Have you ever wondered why health care seems to be unlike any other industry?
I think it is this very peculiar fact: the value we get for the money we spend on it doesn’t increase nearly as fast as in other industries. In Canada health spending continually increases while queues get longer, doctors more scarce, and deaths from preventable mistakes get no better.
In almost every other field or industry, technology and competition drive a constant revolution in value. Take automobiles. While the cost has risen, cars are hugely more technologically sophisticated than they used to be. They are lighter, use less gasoline, are more comfortable and keep you safer. In other words, you get a lot more for your dollar.
That’s partly the result of increasing technological sophistication, but that technological savvy is driven by competition. If we’d kept out Japanese cars in the 1970s, cars would have improved in North America, but not nearly at the same pace as they have as Ford and GM have struggled to meet the competition from overseas.
It’s the same in food. My local Sobeys is much better since the advent of Superstore and Costco, and there are many more stores in better locations with more choice and keener pricing. Again, while food can seem expensive, when measured in the time we have to work in order to buy what we want, the cost has gone down over the years.
The great guru of competitiveness, Harvard’s Michael Porter, looked at these facts, and asked himself why health care didn’t behave the same way. It’s not, of course, that there haven’t been technological advances in health care, but the important thing is that they have not driven a value revolution in that field the way that they have elsewhere. And, as Porter notes, it’s not as if there hasn’t been competition in health care provision in the United States. So why don’t Americans get better value for their health care dollar?
The answer, he says, is that American health care providers have been engaged in the wrong kind of competition, and this has undermined value for users of the health care system. And when you hear why he thinks this, you’ll immediately understand why this is relevant to Canada.
One key mistake American health care providers have made is thinking that a doctor’s visit is pretty much the same everywhere, as is an appendectomy or heart surgery. As a result, the system has concluded that the way to keep costs down is to become ever larger, to increase their bargaining power with physicians and hospitals, and to turn the screws down on costs. That means reducing costs by pushing part of them onto providers (in the form of lower incomes) and part of them on to patients (in the form of restricted access to services, through queuing and the like). Porter calls this “zero-sum competition”, because any advantage it creates for one group in the system can only come at the expense of other groups.
But competition in other industries has created new value through innovation and specialization, meaning that everyone benefits. That’s why Porter argues that the health care system’s woes can only be remedied by focusing on what will provide the greatest value for patients, and abandoning the old Stalinist model of building the largest centralized health bureaucracy possible to force providers to work for less and patients to get less. Instead, specialization would be encouraged, and consumers freed from bureaucrats’ control to take their health care needs to the supplier that can best meet them, in terms of quality, convenience and timeliness.
And this is not just theoretical. As one US health care observer wrote recently, laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and it has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350 — a decline of around 40 percent after inflation.
Why? Laser eye surgery is one of the few health procedures where consumers are king, and where the value revolution so prevalent in other industries has been able to work its magic.
In Canada we are different than the US, not because we’ve taken a different road in health care, but because we’ve gone farther down the road of zero-sum competition in health care. We actually use the power of government to forbid competition and consumer choice. That’s why the US is no model for Canada on health care, and why laser eye surgery should help people on both sides of the border to see more clearly where we’ve gone wrong.
Brian Lee Crowley is president of the Atlantic Institute for Market Studies (www.aims.ca), a public policy think tank in Halifax. E-mail: [email protected]