Nurses Warn Against Privatization

The Canada Health Act was enacted in 1984. In order to defend universal access to health care against extra billing and other threats, the CHA codified the following five principles of universal access to health care: Public administration. Comprehensiveness. Universality. Portability. Accessibility. These principles represent the five conditions under which the provinces have been receiving federal funding for health care since the 1960s. The conditions require all provinces to give reasonable access to all insured health care services for all Canadian residents. Access is to be unimpeded by charges or other obstacles. The insurance is to be publicly administered on a non-profit basis. Canadians enthusiastically participated in the evolution and growth of the Canadian health care system. Of late, they have watched the system endure prolonged cutbacks and stress, but remain loyal to the very sound principles of a single-tier health care system. There are however unmistakable signs of a new and very dangerous drift - universality is under renewed attack. On the one hand, health care services are increasingly slipping away from the blanket of universal coverage. At the same time, influential groups are challenging the very concept of universality. The Canadian public, to its great credit, is resolute in its insistence on this democratic point: access to essential health care services should be equal for all, and not be dependent on income. User fees and other private funding arrangements mean unequal access and a two-tier system. The message from the public is clear: NO TO A TWO-TIER HEALTH CARE SYSTEM. We want all Ontarians to know that the nursing profession is united in its concern about this threat and pledge to defend the principles of a publicly funded, universally accessible health care system. Our system is at a crossroads right now. Rising needs and costs present a challenge and an opportunity. We don't want to return to an era when health was a commodity that was bought and sold, but this is a very real possibility. There are other ways of doing a better job of delivering health care. Primary health care reform, for example, is part of the answer, and it is very much on the agenda in Ontario. Privatization of health care services is not the answer, or even part of the answer. Indeed, will only make things worse, as we show below. 4.1 Creeping privatization means unequal access to health care, and reduced access for most of us: There has been a steady erosion of public funding and provision of health care. Currently, the threat receiving the most fanfare is Premier Ralph Klein's introduction of legislation that would effectively allow private hospitals to perform services in all of the areas currently handled by public hospitals. This is a clear threat to the spirit of universality enshrined in the Canada Health Act (CHA). What makes the threat particularly insidious and dangerous is that Premier Klein purports to support the CHA even as he gradually weakens it. Yet, across the country, the story has been the same: the public share of health expenditures has been plummeting. Outside the publicly funded system, access to health care services depends on wealth and income. Health care is becoming increasingly two-tier. In Ontario, privatization has been continuing apace in subtle ways. The share of health care spending funded by the private sector rose from 23.8% in 1976 to 33.9% in 1999. This represents an increase of 0.8% over the past year alone. This is the most rapid increase of privatization among all Canadian provinces. By comparison, the private share of Canadian health expenditures went from 22.9% to 30.4% over the same period of time. Bear in mind that total privatization is greater, as publicly funded health care services are increasingly being provided privately. This paper will consider private funding and private provision separately, in Sections 5 and 6. 4.1.1 The privatization has occurred in a variety of ways: Shifting services and patients out of sectors covered by the CHA (e.g., hospitals) to uncovered sectors, such as the community, relieves the government of the obligation under the act to deliver those services. For example, most rehabilitation services have become privatized as a consequence of shifting out of hospitals. People relying on OHIP to pay for rehab services find difficulty in accessing those services, and when they do, they find that private patients get a much more comprehensive level of service. Patients moved into home care or long-term care facilities often find services are not fully funded (as they were in the hospital), and that they receive lower levels of service than they received in the hospital. Others who would have formerly been cared for in hospitals now find themselves on lengthy waiting lists for community care services, with their families bearing all of the physical, emotional and financial costs of care in the home. This work falls disproportionately on women. Overall reductions or rationing of services mean that people find themselves having to privately supplement the public services that they still receive. For example, families now find themselves hiring private-duty nurses for in-hospital care of patients with intensive needs. Furthermore, this rationing implies longer waiting times for treatment, and crowding in bottleneck areas such as emergency rooms. Delisting of services formerly covered by OHIP means that some services are only