Applying economic thinking to SA healthcare

Several economic strands to the SA healthcare debate receive inadequate attention. The most important of these is the function of prices, innovation and competition. And, not only just as important, but also harmful when overlooked, is the potential conflict between the self-interest of political decision makers and the best long-term interests of patients.

The utopian notion of ‘free’ healthcare for all, portrayed as a compassionate programme by politicians who ignore the negative consequences and expound only the positives, is a political ploy that ignores the certainty of predictable economic outcomes. Healthcare can never be provided at no cost. Someone has to pay, and, in the case of government-provided healthcare, that cost is borne by taxpayers, government’s only source of funding.

A predictable outcome of offering healthcare free to patients (the consumers of such services and products) is that demand will exceed supply. Demand actually becomes so great that the budgets of countries with the highest per capita incomes become strained and supply has to be deliberately limited. Anecdotal evidence of such strains are constantly in the news in countries such as Canada and the UK, and mainly relate to care being deliberately withheld or delayed through queuing or long waiting times, caused by a lack of resources, particularly shortages of doctors, specialists or hospital beds.

When healthcare is provided ‘free’, demand will inevitably exceed supply, simply because of a change in the behaviour of patients. Patients, who have to pay the full costs of visits to the doctor or for medicines, will endure minor ailments without any form of medical attention in order to save time and money. If medical care and medication is available ‘free’, sufferers will seek attention for every complaint. Nationalised healthcare systems show that the number of people queuing up to have minor ailments treated tends to crowd out the provision of care to more seriously ill patients. This is due to the first-come-first-served system, because doctors and nurses do not have the incentive to work longer hours, and caring for less ill patients is less taxing.

Canada’s Fraser Institute, for many years, has documented the waiting times for healthcare in its nationalised system. Among the key findings in its Waiting Times for Health Care in Canada 2012 Report, is the fact that, ‘specialist physicians surveyed across 12 specialties and 10 Canadian provinces report a total waiting time of 17.7 weeks between referral from a GP and elective treatment in 2012’ and ’patients wait longest for orthopaedic surgery (39.6 weeks) and wait least for medical oncology treatment (4.1 weeks)’. The average waiting time in Canada from referral by a GP to seeing a specialist is 8.5 weeks and from the specialist to receiving treatment is 9.3 weeks. If you are unfortunate enough to live in the province of New Brunswick, you will wait an average of 22.6 weeks after referral by your GP to seeing a specialist, and in Nova Scotia, it will take 17.6 weeks from seeing a specialist to receiving treatment.

Average waiting times in Canada for scans have improved in recent years. In 2012, across Canada, they were: CT-scan 3.7 weeks, MRI 8.4 weeks and ultrasound 3.7 weeks. Animals, on the other hand, if taken to the CARE Centre, a state of the art animal hospital in Calgary, will have a CT-scan done on the same day and an MRI within one week. The reason why pets get faster treatment is because it is provided by a private organisation competing with other private suppliers. They function in a free-market pet care business and have to stay on their toes to prosper and even to survive. Not only do pets receive scans sooner, but treatment, including orthopaedic surgery, is carried out in a fraction of the time that it takes for the carrying out of a similar procedure on their owners, a few days rather than months.

Rather than wait for treatment in Canada, some patients resort to travelling to the US for surgery and treatments. They are often assisted by companies that help them find the lowest cost options in the US. Gradually, private Canadian medical companies are being allowed to provide treatments to human patients (previously prohibited) to give pet owners some of the options and medical services enjoyed by their pets. The disparity that exists is shocking and should be a warning to any country considering some form of nationalisation of healthcare, such as SA.

A much better option for SA is to allow the private sector to grow rapidly and gradually extend services to an increasing percentage of patients, as South Africans become more affluent and can afford the high quality care to which they aspire. The government responsibility could then shrink to the point where only a small minority of indigent patients are dependent on taxpayer-funded healthcare.

In economic terms, SA’s NHI plans make no sense if Canada’s national health is anything to go by. Canada had a 2011 GDP per capita (measured in constant 2005 international $) of $35 716 compared to SA’s $9678 (3.7 times higher), Canadians have totally unacceptable waiting times, and 15% of the population cannot even find a GP. Is this really the kind of healthcare system that government wants to impose on SA - one that will be considerably worse because this country is so much poorer?

Author: Eustace Davie is a director of the Health Policy Unit (a division of the FMF). This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

Note: This opinion piece was first published in the February edition of the Medical Chronicle

HPU Feature Article / 14 February 2013

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