July 14, 2019 - Freedomain Radio - Stefan Molyneux
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Canadian Health Policy Failures | Dr. Brett Skinner and Stefan Molyneux
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Well, thank you so much for taking the time to chat to This is Stefan Molyneux from Freedom Aid Radio.
I'm talking to Dr.
Brett Skinner from the Fraser Institute, who's written a book called Canadian Health Policy Failures.
And I just wanted first and foremost to thank you for taking the time to write this book.
This is A topic that is so laced and injected with ideology, invective and misinformation at times that it is really refreshing to see somebody who dives straight into the data and comes up with some very startling and I would say original insights into the challenges of the healthcare debate.
So I just wanted to thank you for making the book available, particularly it's available online for free.
Well, thanks for inviting me on your program to talk about it.
Well, what was it that drove you in this direction to take on such a sacred cow of Canadiana, such a challenging topic?
What was it that originally gave you the impulse to write the book?
Well, I've been studying health policy in Canada now for around eight or nine years, and really what struck me when I began studying the topic was that, you know, politically in Canada at least, we're constantly told That our healthcare system is the best in the world, bar none. That it is a superior approach to health policy.
And when I began to study our health policy structure in Canada and compare it to different approaches in other countries, I quickly discovered one really enlightening fact, which was that no other developed country in the world, in fact, copied the Canadian approach.
And so if it was indeed the best in the world, It seemed very surprising to me that no one else would have discovered that and copied the model for themselves.
That led me to be quite curious about measuring the output, the performance, the access to medical resources in the Canadian system and to compare that to other systems.
I found some surprising results that sort of contradicted what we were normally told in Canada, at least by our political leaders.
Right, right. And, of course, by the media, which seems to be very pro-public healthcare.
I thought it was a very powerful statement that you made in the book where you said that access to a waitlist is not the same as access to medical care.
And that's something that when you compare the Canadian to the United States versions of healthcare, which is something which we seem addicted to doing as a culture, I thought that the access to waitlists not being accessed to medical care was very interesting, and also the degree of people who do not have any real access to healthcare, which you found was about 5% in the US if I remember rightly, and a similar proportion if you look at the people who are unable to find family doctors who are the gatekeepers to specialists, I wonder if you could talk a little bit about that.
Was that something you expected going in or was that sort of a surprise when you looked at the data?
Well, you know, all of our research questions kind of start with an objective hypothesis that just really looking at insurance coverage in both countries.
One of the great claims about Canadian healthcare that has been made is that it is universal insurance coverage.
And, you know, my book and other researchers have pointed out that the Canadian system tends to produce Lower levels of access to medical resources compared to countries like the United States or other countries, in fact.
And the usual response is to say, well, at least Canadians have universal access to the things that are available.
And so I wanted to sort of develop the concept that would allow us to measure effective insurance coverage or actual access to medical goods and services in both countries.
As opposed to just asking the question about whether people have the promise of insurance coverage.
As you pointed out, having access to a wait list is not the same thing as getting access to medical goods and services.
In Canada, wait lists really result in people being effectively uninsured.
We looked at government statistics over time in my research program here at the Fraser Institute.
And started measuring things like what kind of access do people have to primary care physicians in Canada, knowing that primary care physicians are gatekeepers to things like referrals to secondary treatment to specialists or access to prescription medicines, the things that people actually need from their health insurance.
And realizing that if people didn't have access, in fact, to a primary care physician, They would have limited or restricted access to the things that health insurance is supposed to cover.
So despite the promise of having universal comprehensive insurance coverage provided by the government, people weren't able to get access to the things that were covered by insurance.
So we found that a significant percentage of the Canadian population, just over 7%, as measured by the government itself, Statistics Canada, We had limited or restricted access to primary care physicians and about 3-4% had no access at all.
That's at least what they reported in surveys.
Using a similar methodology, the U.S. government through its Census Bureau reports that 47 million annually in the United States don't have insurance coverage at any one point in time in the U.S. Our research showed in studying what other people have done on this topic That there were far fewer numbers of Americans, in fact, that were actually uninsured involuntarily in the United States.
And when you compare the percentages in both countries, we essentially found that those who were involuntarily insured in the United States represented a similar percentage of the U.S. population as the percentage of the Canadian population that didn't really have access to a primary care physician or had very limited access to primary care at all.
And therefore, Conceptually, those Canadians were no better off than uninsured Americans.
So that's just one interesting sort of way of looking at the question of universal coverage and whether, in fact, that results in universal access to healthcare is a different thing.
And we find the Canadian system doesn't perform much better, if at all, than the U.S. system in providing universal access to healthcare.
