Uneconomic Healthcare: Rising Costs, Longer Wait Times, and the Argument for Private Sector Involvement

Many countries have experienced rising healthcare costs in recent decades and this phenomenon has stimulated a lively debate about the policy options available to governments for mitigating those costs. In Canada, per capita public healthcare expenditures will be roughly $6,057 in 2014–reflecting a staggering total of $215 billion that year.

An important feature of the Canada Health Act, enacted in 1984, is access to healthcare, i.e. ensuring that all Canadians have equal access to public healthcare in every province. Accessibility is a contentious issue, however, and some folks argue that prohibiting Canadians from purchasing private health insurance interferes with their constitutional right to equal access in Canada. (As a result, there have been several lawsuits addressing the issue of private health insurance and many individuals seek treatment abroad.)

In 2014, the Fraser Institute released a study, titled “Waiting your Turn: Wait Times for Health Care in Canada,” that reveals the median waiting time for medically-necessary treatments in Canada to be 18.2 weeks, which is significantly higher than other OECD countries. Echoing this assessment of Canada’s public healthcare system, the Common Wealth Fund (CWF) published a report recently that ranks Canada last in terms of “timely access to healthcare.” Nova Scotia’s average wait time is 32.7 weeks, which is considerably higher than in other provinces. (In Ontario, for instance, the average wait time is 14.1 weeks.) Health Minister Leo Glavine recently admitted that Nova Scotians wait too long for basic medical procedures, and although he touched upon the impact of unions in the province, the provincial government is primarily responsible for healthcare outcomes in Nova Scotia.

The distributional variation in Canadian wait times is staggering, particularly in the Maritime provinces, which have the longest wait times in the country. As previously mentioned, one could argue that unusually long wait times for medical procedures represents a constitutional violation, and from the economic perspective, a healthy workforce should result in greater efficiencies, less absenteeism, and higher productivity levels. Furthermore, in “The Human Capital Model of the Demand for Health,” economist Michael Grossman argues that “health can be viewed as a durable capital stock that produces an output of healthy time.” Because health depreciates as one ages, he also argues that people increase their healthcare expenditures as they age to maintain the same output of “healthy time.”

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Nova Scotia’s population is also ageing considerably faster than the national average and this phenomenon requires larger investments into healthcare infrastructure. In the 2013, for instance, Nova Scotia’s government allocated $3.9 billion or $ 4124 per capita expenditure for healthcare services. Although healthcare expenditures have been rising in all provinces, Atlantic Canada’s ageing population and relatively poor economic performance will create serious fiscal challenges in coming years. Specifically, as the population ages, the demand for medical treatments will rise and eventually exceed the supply, resulting in longer wait times and rising healthcare costs. (Because the provincial government retains a monopoly on most, if not all, medical procedures, public healthcare spending will rise out of necessity.)

Eliminating restrictions that prevent individuals from accessing private healthcare, which would theoretically reduce the burden shouldered by the public healthcare system, is one option available to the provincial government in Nova Scotia. More broadly, implementing measures that facilitate private sector involvement in the province’s healthcare sector would serve to reduce wait times, increase accessibility, and improve healthcare outcomes for all residents in the province. However, in my future blog, I can discuss more about the importance of private sector involvement and its positive impacts on reducing waiting time.

Rinzin Ngodup is an AIMS on Campus Student Fellow who is pursuing a graduate degree in economics at Dalhousie University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

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