In 2003, a group of health economists led by Princeton University professor and University of Saskatchewan graduate Uwe Reinhardt tried to explain the central paradox of American health care: How is it that the United States spends so much more than other countries, yet all that money buys no more – and generally less – health care?
Their answer was neatly summed up by the title of their article in the journal Health Affairs: “It’s the Prices, Stupid.”
They found that, compared with other developed countries, “the U.S. had fewer physicians per 1,000 population, physician visits per capita and acute care beds per capita, as well as fewer hospital admissions per 1,000 population and acute care days per capita.” All this despite the fact that the share of the U.S. economy devoted to spending on everything from doctors and hospitals to drugs and insurance massively exceeds that of other wealthy countries.
A decade and a half later, after Mr. Reinhardt’s death, his colleagues reprised the study. Nothing much had changed. Compared with Canada, U.S. health care spending was 108 per cent higher, yet it still had millions of uninsured citizens, no evidence of more medical procedures than other countries, and “26 per cent fewer hospital beds per capita, 20 per cent fewer practising nurses and 19 per cent fewer practising physicians per capita, compared to the OECD median country.”
Why? It’s there in the title of their 2019 paper: “It’s Still the Prices, Stupid.”
Which brings us to Brian Day’s latest trip to court. There are good legal reasons why he lost at the British Columbia Court of Appeal last Friday, and why he will hopefully lose in the event of an appeal to the Supreme Court of Canada. But putting constitutional law aside for a moment, economics also votes against him.
In response to surgical and other wait times, Dr. Day has long advocated giving Canadians the ability, and the right, to open their wallets and buy their way to the front of line. Many Canadians find it an appealing idea, particularly now, when the sense that our health care system is in ill-health has never been more widespread.
The strain of two-and-a-half years of COVID, heaped upon decades of medicare flying on flight plans from the 1960s, had yielded overwhelmed hospitals, burned-out health care workers and Canadians of all political stripes and income levels worried about what happens if they get sick.
There are long-standing problems, such as several million Canadians without a family doctor. There are pre-existing conditions that have grown worse, such as long overcrowded emergency rooms where wait times are longer than ever. Thanks to COVID, shortages of health care workers and surgical backlogs also appear to be worse than ever.
Medicare needs new money, new resources and major reforms. But Dr. Day’s prescription is not the way forward.
Revolutionizing Canadian health care by allowing people to spend more of their own money on doctors’ visits or surgeries will not, by itself, magically create more doctors, nurses, hospitals and surgeries. Nor will it cause waiting lists to disappear. Giving you the right to get into a bidding war with your neighbours for scarce medical services is unlikely to yield happy results.
The U.S. system shows why privatizing health care won’t necessarily cause prices to fall. All else equal, pumping more money into a market is likely to have the opposite effect. As Mr. Reinhardt et. al. realized, in the privatized and disorganized U.S. health care system, extra spending isn’t delivering more health care – it’s delivering higher prices. Doctors are charging more, but the real winners are legions of well-fed middlemen in U.S. insurance and hospital administration.
In their 2020 book Deaths of Despair and the Future of Capitalism, Anne Case and Nobel economics laureate Angus Deaton described the U.S. health care industry as a mechanism for impoverishing middle-class Americans by uploading much of the nation’s wealth to itself – “a reverse Robin Hood redistribution,” they called it, or a “Sheriff of Nottingham redistribution.”
The result, say the authors, is that the economic strength and social cohesion of American society is being sapped by the health care industry, which “is not very good at promoting health” but “excels at promoting wealth among health care providers.”
Canadian medicare clearly needs a fix. The American model isn’t it. What is? More on that, later this week.
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