Saturday, November 12, 2011

Health Spending to Reach $200 Billion in 2011 (But Don't Worry, The Sky isn't Falling)

So says Dr. Michael Rachlis, a health policy analyst and an associate professor at the University of Toronto. And as impressive as this guys resume may seem, he lacks the ability to perform basic economic logic. Oh, Henry Hazlitt, where are your weekly columns when we need them most?

Rachlis has written an article for the Toronto Star entitled "The health-care sky is not falling!" He begins by referring to the latest health-care spending figures published by Canadian Institute for Health Information (CIHI).

Health costs are not out of control. And the report’s findings remind us that the real issues have little to do with money.

A bureaucracy funded by all levels of government is obviously going to be biased. This fact doesn't seem to dawn on Rachlis, who continues his op-ed with two-dimensional thinking, child-like logic and proof that the while doctors may be medical marvels, the two letter honorific is just that. Two letters.

Several reports have suggested that health spending will inexorably rise to 70 or even 80 per cent of provincial government program spending in the next 10 to 20 years. The CIHI graph of provincial health-care spending over time draws a very different picture from that portrayed in our public debate. Health spending was fairly steady at 33 per cent of program spending during the early and mid-1990s. After 1997, it rose rapidly to 39 per cent of program spending in 2003 before plateauing there until 2008. It has been falling since.

So despite the independent studies and the sheer logic of rising health-care costs, the CIHI insists that spending has been falling based on statistical data that can tweaked to arrive at any arbitrary conclusion they want.

Let's look at these numbers. Health spending was consistent until the 90's when in order to balance the budget, the Liberal government reduced health-transfers to the provinces. In response, the provinces increased spending to offset the loss in federal money. Of course, this was unsustainable - the provinces can't print money and raising taxes isn't voter friendly. So provincial spending on health-care plateaued and has dropped since.

And what has been the result?

Fraser Institute: Remarkably, wait times from GP referral to treatment by a specialist were 53% longer in 2010 than they were in 1997. Wait times were also slightly longer to access critical technologies such as CT and MRI machines, and markedly longer for ultrasounds. In addition, almost 1.7 million Canadians aged 12 or older, 6% of the population, are still unable to find a regular physician.

The saying usually goes: you gotta spend money to make money. But in government finance, there is no making money. It's just spend or cut.

It would be nice if those who spew fire and brimstone about rocketing health costs would read the annual CIHI reports. Then maybe we could get onto the three big issues that get little or no media attention.

Okay, I read it. Usual government propaganda, health care costs are increasing but overall spending is decreasing.

First, we don’t have to spend a lot more money to the fix the system. Most of health care’s problems — from long wait times to inadequate follow-up of chronic illness — are due to antiquated, provider-focused processes of care. The remedy — a high-performing, patient-friendly system. And, contrary to the ill-informed Canadian chin-wag consensus, this shouldn’t mean higher costs. To quote the 2001 Saskatchewan health-care royal commission, “better quality care almost always costs less.”

The remedy - a patient-friendly system - demands a doctor-patient relationship minus the bureaucrat. Better quality care that costs less? It's called profit-and-loss. Private enterprise increases quality and cuts costs - that's how they make profit. If they also cut quality (as governments must) the entrepreneur would lose that profit and another entrepreneur would take over. That's the beauty of competition - it fosters growth, innovation, quality and lower prices. We see this in the technology sector, compare a 1991 cell phone with a 2011 blackberry.

Compare our health-care system in 1991 to 2011. The truth is painfully obvious.

For example the referral route from family physicians to specialists has not changed fundamentally since the professional model was created during the Middle Ages. In Canada you can wait months to see a spinal surgeon. But 90 per cent of patients referred to Ontario spinal surgeons don’t need to have surgery. They may need physical therapies, medication, counselling or acupuncture. But they don’t need surgery and very few of them should even be seeing surgeons.


The solution?


