The Top Ten Things People Believe About Canadian Health Care, But Shouldn’t
Posted: 10/16/2003

Of the many ways that are available to tackle the question of what we all need to learn from Canada’s 30-year love
affair with the government monopoly, single-payer health care system that we call Medicare, I think the model of that
great health care analyst and public policy guru, David Letterman, serves our purposes best. I am therefore going to
entitle my talk today, The Top Ten Things People Believe About Canadian Health Care, But Shouldn’t.

Number One: Canada has the best health care system in the world

Not even close. According to the World Health Organization, Canada ranks 30th in the world, with the US ranking
38th.[1]

Ranking criteria:

Bang for the buck

Preventive measures

Access for vulnerable populations

Thus, while Canada and the US are both only middling performers, we both have a very great deal to learn from other
places that manage to combine costs that are no higher than Canada’s (and frequently are lower) and population health
outcomes (e.g. longevity, infant mortality, etc., etc.), that are as good or better.

Let me offer a comparison that will shake some of the complacent assumptions that many Americans seem to have about the
equity and effectiveness of the Canadian health care system. Let’s talk about infant mortality for African-American
babies vs. Canadian babies. Infant mortality risk is a function of birth-weight, with the risk of death rising as the
birth weight falls. Now over the full range of low birth-weights (i.e. any birth-weight below 2500 grams), African-
American babies fare better than Canadian babies, except at the very top end of the range, where they are essentially
equal. In short, among low birth-weight babies, it is safer to be born to an African-American family than it is to be
born to the average Canadian family.

Number Two: The Canadian public loves Medicare

We have to be careful here. The public loves some features of the system. In particular, there is huge support for the
principle that no one should be denied access to needed medical care on the basis of ability to pay. Ideologues in the
health care system have tried to stretch the public’s support for that basic principle in all kinds of distorted
directions.

For example, there is a view afoot in health policy circles that because Canadians support this basic principle, that
they support a health care monopoly on the current model, that Canadians disapprove of private, for-profit business in
the health care sector, that only the state should deliver health care services, etc., etc. For example, the recent
report of the Royal Commission on the future of health care[2] took as its starting point a picture it painted of
Canadians’ values, arguing that those values supported the status quo, only more so (i.e. an expansion of the system
into home care and pharmacare, and a major injection of taxpayer dollars).

But in fact, Canadians have shown themselves to be a deeply practical and non-ideological people. The head of the Royal
Commission, Roy Romanow has made the case that the debate over the future of Medicare is all about Canadians’ values.
But the way Canadians express those values, unfiltered by the work of the Commission, is far different from what Mr.
Romanow implies Canadians want.

According to a recent poll entitled The National Pulse on Health Strategy, 80 per cent of Canadians want major reforms
of the health care system:

"Two-thirds of Canadians (66 per cent) tend to be supportive, more or less, of a host of new models of financing in
order to reduce stress on the system — for example, where everyone (except those with low incomes) pays a small amount
for health care services out of their own pockets. They also tend to support strategies such as using nurses or other
health practitioners rather than physicians to provide certain services. Just under half (45 per cent) tend to be
supportive of market-oriented reforms — greater efficiency, accountability and customer service, including private
sector companies delivering health care services" (Environics, October 17, 2002).

The National Post reported that the same Environics poll found that fewer than half of respondents would support
increasing taxes to pay for health reforms. But notably, only 10 per cent of Canadians would accept a health care
system that excluded those who could not afford to pay for services.

These results need not be seen as a contradiction. As Jane Armstrong, senior vice president of Environics Research
Group, says, "Canadians, ever-constant champions of fair play and equity, are devoted to maintaining a system that
ensures access to quality health care for all…. They’re willing to make changes, even if this includes new and varied
ways of financing the system as well as a greater dependence on market forces such as private companies delivering
certain health services." (Environics, October 17, 2002)

Another recent poll, by Decima Research (October 25, 2002) found that more than half (55 per cent) of Canadians were
opposed to paying higher personal income taxes even if these funds were designated to pay for health care. An even
larger majority of respondents (67 per cent) also believed they would have to rely on their own personal savings to pay
for their use of health services in the future.