Yeah, an old statement sort of popped into my head while I was reading this part of the book where there's an old saying which says, the beginning of wisdom is to call things by their proper names, which means go beyond the rhetoric to the actual empirical facts.
And when you do that, which free market thinkers do with, I think, a very interesting approach, the sort of edifice of language crumbles and you see a very different picture which is revealed by the data.
There seem to me to be six major arguments or approaches within the book, and if it's all right with you, I'd like to just touch on, or have you really touch on those.
The shortages of the healthcare professionals, the shortages of medical technology, particularly MRIs, which I found to be quite striking.
Of course, the long waits for treatment, inefficient drug spending, a lack of access to new medicines, and Another aspect which I thought you dealt with very, very well in the book which was the imbalance of information, the rent seeking from the special interest groups.
Would you mind touching on those topics?
I can go through them again if you'd like in case you're not taking notes.
Sure. The book really compares Canadian healthcare in an international context on the basis of access to the outputs of a health insurance system which are really medical resources and medical goods and services.
Often we hear the argument that the healthcare system should be measured on the basis of life expectancy statistics and things like that, population health outcomes.
Those statistics are not really impacted by the performance of a healthcare system because few people require medical care of the kind that would extend life expectancy, for instance.
In any given year and that would have very little impact on an overall statistic across the entire population.
Things like when you compare developing countries to developed countries and you compare differences in the treatment of sanitary sewage or general nutrition levels, those things have major impacts on life expectancy statistics but not health insurance, differences in health insurance systems between developed countries.
So we wanted to measure the output of the health insurance system which is access to medical goods and services and we compared Canada on an international basis and that included the United States.
And what we found was that relative to other countries, there was a shortage, a relative shortage of access to the kinds of things that health insurance buys.
So physicians to population ratios, The age or modernity of our hospital infrastructure, access to medical technology, diagnostic devices like MRI machines and CT scans or the number of scans that are performed in a year, for instance. Also, access to new medicines.
All of those measures show that Canada's system was performing far worse, in fact, than other comparable countries with similar social goals and similar levels of economic development.
In fact, we also compared to the United States, and it's well known, of course, in the U.S. debate on health care, that the claim that Americans spend more of their gross domestic product on health care than Canadians do.
In fact, Canadians spend only two-thirds as much on health care in total as a percentage of GDP compared to Americans.
But what do they get in returns?
They get far less in return.
Americans spend more of their GDP on healthcare but they get more relative to Canadians in return.
In fact, four times as many MRI devices, three times as many CT scanners, you know, 20% more physicians per population.
These are the kinds of statistics that the book presents to show in fact that there are hidden costs to the single-payer approach to health insurance in Canada that aren't counted in dollars expended but are counted in long wait times, lack of access to physicians and other medical goods and services.
Those are the kinds of things that are often forgotten in the debate.
So the book goes through chapter by chapter presenting an even-handed look at the evidence in this area and then it presents essentially a series of political explanations because it brings about the question If the Canadian system is so obviously failing relative to other countries, and if other countries do things differently than Canada in terms of its health policy approach, then why aren't we in Canada adopting those better approaches?
And so the book explains several political factors that are involved as obstacles or barriers to change.
Right. And I was also struck when you have a graph in there with the proportion of taxes paid by particular segments of the population to some degree versus the benefits received.
And it's an old quote which says government is a fiction by which everyone attempts to live or imagines they can live at the expense of anyone else.
And I thought that was a very interesting analysis of the political drivers that the people who vote...
are receiving benefits from those who have a smaller percentage of the population, the rich who tend to pay more of the taxes.
Was that a surprising finding or were you expecting that going in?
Well, you know, when I looked over the statistics here and over time in our program as we've studied these things, we've looked at the distribution of illness and the distribution of the tax burden in the population here in Canada.
Your listeners might be interested to know that You know, two-thirds of the personal tax burden in Canada is carried by one-third of the population.
So, you know, the costs of paying for Canadian healthcare are not borne equally by the population.
In fact, most of the population is greatly insulated from the cost of the system.
So it's simply more politically expedient, if you would, for our politicians to raise taxes on a Than it is to introduce things into our public system like user fees or parallel private insurance or the restriction of public subsidies and benefits only to target populations.
Those kinds of things are obvious prices to everyone, whereas taxes can be raised on a minority of the population and it's more politically expedient.
So that's one political explanation for why governments in Canada prefer To ignore economically liberal policy solutions to our health system failures.
Another, of course, is people say, well, when you poll Canadians and you ask them if they like their system, 80%, 90% say they like their system.
