The Public/Private Debate in the Funding, Administration and Delivery of Healthcare in Canada COMMENTARY Gregory P. Marchildon, PHD Canada Research Chair in Public Policy and Economic History and Professor of Public Administration, University of Regina Fellow,School of Policy Studies, Queen s University Past Professor at Johns Hopkins University s School of Advanced International Studies, 1989 1994 Past Executive Director of the Romanow Commission Past Deputy Minister to the Premier and Cabinet Secretary in the Saskatchewan Government ABSTRACT To help clarify the confusing debate concerning the public-private divide in Canada and the respective positions of the Romanow and Kirby reports, a new approach is proposed. The funding, administration and delivery of the healthcare system is split into distinct analytical categories and then applied to three major coverage groupings: universal public (Canada Health Act) coverage for medically necessary/required services; mixed coverage for drug care, home and long-term care; and private health goods and services. While there were no fundamental differences between Romanow and Kirby concerning the funding of public healthcare in Canada, there were some important differences on issues of administration. 61
HealthcarePapers Vol. 4 No. 4 In particular, the Romanow report recommended that home mental healthcare services become universally covered under the Canada Health Act as well as fundamental changes to the regulation and administration of prescription drug care. The reports also differed in terms of framing the private delivery question, with the Romanow report questioning whether the evidence justified private-for-profit delivery replacing current private notfor-profit or public arm s length delivery modes. To say that there is much confusion in the public/private debate in Canada today is an understatement. This confusion is a product of two factors. One is honest: it is our own ignorance in grappling with the extreme complexity of the myriad of institutions, processes, regulations and norms of the so-called healthcare system in Canada. The second is dishonest: a purposeful effort by some to obfuscate an already confused debate in order to pursue an agenda of self-interest. Figure 1 tries to bring some analytical order to the public/private debate. While it is common among scholars to divide funding from delivery issues to encourage clearer thinking in the debate, it is useful to introduce a new category called administration to gain even greater clarity. This additional category, along with the device of splitting up the system into three distinct sectors, should provide a more analytically descriptive (but still highly simplified) model of healthcare in Canada. Figure 1 can be used to make systematic comparisons between the Romanow and Senate Committee on Social Affairs (Kirby) reports. It should be emphasized that Canada Health Act services make up just over 42% of total expenditures in healthcare in Canada, while mixed and private health services constitute close to 53% of total expenditures. Direct federal expenditures on items such as non-insured health benefits (NIHB) and health services for (and transfers to) First Nations and Inuit populations, health coverage for veterans, members of the armed forces and the RCMP, as well as drug regulation and safety make up the remaining 5% of total expenditures (Marchildon 2004). For the sake of simplicity, this 5% is excluded from Figure 1. The predominant public or private character of each category is a rough composite of its funding, administrative and delivery features. By this definition, Canada Health Act services are predominantly public despite having important private delivery aspects. Although outside the Canada Health Act, prescription drugs, home care, institutional and continuing care are health goods and services that have been provided by most provincial governments on a subsidy basis to their respective residents, these benefits vary considerably from province to province. In the case of prescription drugs, for example, out-of-pocket and private insurance outlays equalled approximately 54% of total spending, while public spending through provincial and federal subsidy plans amounted to 44% in 1999 (Canadian Institute for Health Information 2002). Administration is both private and public, while service delivery is mainly private for-profit, 62
The Public/Private Debate in Funding: Administration and Delivery of Healthcare in Canada Figure 1. The Public/Private Divide in the Funding, Administration and Delivery of Healthcare in Canada Public Canada Health Act Services (hospital and primary physician care services as defined under the Canada Health Act) Funding Administration Delivery Public taxation Public and universal singlepayer provincial systems subject to federal Canada Health Act Private self-regulating professions subject to provincial legislative framework Private professional, private not-for-profit and public arm s length providers Public arm s length, not-forprofit and private-for-profit facilities and organizations Mixed Goods and Services (includes most prescription drugs, home care, institutional and continuing care services) Public taxation Private insurance and direct payment (including user fees) Public services that are generally welfare-based and targeted Private services regulated in public interest by provinces and, in the case of branded prescription drugs, by federal government Private professional, notfor-profit and public arm s length providers Private not-for-profit and private-for-profit facilities and organizations Private Goods and Services (includes most dental and vision care