These public opinion polls appear to indicate that Canadians want a system of health care that provides high-quality
medical services and is financially sustainable over the long term at an acceptable economic price, without excluding
poorer people from access to medically necessary services. And in a typically pragmatic way, Canadians are not worried
whether it is the private sector or the public sector that achieves this; they just want results. In fact, when
Canadians do express a preference for either private or public approaches to health reform, the majority are willing to
fund their future medical needs themselves rather than pay higher taxes to expand the Medicare model of health care.

That’s why, in the context of the Romanow Report, I like to say that not since the days of Edgar Bergen and Charlie
McCarthy has ventriloquism enjoyed such vogue. But at least Edgar and Charlie were good at it, and it was purely for
entertainment.

The stakes riding on today’s high profile ventriloquism act are far higher: the future of Canada’s $70 billion public
health care system. What does ventriloquism have to do with Roy Romanow’s Royal Commission report on Medicare?
Everything.

From the very first Mr. Romanow made it clear that the foundation on which all of his work would be built would be the
values of Canadians. That’s powerful: Not many politicians want to be seen as ignoring Canadians’ deeply held views on
a topic as important as health care. Thus the title of Mr. Romanow’s report: Building on Values.

He invoked the values of Canadians up front in an attempt to make his recommendations invulnerable to criticism and
caviling by politicians and interest groups. But for this gambit to succeed, the methods the commissioner used for
arriving at a picture of Canadians’ values on health care must be beyond reproach. Yet his methods were flawed and
unprofessional. The report is a thinly disguised attempt to make Mr. Romanow’s own values, and those of his narrow
coterie of experts and bureaucrats, pass for the values of Canadians generally. Canadians are the dummy, and Mr.
Romanow is the ventriloquist.

If this analogy seems extreme, consider what Mr. Romanow and his colleagues did. They organized focus groups across the
country to find out what people were thinking about where they’d like to see health care go in Canada.

What they heard from these focus groups was pretty much what Canadians have been telling pollsters for the last several
years and that I’ve sketched out for you here. Canadians are a down-to-earth, non-ideological, practical people.
They’re interested in what works and they’re interested in real solutions to the growing evidence of the accelerating
decline of the health care system.

So in response to questions from the Commission’s people, they indicated that they were open to a wide range of options
that needed to be tried if they might improve things. They were open-minded about things like user fees, allowing more
private sector involvement in health care provision, and allowing people to buy health care in circumstances where
they’re not permitted to do so today.

But that didn’t square with the views of Mr. Romanow and his merry band. So they marched their focus groups into a
room, and presented them with "expert opinion" to show these poor benighted citizens why the things they were willing
to try were bad ideas that wouldn’t work, that would harm people’s health and that would be hard on the poor. They
presented these views as established facts, rather than as the highly contested arguments of an elite of health policy-
makers; an elite whose ideas have been responsible for bringing our health system into its current state of disrepair.

Unsurprisingly, upon being presented with what seemed to be an objective and authoritative debunking of ideas that had
seemed practical and worth trying, the members of Mr. Romanow’s focus groups timidly gave in to the views of the
"experts". The irony is that there is much evidence in the academic and policy literature that the practical,
commonsense things that Canadians were prepared to look at actually do make a difference for the better. The only real
flaw in these ideas is that they don’t fit the inflexible and narrow ideology of Mr. Romanow’s colleagues.

Now, anyone in the university polling world can tell you how to avoid such charges of bias in determining what people
think about emotional topics like health care. For instance, a reputable arm’s length polling expert would never have
allowed people from Mr. Romanow’s own commission to be closely involved in the testing of public opinion. The risk of
influencing people to say what the client wants to hear are too great. But the commissioner’s own people did work
directly with the focus group organizers. And those organizers were themselves not members of an objective polling
group, but representatives of a public policy group closely tied to the people guiding the work of the Commission and
identified with their views. This "research" would never have passed muster in a rigorous review by the best university
experts.

So by using a flawed process riddled with conflicts of interest and unprofessional methods, Roy Romanow was able to
make it look like Canadians were ruling out of court any experimentation with the health care status quo he and his
advisors favour. But for someone who made such grand claims about basing his recommendations on hard evidence, the
commissioner has issued a report reflecting nothing more than his own prejudices, transformed by the ventriloquist’s
art into Canadians’ most cherished values. Good thing we’re not the dummies he thinks we are.

