Health care dollars, health care sense

This will be one of my (rapidly becoming less) rare posts in which I discuss something I’m actually qualified to talk about – health care and economic allocation. The reason I do this so rarely is that I emphatically do not wish to have my blogging here confused with my day job. Nothing that I have written here should be seen as reflective of policies or attitudes endorsed by my employer, any university I have been or may become affiliated with, nor any person other than myself as a private individual. While I recognize that this kind of disclaimer carries no legal weight with it, I just want it to be as clear as possible that my comments on health care are as affiliated to my professional life as my comments on racism or religion are – not at all in any way.

With that out of the way, it’s not an accident that I landed in the line of work I am in. I am curious about science and always have been; however, I am also passionate about the idea of publicly-administrated health care and the need to fight for its sustainability. I strongly believe that not-for-profit health care delivery funded by the public sector is the best method of delivery, and that if we approach the challenges inherent in the idea (i.e., waiting lists, resource scarcity) through evidence-based decision making, then we will have far better outcomes than a privately-funded scheme.

To this end I have pursued (and achieved, to a certain extent) some measure of fancy book learnin’ on the subject of useful models for health care delivery and the issues surrounding the way we allocate health care resources. The problem with the way we (I am referring explicitly to Canada here – the American system is a whole other bag of stupid that I have attempted to tackle elsewhere) deliver care here is that it is based on a model that establishes hospitals as the best method of providing service. At the time the relevant legislation was passed, hospitals were where one would expect to go for the most common types of ailments. However, in the past few decades the burden of disease has shifted away from infectious and acute causes toward chronic and end-of-life ones. The system, which should have shifted along with it, did not.

Why is this a big deal? Because it means we are burning money:

Canadian seniors account for 85 per cent of patients in hospital beds who could be receiving care elsewhere, a problem that will only grow as the first baby boomers turn 65 this year, according to a new report.


For example, 47 per cent of seniors have completed their hospital treatment but remain in an acute-care hospital because they’re waiting to be moved to a long-term care facility such as a nursing home or to rehab or home with support (so-called “alternate level of care” patients.)

Those patients have a ripple effect on the rest of a hospital, said Dr. Jeff Turnbull, chief of staff of the Ottawa Hospital. Last year, those ripples meant the hospital had to cancel 600 elective surgeries, he said. Currently, seniors represent 14 per cent of the population, but they use 40 per cent of hospital services and account for about 45 per cent of health spending of provincial and territorial government, the report’s authors found.

For hospitals, an acute-care bed costs about $1,100 a day. In comparison, Turnbull estimated it costs a quarter of that to care for the same senior in the community.

People often ask me about what I do, and inevitably the conversation comes to the best way to save the system money. I usually, cynically, express the thought that bullets are far cheaper than pills, so if our primary goal is to save money we should just shoot people when they walk in the door. The sentiment I am trying to convey with that monstrous statement is that ‘saving money’ per se should not be the goal of any funding scheme. What we must focus on is getting the greatest possible value for our investment. What we are doing instead is using an incredibly expensive tool when there is a much simpler alternative – essentially we are trying to hammer in nails with an electric drill.

In this particular case, we see that a subtle change – managing chronic disease in the elderly through community-based rather than hospital-based programs – can achieve major cost reduction without reducing the quality of care. In fact, if narratives from elder-care advocacy groups are to be believed, it would actually improve health care outcomes by allowing people to maintain a sense of autonomy. There are certainly people who need hospital care, and they should receive it; however, that population is far smaller than the number actually living in hospital simply because they have nowhere else to go, be that their own home or a managed care facility. While the issue of elder hospitalization is the simplest and perhaps most dramatic example of significant cost savings that could be achieved by a simple shift in policy focus, there are a number of other sectors that could see similar results: addiction management, certain types of emergency care, and (my personal bugbear) mental health.

As governments begin feeling the financial pinch, the issue of public provision of health care will come into sharper focus. Luckily, we have the stats on our side:

Evidence out of Canada supports a similar conclusion. McMaster University associate professor Dr. PJ Devereaux—who led almost all the systematic reviews (the highest form of evidence) around this debate—has studied death rates in private for-profit and private not-for-profit hospitals, as well as out-patient for-profit dialysis clinics compared to not-for-profit clinics. In both systematic reviews, for-profit ownership resulted in a statistically significant increase in the risk of death for patients. Dr. Devereaux found the same association between worse care and profit in his BMJ systematic review on the quality of care in for-profit and not-for-profit nursing homes.

While it seems counter-intuitive, publicly-delivered health care services are consistently cheaper and as or more effective when compared to private delivery. The ECON-101 argument tells us that having different groups competing for the same pool of consumers will ultimately drive costs to their lowest sustainable point, whereas single-party delivery has no cost control mechanism. However, once you leave 101-level economics you realize that the supply/demand dichotomy fails to factor in the issue of need:

“Most people consuming health care are critically ill,” Dr. Devereaux told Science-ish. “You don’t have time to shop around for a hospital if you break your hip.” When you buy a new computer, on the other hand, you can do research in advance, and the product isn’t as prohibitively expensive as a week in the hospital for major surgery.

