Monopolists and Healthcare

In Canada, healthcare in British Columbia is slowly coming apart because of the existence of a private health clinic.

Canada

Afraid, very afraid.

This link is to a legal foundation that takes on legal cases such as this and provides a reasonable overview of the situation: LINK

In Canada there is continuing debate whether the Canada Health Act‘s language that healthcare be publicly administered, means that it must be government-run. A Senate report (LINK here to the final report) of some years ago drew the view that this one of the great myths of Canadian healthcare, but the more publicly acceptable Romanov report caved in to political correctness and said that people preferred a government monopoly.

There is, however, an interesting problem that state monopolies can cause: namely that they may be manifestly unable to provide the services that they monopolise. That is to say, the government controls the whole healthcare system in some form (what in Canada is referred to in part as a single payer system, but in the case of providers, excludes providers that are emantions of the state — i.e. publicly mandated in some form) and in so doing does not provide the range of services or access provisions to meet those obligations. Now, at a simple level, would a rational person accept to buy a service from an organisation acting as a monopoly that could not meet their needs? Unlikely and we’d most likely find somewhere else to get what we needed; but what if you have no choice? This is the essence of the problem in Canada.

The European Court of Justice rulings have caused so much change in access to healthcare across Europe but the really important, in my view, relevant to healthcare actually aren’t about healthcare.  In some work I did a few years ago, some ECJ cases are instructive and may serve to help Canadian authorities identify key factors for their own decision making; the last one of the list is the one that is most interesting:

  • CBEM v CLT and IBP Case C 311/84 [1985] ECR 3261: statutory monopolies have a dominant position in the market
  • Bobson v Pompes Funebres des regions liberyees Case 30/87 [1988] ECR 2479: states may not use a dominant economic position to fix prices and restrict market entry of competitors
  • RTT v GB-INNO Case C 18/88: public undertakings operating public infrastructures abuse their dominant position by excluding third-party service and content competitors
  • Merci Convenzionali Porto di Genova SpA v Siderurgica Gabrielle Case C 179/90: dominant positions are not in illegal, but undertakings may not be created which cannot help but abuse that dominant position in what they are tasked to do by the state
  • Hofner and Elser v Macrotron GmbH Case C 41/90 [1993] 4 CMLR 306: states may not create economic entities with dominant positions that are unable to meet the demand for services, or distort the competitive structure of economic markets.

Now, the ECJ rulings may or may not interest folks in Canada as this would not necessarily present a ‘made in Canada’ solution. It is a sine qua non of Canadian healthcare that the state edifice, constructed by the Canada Health Act, protects Canadians from healthcare costs and trades off greater choice and service access (i.e. waiting times) for that benefit.

Of course, one might argue that healthcare isn’t an economic market, but in fact it is hard not to think of it as such for a number of reasons. It accounts for about 10% of most economies, perhaps 5% of the workforce is employed in healthcare, it comprises provider and payer bodies that interact with each other through contractual arrangements of one sort or another, and there are user fees/copayments, or reimbursements to patients which clearly suggest some sort of economic transaction. Keeping things simple helps, and avoiding the usual arguments that patients are unable to make informed choices or generally do not as such ‘choose’ healthcare as a consumable good, but are forced into a transaction by their liver or heart or an accident. How we get their seems irrelevant: it would be like arguing that the housing market wasn’t a market because people are ‘forced’ into needing housing, or even food….

In my view it is time for the Canada Health Act to be interpreted in the form that Kirby and others in their Senate report urged and enable greater contestability of the provision of healthcare, as long as the basic underlying principles of community risk sharing on the payment side isn’t compromised. It is this latter point that was the essence of the ruling of the US Supreme Court (the bit about mandates and whether payment was a tax or a penalty).

No country today sensibly tries to restrict provision so long as they have control of the payment levers. However, and here austerity raises an ugly presence, healthcare is the biggest item in the provincial budgets and unless the provincial governments figurer out how to bend the cost curve down, this cost area will continue to consume a larger and larger chunk of provincial expenditure. Solutions lie, in part, in creating conditions for consumer (patient) driven reforms; there are no incentives for health professionals to do things differently (i.e. less expensively) when the state decides the structure and capacity of the healthcare system, which might actually under specify what is needed, but overpay for that capacity. Across Europe, healthcare costs are included in the national debt restructuring but we don’t see enough reform efforts as the bulk of the research has focused on state-mandated health reform so little is know about how to take apart a health system. The same holds true in countries like Canada. Sclerotic administrative practices and controls that manifestly restrict freedom of consumers to choose and those choices to lead to system reform need rooting out.

Regretfully, it appears, like in all things that really matter, the courts will force the health reform debate.

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