“Private financing, private delivery. Two tier health care?”
A presentation to a National Healthcare Leadership Conference Panel

Brian Lee Crowley, president, AIMS
Halifax, 27 May 2002

Two-tier health care is a slippery concept. Everybody seems to think they know what it is, but I think that there is a lot more confusion than people realize. As some have already pointed out, we have a lot of angry discussions about “preventing” two-tier access in Canada, and yet we clearly already have multi-tier access, including to insured services. If you are on workers comp, are in the RCMP or the military, if your company has its own salaried physicians, if you use a private hospital like Shouldice in Toronto, if you are a member of the medical professions or know someone who is, or are just articulate and determined, or if you travel abroad to the US or any one of a number of other places, you can get better, faster or more satisfactory care than someone who just lets the wheels of medicare grind on. Moreover, technology is allowing the remote delivery of more and more health services, so the ability of governments to frustrate patients’ desire to get better and faster treatment than the government is willing to provide them, is declining, and that decline will accelerate. So the debate is really about how many tiers and under what conditions. And some of these tiers, such as travel abroad, or access to remote health services via the Internet, are not amenable to government controls.

Note too the slipperiness of the concept of multiple tiers. For some people, multiple tiers are a concern for reasons of adequate access. If some people can get a service by paying for it, while others who cannot pay do not get access, that is multiple tiers. On the other hand, there are people who have multiple tier concerns for reasons of commitment to an ideology of egalitarianism. Thus two people with similar conditions may both get treated, one more quickly through private payment, the other more slowly, but within appropriate norms for their condition, by medicare. The complaints that this generates are not about whether some people are denied medical care based on ability to pay, because anyone willing to wait in the system will eventually get care (although we possess no figures on the number of Canadians who die while queuing for care). The complaint is rather that someone got care more quickly, a very different objection based in the notion that no one should be able to get faster treatment than in the public system, even where such faster access does not affect the quality or timeliness of the care obtained by people who continue to use the public system.

Even the concept of private sector involvement is ill-defined. While we have conferences at which people decry the possibility of permitting any significant private sector involvement in health care at all, British health policy analysts Carol Propper and Katherine Green, in a paper reviewing the public-private mix of care across countries, classify Canada as having public finance but “mainly private provision” of care.

We often hear that the private share of total health expenditure in Canada has risen to close to 30%, which is roughly the same as the private share was in 1970, before all provinces had entered Medicare, the implication being that we are in the process of reverting to the bad old days. But in 1970, only 77% of all physician services were paid for out of the public purse, whereas today 99% are paid for publicly, as are 92% of hospital services.

There are certainly countries with lower overall private shares – in Denmark 18% of total health expenditure is privately funded, and in France 22%, but for the comparisons to be meaningful we have to be comparing like with like. In some countries, items that we obtain under Medicare are supplied by both the public and private sectors: in Denmark the public purse covers only 87% of expenditure on physician services, and in France the public share of spending on physician services is only 60%.

The increase in the private share of total expenditure in Canada has come from non-Medicare items: dental services and other professional services, for example, 89% of expenditure on which is privately financed, and drugs, both prescription and over the counter (67% privately financed). Spending on these things has indeed increased over time, because our incomes have risen over time and these are things that higher income individuals tend to buy more of. Our private insurance coverage has also increased over time, giving more people access to more expensive eyeglasses, for example. More rapid growth in expenditure on non-Medicare items is what you would expect in a growing economy, and tells us nothing about the health of Medicare.

The most recent catalyst for the debate about multiple tiers and private sector involvement in the delivery of health services was Alberta’s Bill 11, which extended the scope of private, for-profit clinics in Alberta. Bill 11 was followed by the report of the Alberta Premier’s Council on Health (the “Mazankowski Committee”, of which I have the honour to be a member), which proposed a greater degree of neutrality between public and private sector suppliers of health services, including such clinics, when government purchases health care for its citizens. There have been the usual objections, replete with claims that if Alberta is permitted to go ahead, medicare is doomed. The Alberta proposals have been labeled as the first step towards Americanizing the Canadian health care system, but that does not clarify matters – any proposal to change the form of medicare, regardless of its effect on function, is labelled as Americanizing the system and as the precursor to the introduction of two-tier health care.

What Alberta has proposed is really fairly minor, and a logical extension of the current structure of medicare. It certainly has nothing to do with “Americanizing” medicare. It is true that when most Canadians think of private hospitals they immediately think of the United States – in fact in that context most Canadians think only of the United States. They assume that the high proportion of GDP which the Americans spend on health, and their relatively lower life expectancy at birth (79.4 years for females as compared to 81.4 years in Canada) are the result of their having private health care.

In fact, though, a great many countries, and not just the United States, permit Alberta-style clinics to operate within their public health care systems, and those countries have health outcomes at least as good as ours. In some cases private clinics contract with the public system to perform a certain number of services for a predetermined payment, and in others they supply services on a fee-for-service basis. In Sweden in the late 1980s under a contracting system, private suppliers were performing 25% of coronary bypass surgery. In France, under fee-for-service, private clinics handle surgery for digestive diseases and eye surgery, and fully one third of hospital stays are in private facilities, and in Norway private clinics specialize in open-heart surgery and hip surgery, among others. None of these countries spend a significantly higher proportion of their GDP on health than we do, none has a higher private expenditure share, and all have life expectancies at birth on the same order as ours. In Japan, where both male and female life expectancy at birth are the highest in the OECD countries, and where expenditure on health takes up a mere 7.4% of GDP, a very large proportion of hospitals are in fact small, private clinics with facilities for overnight stays, and 54% of beds are classified as investor-owned.

