Our Anti-Model to the North: Whatever you do: don't do like Canada

National Review, June 30, 2003 by John R. Graham

Twelve years ago, Canadians were scandalized to learn that a Toronto hospital was using its CT scanner to do brain examinations on dogs for $300 (Cdn.) a pop. Meanwhile, patients were waiting up to three months to get checked out. When did Canadian health care go to the dogs?

CT scans are considered "medically necessary." According to the Canada Health Act -- the law that completed the socialization of Canadian health care in 1984 -- procedures deemed medically necessary fall under the government monopoly. Cosmetic plastic surgery, on the other hand, is not subject to government rationing -- which means the free market kicks in and waiting lines all but disappear. But when a Canadian citizen needs to get a CT scan of his brain, he has to wait until the government is good and ready to give him one. Dogs, however, are free to shop around.

What motivated this hospital to sell CT scans to dogs rather than people? Dog owners pay cash, creating marginal revenue for the hospital to distribute among its stakeholders. Patients, however, do not bring in revenue. Under block-funding formulas, Canadian hospitals usually negotiate agreements for operating funds with their provincial governments. Money does not follow patients -- it follows bureaucratic edicts. Furthermore, because provincial governments also finance hospitals, hospitals are in effect government agencies, a situation that creates a massive conflict of interest. (Imagine that the government forced welfare recipients to get their groceries from government warehouses: Does anyone really think that those warehouses would provide good service?)

Things have not changed for the better since 1991 -- when the dog scandal broke.

With respect to CT scanners per million residents, Canada ranked 17th out of 22 OECD countries in 2000, just ahead of Turkey. As for surgeries, the median total waiting time grew from 9.3 weeks in 1993 to 16.5 weeks in 2002. Of this total, it takes seven weeks between a general practitioner's referral and the appointment with a specialist, and nine weeks between that appointment and actual treatment. This is twice as long as specialists deem clinically reasonable. Canadian doctors are so fed up with this appalling lack of access to diagnostic equipment and surgery, they're leaving the system. With only 1.8 doctors per thousand residents in 1999, Canada ranked 17th out of 20 OECD countries in number of physicians.

These dreadful conditions are a result of a system that stymies patients from both the demand side and the supply side. On the demand side, patients are generally not allowed to buy private insurance for services that are legally defined as medically necessary. Therefore, all Canadians are stuck with the one-size-fits-all government insurance plan. Furthermore, the government provides free health care out of general taxation and forbids doctors who provide superior service to charge patients. Because patients do not direct any of the money, they have no influence whatsoever over which services they receive or how they are delivered, a situation that stifles reform. And, since Canadian health professionals negotiate their terms of engagement centrally via collective bargaining, reforming primary-care delivery has become bogged down in turf wars between the professions.

On the supply side, provincial governments do not allow private hospitals to compete against government-financed ones. Whenever a private entrepreneur suggests that he might be able to provide a high- quality service at a lower cost to the government insurer than the public hospitals, the establishment circles the wagons and declares that profits should not come before people!

Things might be changing on this front, however. A recent national commission reluctantly concluded that it might just be tolerable to allow hospitals to outsource their laundry services to private contractors, but only if absolutely necessary. To date, the only tentative privatization of the supply side has occurred for facilities that provide same-day services, such as cataract operations or abortions. Given the disgraceful lack of publicly supplied diagnostic machines, some private diagnostic clinics have opened up and are serving the public system in a few areas. The results are impressive. In 1999 and 2000, the health authority for the city of Calgary was allowed to contract privately for MRI scans. Within three months, the waiting list for MRIs dropped from 200 days to 70.

These initiatives have hit a wall of opposition, built primarily by public-sector unions, to which employees of government-run hospitals belong. Their opposition is understandable. In the city of Vancouver's main hospital, we at the Fraser Institute observed that workers such as payroll clerks and painters were earning one-third more than their private-sector, unionized counterparts in other industries.

While governments in every developed country intervene heavily in their health-care systems, none (with the possible exception of the Czech Republic) has gone as far as Canada in eliminating private choice and initiative. If we drop the United States from comparison and look only at developed countries where the government makes an explicit commitment to equity and access to health care, Canada was the fourth- highest spender on health care in the OECD in 1999 (when measured as a share of GDP) after Germany, Switzerland, and France. Those countries have significantly older populations, so we would expect them to spend more. When the measurement is adjusted to normalize for the proportion of senior citizens in the population, Canada jumps to the top of the spending chart. This big spending doesn't translate into a healthier life for Canadians, however: Canada ranks tenth in terms of disability- free life expectancy (i.e., that amount of your life that you can expect to live in full health).