That's actually not a very surprising finding because 80% to 90% of the public is mostly healthy and rarely uses healthcare.
They are not catastrophically ill, but if you were to poll the folks who are catastrophically ill, you would find quite a different answer, I predict.
And those are the folks that are most harmed by wait times, long wait times.
Those are the folks harmed by not being able to get access to new medicines, not being able to get access to diagnostic services, or can't get access to primary care physicians.
Those people represent a An extreme minority of the voting public who are disenfranchised by virtue of their health conditions.
But in addition to that, just, you know, are such small numbers that they're not on the radar of our policymakers and quite essentially our politicians can afford to ignore them.
Well, and I think also the emotional factor that when you get gravely ill, you're thinking about a lot of things other than reforming the Canadian healthcare system.
You have a lot of stressors and problems on your plate.
And so when you hit that wall, I don't think that's a very active group of lobbyists relative to, you know, say the doctors or the...
You also talk, I think, about the...
The businesses that make a lot of money from the existing healthcare system, which I thought was an interesting approach.
Sometimes there seems to be no greater enemies to capitalism than large companies who are pointed towards the state coffers.
I wonder if you could talk a little bit about that as well.
Yeah, as you mentioned earlier, the theory in this area refers to the behavior of special interest groups who seek special favors from government, special privileges or barriers to competition.
Those kinds of things are called rent seeking.
And in particular, there are several examples of special interest groups that benefit from the status quo in Canada.
That is, they benefit from government intervention in medical markets.
And that seems counterintuitive, especially when you identify some of those groups as business groups.
But in particular, the generic pharmaceutical industry, these are the drug makers who copy patented medicines, essentially, And then are supposed to be the least expensive versions of those medicines and that normally or theoretically should lead to savings in the drug system.
But what the evidence shows is that generic drug prices in Canada are among the highest in the world and in fact on average twice as high as identical drugs in the United States.
So why does this occur?
Mainly because of the intervention of our public drug plans in Canada Which essentially set the prices of generic drugs, the rates at which they're willing to reimburse generic drugs at prices that are much higher than would be produced in a competitive marketplace.
By proxy, we use the United States to show what competitive prices would look like.
And so it's the policies of our drug plans, the size and scale of our drug plans, and the way they're able to set one price for the entire market.
If governments, as they typically do, make errors in setting prices, that is, setting prices either too low or too high relative to what a competitive, sustainable market price might be, that creates problems in the market.
In Canada, that leads to a lot of wasted spending on generic drugs that wouldn't occur if governments simply had not distorted market dynamics through their public drug plans.
So the companies actually benefit from the status quo and government intervention in the market and therefore they're in favor of it.
They lobby on behalf of big government intervention in healthcare.
They lobby on behalf of the expansion of government insurance because it leads to more sales of their products and services.
It allows them to charge often higher prices than they could obtain in a competitive market.
So regulatory intervention, government provision of goods and services often counter-intuitively actually benefit some businesses, but of course not consumers in general or patients in general or even the business community in general, but only particular rent-seeking businesses.
Right. And it is a shocking lack of economic education that a lot of Canadians feel that if there is some sort of parallel private healthcare system, that that is going to drain resources away from the public healthcare system.
And they imagine there's going to be this Shangri-La of, you know, private for the rich treatment.
And, you know, there's only going to be, I don't know, quacks and snake oil salesmen left for the general public, which is not true at all.
I mean, an example that is similar is near my house is a A private highway called the 407, which you're probably aware of.
People don't think, well, the people who drive on the 407 are somehow taking away resources or adding to the traffic on the 401 or the public highway.
It's not the case. What happens is when stuff gets moved off to the private sector, it's less burden on the public sector.
The only problem that occurs is if the supply of doctors is not increased, then it will be a zero sum game.
But of course, that's a different aspect of government policy, which is a control over not just the supply of medicine, but the supply of medical professionals, which I think is really quite catastrophic in Canada.
Yeah, it's true. There's really no end to government intervention when it comes to medical markets in Canada, including medical education.
The reason largely why we have a shortage of physicians in Canada relative to other countries is because governments intervened to restrict the number of doctors who could be trained because governments perceived doctors to be a cost and not an asset to the medical system.
And so they just simply restricted the amount of money that was transferred to university educational programs and training programs for physicians, which, you know, universities are not allowed to charge private tuitions under government rules, and so they can only train as many physicians as they're given the resources for by governments, and when governments restrict those resources, fewer doctors are trained, and that leads to physician shortages.
This is actually a very well-known In the health policy debate in Canada, governments are responsible for creating what we now know as our current shortages.
