Canadian Critique: A Response

One hardly knows where to begin. Although he claims to be Canadian, Mr Bugos apparently remains ignorant of the fact that Canadian health care is not socialized. Of course, he also believes that anyone disagreeing with him is either a socialist or -- worse -- a Soviet. 


I appreciate that Mr Bugos is Canadian and that I am not; however, this renders his at times factual mischaracterization of Canadian health care all the more baffling. Essentially, his argument is one long assertion without supporting data; also, he states things like “economics teaches us” as if he were advancing a truism rather than a debatable point. A couple of observations:

• Unlike the Veteran's Administration in the United States, Canadian health care is not socialized: The government does not own and operate the means of production or service. Instead, the thirteen provincial and territorial governments administer tax-financed insurance a la Medicare (the name of the Canada’s health care system) to reimburse private providers. Thus, there is no "state monopoly in the provision of Medicare." The national government serves to set standards and to negotiate on behalf of the Canadian people. That's a good thing;
• The genesis of the Canadian health care system goes back to the mid 40s. It arose as a result of need, not a left-wing scheme to undermine the free market. Canadians believed that the free market had failed to provide equal access to quality care. The system that emerged is a statement of pragmatism, not ideology;
• Government regulation of health care is the common denominator of the health care systems of every developed nation. All -- even the United States -- have concluded to varying degrees that the health of their country and the people who reside there cannot hope to succeed based on rates of return;
• Canadians like their health care system. In 2003, 57% of Canadians reported satisfaction with their health care, compared with 25% of Americans. (Danes, who have a true socialized system, register the highest degree of satisfaction at over 90%);
• The World Health Organization does not share Mr Bugos' assessment of the poor quality of Canadian health care: It ranks their system ahead of ours (30th to 37th). Canadians live longer than Americans and have a healthier life expectancy. Their maternal mortality rate is lower than ours, and they even smoke less. And, of course, Canada accomplishes this while spending less than we do. Mr Bugos' understanding of quality seems to have the same relationship to reality as the Land of Oz;
• Canada’s health care system reflects a national egalitarian ethos that exceeds that of the United States or even France;
• The argument that American health care somehow serves as a safety valve to relieve pressure on other systems is a canard never accompanied even by anecdotes, much less actual evidence. I am immersed in this stuff, and have yet to see this particular claim seriously advanced. Here is an anecdote: One of my MHA colleagues is an interventional cardiologist, i.e., a heart surgeon. By no means is he the class liberal. Someone asked him if he had many Canadian patients fleeing the supposed inadequacies of Canada’s secondary care. He was genuinely puzzled by the question. Even someone extremely wealthy, he explained, would think twice about paying 100K for a procedure that would be performed in Canada both free and perfectly well;
• Why does Mr Bugos cite 1904 AMA restrictions as an example of unwarranted state intervention? The AMA is a private organization. This is a case of the market imposing artificial controls, not the state;
• American history suggests that when the money gets big enough (i.e., railroads, oil, telecommunications), unregulated markets will consolidate until a few major competitors emerge as price setters, a development in health care that most Americans would find unacceptable. Mr Bugos does not address this as even a possibility even though history suggests that it is a likelihood;
• Mr Bugos writes that the United States government "forced" employers to contribute to health care, the presumes to lecture about what "economics teaches us." Had Mr Bugos passed his freshman Econ class, he would know that payroll taxes are inevitably passed on to consumers. Moreover, Mr Bugos ignores altogether the impact of the Revenue Act of 1954, which established a tax exemption for employer-provided health care benefits. In what way is that government coercion?
• In the same paragraph. Mr Bugos accuses the United States government of sabotaging the free market, then touts its relative freedom. Admittedly, by then I didn't know whether he was coming or going either.

Overall, Mr Bugos makes an argument typical of the ones advanced by privatizers: It assumes a debatable premise and proceeds from there, rather than constructing a theory supported by underlying data. The result consists of cherry-picking, ad hominem attacks, and straw men. 