There are countries with full-scale private hospital systems running in parallel to their private systems – Australia and the UK are probably the best known. In the UK the private hospital system is well established, and is regularly used by the NHS to pick up the excess demand when public sector waiting lists get too long, just as Canadian governments use the US private health care sector to relieve queuing times in Canada, as the Ontario government, for example, has done recently with cancer care.

The Australian private hospital system is probably less important in the overall health care system than is its British counterpart, but it is a well established part of that system, and at least one Australian government report has concluded that private hospitals are probably slightly more efficient than their public counterparts, although the difference is not large. Both countries have very respectable life expectancies at birth, and in both cases health takes up a smaller share of GDP than in Canada.

Even in the United States the picture is not as clear as generally assumed by Canadians – contrary to the widely held view, the US hospital system is not dominated by for-profit providers – only 15% of hospitals representing 12% of beds are in for-profit hospitals, the remaining 85% of hospitals (and 88% of beds) are private and government non-profits. Even the differences in outcomes measures aren’t as clear as most Canadians assume.

Most Canadians have also heard that there are no studies published in peer reviewed journals which find that for-profit hospitals are less costly, or more efficient, than not-for-profit hospitals or, if they do find that for-profit hospitals are less costly, it must be because they produce lower quality care. Neither of these statements is true. Looking at the American peer- reviewed literature, which is where the bulk of the evidence is drawn from, we find that there are in fact articles which find for-profit hospitals are less costly, and more efficient, and the peer-reviewed literature indicates that there is no significant difference in quality between for-profit and non-profit hospitals in general. There are also articles, which find that not-for-profit hospitals are more efficient and less costly, and there are a lot of articles, which find no significant difference in cost or efficiency. The only edge non-profits have is that teaching hospitals, which tend to be not-for-profit, have better outcomes than either for-profits or other not-for-profit hospitals. This doesn’t mean that introducing for-profit hospitals into Canada would result in tremendous cost savings or efficiency gains, but it does mean that, contrary to the widely held view, for-profits are not automatically more costly.

If we do something very unusual for the Canadian health policy debate, and look beyond the United States, international experience gives us a fairly clear picture of what we should expect from Alberta-style clinics. First, they will almost certainly not grow into full-fledged hospitals, such as are found in Australia and the UK. Those hospitals are supported by a private insurance system operating in parallel with the public system, and no such system has been proposed here nor, given the Australian experience of private insurance entering a classic insurance death spiral, is it likely to be. They are more likely to remain specialized clinics on the French or Norwegian models, selling services to Medicare on a fee-for-service basis. There is Canadian precedent for this, including in Toronto’s Shouldice hospital.

It is worth noting, in concluding this section of my remarks, that Canada is almost alone in the Western world in outlawing private access, through payment, to services that are also publicly insured. One already-noted consequence of this is that while we pay virtually the totality of physician services out of the public purse, there are many services, such as drugs or home care or long term care, that are not covered by medicare, whereas they are insured in other countries. One way of looking at this is to say that by forbidding people who wish to pay the ability to do so, we satisfy our ideological craving for egalitarianism, but at the cost of an inability to make room in the public budget for a wider range of services that low income people might truly need.

Now this might be a defensible trade-off if on objective and subjective criteria, our system were superior to others, and indeed we frequently hear it said in Canada that we have the best health care system in the world. But neither the UN nor the citizens of Canada, nor the poor and the elderly in Canada, agree.

When the WHO rated health systems around the world, Canada ranked 14th in “overall system performance” among industrialized countries, 4th in terms of overall system attainment and 5th in terms of responsiveness. Virtually every country that the UN ranked higher than Canada allows people to gain access to health services through private payment, and many of them have as good or better population health indicators and spend more per capita on health care.

A Harvard study comparing the UN health care system rankings with the opinions of the population of each country, found that Canadians’ level of satisfaction with their system was 12th in the industrialized countries, again lagging a long list of countries with more formalized multi-tier access and a broader range of services covered by public insurance. The poor and the elderly in this country both ranked Canada lower, at 14th.

In sum, much of our debate about multiple tiers is ideological, and has little to do with the quality of care delivered within the public system. We cling to a system that outlaws private spending on publicly-insured services, usually on the basis that parallel systems of care rob the public system of resources, while both objective and subjective international rankings show that multiple tiers of access are fully compatible with high quality public systems and high levels of care overall and high levels of patient satisfaction. Finally, the small steps that are being taken within Canada toward more private provision of care within the publicly-funded system are logical extensions of medicare and the evidence from other countries is that such use of private facilities can introduce efficiencies and is certainly compatible with a dynamic and high quality health care system in which no one is denied needed medical care on the basis of ability to pay.

Thank you.