CD Howe fiddles while Canada's health care system burns

Don Drummond, through the CD Howe Institute, has recently published a paper on Canada’s Health Care system. It is an interesting piece of work. The interest is not so much because of the conclusions it reaches, there isn’t much there that’s new or innovative, but because it is an example of what is wrong with the health care policy debate in Canada. There is a blatant and conscience effort to avoid discussing changes that can be made to the single/public-payer model. That is to say, no one wants to talk about private financing in Canada’s health care system.

The report itself is an effort to come up with ways that health care spending could be reduced without touching the financing of health care. Mr. Drummond discusses creating incentives that will reduce overuse on the part of the patients and encourage efficiency from suppliers. He suggests that fees to providers should constantly be reviewed to reflect innovations and cost changes. He wants funding to shift from one area of health care to another where he believes that demand is rising.

Throughout the whole paper he completely ignores the fact that there already exists a method that would accomplish all of this in one shot: price signals.

Price signals allows for the consumers to act as if they know without actually knowing how much supply there is available of a good. Price signals encourage providers to adjust to changes in demand and the accompanying profit motive gives them an incentive to be more efficient. Price signals will do everything that Mr. Drummond wants done, but he won’t even talk about it, because for price signals to work private financing would have to be introduced to the system.

To the CD Howe Institute’s credit they are pretty blunt about why they won’t talk about financing. The president of the Institute writes that changing the financing “would be so politically inflammatory as to block reforms.” What he means is that he is too afraid of a public backlash to speak truth to power.

The truth is that governments can fiddle with the administration of the public funded system all they want but all they are doing at best is kicking the can down the road.

The single/public-payer model is at the core of the unsustainability of Canada’s health care system. It is the inability to solve basic knowledge problems of supply and demand through the price signals that creates waste and inefficiency. A central planner simply cannot mover fast enough nor can it know enough to replace prices as a solution.

The public is not being well served by respected academics like Don Drummond refusing to talk about this issue. The health care debate in this country is incredibly incomplete, with only a few individuals or organizations, like the Fraser Institute, willing to address it. Fear of the public not liking what it hears is no excuse. Real change does not happen from following a crowd but by leading it.