Healthy solutions to the crisis in Medicare

January 1, 2000

Canadians love having a public health care system. Recently, however, rising costs, new technologies, and an aging population have led many to think they have no choice but to accept private funding and private care. Canadian seniors are especially alarmed that, as the generation that founded medicare, they now face the prospect of not being able to access the services they fought so hard to establish. But before we throw in the towel on the ideal of publicly-funded and comprehensive health care, we need to get a few things straight.

Most of the problems with our health care system are a result of cuts in cash transfers to the provinces by a federal government more concerned with deficit reduction than the health of Canadians. The drastic cuts of the mid-1990s blocked many of the reforms needed to improve and modernize medicare.

These budget cuts have also opened the door to privatization, as provincial governments, families and for-profit firms try to fill the gaping holes left by the federal government's retreat from health care. The BC government has done more than most provinces in compensating for federal cuts by increasing health care spending. While positive, these increases did not keep pace with inflation and population growth, particularly in the mid-1990s, and did not result in badly-needed reforms to the delivery system. Today, more care falls to friends and relatives, and there is an increase in out-of-pocket expenses for individuals in the form of higher deductibles for Pharmacare coverage and higher user fees for long-term and home care services.

The area where BC has really fallen short is in its investment in health care infrastructure. The government has spent almost nothing on new buildings and equipment. Serious shortages in long-term care beds have had ripple effects throughout the health care system--the recent crisis in hospital emergency rooms is but one effect of these shortages. About 7,000 seniors are currently waiting for one of BC's 24,707 publicly-funded long-term care beds.

We urgently need more money to build and operate long-term care facilities but, instead of providing the necessary public resources, the provincial government plans to fund all new long-term care developments through partnerships with the private sector. Adopted in 1997, the "Public-Private Partnership" policy (P3) requires that new care facilities be built by private investors who retain ownership of the buildings and land in exchange for mortgage subsidies and operating funds.

In effect, P3 is just another name for privatization. The lack of public investment in long-term care means that within five years the majority of long-term care facilities could be private, turning the clock back 30 years to the time when for-profit nursing homes--and concerns about accessibility and standards of care--were the norm.

Privatization is neither an efficient nor an effective response to the shortage of long-term care facilities. Some Regional Health Authorities see P3s as an obstacle to the provision of well-coordinated and fiscally-responsible care. Centralized administration of public health care provides both lower administrative costs and economies of scale. Indeed, the fact that health care costs so much more in the US than in Canada--13.5 percent of GDP in the US compared with 9.2 percent in Canada--is largely the result of higher administrative costs in a system comprised of numerous competitive insurance firms, hospitals, clinics, and so on.

Private sector financing is also more expensive than public financing because private borrowing costs are higher, and those additional costs are passed on to taxpayers. The only way the private sector can provide long-term care at a lower cost than public health authorities is by building to lower construction standards, using a cheaper, inadequately-trained and less stable workforce, or by diverting public funds designated for patient care to property costs and profits. Let's not forget the private long-term care homes that were closed in BC last year because of poor staffing levels and sub-standard care.

Finally, a public system simply makes more sense when it comes to caring for peoples' health. In a public system physicians and other health care workers are accountable to their patients and their public employer, and their performance is evaluated on the quality of the services they provide. Corporations are accountable to their shareholders and are motivated by an entirely different imperative--namely to increase shareholder value. What implications does this have? Most obviously it means that for-profit health care companies have a build-in incentive to cut corners and enhance profits. It also means that tax dollars go to profits rather than care, and that the quality and accessibility of necessary health care services is eroded.

Rather than encouraging private, for-profit investment, a better approach to the long-term care shortage would be to foster a range of publicly-subsidized supportive housing and long-term care options in partnership with Regional Health Authorities and non-profit societies.