The Alberta Health Advantage
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PUBLIC POLICY SOURCES Number 81 The Alberta Health Care Advantage: An Accessible, High Quality, and Sustainable System Cynthia Ramsay, Elm Consulting, and Nadeem Esmail, The Fraser Institute Contents Executive Summary ............................................... 3 Section 1: Introduction ............................................. 6 Section 2: The Basic Economics of Health Care ........................... 8 Section 3: Alberta’s Health Care System ............................... 11 Section 4: Building a Better Health Care System .......................... 27 Section 5: The Public-Private Mix in Other Countries ...................... 50 Section 6: The Potential Role for the Private Sector ......................... 57 Section 7: Recommendations ........................................ 72 Bibliography .................................................... 78 About the Authors ............................................... 89 Acknowledgements ................................................ 90 A FRASER INSTITUTE OCCASIONAL PAPER Public Policy Sources is published periodically throughout the year by The Fraser Institute, Vancouver, B.C., Canada. The Fraser Institute is an independent Canadian economic and social research and educational organi- zation. It has as its objective the redirection of public attention to the role of competitive markets in pro- viding for the well-being of Canadians. Where markets work, the Institute’s interest lies in trying to discover prospects for improvement. Where markets do not work, its interest lies in finding the reasons. Where competitive markets have been replaced by government control, the interest of the Institute lies in documenting objectively the nature of the improvement or deterioration resulting from government intervention. The work of the Institute is assisted by an Editorial Advisory Board of internationally re- nowned economists. The Fraser Institute is a national, federally chartered non-profit organization fi- nanced by the sale of its publications and the tax-deductible contributions of its members, foundations, and other supporters; it receives no government funding. For information about Fraser Institute membership, please call the Development Department in Van- couver at (604) 688-0221, or from Toronto: (416) 363-6575, or from Calgary: (403) 216-7175. Editor & Designer: Kristin McCahon For media information, please contact Suzanne Walters, Director of Communications, (604) 688-0221, ext. 582, or from Toronto: (416) 363-6575, ext. 582. To order additional copies, write or call The Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, B.C., V6J 3G7 Toll-free order line: 1-800-665-3558; Telephone: (604) 688-0221, ext. 580; Fax: (604) 688-8539 In Toronto, call (416) 363-6575, ext. 580; Fax: (416) 601-7322 In Calgary, call (403) 216-7175; Fax: (403) 234-9010 Visit our Web site at http://www.fraserinstitute.ca Copyright 8 2004 The Fraser Institute. All rights reserved. No part of this monograph may be repro- duced in any manner whatsoever without written permission except in the case of brief quotations em- bodied in critical articles and reviews. The authors of this study have worked independently and opinions expressed by them are, therefore, their own, and do not necessarily reflect the opinions of the members or trustees of The Fraser Institute. Printed and bound in Canada. ISSN 1206-6257 Date of issue: June 2004 Executive Summary n recent months, Alberta Premier Ralph Klein Better Public Health Care System, is based on the 44 I and Alberta Health Minister Gary Mar have recommendations made by the advisory council said that Alberta is about to embark on “radical in December 2001. These included the setting of changes” to its health care system—which could clear health objectives and targets, providing include user fees or tax incentives for healthy be- more information to Albertans, reducing waiting haviour—whether or not that means violating the lists, encouraging primary care projects, evaluat- Canada Health Act (Barrett, 2004). ing the services covered by public insurance, in- vesting in information technology and health Among the regulations comprising the Canada research, improving incentives to help retain and Health Act are sections 18 through 21, which ef- make the best use of health providers, making the fectively ban extra billing by physicians and user public sector accountable for health outcomes, fees for services that are publicly insured. The and laying out a clear transition plan for reform. federal government can reduce its payments to While the government has made progress on all of provinces that permit hospitals and physicians to these items and others, it has made little headway charge patients in these ways. The introduction of on the more substantial, and arguably more essen- user fees would bring Alberta into direct conflict tial, directions for change, such as diversifying the with the federal legislation, resulting in possible revenue stream, creating incentives for people to financial penalties. stay healthy, introducing more choice and compe- tition into the system, and promoting health care While the outspokenness of the premier and as an important part of the Alberta economy. health minister on openly violating a piece of leg- islation that has become sacrosanct in Canada is Will Health First create a surprising, the reforms they have put forward are sustainable health care system? not. Two and a half years ago, the Premier’s Advi- sory Council on Health for Alberta, chaired by In 2002/2003, the Alberta government spent $6.8 Don Mazankowski, delivered (by Canadian stan- billion on health care, an 8.2 percent increase over dards) a much more radical set of ideas to raise 2001/2002 (Alberta Health and Wellness, 2003b). health care revenues and temper demand for Since 1995, health spending in Alberta has in- health services in order to make the system sus- creased by more than 80 percent, four times faster tainable. The list included user fees, risk-rated than all other government spending (Alberta premiums, co-payments, deductibles, taxable Health and Wellness, 2003c). Currently, the gov- benefits, medical savings accounts, and supple- ernment spends the highest portion of its budget mentary insurance (Premier’s Advisory Council on health care (about a third) and future increases on Health, 2001). of 5.7 percent and 3.8 percent will bring ministry spending to almost $8.8 billion by 2006/2007 However, most of the reforms suggested by the (Government of Alberta, 2004b). Mazankowski Report were less controversial and the province’s action plan for improving the Alberta is already one of the biggest spenders per health care system, Alberta: Health First, Building a capita on health care in Canada, yet its health care The Fraser Institute 3 The Alberta Health Care Advantage PUBLIC POLICY SOURCES, NUMBER 81 system relative to other provinces is not exemplary. Another encouraging aspect of Alberta’s reforms Access to care seems to be a concern—waiting times is the contracting out of certain surgical services are an issue, from GP to specialist and especially in to private facilities, but the overall impact of this the areas of orthopaedic and elective cardiovascu- policy, however, is minimal, as these contracts lar surgery. Yet the number of surgeries per- represent only 0.15 percent of provincial health formed has been increasing, as have the number of spending (Alberta Health and Wellness, 2004h). physicians in the province. Even the proportion of registered nurses, while relatively low in Alberta, Meanwhile, most of the authorities reported def- has been increasing, as has that of physicians. icits in 2002/2003 and the introduction of multi-year performance agreements between While it is impressive that the ministry of health the ministry and the regions is not yet complete. and the regional health authorities have set spe- The health authorities, while having a signifi- cific targets for so many aspects of health status, cant role in planning and providing for their re- system quality, etc., many of the targets are not be- gions’ health needs, are still, ultimately, ing met and the government strategies for improv- advisory bodies to the minister of health and, ing the health of Albertans are ambiguous. The therefore, are limited in their ability to raise vast majority of ministry spending is directed to other revenues and be innovative. Despite all of physicians, hospitals, long-term care, and other Alberta’s health reforms, the system still oper- aspects of the health system, but increased fund- ates as a monopoly. ing in these areas over a number of years has yet to achieve any permanent reduction in waiting In addition to the general problems associated times or increased patient access to the system. with monopolies, such as higher prices, slower Reforms are going to have to be more substantial, adoption of technology, and poorer customer ser- including changes to the way in which hospitals vice, the impact of having only one employer in are funded, to create incentives for hospitals to the health care sector—the government—makes treat more patients and to provide the types of labour issues more difficult to resolve without services that patients desire. service disruption. The minimization of these costs is one of the reasons behind Alberta’s recent As well, primary care teams, moving physicians passing of Bill 27, which reduces the number of off fee-for-service, and encouraging other practi- bargaining units and introduces compulsory