The Canadian public health care system is on an unsustainable course, says a new study published today by the Atlantic Institute for Market Studies, a course that will plunge medicare in ever-deepening crises over the next 10 to 20 years. Canadians will therefore have to reform medicare substantially if they are to preserve those features of the system that they value so highly: universal coverage and provision of needed medical services on the basis of need, not ability to pay. 

The study, Operating in the Dark: The Gathering Crisis in Canada’s Public Health Care System (requires Adobe Acrobat Reader – see below to download), is intended to offer a guide to Canadians and their policymakers in thinking through the roots of medicare’s current difficulties, and a toolkit for resolving those difficulties as they intensify in the years to come. Operating in the Dark can be downloaded from the Institute’s website at

The study’s authors – Brian Lee Crowley, AIMS president, David Zitner, Director of Medical Informatics at Dalhousie University, and AIMS Policy Analyst Nancy Faraday-Smith – argue that medicare’s troubles stem from a long list of design flaws and rapidly changing circumstances to which the system is responding poorly, if at all. 

Among the design flaws they note: 

·         monopoly provision of publicly provided services;

·         lack of accountability;

·         politicization of health care decision-making;

·         perverse incentives for both patients and health care providers;

·         many barriers to innovation; and

·         lack of regular and reliable information about access and health outcomes.

Changing circumstances include

·         demographic change;

·         rapidly rising costs;

·         intensifying competition for tax dollars, not only for other programmes, but for tax cuts and debt reduction; and

·         technological change. 

Crowley, Zitner and Faraday-Smith argue that the system can only meet these challenges through fundamental reform in four key areas: 

1)      Information gathering. Health care is the largest public spending programme in government. Yet we do not possess the information, or even the ability to gather the information, that would allow us to assess the performance of the current system, let alone evaluate the realistic alternatives. Efforts to overcome the disincentives to vital information gathering within the medicare system have proven ineffective to date. No Canadian jurisdiction is able to provide either systematic, regular and reliable information linking health outcomes with health care activities, or regular and reliable information about access to care.

2)      Introduction of competition. Lack of competition, with its attendant absence of accountability and barriers to patient satisfaction or effective management, is a major cause of the system’s failings. Finding ways to introduce the discipline of competition into the provision of publicly insured services is thus seen as fundamental to successful reform. 

3)      Openness to more private sector participation. Crowley, Zitner and Faraday-Smith are deeply sceptical of medicare’s ability to continue to obstruct private sector participation in the provision of many aspects of health care that are currently publicly provided. Increased private sector participation can take many forms, including contracting out of services such as laboratories and food services, compulsory competitive tendering, and provision of management, technical expertise and financing currently provided almost exclusively within the public sector. Internal markets with capitation fees, and health allowances or Medical Savings Accounts, are examined as ways to improve incentives within the health care system. 

4)      Improving the payment system. How and under what conditions money changes hands within the health care system is a vital determinant of its incentive structure. Operating in the Dark thus concludes with an examination of the three chief methods for paying physicians: fee for encounter, capitation and salary. The authors conclude that the search for the “one-size-fits-all” payment system is a vain one. On the contrary, the circumstances of people within the system are so varied that no one payment system is fully satisfactory because each has characteristic strengths and weaknesses. Far more experimentation is required within the system to identify the variety of payment approaches that reflects the diversity of circumstances of patients, professionals and health care institutions. This experimentation must compare not only payment systems (e.g. capitation vs. fee for encounter) in different circumstances, but also different payment levels within each system.  

AIMS is a privately-funded public policy think tank based in Halifax, Nova Scotia. It seeks to stimulate Canadians to think in new and creative ways about the public policy challenges they face.   

Click Here to read “Operating in the Dark”