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Who's Afraid of Two-Tiered Health Care?


Health care in Canada, and the public system which provides it, would benefit from greater participation by private sector providers.


Neil Seeman

 Author Notes

Lawyer and columnist, member of the Editorial Board of Canada's National Post newspaper

 Essay - 2/18/1998

Although once a dirty issue that no Canadian politician dared to discuss, the problem of what to do about queue jumping - and the evolution of so-called two-tiered medicine - has reached the stage at which it can no longer be ignored. There are now as many as 300 private or semi-private facilities throughout Canada, charging fees and covering treatments from eye surgery to in-vitro fertilization. At the same time, if wealthy Canadians need procedures that are not approved for public financing or others that involve long waiting lists, they can simply hop across the border and pay for what they need. And they are doing so in increasing numbers. At some U.S. clinics near the borders, more than 60 per cent of the cancer patients are Canadian. According to estimates from a recently released Health Canada report, approximately $1 billion was spent by Canadians on US health care in 1993.

By queue jumping I refer to three related phenomena: (a) Canadians who travel south of the border to purchase ready access to diagnostic procedures (e.g. MRIs) and treatments (e.g. radiation therapy for prostate cancer) for which they otherwise would have had to wait their turn along with their fellow citizens; (b) Canadians who remain inside Canada but take advantage of third-party insurers operating outside of provincial reimbursement plans to access care in a timelier fashion than others in the queue; and (c) Canadians who pay out of their own pockets at private or semi-private clinics for special services which are not fully subsidized by medicare, Canada’s national health insurance plan. All this means that queue jumping does not immediately displace others waiting in the queue - as is often misunderstood to be the case - but rather recasts who stands in the queue and who gets their health care without waiting.

Canadian patients have increasingly found new and legal ways around the medicare system. For example, hospitals may permit their diagnostic machines to be rented out privately, after regular operating hours, but only under limited conditions - i.e. on behalf of insurance companies, to investigate workers compensation claims, which operate outside of medicare. For a few hundred dollars and an arrangement with a third-party insurer, a patient can do an end-run around Canadian health-care principles that state that people should be treated on the basis of need rather than ready cash. Typically, the patients who are able to skirt the queue tend to be wealthier and tend to be the ones with the right connections.

The steady rise in queue jumping has largely been in response to longer waiting lists. The average wait for an appointment with a specialist in the key areas of ophthalmology, neurosurgery, orthopedic surgery and cardiovascular surgery is now 21 weeks. Procedures such as cardiac surgery, hip and knee replacements, and diagnostic tests such as MRIs are among those with particularly long wait times. It has been estimated that at any given time, 170,000 Canadians are on waiting lists for medical procedures. And things are getting worse. The waiting time to see a specialist has increased in every province since 1994. For all of Canada, the waiting time to see a specialist has increased by over 10 per cent over the last three years.

The federal government has warned that it will cut payments to provinces that do not abide by the five principles of the Canada Health Act: accessibility, universality, comprehensiveness, portability and public administration. But Ottawa is increasingly restricted to moral suasion in its efforts to preserve medicare, because it cannot afford the ever-increasing transfer payments to the provinces that would be required to fully fund health care. Indeed, transfer payments are being cut at an alarming rate. Federal health cuts nationally have added up to $30 billion since the mid-1980s.

Given new fiscal realities, it is somewhat of a misnomer to suggest that Canadians still enjoy anything like universal coverage - now, more than a quarter of total health care spending, on everything from certain kinds of psychotherapy, telephone advice, ambulance rides, doctors certificates, home nursing, private hospital accommodation - all previously covered items, comes out of patients pockets, not government coffers.

Canada’s commitment to a health care system that offers universal or even near-universal care is clearly weakening. In 1995, Canada’s main physicians group (representing over 45,000 Canadian physicians) just narrowly defeated a motion stating that people should be allowed to buy private insurance to cover all of their medical services. There is increasing discussion about using public dollars only for essential health services, with private dollars funding services deemed non-essential. The difficulty is that it is extremely hard to gain consensus on what is essential.

Given the hardships of political consensus in an age of budget-conscious spending, one might question whether it is at all possible (even if it once might have been) to construct a social contract around health care which reflects the community’s vision of equity. Some say that allowing private payers to jump the queue within Canada will threaten the well-being of the beleaguered public health care system. This argument says that long waiting lists compel governments to re-direct millions of dollars in health care funding to reduce waiting lists for such procedures as cardiac surgery and cancer treatment. Indeed, it has been estimated that this erosion of the public health system costs the federal government $2500 per Canadian per year.

Stalwart defenders of the status quo like Dr. Michael Rachlis (Strong Medicine) have contended that when people have access to private care because they have money, medicare itself may be threatened because those same people begin to object to paying for a public health-care system through taxation. The unvarying consequence of any two tiered system, so the argument goes, is that the second tier becomes a third rate one; monies will evaporate from the public system as people move their low-risk premiums into the other group.

As an added irony, the public system may wind up subsidizing the private system, since unanticipated complications and cross-referrals arising from privately-funded treatments (e.g. complications from private hernia surgery and in vitro fertilization) might end up being handled in public hospitals. Meanwhile, a private system would skim the best physicians and equipment from the public system, depriving the public system of health care professionals who have been trained at public expense. As talent and money shift over to the private tier, those citizens best able to lobby for improvements - the vocal and confident wealthy and upper-middle class - lose interest in the public system once they have withdrawn their children, aged parents and themselves.

