The Black Hole that is Canada's Medicare

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Appeared in the Times Colonist, February 14, 2005

On Monday, Finance Minister Goodale tabled legislation to implement the government’s 10-year plan for improving health care. Though the legislation itself is simply part of the process of implementing the plan that was agreed to last September, its tabling should spur Canadians to again consider the merits of the 10-year Plan to Strengthen Health Care. Will the plan, as Health Minister Dosanjh claims, help to “renew our health care system?” Or is the plan simply a vehicle for the Canadian Medicare program to suck even more funding from taxpayer’s pockets with virtually no improvement in the quantity or quality of services delivered?

As with all new proposals, it is important to first consider whether or not an increase in funding is necessary. With the government planning to pour an extra $41 billion into the system over the next ten years, one might assume that the system is currently underfunded.

Quite to the contrary, no nation with the goal of guaranteeing access to care regardless of ability to pay spends more than Canada once we account for the relatively youthful population in this country. And yet Canada’s governments have concluded that the solution to our long waiting times, shortages of physicians, and lack of access to high tech diagnostic machinery is a massive cash infusion associated with the vague goals of ‘reducing’ waiting times (not eliminating) and ‘improving access’, and the creation of a new Health Council.

A quick look back over the last 11 years provides additional perspective. Between 1993 and 2004, inflation adjusted health care spending per person increased by 27 percent, while waiting lists nationally grew by an incredible 92 percent. Statistical analyses of this bizarre relationship have confirmed that past increases in provincial spending, unless specifically targeted to physicians or pharmaceuticals, were indeed correlated with increases in waiting times, which is not all that surprising considering that provinces that spent more on health care were also found to be providing fewer major surgeries for patients.

If we ended up with longer wait times and a reduction of services when we spent more in the past, why should Canadians expect any different this time around?

Dr. Max Gammon, after studying health expenditures and health services in the British National Health Service, formulated what he called “the theory of bureaucratic displacement,” now known as Gammon’s Law. The law states that an increase in expenditures in a bureaucratic system will be matched by a fall in production. As Dr. Gammon put it, “Such systems will act rather like ‘black holes’, in the economic universe, simultaneously sucking in resources, and shrinking in terms of ‘emitted production’.”

Considering that the Canadian health care program was originally modeled on the now failing British NHS, it should not come as a surprise to anyone that we are subject to the same results from increases in health expenditures. That giant sucking sound you hear, and the related lightness you’ll soon feel in your wallet, is Gammon’s Law at work.

Rather than spend more money year after year, let’s consider for a moment what other, far more successful universal-access health care programs have done in order to create and enjoy that success.

Australia, Austria, Belgium, France, Germany, Japan, Luxembourg, Sweden, and Switzerland all have private hospitals delivering publicly funded care, all have cost sharing arrangements for publicly funded care, and all allow individuals to seek care privately (as does every developed nation except Canada). As a result, all of these nations manage either better health outcomes from care, access to care without waiting lists, or, in the cases of France and Japan, do both. And since these nations guarantee access to health services regardless of ability to pay, all their citizens enjoy the unimpeded access to high quality services that these policies have created, which is precisely what would happen if these policies were enacted in Canada.

Real health reform, guided by the lessons that international experience and economic research provide, will give Canadians a world class health care program: a program characterized by a lack of waiting lists for health services, superior health outcomes, and a reasonable bill for the taxpayers. Unfortunately, the 10-year plan tabled Monday incorporates none of these lessons and will ultimately have only one meaningful impact on Medicare; making it far more expensive than it already is.

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