Incremental improvements are the best route to health reform. Many positive steps have a better chance of succeeding than a single giant leap, which could prove disastrous if wrong. All the signs indicate that government is edging towards following the more cautious route, a decision that will be welcomed, not only by everyone involved in healthcare delivery and funding, but also by potential patients.
Canadian Health Policy Failures: What’s wrong? Who gets hurt? Why nothing changes, a new book by Brett J Skinner of the Fraser Institute, describes the problems faced in the Canadian healthcare system. According to the author, the hidden costs of Canadian health care include: unfunded liabilities and a financial crisis facing government because of the uncontrolled growth of public healthcare spending; inadequate resources for high technology and advanced medical treatments; significant lack of access to publicly funded and medically necessary health care; statutory restriction of incomes of medical professionals to below-market rates, and disincentives for medical innovation.
The book provides ample evidence that a single-payer system is fraught with difficulties and any government considering such a system would do well to take note of the author’s findings. For instance, it is not surprising to find that price-control on the incomes of medical professionals has led to a shortage of physicians in Canada. Price controls always lead to shortages.
Government enterprises are notorious for being slow in carrying out essential capital expenditure, which competitive firms dare not do if they wish to stay in business, so Canada’s reluctance to spend on MRI units and CT scanners is entirely predictable. It is not that the people in the system do not care; the problem is that perverse incentives and disincentives do not allow them to invest in technology and new treatments in a timely manner.
An alternative to adopting a healthcare “model” from elsewhere, whether Canada’s or any other, is for SA to create its own system, not by grand design but by cumulative additions, which is the way in which all well-functioning systems come into being. Thousands of trials and errors lead to the discovery of ever-better ways of doing things, which is what human beings have been doing since the discovery of the wheel.
In modern times, it is as well for anyone wishing to establish an enterprise of any kind, whether private or government-controlled, to take economics (the study of human action) into account. Economics has shown us that positive incentives work infinitely better than using force, prohibitions and coercion to achieve our objectives and that, at the extreme, slavery tends to be the most unproductive way to extract labour from people. So, if we want providers and funders of health care to supply the best possible care, we must create an enabling environment that will induce them to voluntarily and happily use all their skills, talents and abilities to heal the sick and prevent the healthy from becoming ill.
Government could start by removing disincentives to competition between private suppliers of medical care. Replacing restrictive licensing of hospitals and other medical facilities with objective criteria aimed at ensuring the safety of patients should appear high on the list. Anyone should be entitled to erect a hospital or other medical facility if they meet the objective criteria and there should be no blocking of such investments based on the discretionary judgement of officials. There is no case for protecting existing hospitals and other facilities, whether government or private, from competition. Open competition, and only open competition, can efficiently allocate resources to meet the medical needs of patients.
Other barriers that could be removed expeditiously are those that limit the number of medical professionals available in the country. Limits on the number of medical students should be abolished and when the quota of taxpayer-subsidised students is filled, universities should be entitled to enrol students who pay fees equivalent to the full cost of their training.
Establishment of private medical schools allowed to issue medical degrees if they meet objective criteria should be encouraged. Medical graduates could be entitled to serve internships at accredited private hospitals. Similar principles could apply in the private training of nurses and other medical professionals. The “forced labour” of young medical graduates who are required to carry out community service in difficult environments such as rural areas with few facilities is an obvious disincentive and could be discontinued.
A greater proliferation of medical schemes, and especially the creation of schemes to cater for low-income members, would require the removal of regulatory barriers that impose costs that drive up member contributions. So-called “equity” has driven out products that suit the requirements of lower income people. Insurance to cover catastrophic medical events would be sufficient cover for most people and could be provided at much lower cost.
There are many possibilities for solving existing constraints in SA’s healthcare system and these should be utilised. Government already provides healthcare services to a large percentage of the population and there appears to be a new initiative to introduce much-needed efficiencies into its delivery process. A simultaneous initiative to remove regulatory barriers that curtail and prevent new developments and innovation in the healthcare field would be most welcome.
Author: Eustace Davie is a director of the Health Policy Unit (a division of the Free Market Foundation). 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.
FMF Feature Article / 03 November 2009