Government monopoly over health insurance, government regulation and effective monopoly over the delivery of medical services, government monopoly over medical education, these kinds of things are what are really leading to the health policy failures that I identify in the book.
The sustainability argument, I thought, was very powerful.
And it's something that we've heard for many, many years and not just in Canada, which is the degree to which based on current trends continuing, which I think are only going to get worse as the demographic bulge heads into retirement and thus to a higher health care cost situation.
The lack of sustainability in these state programs is something that you see rarely addressed.
The people talk about this, you know, magical land where people can get great free health care forever and so on, but it really doesn't deal with the fiscal realities of the increasing deficits.
And again, the problem of the baby boomer bulge passing into retirement.
Do you see any particular movement on the part of politicians to touch this third rail or think about ways of dealing with it?
Or is it everybody just saying, well, it's not on my watch, so let's cross your fingers and keep moving?
Well, I think what you're describing is what I call the pay more, get less approach to healthcare.
The truth of the matter is that you can look at the growth in government health spending since the beginning, the introduction of Medicare in around 1970.
And government health expenditures on an annual basis have grown faster on average than the growth in the economy or GDP and faster than total available revenues available to the provinces.
And that includes federal transfers, all tax revenues available to the provinces, all income from crown corporations, etc.
So as time has moved on since 1970, what has occurred is that when When governments stopped borrowing to pay for these expenses, healthcare expenditures began to consume a larger and larger share of available revenues in the provinces, so much so that in a few short years, 6 out of 10 Canadian provinces will find themselves in a situation in which they are spending 50% of their total available revenues on healthcare.
That's a significant tipping point and I think politicians are increasingly We're aware that the key issue in healthcare is financial sustainability.
Now, what they've done over time is they've raised taxes, of course, to pay for that.
As that has become increasingly unpopular and the negative economic consequences of doing that have become apparent, governments have done the other thing, which is to ration access to care or to basically make Canadians get less for the money they spend on healthcare.
So we have this pay more, get less approach.
The only way that governments have been able to make healthcare sustainable in a zero-price system, in a government monopoly system, is to raise taxes and to ration access to healthcare to make people pay more and get less over time.
As I say, most people aren't aware that that's occurring because the tax burden is borne mainly by a relative minority of the population.
One-third of the population pays two-thirds of all personal taxes.
And on the get less side, the rationing side, governments can get away with rationing care because it affects very few people, a very small percentage of voters.
So this is really the heart of the problem with the Canadian healthcare system.
We're paying more and getting less.
And do you think, or to what degree do you think change might be proactively possible within the system, or to what degree do you think it's really going to have to hit the wall fiscally or demographically in order to be changed?
I mean, obviously, proactively would be better.
You know, it's better to put the wheels down before the plane hits the ground, but it doesn't seem to be, given the level of rhetoric, ideology, and mythology that surrounds this ideal system that is very imperfect in practice, Do you think that the chance is there for proactive political change or do you think it's going to have to be, you know, climb out of the wreckage as best you can?
Well, you know, economic reality is a stern teacher.
If you look at a case like Ontario, Ontario has just projected that in this fiscal year it will have a deficit of $25 billion.
The province is on pace so that next year 50% of its total available revenues will be spent on healthcare.
That's a significant problem for the province.
Healthcare continues to grow at a faster rate than total available revenues, at a faster rate than the provincial economy.
This has to change at some point.
We have to realize that we can't afford to pay for healthcare from public means alone.
We have to have some form of private financing.
We have to expose patients and consumers to some form of a price at the point of consumption.
Patients have to be responsible for some portion of the cost of the healthcare they consume in order to have incentives to utilize healthcare rationally, to make efficient substitution choices between treatment options.
All of these things are absent from our system.
Until we introduce economically liberal approaches, we're going to face these problems.
Some provinces, in fact, if you looked only at provincial sources of revenues and you excluded federal transfers, Some provinces already spend 75% of all provincial revenues, excluding federal transfers, on healthcare.
75% of their own source revenues are spent on healthcare already.
It won't be long before in some provinces, every penny that they collect in provincial own source revenues will be spent on healthcare.
And if they want to fund things like education, policing, roads, courts, all of those things will come out of federal transfer funds.
So, you know, this is a significant threat even to provincial policy autonomy over time.
And it certainly creates a crowding out and a trade-off between other, you know, worthy public responsibilities.
And people have to know that there are costs.
The cost may not be as obvious as the dollars we spend out of pocket on healthcare, but the costs are real nonetheless.