On the other hand, it may be argued that delayed care for people in the queue increases the ultimate costs the system must spend on the patient. If a patient, and his care-giving family member(s), wait at home or in partial employment while his or her required test is several months in the future, there is a significant cost to the economy in terms of lost productivity. In addition, the health care system must pay for medical visits in which the attending physician can do little more than comfort the patient. Taken over the entire system these extra visits cost billions of dollars. And the system in the end eventually pays the cost of the delayed diagnostic test anyway.

Policy evaluation demands toting up the real costs associated with waiting in the form of lost wages, benefits, as well as physical and psychological suffering. Health care policy makers have not traditionally considered the costs outside their direct controllable budgets as costs. For example, a woman with a lump in her breast who is told she must wait several weeks for a biopsy to determine whether the lump is cancerous will likely suffer anxiety and tangible psychological pain, neither of which are usually included in the costs of operating the health care system.

Neither do policy analysts generally consider the cost to employers in providing replacement employees while theirs are off work. The longer an employee is away from gainful employment the less likely it is that he will ever return to the workplace. The Workers Compensation Board of Ontario publishes tables which clearly illustrate that if an employee who earns $600 per week is disabled for a year, more than $160,000 in reserves must be set aside for the future pension he will receive if he never returns to work.

Denying those who want to pay for extra or quicker service will not help out those who do not, or cannot pay. It will only make the position of the latter group more difficult. They will still have to stand in line for service, but the line will be a lot longer because the rich will be in it as well as everyone else. No ones access to public health care is denied merely because someone else pays out of his or her own pocket for private treatment. It would, if those opting for private care did not also pay taxes to support the public system. But they do. Indeed, by shortening the lineups in the public system, they make health care more accessible for everyone else. It may be a two tier system, but both tiers are better off. It is, in economic jargon, what’s called a Pareto superior move.

Proponents of increased choice in health care can show that the status quo has nothing to do with equity, and that a two-tier system of sorts already exists in Canada anyway; thus, turning a blind eye to queue jumping will have little real impact upon equity considerations, or, for that matter, on the community’s shared sense of values. If, for example, in a rationing environment, personal acquaintance with the chief of surgery leads to less waiting, then rationing by waiting merely masks a system of personal privilege.

Inequities in the current system abound. For instance, there is a great irony in the federal policy insofar as the very bureaucrats making the policy decisions are themselves insulated from the shortcomings and long waits in the public health sector. The most blatant example of two-tier health service is the National Defense Medical Centre in Ottawa that makes available to politicians and senior bureaucrats instant health care and provides everything from an aspirin for a headache to extensive open-heart surgery. Everybody pays for this clinic, but it is available to only a select few.

A second example of inequity in the current system relates to the fact that waiting lists vary widely across Canada’s diverse geographic regions. The Fraser Institute’s annual study has consistently shown that the have-not province of Prince Edward Island has the longest waiting lists of any province. And among the other provinces, gross disparities are routine. In 1993, people were waiting 18 weeks for general surgery in Newfoundland while Ontarians were only waiting four weeks.

A third inequity in the current system relates to waiting lists generally as a means of apportioning and rationing care. Currently, in order to control rising medicare costs, provinces increase the time people have to wait to get treatment (studies showing that longer waits are associated with lower rates of provincial spending on health care confirm this view); this is accomplished in part by the fact that the determination of what is medically necessary and thus subject to medicare subsidies is an entirely political decision, and therefore inherently unstable. This throws into question the accepted logic that waiting lists are an efficient form of rationing which filter medically emergent cases to the top of the list.

The politics of waiting lists are perhaps best illustrated by the fact that while Canadians who want to obtain cataract surgery have no way of avoiding the waiting time, those seeking abortions do. Canadians who want an abortion will be allowed to pay the hundreds of dollars in service fees imposed by free-standing clinics while all taxpayers contribute to the fees charged by the doctors doing the actual work. Why are service fees charged by free standing abortion clinics somehow different, somehow more acceptable, than those charged by free standing cataract clinics?

From an economic cost-benefit perspective, total utility is certain to shoot up as a result of the introduction of rationing through the price-system. Prices, unlike waiting lists, are efficient mechanisms for signaling the relative scarcity of any good or service, thereby incenting both producers and consumers to modify their behaviour in response. The introduction of private care also increases overall average utility since it accommodates differences in intensities of demand across different sets of consumers.

There are potentially vast added marginal benefits to be gained by opening the doors to queue jumping and privatized care. In addition to profits, there are considerable benefits to Canadian doctors and other health care professionals to allowing a private tier. Currently, Canadian specialists who work on non-emergency cases are finding that their operating room times (and hence their autonomy) have been sharply curtailed. Consequently, Canadian doctors are heading south to salaried jobs in the United States, drawn by the greater availability of facilities and modern equipment. At the same time, creating private clinics in Canada might also attract American health care consumers, who generally pay much higher doctor and hospital fees at home because U.S. surgeons are paid higher fees than their Canadian counterparts. By selling health care to the Americans, Canadians could create a more solid tax base in addition to plugging the southward brain drain of Canadian-trained professionals.

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