and products as well as over-the-counter drugs and alternative medicines) Private insurance and direct payment Private ownership and control Private self-regulating professions subject to provincial legislative framework Public regulation of food and drug safety Private professional and private providers Private-for-profit facilities and organizations although important public and private not-for-profit delivery institutions are also involved. Finally, dental and vision care are predominantly private with largely private funding, administration and service delivery. In terms of the public/private funding mix, there were no fundamental differences between the Romanow and Kirby recommendations. Indeed, both recommended moving up two categories of targeted home-care services post-acute home care and palliative home care from the mixed funding category to the public funding category in order to improve patient access, as well as to improve integration with publicly covered hospital and primary physician care services. Romanow went one step further by recommending that a third category of home mental health services and behaviour intervention services also become part of Canada Health Act services. He did so for two reasons. First, as the orphan child of medicare, mental health services have not been given the priority accorded to hospital and physician services. Second, carefully targeted homecare services to treat those suffering chronic or episodic mental conditions could potentially save large sums of public money in the acute care (public funding) and institutional care (mixed funding) sectors (Romanow and Marchildon 2003). Romanow did not recommend any fundamental changes to the tax-based funding source for Canada Health Act services. Although various ideas concerning user fees and private insurance were put forward in the Kirby interim reports, 63
HealthcarePapers Vol. 4 No. 4 the final report ultimately rejected anything other than tax-based methods to fund Canada Health Act services. Arguing that the federal government would have to increase revenues to increase health transfer payments to the provinces (the Romanow report chose to leave this matter to the judgment of the federal government), Kirby recommended tax-based measures rather than user fees or private insurance. In summary, Romanow and Kirby drew the same public/private lines on funding. In terms of the public-private divide in terms of the administration of healthcare, the Romanow and Kirby reports were also similar. Both upheld the status quo in terms of defending the public single-payer system that has been layered on top of a system of professional selfregulation. With the exception of the targeted home-care services discussed above, neither report recommended fundamental changes to the mixed systems of public/private administration that have evolved in terms of long-term institutional care and continuing care. Finally, neither Romanow nor Kirby suggested any major changes in terms of the third cluster of predominantly private healthcare services that are covered in row 3 of Figure 1. The major public/private difference concerning administration centred on prescription drugs. Although both final reports suggested forms of catastrophic drug coverage, the major thrust of the Romanow report was on changing the administrative framework for prescription drugs in order to reform prescription and utilization behaviour and to enhance cost control. In particular, Romanow recommended that a number of changes accompany any increase in public drug coverage including: the creation of a National Drug Agency responsible for both generic and brand-name products as well as the development of standards for the collection and dissemination of prescription drug utilization and outcome data; the establishment of a national drug formulary based on a transparent and accountable evaluation process; the creation of a new medication management program that would be linked to primary healthcare;and the review of certain pharmaceutical industry practices related to patent protection that continue to keep costs high and/or reduce access. 1 These recommended changes, taken as a coherent group, were intended to improve the effectiveness and cost-efficiency of our mixed administrative system of public/private drug coverage by improving public oversight and regulation. Only after prescription and utilization behaviour has been transformed through effective medication management, and the administrative and regulatory structures and rules are put in place to contain costs, can prescription drugs be feasibly brought within the Canada Health Act the longterm objective set out in the Romanow report. If these steps are not taken, it is hard to see how the cost of the drugs can be sufficiently contained to permit the deepening of public coverage even if many individuals currently face serious problems of access and regional equity through our current mixed system. 1. These practices include evergreening and the use of notice of compliance regulations by patent drug companies to block or slow down the introduction of generic drug products. 64
