11/23/2011 05:15 EST | Updated 01/23/2012 05:12 EST

Shattering Canadian Health Care's Conventional Wisdom

There is no single reform that is going to make medicare work better. But there is a general approach that would be useful. And that alternative approach recognizes the limitations of centralized planning and the need to allow more private money and leadership into the system.


Canadian health care is wasteful, inefficient, and doomed to eat up an absurd portion of provincial budgets unless we do something big. Where to look for ideas? Consider the successes of some countries that rely more on private money and private insurance -- and, hey, still manage to cover all their citizens.

Don Drummond, the former TD chief economist, said this in his recent paper on Canadian health care. Published last week by the C.D. Howe Institute, the paper lends itself to radical conclusions. And that's important since his current project -- reviewing program spending for the province of Ontario -- makes his writing relevant. Drummond isn't musing, he's advising, and Queen's Park is listening.

The media reports, though, have been anything but dramatic. "Top economist warns Canada against two-tiered health care," readsThe Globe and Mail's headline. Over at National Post's Full Comment, blogger Hugh MacIntyre doesn't mince his words.

[Drummond's paper] is an interesting piece of work. The interest is not due so much to the conclusions it reaches, since there isn't much that's new or innovative, but because the paper serves as an example of what is wrong with the health care policy debate itself. There is a blatant and conscious effort to avoid discussing changes that can be made to the single/public-payer model.

It's easy to understand how people would conclude that Drummond isn't particularly controversial. For starters, Drummond doesn't seem to fully appreciate the conclusions that logically flow from his thinking. Drummond, for the record, talks approvingly about other systems but then "sets aside" the option of private insurance; Drummond also predicts that by 2030, health spending will eat up some 80 per cent of the Ontario budget -- but he thinks the system is sustainable.

The report falls back on the usual recommendations. And by usual recommendations, I mean the sort of recommendations that make it into practically every report. Salaries for docs, better information, more emphasis on prevention, better coordination. That first idea may be a bit controversial, but suggesting that, say, the black box of Canadian health care -- limited information available to patients and payers, alas -- needs the light of information doesn't exactly cause massive outcries.

But if we push past the rhetoric of Drummond and really look at what he's saying -- the paper is a big wake-up call. And no wonder: Drummond doesn't simply question the conventional wisdom on Canadian health care, he shatters it.

Today's conventional wisdom is built on three basic ideas. One, Canadian health care isn't particularly expensive when compared to other countries' systems. Two, the system is pretty efficient. And three, big reform ideas aren't needed.

Consider what Drummond's paper says about these.

Conventional Wisdom 1

Start with the idea that Canadian health care isn't particularly expensive. Canadians hear much about our system compared to the one south of the border. But look to the full OECD data, and you reach a striking realization:

Of the 34 countries covered in the latest OECD health data, Canada had the 7th most expensive system. So Canada is in the group of developed countries with the most expensive healthcare systems. Worse, many of the other countries have older populations than does Canada. Other things being equal, our system should be less expensive because health spending rises sharply with the age of the population -- so on an age-adjusted basis, Canada has one of the most expensive systems among its peers.

Drummond goes further and considers rising health costs. Assuming a growth rate of 6.5 per cent over the next two decades (lower, by the way, than the last decade), health care will account for 80 per cent of the Ontario budget by 2030.

Conventional Wisdom 2

How efficient is this system? Drummond is sharp, citing example after example of inefficiencies:

Despite lack of evidence of benefit, 3,600 therapeutic knee arthroscopies were performed in Canada in 2008/2009 and 1,050 vertebroplasties were done. At 19 per cent of all deliveries, Caesarean sections far exceed clinical guidelines, as does the continuing widespread practice of hysterectomies. Compared with other countries, Canada does poorly on avoidable hospital admissions for diabetes. Hospitalizations in Canada for diabetes per 100,000 people are above the OECD average, and only 32 percent of diabetics reported receiving all four recommended tests in 2007.

How then does the system save money? Drummond talks about the rationing of public care. He notes that some 5 million Canadians don't even have a family doctor (based upon CMA statistics).

Conventional Wisdom 3

But if we pay much and don't get good value, where to turn? Drummond notes our inefficiencies and finds other countries to consider.

Inefficiencies in our healthcare system are costly. The OECD estimates that if Canada were to become as efficient as the best performing countries -- namely, Australia, Japan, Korea and Switzerland -- there would be a saving in public healthcare costs of 2.5 per cent of GDP in 2017. These data suggest that today, as much as one-quarter or more of all spending is "wasted" through inefficiency.

These different systems offer different approaches. Canadians can recognize much in Australia's NHS-inspired system. Switzerland -- almost entirely built on publicly-regulated but privately-owned and administered insurance -- is completely different from medicare.

But in citing four "efficient" systems -- which, incidentally, have almost no wait times and provide better access to physicians than ours -- he points to systems that allow private insurance and a vastly greater blend of public and private finance.

Let's be clear: There is no single reform that is going to make medicare work better. But there is a general approach that would be useful. And that alternative approach recognizes the limitations of centralized planning and the need to allow more private money and leadership into the system.

As I noted above, Drummond doesn't formally make this recommendation. Actually, he does the opposite. MacIntyre is right; it's a conscious effort to avoid discussing bigger changes.

But, unconsciously, by shattering the conventional wisdom, Drummond leads us to an inevitable conclusion. Canadian medicare doesn't need an Americanization, but it could benefit from learning from Australia, Switzerland and other universal systems.