological development in almost all areas of western economies has lowered costs, so that the fraction of national income spent on food, transportation, communication, etc. has gone down. Resources are thereby released to produce new products or services. With nationalized healthcare the reverse occurs; escalating costs for diminishing returns.

A key difference between medical care and the other technological revolutions is the role of government. If we relied on government to be the sole provider of food, housing and all the other essentials, we would have a living standard closer to that of the 12th century.

Health economists at the National Center for Policy (NCPA) recommend Medical Savings Accounts (MSA) in place of government run health plans. The effect is to reduce bureaucracy and increase personal responsibility. Singapore and South Africa have implemented this program, and probably so should The Bahamas.

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