The Public/Private Debate in Funding: Administration and Delivery of Healthcare in Canada Health service delivery is the third and most contentious category in the public/ private divide. Most of the debate in this country has focused on private delivery of Canada Health Act services, the first row in Figure 1. There are at least two important reasons for this. First, the myriad of private for-profit and private not-forprofit institutions and the position of the self-governing but publicly regulated professions that dominate the mixed and private categories of healthcare services have largely been the same for the past two decades. This stands in sharp contrast to more recent changes in the ownership and control of the institutions that deliver acute care, ambulatory care and advanced diagnostic services. Second, for reasons that are largely historical, most Canadians implicitly accept a larger role for the private sector in healthcare domains that are not perceived as part of core medicare services. This acceptance is challenged when the public/private lines are redrawn as they were when the physician portion of medicare was introduced in the 1960s. A less famous example was the Children s Dental Plan, introduced in Saskatchewan in the mid-1970s. This innovative program, based upon salaried dental therapists working in the province s schools, was strongly opposed by private practice dentists, and some residents, in part because it altered the public/private line. By improving access to dental services, the program dramatically reduced the rate of dental disease among Saskatchewan children (ages 4 13). Based upon an independent assessment by the University of Toronto six years after implementation, the quality of work performed by the salaried dental therapists was found to have been equal to, and sometimes higher, than that performed by private practitioners. Moreover, the treatment protocols introduced by the Children s Dental Plan, such as the wearing of masks and rubber gloves, eventually became the standard of care in North America. In a reversal of what has become the conventional wisdom today concerning private delivery, the Children s Dental Plan is an example of public entrepreneurship and service delivery raising the bar for private services through competition. Moving to healthcare institutions and facilities, particularly those associated with Canada Health Act services, we can see much change in recent years. The introduction of new drug therapies as well as new surgical techniques now permits earlier release from hospital as well as day (ambulatory) surgeries. Technological change has also encouraged the creation of more specialized surgical and diagnostic facilities that are not part of our hospital complexes. Finally, regionalization reforms in most provinces, combined with some consolidation, have changed the ownership, control and administration of hospitals and other healthcare organizations. That said, few have been converted into purely public or private for-profit entities. As Raisa Deber (2004) notes, there are numerous types of ownership and control associated with these institutions between the extremes of large, corporate, private for-profit organizations to purely government institutions. In fact, most of our healthcare organizations, including ambulatory and MRI clinics as well as hospitals, fall somewhere within these two poles. In his history of Canadian hospital policy, Terry Boychuk (1999) points out 65
HealthcarePapers Vol. 4 No. 4 that most hospitals were private not-forprofit organizations or municipal entities that retained their arm s length and independent status from both orders of government following the introduction of hospitalization. This status was altered to varying degrees by recent regionalization reforms. Even with regionalization, however, hospitals that are administered and controlled by regional health authorities remain managed at arm s length from provincial governments. Thus, even within the public hospital sector, the Canadian system hardly resembles the caricature of monolithic, state-run monopoly. It differs substantially from the National Health Service in the United Kingdom where hospitals and hospital employees did work directly for the state. Moreover, there is already a purchaser-provider split built into the Canadian system by virtue of the arm s length relationship between the funders (all provincial governments aided by the federal government through transfers) on the one hand and the regional health authorities (nine provinces) and hospitals (Ontario) as the service deliverers on the other hand. In the Canadian context, the question is really one of whether private for-profit delivery should replace private not-forprofit or public arm s length delivery in three situations. The first is where a province or regional health authority wants to contract services out to existing private for-profit services. This practice has become prevalent for ancillary services, including cafeteria and laundry services, but it is also common for many less complex diagnostic and therapeutic services, including laboratory analyses, X-rays, abortions, endoscopies and other direct medical services that may fall within the Canada Health Act. The real debate concerns the contracting out of more complex medical services to private for-profit facilities. Since the Canada Health Act does not govern service delivery nor can the federal government regulate the mode of service delivery from a constitutional perspective the question is one for the provinces and regional health authorities to decide. Here, the debate centres on comparing efficiency and quality outcomes between so-called public (actually private not-for-profit or arm s length public) health organizations and private for-profit health organizations in Canada. The complication in this debate concerns facilities that have been largely set up to service workers compensation clients. The owners of these facilities are actively lobbying provincial governments to pay for regular medicare patients in order to increase throughput and improve profitability. On this, the Romanow and Kirby reports differed. Romanow recommended a review of the provincial workers compensation systems, because they are exempt from the Canada Health Act and have created an exception to the principle of equitable access. As Chodos and MacLeod point out, the Kirby report sees these systems as valuable precisely because they support a private for-profit delivery alternative to existing public delivery. The second context in which the public/private service delivery debate is triggered concerns public-private partnerships (P3s) in the building of new health facilities, known as private finance initiatives (PFIs) in the U.K.Here, the question is a financial one. Does it make fiscal 66