Number Three: Canadian Medicare is sustainable

On the contrary, Medicare is not sustainable on its present course. A modest slowdown in the rate spending increases
has been bought chiefly through reductions in services, closure of facilities, fewer health professionals, increased
waiting times and through forgoing innovative, but expensive, new technologies.

Medicare as we know it can only be "sustainable" if Canadians are willing to accept less service or more taxes. Polls,
as I’ve already mentioned, indicate that neither is acceptable. And given increasing consumer expectations for
expensive health technologies, drugs and procedures, and the expected health demands from an aging population,
Medicare’s problems are only going to grow. In fact, a paper[3] by Bill Robson, vice president of the C.D. Howe
Institute, a very prestigious think tank in Toronto, has argued that the unfunded liability of Medicare (promises to
pay for services that normal increases in the take from the existing tax load will not cover) is in the $500 billion —
$1.2 trillion range. Canada’s entire national debt, by comparison, is currently about $530 billion.

Yet Roy Romanow has already publicly rejected these arguments and has recommended not only retaining but even expanding
the centrally planned, government monopoly model of health care in Canada.

Virtually every other major inquiry into health care, including the Kirby Report (by a committee of the Senate of
Canada), the Mazankowski Report (by the Alberta Premier’s Advisory Council on Health, of which I was a member) and the
Fyke Report for the Government of Saskatchewan (where Mr. Romanow was premier), identifies sustainability of the health
care system as the challenge we face. Mr. Romanow’s own former Minister of Finance in Saskatchewan, underlined this
when she testified before his commission.

But Mr. Romanow denies there’s a problem. We’re spending the same share of GDP today on public health care as 30 years
ago. If a little more than 7 percent of GDP was sustainable in 1972, why is that same percentage unsustainable today?

It’s the wrong question. It’s not how much we’re spending, but how we’re paying for it and what we’re getting in
return. For years we borrowed and spent on health care (and other services), so we got more than we were willing to pay
for. Today, as the only G7 country consistently in budgetary surplus, we pay the full cost of today’s services, plus
the interest on money we borrowed for health care and other things in the past. So while the spending has remained
constant as a share of GDP, the tax burden has grown and quality has declined.

The irresistible force of demand for "free" services is running headlong into the immovable object of unavoidably
limited health budgets. To date, the pressure has been relieved by crumbling health infrastructure, loss of access to
the latest medical innovations, declining numbers of medical professionals and lengthening queues. By and large, people
have access to ordinary, relatively low-cost services like GP office visits, but find it increasingly difficult to get
vital services such as sophisticated diagnostics, or many types of surgery and cancer care, where the waits can be
measured in months if not years.

This is the exact reverse of what the rational person would want. We should use the public sector to pool everyone’s
risk of expensive interventions, ensuring that they are available when needed, but leaving ordinary interventions,
whose cost can easily be borne by the average person, to individuals, supplemented by private insurance and by
subsidies for those on low-incomes. Hardly anyone can afford cancer care, bypass surgery, gene therapy or a serious
chronic illness on their own. These are the things that, without insurance, destroy people’s finances.

Yet as much as 30 percent of the services consumed under Medicare are unnecessary, not medically beneficial or even
harmful. No one would be financially ruined by having to pay for an ordinary doctor’s office visit if we ensured that
people on low-incomes were subsidized and that there was a reasonable maximum anyone would be called on to pay. No one
would be harmed by an incentive not to go to the emergency room when a visit to the family clinic would do just as
well. The biggest health care study in the world, the RAND experiment, found that people who had to pay something
towards the cost of their care consumed less of it, but that their health was, with very slight qualifications,[4]
every bit as good as those who got totally free care.

The extra infusion of taxes Mr. Romanow recommends will merely put off the day when we realize that we must concentrate
scarce public health care dollars where they’ll do the most good, and that we must give users of the system incentives
to be prudent about how they spend them. We spend vast sums on procedures of little or no value, while we place
patients whose condition endangers their life, in lengthening queues.

Number Four: Single payer, Canadian-style, keeps costs under control

A mythology has grown up about the superiority of our system’s ability to control costs. Indeed, Mr. Romanow in his
report repeats the argument that, up until the introduction of Medicare, our health care costs tracked those of the
U.S. After the introduction of Medicare, however, our growth in costs, and especially physician costs, dropped
significantly after the predictable short-term rise. In a paper for my Institute, by health care economist Brian
Ferguson, a wholly different picture emerged.