Health care ‘consumers’ are not consumers, but patients. The system needs to be constructed in such a way that it serves their best interests, rather than its own (which would be the case in a private funding scheme). However, once that is done, we must fight to ensure that the system is taken care of enough such that it will still be intact when the time comes for us to use it. It’s not an easy job, but it’s an important one.

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  1. Dunc says

    While it seems counter-intuitive, publicly-delivered health care services are consistently cheaper and as or more effective when compared to private delivery.

    It’s only counter-intuitive if you’ve been constantly drilled in the conventional economic “wisdom” that public delivery is always inherently inefficient whilst private delivery is always perfect. Personally, I’ve always found the idea that a system providing a service for a profit can do it cheaper than a system not producing a profit to be counter-intuitive.

    I’ve worked in both public and private sectors, and I’ve seen plenty of inefficiency in both. In fact, the worst inefficiencies I’ve seen have been in the private sector.

  2. lordshipmayhem says

    Thank you – I’ve argued that we need to look at the best systems around the world, and cherry-pick their best ideas, only to be told there are only two models of health care delivery: Canada’s and the United States. Any attempt at reforming the Canadian system is generally tagged as moving to the American system.

    Apparently to those advocates of health care, the rest of the world don’t have their own versions of health care delivery. Presumably, the officials in those other countries shoot their wounded…

    There’s no real recognition by those who refuse to seek out change that we’re risking a bankruptcy of our system if we don’t try to become more efficient in how we deliver health care to Canadians.

  3. lordshipmayhem says

    Funny, the classic examples I can think of from my own experiences are from the public sector. The private sector tends to be self-correcting, as inefficient organizations get eaten by more-efficient competitors. The only exceptions are when you get monopolies or oligopolies, where less of a worry about the bottom line results in the same empire-building and featherbedding as in the public sector.

    When the GST was introduced to Canada, I went to a seminar hosted by a particular industry organization. Two consultant from accounting firms gave their presentations solo, including in each case a spare and readable PowerPoint presentation (one concentrated on what was subject to GST, the other on how to account for it). The Government presentation required two people, one of whom ran the (busy and incomprehensible) PowerPoint presentation and the other of whom spoke. Much tittering from the crowd about the difference between the government manpower requirements and private sector requirements.

    Example: Garbage collection: almost always, union agreements between municipality and garbage collectors results in overmanned trucks at wages above and beyond private sector rates. Privatizing garbage collection typically results in sizable savings in wages alone.

  4. DaveH says

    Which is actually comparable to a non-hospital health care setting in Canada. A physician running a private practice is a private, for-profit, businessperson. However, he or she is heavily regulated, prices are set by the dominant insurer (the provinces), and he or she is required to accept that insurance.

  5. DaveH says

    And the worst example of waste I have seen has been in the private sector, and the most efficient example has been in the public sector (a DFO semi-independant outfit, if anyone is wondering). The plural of anecdote is not data.

    Maybe in the case you cite, the private speakers were professional PR types, and the gov’t ones the bureaucrats who would be administering it, and they brought a second expert for some of the more unusual questions; both of them sucked at public speaking. I have no idea if this was true, but in my explanation, the gov’t ones were probably being more efficient, in not having an extra warm body to pay. Again, I wasn’t there, so this is hypothetical on my part.

    I think (for the record) that both points are valid. It makes sense that cutting profit out of the picture lowers costs, and it makes sense that the cutthroat nature of business can be very efficient at weeding out the bloat that tends to creep in to any large organization. The point is to select the most appropriate one for the situation.

    However, I would like to point out two things. One, if you have a profitable business, say from a loyal customer base for a necessary good, it can grow bloat relatively unimpeded as long as it delivers a no-fuss profit each quarter, though perhaps not the most possible. On the other hand, gov’ts of the day (like right now) are always looking to cut costs, balance the budget, pay down the debt, fill up the pork barrel, and maybe even increase service delivery.

    Second, your garbage delivery example overlooks the fact that the bloat in wages, etc. might be less of a cost than the profit margin for a comparable level of services, and the drivers and trucks might be also used for things like snow removal.

  6. Dunc says

    The private sector tends to be self-correcting, as inefficient organizations get eaten by more-efficient competitors.

    Well, the specific example I was thinking of was a subsidiary of a major international bank. Tell me, how well do you see this “self-correcting” principle working out in the international banking sector over the last few years? Hmmm?

    Also, I’m not entirely convinced that comparing the presentation skills of various speakers at a seminar is a good way of assessing the relative efficiency of private- vs public-sector service provision.

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