The Public/Private Debate in Funding: Administration and Delivery of Healthcare in Canada sense for a province or regional health authority to move its capital construction expenses off its own budget line and instead pay a facility rental fee to the private enterprise that builds and manages the facility? The evidence from the U.K. thus far indicates that, in the long run, such facilities may actually cost governments more (Sussex 2001). It should be noted, however, that such enterprises sometimes avoid unionized workforces in order to keep costs down and increase labour flexibility. For this reason, organized labour in Canada is extremely hostile to the notion of public/private partnerships, explaining some of the clear left/right ideological split in terms of the public/private service delivery debate. Recently, the possibility of private delivery of advanced diagnostic services by First Nations on urban reserves or reserves located near large urban centres has raised a third private-delivery issue. Provincial laws and regulations concerning singlepayer universal medicare insurance do not have jurisdiction on reserves, thereby allowing for a potential parallel private for-profit alternative to the public system. At the same time, the legal status of the Canada Health Act on First Nations territories is being questioned. Given the seriousness of this potential exception to the single-payer system - potentially larger than the workers compensation exception it will be incumbent upon both orders of government to address this question as soon as possible. Given the mixed to poor evidence to date concerning the efficiency and quality of private for-profit service delivery, the Romanow report expressed some welljustified skepticism about increasing private for-profit service delivery. While reasonable people may disagree concerning the moral and value implications of such modes of delivery, there can be little question that self-interest is also a powerful factor on both sides in the current debate. On one side, the arguments used to gain access to the most public part of the Canadian healthcare system are motivated by a desire for profit or a desire to replace unionized workforces with non-unionized labour. On the other side, the arguments used to block such efforts are motivated by a desire to protect organized labour and its membership, salaries and benefits. These underlying motives should be made more explicit in the current debate. At the same time, it should be recognized that there is no straitjacket. The truth is that provinces and regional health authorities have always been at liberty to structure their service delivery arrangements in the way they deem most advantageous. Historically, they have largely done so through private not-for-profit organizations and facilities. This remains the case in Ontario. In the other nine provinces, regionalization may have changed governance and control in order to improve the coordination and continuity of care among a range of healthcare organizations, but the new regional health authorities remain at arm s length from the governments that created them. So far, despite having the freedom to do so, they have shown little inclination to engage private for-profit enterprises for the delivery of complex medical services to patients, a hardly unsurprising result given the lack of evidence that such enterprises are more efficient and effective than not-for-profit or public organizations. 67
HealthcarePapers Vol. 4 No. 4 References Boychuk, Terry. 1999. The Making and Meaning of Hospital Policy in the United States and Canada. Ann Arbor: University of Michigan Press. Canadian Institute for Health Information. 2002. Drug Expenditures in Canada, 1985-2001. Ottawa: Canadian Institute for Health Information. Deber, Raisa B. 2004. Delivering Health Care: Public, Not-for-Profit, or Private? In Gregory P. Marchildon, Tom McIntosh and Pierre-Gerlier Forest, eds., The Fiscal Sustainability of Health Care in Canada. Toronto: University of Toronto Press. Marchildon, Gregory P. 2004. Introduction: The Many Worlds of Fiscal Sustainability. In Gregory P. Marchildon, Tom McIntosh and Pierre-Gerlier Forest, eds., The Fiscal Sustainability of Health Care in Canada. Toronto: University of Toronto Press. Romanow, Roy J. and Gregory P. Marchildon. 2003. Psychological Services and the Future of Health Care in Canada. Canadian Psychology 44(4). Sussex, Jon. 2001. The Economics of the Private Finance Initiative in the NHS.London: King s Fund Office of Health Economics. Wolfson, Steve. 1997. Use of Paraprofessionals: The Saskatchewan Dental Plan. In Eleanor Glor, ed., Policy Innovation in the Saskatchewan Public Sector. Toronto: Captus Press. Collaborate with minds that matter. Register your interest now. HealthcareRounds presents The Future of Healthcare Produced by the publishers of Healthcare Quarterly in collaboration with the University Health Network Real ideas reaching beyond the meridians of the mind For more information send an email message to Lina Lopez at llopez@longwoods.com Healthcare Quarterly 68