Is ‘privatization’ a cure for what ails medicare? If you believe that, I have magic beans for sale

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Dr. Brian Day has spent the past 14 years trying to persuade the courts that medicare is, at least in part, unconstitutional. Earlier this month, the Supreme Court of Canada ended that campaign by declining to hear his appeal from losses before two lower courts. By deciding to not decide, the Supreme Court left the future of health care in the hands of the federal government, 13 provincial and territorial governments and 39 million Canadians. That’s the right decision.

It means that it’s up to us – governments and the voters who elect them – to figure out how to improve Canadian health care. It will not be an easy challenge. But the Supreme Court has at least taken off the table one magical solution, based on magical thinking – that nine people with deep expertise in legal analysis and zero experience in health-system management could, based on a few hours of oral hearings and some short written arguments on constitutional rights, craft an effective and equitable redesign of the nation’s $331-billion health sector. Please.

If you think that’s the way to fix medicare, then perhaps we should also ask the College of Family Physicians to come up with a plan for lowering Canada’s high cellphone bills.

The Supreme Court has instead left it to all of us to decide, through representative government, how much or how little private enterprise there should be in health care, and where it should or should not be, and why.

Arriving at the best answers will involve grappling with a hard issue that many people want to imagine is easy. There are many magic-bean solutions out there.

Take the fantasy that allowing Canadians with money to buy their way around the publicly funded, universal health care system will improve care and shorten wait-lists in the publicly funded, universal health care system. How? It doesn’t compute. Nor does it accord with international experience.

Canada clearly needs more physicians (and more family doctor alternatives known as nurse practitioners). But that is a separate issue from the privatization of their services. Doctors moving outside of medicare for higher fees in the private sector won’t solve the doctor shortage. It may, however, change the distribution of physician services – who receives treatment sooner, and who gets it later.

There’s also the fantasy that handing more of health care over to the private sector will fix things – because the private sector always delivers better services and lower costs, without need for oversight.

Yes, there are opportunities to take advantage of market incentives and private-sector entrepreneurship. But government can’t just throw up its hands, vacate the field and assume that Bay Street plus the invisible hand will swoop in and make the boo-boo all better.

The United States is the classic cautionary tale of what happens when the mechanisms for setting health care prices and allocating health resources are largely left to the market. The U.S. system is the most expensive in the developed world, by far, yet instead of more and better health care it actually delivers less health care than universal health care systems in Europe, at way higher cost. But it does redirect massive amounts of wealth to private hospitals and private insurance companies.

The free market is the greatest vehicle for efficient economic allocation ever developed. The problem, as the Nobel Prize-winning economist Kenneth Arrow pointed out way back in 1963, is that health care isn’t like other markets. There is, among other things, a severe information asymmetry between patients and providers. In an emergency, most of us would be willing to pay any price for a procedure that promises to make us healthy. Consumer’s choice is part of what makes the free market work, but the kind of consumer choice involved in, say, deciding which colour shirt to buy, and at what price, is mostly not present in health care.

Introducing private delivery and private incentives directly into public health care may hold promise, but only if the government has carefully thought out the design of the system. That means figuring out how to harness the private sector for public benefit, and not the other way around.

Many European health care systems, most of which perform somewhat better than Canada’s, offer some degree of additional private coverage through private insurance. But those private insurance options are often small and limited, offered as optional add-ons to universal health care systems that are more extensive and comprehensive than Canadian medicare.

Consider the Netherlands. Instead of a single government insurer as in Canada, it has several non-profit insurers. Citizens must choose which one will provide their mandatory universal health coverage. People can buy additional private insurance to cover things such as physiotherapy and dentistry. But extra private insurance doesn’t allow you to pay your way to an earlier visit to the doctor, or quicker surgery.

The Netherlands insurance model tries to harness the power of competition while retaining universal coverage. But like all major European health systems, it is at the same time more comprehensive and less privatized than the Canadian system. In Canada, private-sector spending – such as private insurance or out-of-pocket payments – is 25 per cent of health spending. In the Netherlands, that figure is just 15 per cent.