We see the spike in expenditure associated with the introduction of Medicare, and the drop off in expenditure growth as
the adjustment to universal coverage works itself through. But by the late 1970s, the two countries’ expenditure growth
series are back in sync – in fact they are more closely aligned in that period than they are in any previous period.
They diverge again only in the mid-to late 1980s, when, arguably, Canadian governments became really serious about
controlling spending.

While we can identify transitional effects surrounding the introduction of Medicare, it is not possible to identify a
lasting effect of the introduction of Medicare on expenditure on MD services. Basically, the introduction of Medicare
had no effect on the rate of growth of expenditure, and the reason the Canadian GDP share figure fell below the U.S.
figure was not because of differences in the rate of growth of expenditure but rather because Canada happened to have
the good fortune to bring Medicare in during a period in which the Canadian economy outdid the U.S. economy in terms of
real growth.

Had our economic growth been as weak as U.S. growth was through the 1970s and 80s, and had our health spending
nonetheless remained unchanged, for two decades our share of GDP devoted to health care would have been higher than the
actual US GDP share. Canada, in other words, would have had the most expensive health care system in the world, a
situation which would have changed only in the 1990s.

Why, given Canada’s apparent success at controlling health care costs through the 70s and 80s, at least as judged by
the GDP share evidence, were recent efforts at cost control not handled with less disruption?

The answer now seems to be not that we were poor performers this time around, but rather that our earlier "success" at
cost control was illusory. Simply put, the introduction of Medicare did not introduce a period of, or efficient
mechanism for, health care cost control. When it came to the question of how much of our national income we were
spending on health, we weren’t particularly good, we were just lucky.

Number Five: More cash is the solution to Medicare’s problems

Canada spends roughly $75 billion dollars on publicly-funded health care (and another $30 billion or so on private
health care). Mr. Romanow’s solution to our problems is a cash infusion of up to $6.5 billion per year. But the federal-
provincial deputy ministers of health, in their last report, made a convincing case that health care costs are rising
within the system at 5-6% a year, just under the current cost pressures, and that a number of new pressures are likely
to accelerate that trend. So, you do the math. Add an annual tax-financed contribution of $6.5 billion to a health care
budget of $75 billion rising at 5% per year, and within two years the ordinary and totally foreseeable costs of the
existing system will have eaten up every penny of that new funding.

Indeed, the health care system in Canada staggers from crisis to crisis in which new funding is promised by the federal
government. But the federal government put something like $20 billion into Medicare just before the last federal
election several years ago, and, as Mr. Romanow himself remarked in his press conference last week, everybody wants to
know what we got for that money. The queues have lengthened, not shortened, the shortage of diagnostic equipment has
gotten worse, people are less able to find a family physician than they were five years ago. In fact, we have had a lot
of experience in Canada with new injections of cash into the system, supposedly to "buy change". Normally what happens
is that the powerful organised interests within the system (doctors, nurses, support staff, etc.), organise to capture
a share of that money. Costs rise, but productivity does not, and services are no better or more timely. The Canadian
Medicare system is a black hole into which we can pour seemingly infinite amounts of money.

A final note on this point. The Canadian Medicare system was created in the 1960s as a new layer on top of an existing,
relatively well-funded health care system. Since then, we have paid most of the day-to-day operating costs, but we’ve
been coasting on the capital within the system, and not renewing it.

The average hospital in Ontario, our wealthiest province, is 47 years old. David MacKinnon, the head of the Ontario
Hospitals Association and I calculate that the total working capital deficit of Canada’s hospitals today is roughly $4
billion. On top of that, the capital expenditures for the Canadian hospital system will be about $2 billion a year for
the next five years.

So simply eliminating the working capital deficit in our hospitals (because working capital represents capacity for
change) and paying for the ordinary capital costs in the hospital sector alone over the next five years, would wipe out
all the extra funding Mr. Romanow is proposing for the system as a whole. And don’t forget that he’s not merely
proposing throwing cash at the existing system – he’s also talking about larding it with new responsibilities whose
costs are virtually guaranteed to be higher than what has been forecast. Even if you think that money’s the solution,
what Mr. Romanow is proposing is barely enough to take the incipient crisis in Canadian health care off the boiling
point for 2-3 years at best.

SOURCE: Mackinac Center for Public Policy
http://www.mackinac.org/article.asp?ID=5863

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