Canadian Critique

An associate recently forwarded the following critique of Canada's health care system, written by a Canadian Ed Bugos:

A subscriber and friend, Laurence Hunt (who has his own blog here, who lives in Canada, as do I, made some comments to the effect that the Canadian socialized medical system is better than a free market medical system.This is a very prevalent attitude in Canada.  Here was the main thrust of his argument:"The Canadian system delivers world class healthcare at half the cost due to disintermediation. The system is run like infrastructure, like the highways, and is more economical.   I'm still an advocate of government running infrastructure, as there has to be a method of collective participation. I do think that without government, the bullies would be in charge (they are hard to restrain under any system). Nothing is perfect, including freedom."The following is my response: 

Laurence I respectfully disagree with your comment. First, we would hope that healthcare is ultimately not run like "infrastructure," especially not like the highway system.  A warlock of Austrian Economics, Walter Block, who wrote a book lobbying for a return to private roads and highway, notes:"If the highways were now commercial ventures, as once in our history they were, and upward of 40,000 people were killed on them annually, you can bet your bottom dollar that Ted Kennedy and his ilk would be holding Senate hearings on the matter.  Blamed would be "capitalism," "markets," "greed," i.e., the usual suspects. But it is the public authorities who are responsible for this slaughter of the innocents."   

Aside from your comment on "infrastructure", if you are going to compare the Canadian system to the US system we need to first recognize the difference. In Canada there is a state monopoly in the provision of medical care (though not in the provision of essential goods to the medical system monopoly).In America they have had increasing state intervention into the medical industry starting with the AMA who in 1904 limited the number of doctors entering the field and closed down a bunch of schools.  This was done in the name of protecting the consumer, but in reality the doctors got together and did it to raise their incomes.They essentially created a labor monopoly within a private system.  This is typical, by the way. In Canada the state likes to control the industry; in the US monopoly power is doled out by the state but usually vests in private hands - so up here you have state monopolies and crown corporations while down there you have antitrust and cronyism...or "state capitalism" (or corporatism) - in Russia you have oligarchs. Progressively, over the years, the US government eventually forced employers to contribute, then granted the power of licensing to the states, and began to underwrite (subsidize) medical care demand a few decades ago.

Economics teaches us that when you restrict supply and subsidize demand you will get shortages and higher prices - and that's even before we throw the Fed into the mix.  The so called free market medical system in the US has been progressively sabotaged over the past century.  The universal coverage - Obamacare - is just a final straw.So the high price of medical care has nothing to do with it being relatively more private in the US than in Canada - in fact economics teaches us also that prices would fall if the industry were free from government.  So make sure to put the blame for the high cost where it belongs: on government regulation and subsidy, as usual. 

As for Canada's healthcare system costing half as much, undoubtedly the figures do not account for the lower 'quality' and the greater shortages we get here. So in reality you are getting half as much too. As the US system is more socialized you will find that our medical costs not only start to rise more, but also, their quality/availability will fall. 

Like it or not Canada has been a big beneficiary of the innovations of the relatively freer market down south in this industry.  I can attest to that personally.  If you slow down those innovations, because, say, the system is totally socialized, then our state monopoly system will suffer as well.That is, costs will rise and quality will fall.The soviets were the first to try out universal medical care.  As one of Gorbachev's economists pointed out, the system basically deteriorated to the point where a black market developed based on bribery - outside of which the doctors would quip that their patients "pretend they are paying us and we pretend we are working".  And if you were dying, they pushed you out the door so that the hospital statistics wouldn't look bad. The only reason this hasn't happened in countries like Canada that have adopted a similar system is that the rest of the economy here is not centrally planned.  Thankfully, there is a relatively free market in the goods that supply the medical provider monopoly.  And the state is loosening its grip on some provisions lately.

But the main point is that it is a matter of economic law that a private system in medical care would result in lower prices and better quality.  After all, all we want is to allow competition.  It's a ridiculous argument to say that we are better off because our government restricts competition.  Effectively, that is what our system is.In regard to your comment that "nothing is perfect, including freedom," of course you are correct.Undoubtedly nothing is perfect.  Let's not put that stick man up.  The socialists are always criticizing the imperfections of the market but the idea is not to achieve perfection.  Neither Jeff nor I nor Mises would claim the market is perfect.  Far from it. It is a matter of what is better - a state monopoly service or free market competition. 