Right. And I think also a problem that I've always had with publicly funded healthcare systems is their lack of proactivity in the maintenance of health.
I mean, in the US, if you smoke, if you drink, if you're overweight, if you have particular, you know, problematic conditions that could lead to higher healthcare costs...
That is reflected in your insurance payments which gives you an incentive to move into a healthier bracket.
That is really not the case in a purely reactive system where the doctors don't come by and make sure you're doing well and make sure you're heading in the right direction but they wait until you get sick.
There's a Chinese model that is that you pay your doctor until you get sick and then you stop paying him so that he has every incentive to keep you healthy.
That's not really the case in socialized healthcare, which I think is a real tragedy, but I don't see that changing at any particular point other than maybe some small user fees in Canada in the near future.
Well, I think incentives for healthy living and preventative medicine would be higher if there was some obvious greater cost to patients and consumers of health goods and services If, in fact, they became unhealthy due to their own behaviors.
You know, I think much of our health outcomes are determined by our behaviors and lifestyle choices, but much, of course, is determined genetically.
So it's a difficult concept to structure health insurance entirely around lifestyle choices.
We certainly have to take account of the fact that much of it is random, environmental, or genetic.
And health insurance is designed to pool risk across populations so that we can actually collectively afford what we can't individually afford in terms of catastrophic illness.
But our system is really not designed as insurance to begin with.
It's really designed as a wealth transfer.
Insurance is meant to cover catastrophic, expensive events, That we can't individually afford but therefore have to collectively join together to afford.
And the market has developed this product called insurance and it essentially allows us to pay for those things that occur infrequently, occur unexpectedly or randomly and then to share the cost collectively.
Our programs don't do that.
We pay first dollar coverage.
For everything, including affordable visits to the doctor's office, affordable generic drug products.
I think there's a strong argument to be made for user fees and copayments, but in addition to that, perhaps even deductible ranges, where insurance only kicks in when expenses are high enough to justify insurance coverage.
There are many ways to structure our health insurance programs so that they perform better, more economically sensible ways of doing things, policies that are used in other countries with the same social goals that Canada has, the social goal of universal coverage.
But we're not adopting those policies.
We should be considering them and adopting them here at home and improving healthcare for Canadians in the process.
And I'd like to, if you don't mind, if you have in your heart one impassioned speech that you would like to deliver to my audience, it has a great deal of Americans in it.
And, of course, they are on this precipice, right, rolling in a sense towards a universal healthcare coverage.
Probably within a generation at least.
But that's the big debate at the moment.
And I was wondering if you had anything that Americans would want to hear or should hear based upon your examination of a system which many of them revere as the ideal of healthcare provision, if there's anything that you'd want to say to them that would be helpful in the debate that they're experiencing south of the border at the moment.
Well, I think it's helpful to remember what we stated at the beginning of our conversation, that access to a waiting list is not the same thing as access to healthcare.
You can have the promise of health insurance coverage, but if you can't practically get access to the things that are supposed to be insured, then what real good is that promise to you?
It's of no practical good at all.
And so when we talk about universal coverage, we have to Define exactly what it is we're trying to achieve.
Is it the promise of insurance coverage so that we can make a political problem go away?
Or is it really to improve practical access to medical goods and services?
And if we want to do that, then the latter that is, improve access to medical goods and services, then there are economically sensible ways to do that.
And even if we wanted to achieve a universal health insurance promise, The Canadian model is a single-payer approach to that, but all other countries of the OECD have universal coverage systems as well, and none of them have single-payer approaches.
So there are a multitude of ways of achieving greater insurance coverage, even universal coverage, without a single-payer system.
In fact, the single-payer system in Canada is probably the worst way to approach this problem.
It results in long, unnecessary wait times, A lack of access to medical goods and services and really poor quality health care for those who are able to obtain it at all.
These are the kinds of lessons that the book presents in terms of its evidence and by way of international comparison.
I encourage your listeners to pick it up and look through the evidence and decide for themselves whether they're persuaded.
I think the book serves as a warning About what not to do in healthcare and Canada is a model I think of what not to do.
Well, I really do appreciate your time.
Thank you so much. And again, just from a man who's very much into voluntarist and free market solutions to complex social problems, I really do applaud you in taking the time and going through the intense, grindy effort of going through all the data and coming up with the most excellent and powerful and peer-reviewed, for those who are interested, book.
And I will be sure to post a link to people who want to purchase the book or have a look at the PDF. When I post the interview, and I just wanted to thank you, Dr.
Skinner, so much for taking the time to chat with us.
Well, thanks again for inviting me, and I thought the conversation was very enlightening.