Tuesday, February 28, 2006

Klein's Third Wrong Way

Kegan’s Blog asks if Healthcare in Alberta has taken a hit due to Ralph Klien’s recently announced Third Way initiative, a 10 point framework for healthcare in Alberta. Let’s try to cut through some of this crap.

Most of the announced framework is simply window dressing for the one real substantive change; the introduction of a parallel private healthcare system and the ability for doctors to participate in both the private and public healthcare systems. Of the different funding models, this is possibly the worst alternative in terms of its impact on the public healthcare system. It is being sold to sheeple of Alberta under the guise of increased choice – a well worn conservative euphemism for pandering to the wealthy. Alberta Health Minister Iris Evans says “It’s people making choices for themselves. These will be alternatives for people that can afford to pay for them”.

Dr. Arnold Relman, professor emeritus of medicine and social medicine at Harvard Medical School and emeritus editor-in-chief of the New England Journal of Medicine, in testimony to the Canadian Senate committee in 2002 warned of the deceptive dangers of “choice” in healthcare.

“While there is much to be said for making more information available to people about their health care, it is a fundamental misconception to imagine that sick patients can or should behave like ordinary consumers in commercial transactions, selecting the services and prices they want. Health care is totally different from most goods and services, and that's why we have medical insurance and why sick people need the professional and altruistic services of physicians and other providers.”

Klien maintains that privatization under this model will reduce waiting times – I’m sure appealing to the near universal belief that private delivery is more efficient than public delivery of services. This is of course in the healthcare sector a total fallacy as Canadian hospitals are far more efficient than private hospitals in the United States. Efficiency gains in Canadian healthcare delivery come from massive economies of scale, greater purchasing power, specialization (centres of excellence) and lower administrative overhead. A 1991 study published in the New England Journal of Medicine found that administrative costs in US hospitals were at least 117% higher (and growing) than in Canada, accounting for almost half of the total healthcare spending difference between the two nations. Competition and market forces do not always improve service and reduce costs. When hospitals compete, they often duplicate expensive equipment required for certain procedures and build in excess capacity to compete on service. They then waste money on advertising to ensure that this capacity is utilized. It is far more efficient to coordinate services between facilities and establish centres of excellence for certain types of procedures so that economies of scale and comparative advantage can reduce costs and improve efficiencies.

Even Ms. Evans admits that “[Privatization], of its own accord, may not help the public system by withdrawing people.” If wait lists are reduced and service in the public system improved it will be through the addition of resources to the public system.

This two tier dual access system with practitioners participating simultaneously in both the private and public healthcare systems has not produced the desired results anywhere it has been tried or studied (England, France, New Zealand and Australia). The reason for this is that the problem is a lack of capacity, not the single payer funding model. Dividing healthcare resources between the private and public system is not going to fix the capacity problem. In fact it will make it worse, as doctors will have a perverse incentive as long waiting lists actually add value to their higher margin private practices. Additionally, it is feared that doctors will treat the simpler procedures in their private practices and dump the more complex and costly cases on the public system – with its long waiting list.

The really sad fact about the whole Alberta plan is that it might actually improve healthcare in Alberta. Not because of privatization – although Klien’s sycophants will no doubt make that claim. The presence of a for-profit private system in Alberta may just attract more doctors from other areas of Canada; providing enhanced healthcare services to wealthy Albertans at the expense of other Canadians. That's the third way.


fiddlefaddle said...

Excellent work on this post. As an Albertan I find it maddening that there is no vehicle available to call these incompetents to task.
The only thing Klein and co. excel at is shoot, shovel and shut-up style politics. Otherwise they're incompetent fools dependant upon protection from a compliant media and guidance from the insurance industry.

Anonymous said...

You site England, France, etc. as examples of where 2 tier has not worked. The World Health Organization rated France #1 with the U.K. a close second. They both have 2 tier systems. If you think for 1 minute that we can keep on spending money on healthcare at the rate we are and still maintain the system you're wrong. It is estimated that if we maintain spending at the rate we are now, in 10 years we will be paying 70% income tax. If we don't look at alternative healthcare and combining public and private, we'll be in serious trouble. Manitoba spends the most on healthcare per capita than any other province. Yet we have one of the worst waiting lines in the country. Throwing money at this problem will not solve it. Here's a simple hypothetical situation. Lets say there is a clinic on a street that is publically owned and I decide to open up a private clinic next door. The waiting line at the public clinic has 25 people in it. I go up to those 25 people and say, "if you can afford it, come to my clinic and I'll do the procedure but it will cost you." 10 of those people come to my clinic. I have just saved the tax payers thousands of dollars and there now are 10 fewer people in line at the public clinic. What is wrong with that?

scott said...

I come from Ontario and am afraid that Harper will do the same thing to Canada. I heard him say "as far as he knew, Ralph Klein was going by the Canada Health Act" Huh?
The rich should not be able to have better health care just because they have money..poor people have just as much right to have the same health care as the rich.

CoteGauche said...

Anon: You are missing some really important points.

1. Privatization does not fix the capacity problem, it exacerbates it by dividing resources between public and for-profit systems where providers have an incentive to service higher paying clients first.

2. Privatization will not reduce costs. Competition in the healthcare sector will drive up costs as providers duplicate services to compete for high margin business.

3. You are wrong on England and France. The UK has made greate strides recently in reducing wait times for treatement, but this has not been a result of privatization - the UK has had a two tier system for years and wait times exploded under this model. Wait times have been reduced in the UK by dedicating resources to the National Health Service (NHS), establishing evidence based benchmarks for various procedures (they call them targets) and establishing a system to accurately measure performance against these targets (their 5 star system). Still, wait times for surgury in the UK are typically in the 5-6 month range.

See: http://www.performance.doh.gov.uk/waitingtimes/2005/q3/kh07_y00.html

CoteGauche said...

Anon: One more thing.

I think you underestimate the cost of surgical procedures.

Hip Replacement Surgery (in Germany) ranges from 7200 euros (for older people using prosthetics that are not intended to last for many years) to well over 13,000 euros. At a private surgical clinic in England the procedure is estimated to cost from 9,000 to 12,000 pounds. In the US the procedure ranges from a low of $12,000 to a high of $30,000. So for your average Albertan that is a choice between a 2nd mortgage on the home, or waiting 4 - 5 months. Median wait time in Alberta is about 16 weeks.

Cataract Surgury - average cost (US) is about $3000 per eye (Median wait time in Alberta is 11 weeks).