The socialists will decry the quality of movies produced by Hollywood or the books written in a capitalistic society.  No doubt that in many cases they can produce better quality stuff - even better quality goods - if it were planned.  But the market may not want the "best" quality goods.  In a free system it gets what it wants.People get what they want.I hate what Hollywood produces personally, and it does show that the majority of people (the market) has bad taste, etc.  That doesn't mean that I would favor a centrally planned movie industry.  It would produce movies no one would want to watch even if by someone's standards they would be considered perfect.I'm sure that a centrally planned body could build better cars than we have on the road -but would everyone get one?  Would it be as cost effective without any competition?  In a market economy you would have goods that are near perfect that only a few millionaires could afford - like the Lamborghini - and you would havegoods like the Hyundai that everyone could afford.  You would have a full range for everyone.  This is just not possible through a state monopoly.We'd all either be driving the Yugo or only the despots would be driving their perfect autos.But one thing is for sure - apodictic  - competition ensures that the costs of providing goods is lower than it would be otherwise. 

In regard to your comment about the Government needing to intervene or we'd all be taken over by bullies.  How ironic to say that bullies would take advantage in a voluntary society so let's replace voluntarism with a coercive apparatus that prevents free competition.  Whenever the state controls an industry it is the coercive apparatus that is used instead of voluntary decisions that are being made.This stuff about a "bully" is another socialist tactic.  They've been using it on essential services since time immemorial.  It's almost as bad as the first stick man you used above!  But it's okay.  We're indoctrinated that way up here in Canada.  Unless you have read Mises and Rothbard you're defenseless against the socialists. In order to discredit the myth about bullies in a free market system one of my favorite authors, Frederic Bastiat, used to say: "In war, the stronger overcomes the weaker.  In business, the stronger imparts strength to the weaker."  This is 100% true.   

It is pure irony to say that the state protects the weak from bullies. The state is the biggest bully of all. It's this simple.  If you would not put the state in charge of providing electronics goods why put them in charge of providing ESSENTIAL goods?  Explain to me how anyone is "bullied" in any other industry that we'd agree was a free market industry.  I don't see it.  I see that businesses are accountable to consumers.  I also see that government is not.  I pay FEDEX for any important mail.  The post office is a great example of how government does things. Sure, it all looks great as long as there is no free market alternative. 

Free market medical care would be cheaper and it would be better.  It would be better all around.  I don't expect anyone to agree.  No one agrees, after all, that we could eliminate recessions altogether by going to a real gold standard.  They don't buy it because we've had a gold standard but we still had recessions.  For the same reason, people won't buy that a true free market would be 100 times better than what they call free medical care! They don't buy it because they see the so-called private system in the US costing more.  But they fail to credit the state with that problem, just like they failed to acknowledge that the gold standard of old was rigged too. For every story about a private doctor not treating someone, say, because the customer has no money, there are a dozen such stories under universal medical care systems where patients in dire need are either shoved out the hospital door or discharged by a death committee or otherwise mistreated.  There are many stories.  I can tell you from experience with markets in general that if I had a heart attack and no money I'm confident that the doctor in a free market system would still help me even if he wasn't going to get paid. Charity is something only a free market system can afford.

 I'll respond to Mr Bugos later in the week.

Country Profile: Canada

I felt that no boy should have to depend either for his leg or his life upon the ability of parents to raise enough money. I came to believe that people should be able to get...health services irrespective of their individual capacity to pay.

Tommy Douglas, father of Medicare, Canada's National Health Insurance system

Population 32,000,000

Government Constitutional monarchy based on parliamentary democracy

Health Care Model National Health Insurance

GDP 1.335T (2010 est)

% GDP Spent on Health Care 10.0%

Per Capita Income $39,600

Health Care Expense Per Capita $3,672

Health Care Expense Per Capita Normalized to Income of 50K $4,636

Life Expectancy (m/f) 78/83

Healthy Life Expectancy (m/f) 70/74

The health care writer T. R. Reid (The Healing of America) has described Canada's health care system as the paradigm for the national health insurance model. Its genesis goes back to 1910, when the Douglas family migrated from Scotland to Canada. A Winnipeg doctor chose young Tommy Douglas as the beneficiary of a new technique in orthopedic surgery, and a boy who had expected to limp through life suddenly had a normal stride.

