In Defence of Choice and Competition: Vouchers and Charter Schools

Education reform is typically a controversial and polarizing issue. Student performance is falling below the national average in some provinces such as Newfoundland and Labrador, however, and the rationale for reforming the public education system seems clearer than ever. Yet, revisiting how provincial governments deliver education does not necessarily mean creating more government programs and more bureaucratic red tape. Instead, there are two alternative reform paths that will be the topic of discussion in this article: vouchers and charter schools.

By definition, a school voucher is a funding certificate issued by the government to parents who wish to enroll their child in a private school or, in some jurisdictions, who choose to homeschool their children. The values of these vouchers typically reflect the cost of educating a student at a public school. They reduce barriers that prevent parents from sending their children to privately-owned institutions, which may provide higher-quality education or education programs that are more suitable for their children’s needs. Critics of school vouchers argue that they force public schools to compete with private schools and that the diversion of funds away from the former results in lower-quality education for those who cannot afford a private alternative. Yet, while it is true that implementing a school voucher system would force public schools to compete with private schools, several studies indicate that student performance improved in jurisdictions wherein competition is rife.

Another alternative is that of the charter school system. Charter schools are publicly-funded, privately-operated autonomous schools operated by groups of educators and parents. These schools feature flexible curricula and offer unique educational programs, but they must demonstrate that their programs are different from what other schools offer and they must be held accountable to the provincial government.

Since elected officials in Alberta enacted the School Amendment Act in 1994, charter schools have played an important role in the province’s education system. And, like the implementation of a voucher system, the charter school system has demonstrated the value of competition and choice. One study indicates that charter schools have been better equipped to advance student learning and another study argues that the success of Alberta’s charter school experiment should be the rationale for expanding it.

In reviewing the successes of both the school voucher system and Alberta’s charter school experiment, it becomes increasingly evident that competition-driven reforms that emphasize individual choice deserve the attention of elected officials in Atlantic Canada, particularly in Newfoundland and Labrador. Parents could then decide what school will best meet the needs of their children and public schools would have an incentive to improve student performance outcomes by developing more effective curricula. Indeed, a rising tide lifts all boats.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Private Hospitals and Two-tier Healthcare

I argued previously that private hospitals could play an important role in reducing hospital wait times and may result in greater efficiencies in the Canadian healthcare system. Yet, skepticism toward private-sector involvement is rife in Canada and many folks believe that it could create a more inequitable healthcare system. In fact, one pundit argues that provincial governments need to further consolidate their control over healthcare.

The widespread negative perception of “private healthcare” in the United States reinforces the skepticism that most Canadians have toward private-sector inolvement, which is the subject of health economist Audrey Laporte’s new study, “How Markets Can Put Patients First: Economics Before Politics in Canadian Healthcare Delivery.” This study argues that “Historically, the tendency among Canadian health policy analysts and policymakers has been to compare Medicare with the American system and to conclude that since we are doing much better than Americans in so many of the standard metrics used to judge healthcare systems, notably cost and various measures of access to care, we don’t need to consider making any significant changes to the structure of Medicare.” Nevertheless, comparing Canada’s healthcare system to that of the United States is a fallacy of composition, which is when someone has a distorted belief that what is true in one instance is true in all instances.

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In the last decade, Canadian health expenditures have skyrocketed and one estimate shows that “total public health spending has grown at an average annual rate of 7.5 per cent.” Excluding federal transfers, roughly 88 per cent of Nova Scotia’s provincial revenues pay for healthcare services on an annual basis. Yet, despite these enormous outlays, Nova Scotia ranks last in hospital wait times.

One of the problems facing the Canadian healthcare system is that provincial governments determine the price of healthcare services behind the scenes and patients (who double as taxpayers) remain uninformed. Essentially, the monopolistic structure of Canada’s healthcare system results in limited choices for Canadians seeking medical care and the result is longer wait times and poorer outcomes. In fact, there has been a surge of Canadians who are seeking medical treatment abroad, which indicates that there is room for improvement. An alternative system that provided more options to individuals seeking healthcare would be a huge improvement.

According to the Health Council of Canada’s 2007 survey, 47 per cent of the sample population like the idea of having private hospitals in Canada and 67 per cent felt that the Chaoulli decision was the key to two-tier healthcare. Indeed, the coexistence of publicly- and privately-operated hospitals will create efficiencies by reducing wait times as has happened in other developed countries. These countries, such as the Netherlands, Switzerland, and France, boast healthcare systems similar to that of Canada’s, but with a few subtle improvements–including two-tier healthcare. In the Netherlands, for instance, there were 151 hospitals and 52 outpatient clinic owned by 93 private organizations in 2010 and Dutch citizens reported much better outcomes than Canadian citizens: 41 per cent of Canadians reported waiting longer than four months for a surgery compared with 5 per cent in the Netherlands.

Given the inefficiencies plaguing Canada’s healthcare system, the time is ripe to change the status quo such that all Canadians receive quality medical treatment in a timely manner. One small step toward achieving this objective would be to allow private health insurance, which would ensure that all Canadian citizens have equitable access to healthcare.

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

Realizing the Benefits of Public-Private Venture

This past March, the Saint John Common Council voted to develop a new water treatment facility in partnership with the private sector, a policy route some observers argue would save the City of Saint John several million dollars. Likewise, Moncton entered into a similar agreement in 1999, which Public-Private Partnerships Canada (PPP Canada) believes will save the city $9 million in capital costs and $12 million in operating costs over the contract’s twenty-year term.

These policies align with the broader trend of delivering services to taxpayers in an efficient and less-costly manner, which, in the current economic climate of fiscal restraint, is necessary. Taxpayers, however, will rightfully continue to expect quality service, which presents a dilemma for government.

To sustain quality service, governments can look to collaborating with the private sector (in many cases, the private sector is better equipped to deliver services in a more efficient manner than its public sector counterpart, depending, of course, on the nature of the service).

Saint John, for example, is seeking to create a public-private partnership (P3), which is an arrangement whereby the government announces the delivery of a service and, rather than providing the service itself, contracts the private sector. Not to be confused with privatization–wherein the public sector gives control of a service wholesale to the private sector–P3s allow the government to maintain control over a service while capitalizing on the private sector’s efficiency.

The greatest benefit of collaborating with the private sector is the latter’s capacity to provide services in a more timely and cost-effective manner.

In a 2008 article published in the Journal of Canadian Public Administration, for example, Timothy Murphy provides strong arguments for why the private sector is better equipped to provide services than the public sector. One such arguments is a case study performed by the United Kingdom’s (UK) National Audit Office (NAO), which found that projects funded using the 3P model (formally titled ‘privately financed initiatives’ in the UK) were completed on-time and on-budget 76% and 78% of the time, respectively (compared to non-privately funded initiatives, which reported 30% and 27%, respectively).

Saint John, as well as other governments considering P3 initiatives, however, ought to keep in mind some lessons from Moncton’s 1999 public-private venture. Moncton, for instance, maintained ownership of its water supply and remains responsible for setting water rates and quality standards. Furthermore, the municipal government also transferred risk to the private sector by including strict maintenance and operating requirements that, if not meant, resulted in penalization. These factors allowed Moncton access to the private sector and its accolades, without entirely surrendering control over its service delivery.

Given these caveats, it is evident that P3s can be an important tool for governments throughout Canada that are seeking ways to improve services, while lowering costs and maximizing efficiency. Other governments, therefore, could benefit from pursuing private sector alternatives (certainly when the public sector alternative is untenable) as a policy option for delivering services to taxpayers in the most competent manner possible.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute