Cut health-care costs by getting back to basics

Don Newman suggests going back to the old medicare of the 1960s as a way to deal with the looming health-care cost crisis.

The coming crisis in Canadian health care is being ignored by federal politicians in all parties at the moment — and pretty much everyone in provincial governments as well.

Well, not exactly everyone. Last week, I talked about how governments in the three biggest provinces are at least taking preliminary steps to try to get escalating health-care costs under control.

Governments in Quebec, Ontario and B.C. are taking the first steps towards controlling health-care costs. ((Richard Buchan/Canadian Press))

Quebec is proposing user fees for visits to a doctor. Ontario is forcing pharmacies to cut generic-drug prices to half the current level and wants to eliminate incentive fees that generic-drug manufacturers pay to pharmacists. And British Columbia is switching from financing hospitals with block grants to putting in place a fee-for-procedure payment system.

Yet costs are increasing on average by about six per cent a year, much faster than population growth and inflation. Increases will only accelerate with the aging population and the increasing price of life-extending drugs that fortunately continue to come on the market.

Health care now consumes more than 40 per cent of provincial budgets, and that is with the current federal health-care funding agreement negotiated in 2004 between Paul Martin's Liberal government and the provinces.

That program expires in 2013, and whatever replaces it won't be as generous or as long-term. The agreement was reached after hard bargaining, at a time when Ottawa and most of the provinces had budget surpluses and the economy was booming. Negotiations for a new arrangement will take place with Ottawa and most of the provinces in deficit and the economy still emerging from its slowdown.

All of that tells us that mere tinkering with health care isn't going to solve things.

A new look at an old idea

Does that mean we need a new medicare? 

I suggest we go back to the old medicare of the 1960s instead.

When Tommy Douglas and his CCF government introduced government health insurance legislation in the Saskatchewan legislature in 1961, they were creating a government-run insurance plan to replace a private scheme run by the province's doctors.

The new government plan covered everybody, whether or not they could afford insurance or had a pre-existing health condition. 

After the federal Liberal government of Lester Pearson passed legislation offering to pay half of the costs of any provincial public insurance plan, the other provinces had no choice but to fall in line. And with some rather slight variations, each adopted a plan similar to the original one in Saskatchewan.

Those plans covered doctors' services and hospital procedures in existing facilities. Hospitals were run by cities through civic corporations, religious organizations or other private groups — not the provinces.

How to keep up

So as demand increases and costs rise, the question is how to have a health-care system that meets Canadians' needs, and how to pay for that system.

Should hospitals and other health-care infrastructure be run outside of government? ((Ryan Remiorz/Canadian Press))

For the sake of argument, how about this? Let's get back to basics.

Let the bulk of the public money going into health care go toward insuring hospital care and procedures and doctors services.

Let the massively expensive infrastructure costs of health care — the physical hospital plant, the MRIs, CAT scans and the like — be provided by non-government sources: non-profit organizations, religious groups and, yes, for-profit hospitals.  

Some will argue that private delivery will increase the costs for all medical services.

No it won't — not if the doctor, hospital or other service provider wants to be paid by the public health insurance plan. That's the way it works now for doctors and private labs and clinics. That's the way it would still work.

But wouldn't groups either building new hospitals or acquiring existing ones have to borrow a lot of money? And if they couldn't add that to their costs, how would they stay in business?

Well, the interest on a lot of business is tax-deductible. And another way to keep interest costs down and keep federal involvement in the health-care system would be for Ottawa to create a Health Care Infrastructure Bank, with money it borrowed to finance health-care infrastructure construction.

The federal government can borrow money more cheaply than anyone, which would help keep costs down. The money for health-care infrastructure would not be part of the federal deficit, because it would be paid back to Ottawa in an orderly fashion just like any other loan. 

And finally, with an aging population and demand for health care steadily rising, demand is guaranteed. Providing health-care services insured by a government plan is recession-proof, even if the rate of return on the operation of a hospital or other facility might be lower than other types of business in some years.

The drugs dilemma

While an approach like this would make public health-care dollars go further, it would not address the ever-increasing costs of expensive, life-prolonging drugs that have done much to expand the human longevity that is helping to push up health-care costs.

How to pay for them? Again, back to the future.

When medicare was introduced in most provinces, it replaced one or more private health-care plans where those insured paid premiums for their coverage. Premiums pretty well disappeared in the 1980s, but to cover drug and other rising costs, provincial governments should be allowed to reintroduce them.

As before, there would be one lower premium for single people and a higher group rate for families, the same no matter how many family members were covered. People with an insufficient level of income would not have to pay.

Is that a means test? Well, sort of. But people with low incomes get GST rebates on their income taxes. No one complains about that, and medicare premiums could be handled the same way.

Public administration, private delivery

Health-care unions, politicians on the make and many well-intentioned people will see these ideas as heresy. If given fair examination, however, it is clear all the proposals fit within the five principles of the Canada Health Act:

[H]ealth care must be comprehensive, accessible, universal, portable and publicly administered.

That last requirement could generate controversy. Is health care publicly administered if private sector organizations deliver the services?

Well governments administer doctors now by deciding what is included in their fee schedule and how much each procedure is worth. They would do the same with private institutions. And provincial governments could monitor performances and demand reports on how hospitals are operated.

Plus there would have to be federal-provincial agreement before any money could be borrowed for private construction from the Health Care Infrastructure Bank.

All of that would be public administration of Canadian health care.  

Still haven't convinced you? Well if not this idea, let's hear some better ones!