Markets, Competition and Choice: Lessons for Canada
Good day and thank you for the opportunity to provide a Canadian perspective on health sector reform. I am sorry I cannot appear live. I am currently the Vice-President of Health Policy and Research at the Canadian Medical Association (CMA), where I have worked for 23 years. The CMA is a national professional association representing a majority of the physicians in Canada and we advocate on behalf of physicians and patients. Akram asked me to address several topics but I would first begin with ethical theories underpinning health systems because I think that is fundamental – certainly that has been the case in Canada.
Just a quick note about our health system. Canada is a federation of 10 provinces and three northern territories, our population is some 35 million. Our constitution of 1867 effectively granted responsibility for health care to the provinces. The federal government has jurisdiction for the health care of Aborignal peoples, the military and inmates of federal correctional institutions. However, since the 1950s the Federal government has provided financial transfers to the provinces and territories for health care.
Our national health care program began in the 1950s, first with hospital insurance and followed by coverage of medical care in the 1960s. I believe that this was the result of a consensus around some core principles that we generally consider to be values. The original ones were:
- Universality – all residents had to be covered
- Portability – people would be covered wherever they moved in the country
- Comprehensiveness – all insured services would be covered
- Public administration – while delivery might be privately provided, the administration would be public.
In 1984 a fifth principle was added – accessibility. This means that there can be no financial barriers to accessing hospital and medical services, such as user fees., These principles are set out in the Canada Health Act and federal transfers to the provinces and territories are contingent on them being satisfied.
What this practically means is that virtually all of physician and hospital expenditures are publicly financed. However – an open question remains – is this the extent of the consensus? The issue here is that health care is now much more than doctors and hospitals. Prescription drugs are now the third largest item of health care expenditures 13% – behind hospitals at 28% and physicians at 15%. I think our experience is important for any one designing a health system. While incrementalism may be practical in terms of financial affordability, you also need to be able to entertain future expansion. Thus far this has eluded us in Canada. Less than half of our prescription drug expenditures are publicly funded and many Canadians have difficulty in affording their medications. Looking ahead we will face the challenge of providing both home-based and institutional care for our aging population. The degree to which this will be funded on an individual versus pooled risk basis is very much in question.
So the lesson is you need to think about is how values and ethics shape health systems.
Let me turn to health sector reform. I think it is fair to say that the largest experimentation with health sector reform in Canada in recent decades has been in the area of decentralization.
Since the 1990s virtually all of our provinces and territories have gone through at least one wave of decentralization, many have gone through two or more and now we are starting to recentralize. The most dramatic example is the province of Alberta which started by reducing some 250 health Boards down to 17 regions in 1994 then moved down to 9 and then has consolidated these to a single region. It is not clear, however what decentralization has accomplished and I think that one reason is that jurisdictions were not clear on their objectives. In effect decentralization has consolidated governance of the range of institutional and community-based services. But you have to wonder if you want to have a system grounded in primary care and what kind of challenge that represents. Also in the Canadian experience, I don’t think that we have been that successful in shifting from institutional to community-based care. Another issue is that governments continue to intervene – health remains a political issue and will probably always be so. So I think a key lesson is to have clear objectives and a means of measuring progress against them.
Next, on the theme of market incentives, I would like to highlight one reform that we have not tried in Canada but which has been adopted extensively in European systems is the internal market, which essentially means the stimulation of competition within a publicly funded system. The United Kingdom pioneered this in the early 1990s, inspired by the work of Alain Enthoven. One of the challenges in Canada is that we only have three really large population centres that would support competition. However, more recently Canada has been one of the last industrialized countries to move in the direction of activity-based funding along the lines of prospective reimbursement linked to Diagnosis-Related Groups that were adopted in the United States in the 1980s. In effect activity-based funding means that hospitals are competing on the basis of quality and efficiency and not on price.
Another issue that we have been reluctant to pursue in Canada is the issue of choice and rights. Referring back to the fundamental principles of our system, they only assure that all individuals receive care on uniform terms and conditions. There is no assurance that they will receive timely care. As a result, we continue to have long waiting times for specialist consultations and elective surgical procedures. Our federal government introduced a wait time reduction fund in 2004 to address 5 procedures such as hip and knee replacements and there have been some improvements, but this has not been the rising tide that lifts all boats although it has resulted in a growth of operations research and measurement in the health sector. Our province of Alberta has recently introduced a health charter for consultation and I hope it will be adopted as it could provide an example for other jurisdictions to follow. So I think that another lesson from our experience is that if you want to sustain a universal system based on need, you have to be able to access the care they need in a timely manner.
Next, I would like to comment on public-private partnerships (P3s). First I would note that while 70% of the health care in Canada is publicly funded, the majority of care is privately delivered. Physicians for the most part are independent contractors. Where we have used so-called P3s is mainly in the capital funding of new hospitals and other health care facilities. In my view the Jury is out on how cost-effective this is in terms of value-for-money for the public purse. Looking ahead however, as we can deliver more complex surgical procedures outside of hospitals, we will probably see more private facilities that will provide publicly-funded services for the most part. I would add that most of our provinces have some means of regulating the quality of care in private facilities.
I would conclude my comments by emphasizing the need for a quality framework in a health system. I think the United States Institute of Medicine (IOM) has captured it best in their 2001 report Crossing the Quality Chasm. The IOM sets out six dimensions of quality:
We have been embracing these elements slowly in Canada. One of the problems is that there has been a preoccupation with timely access over the past decade. While we have also put a lot of emphasis on patient safety, we have a lot more work to do on those and the other dimensions.
I would add that in my view, it would help to have a national quality framework that would support the development of comparable indicators. We now have seven different provincial quality councils and there is variation in the elements they include and the things they measure.
In closing, let me thank you again for this opportunity and I wish you all the best in the reforms you are planning in Iran.
Vice-President Health Policy & Research
Canadian Medical Association