But even then, the boy was troubled. Why him? Was it right that chance blessed one boy with health and left another crippled? The question gnawed at Douglas, and when he became governor of Saskatchewan in 1944, he instituted a hybrid form of the single payer model in which the government served as insurer while providers remained private. By 1961, every province and territory in Canada had adopted Saskatchewan's model. The Republic of Korea and Taiwan later followed suit, and in 1965, the U. S. Congress adopted the name of Douglas' model for the legislation that established Medicare. In 2004, a national poll named Tommy Douglas as the "greatest Canadian of all time."

Overview

• Goals: Universality, public administration, comprehensiveness, portability, accessibility
• Thirteen provincial and territorial single-payer systems varying approaches to financing, administration, delivery, and range of service
• Eligibility for national funding dependent on meeting the five goals listed above
• Heavy emphasis on equality of access regardless of income
• High level of population health
• Challenges: Aging population, medical inflation (especially pharmaceuticals), waiting times, shortage of health human resources

Structure

Canadian health care is organized around the federal government, provincial and territorial governments, and intergovernmental cooperation. Provinces fund hospitals, negotiate with physicians' association to determine remuneration, oversee public health, and may fund health research and evaluate new technologies. Intergovernmental councils and committee play a largely facilitative role, coordinating cross-provincial advisory committees and various national foundations and institutes.

Financing

Canada finances 70% of its health care services via a group of federal and provincial taxes, including an income tax, corporate taxes, consumption taxes, and targeted supplementary taxes called "premiums." The bulk of the remaining 30% comes from out-of-pocket payments and voluntary supplementary insurance.

Delivery
Canada's primary care physicians serve as gatekeepers to the rest of the health system. Canadians are free to choose a PCP, and most choose based on long-standing family relationships. Recent reforms have extended selected primary care responsibilities to nurse practitioners. While the physicians typically work on a basis of fee-for-service, provinces are experimenting with alternative payment contracts based on such modernizations as 24/7 availability and telehealth applications for rural and remote areas.

In general, care has trended toward a discrete model wherein family physicians and community health facilities provide provide primary care, hospitals provide secondary and emergency care, and nursing homes provide long-term care.

Federal and regional authorities provide public health services, as defined by these six categories: population health assessment, health promotion, disease and injury control and prevention, health protection, surveillance (i.e., collection of health data to guide public policy), and emergency response.

Challenges
The chief challenge facing Canada's health care system is well-known: Lengthy waits for diagnostic tests and non-acute surgical procedures and -- in some areas -- primary care physicians. In 2005, Canada's Supreme Court determined that the country's prohibition on private insurance limited access was therefore dangerous. The long-term effect on Canada's single-tier system remains to be seen.

Beyond that, Canada faces the vexing, worldwide issue of medical inflation. Its decision to address this by stinting on expenses has aggravated the issue of lengthy waits.


Overall
Despite issues with waiting times and mediocre survival rates on some chronic diseases, Canada ranks high in such aggregate indicators as healthy life expectancy, potential years of life loss, and survival rates from stroke. The 2005 court decision notwithstanding, Canada's commitment to equality of access remains the signature statement of its health care system. And it has provided an object lesson that Vermont may be taking to heart: Single-payer need not start at the national level. As T. R. Reid observes,

Universal coverage doesn't have to start at the national level. Once [Tommy] Douglas established free hospital care in a poor rural province and made it work, the demonstration effect drove other provinces to do the same thing. And once Douglas established his taxpayer-funded Medicare system to pay all medical bills in the province, the demonstration effect quickly turned Saskatchewan's idea into a national health care system that covers everybody.

WHO Ranking 30 (U.S. 37)

Click here to read more about Canada's health care system.  T. R. Reid's book The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, includes a chapter on Canada.