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.