In Hamilton, 20 psychiatrists are working part-time with more than 100 family doctors, 80 mental health counsellors and dozens of other professionals. Urgent questions for the psychiatrists are answered immediately by cellphone. The psychiatrists also drop into the family practices every week or two where they see patients directly, discuss other cases with staff, and generally raise the already high standards of mental health delivery.

In other words, ignoring the bureaucracy.

Second, we should be spending more public money if it remedies private market failures. Justice Emmett Hall’s 1964 royal commission recommended public insurance for physicians because it would cover everyone and cost millions less to administer than a private system. The same argument holds for drugs, long-term care and home care.

First off, what private market failures?! Aside from the fact that there ain't no such thing as a market failure, the Canadian health-care system is almost completely engulfed by the State. We may have private companies building MRI machines, but it's paid for out of the public pocket. This creates a whole set of problems.

But addressing the 1964 commission recommending public insurance: a monopolization of any insurance facilitates rising costs, an opportunity for an infinite increase in quantity demanded (at the expense of everyone) and incentives to reduce quality as there is no longer any competition or entrepreneurs. The bureaucracy would not cost millions less than a private system. The same argument holds for drugs, long-term care and home care.

Finally, we need to resuscitate our shrinking public sector. Health care increased its share of the public pie from 1997 to 2008 largely because government cut the size of the pie by axing other programs. The feds eliminated the National Housing Program in 1993 and Ontario social assistance recipients have seen their inflation-adjusted incomes fall by 40 per cent since 1995. These policy debacles have made a lot of people sick and applied pressure to hospitals and other health-care organizations.

Socialism has failed, will always fail and no wishful thinking will reverse this trend. Instead of expanding the State's role in the everyday lives of Canadians, all levels of government should move to privatizing the public sector and legalizing competition. The culture of dependency needs to end before economic realities create chaos.

According to the latest figures from the Department of Finance, from 2000 to 2010 Canadian governments cut their incomes by 5.8 per cent of GDP, the equivalent of $94 billion. If we had cut taxes by only half that amount, all governments could be out of deficit by 2012. Or we could afford to pay for first-dollar universal pharmacare, long-term care and home care, as well as regulated child care for all parents who want it, free university and college tuition, 20,000 new social housing units a year, and a hike in the Canadian Child Tax Benefit to $5,000 per child.

And only if the government nationalized every industry then Canadians could not only have free health-care but education, daycare, cars, houses, and high-speed internet! Hell, with a 100% planned economy we could eliminate poverty and make everyone rich!

Our health-care system is affordable. To make it sustainable, we need to complete Tommy Douglas’s vision for medicare by changing the way we deliver health services. Let’s set aside the shroud-waving about rising costs and refocus on redesigning the delivery system. Medicare remains as sustainable as we want it to be.

Yes. Let's complete Tommy Douglas's vision. Let's sterilize societies "mentally and physically defective" and build a New Jerusalem in Canada (I'm not making this up, Douglas actually wrote this).

Only then will our nationalized health-care system be able to accommodate its users. Everyone knows that only heathens get sick and with over half the population in concentration camps, hospital waiting lines will be reduced drastically.


  1. LOL what a clueless academic....and a terrible logician...

    What he basically said: managed care doesn't work...let's have more of it!

    if government can manage so efficiently and easily as he says, why didn't they do this BEFORE the trouble started???? Lunatics...

    these people cannot understand the simple concept of time and a changing economy (changing tax revenues), changing preferences, changing demographics, changing technology, etc etc...

    government policy assumes that nothing changes and everything stays static. It works from an assumption that all the variables will remain the same so that what works now will indefinitely work into the desire to understand that prices, demand, supply, technology, etc etc constantly change...

    therefore it is impossible for bureaucrats to ever get the "perfect" policy because they're looking at information that is constantly changing over time and to keep up with the dynamics would spell a logistical disaster...

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