available to those who can afford to pay for them. In addition, access to some other services has been reduced. As an example, OHIP will now only pay for one periodic eye examination per patient, once every two years for people aged 20 to 64. Contracting out to private firms of medical services (e.g., laboratory services in Ontario and cataracts in Alberta), and of non-medical services (e.g., laundry and food services) ostensibly is intended to save money. However, many of those services would be much cheaper in-house (e.g., the lab services). The sale of public health care assets (e.g., hospitals ruled surplus) in turn often results in those assets being used by private health care providers that compete with the public system. For example, after extensive renovations, Holy Cross Hospital in Calgary was sold for $4.5 million in 1998 by the Calgary Regional Health Authority to Enterprise Universal, owned by two doctors. One of these doctors had been recently named divisional head of ophthalmology for the CRHA. The CRHA subsequently was reported considering moving eye surgery to the same hospital. Extra billing for services formerly funded by the government, such as copayments for drugs by seniors who formerly received comprehensive drug benefits, affects access. It is well established that even small copayments result in reduced use of essential services by the most vulnerable in society (New Zealand, Australia, and UK). There has also been a shift to for-profit provision from public and not-for-profit provision (e.g., in the long-term care sector and in the home care sector). This trend has been accelerated by the introduction of a competitive bidding process, which has resulted in awards going preponderantly to for-profit providers. As we show below, this is both costly to government and bad for patients. Creeping privatization quietly but steadily undermines the principle of universality in health care. As services are rationed and become less publicly accessible, those individuals who can afford it are forced to purchase needed services. 4.2 Direct challenges to the principles of universality: There is a disturbing buzz in the corridors of power: universality, it is whispered, is a concept whose time has past. Some are so bold as to go public on the issue, although they know they are treading in a minefield of Canadian sensitivities. Consider the following recent examples: William Orovan, while president of the Ontario Medical Association, questioned whether government could continue to adequately fund health care, and suggested that a reduced role for government might be in order Echoing the sentiments of Premier Klein, David MacKinnon, Ontario Hospital Association (OHA) President made the following comment in his address to the 1999 annual OHA convention. "What is very clear is that the dimensions of this debate must also include a serious discussion about what role the private sector can play in maintaining and improving patient care while, at the same time, protecting the core principles of universal access ." Influential columnists such as Jeffrey Simpson in the Globe and Mail suggest that the public sector can no longer afford to pay for growing health care costs, and that the concept of universality is no longer viable. From the evidence, the question is not: Can we afford a comprehensive, publicly funded health-care system? It is: Can we afford to be without it? Renowned health economists from across the world agree that public funding is far superior to private funding on all grounds that matter: access, quality, efficiency, and affordability. Let's look at each of these more closely. 5.1 Access and Quality: When users pay directly or indirectly (e.g., through insurers), greater access and quality goes to those who can afford to pay. People are well aware of the situation in the US, where well over 40 million people have no health insurance (43.4 million in 1997, the latest year for which we have figures; a further 20 million were estimated to be underinsured in 1990). Data from around the world are consistent: wherever user fees, copayments or coinsurance, etc. (no matter how small) are implemented, many people are deterred from using the health care system, irrespective of the how essential the service is. This was true in Canada before medicare, and has happened in jurisdictions like New Zealand and Australia when user fees were implemented. When collected, the data also show that poor people are disproportionately deterred, as one would expect. 5.2 Efficiency and Affordability: A public, single-payer system is much cheaper than a privately funded, multi-payer system. The American health care system, which is 54% privately funded, is much more expensive than the Canadian system, on a per capita basis. In general, there is a positive correlation between the degree of privatization of health care systems and the per capita expense of those systems. The Canadian system is administratively much cheaper. The US spends US $100 billion in excess administrative costs, over Canada. The Canadian system: Saves on assessments of clients for health insurance coverage. Avoids the cost of setting insurance rates. Consequently entails less record keeping. Avoids the need for complex insurance contracts, and to judge coverage when needed. Avoids marketing costs and commissions. Avoids costly revenue collection (the tax system is already in place). Accesses the maximum-sized pool for greatest risk sharing. Providers and consumers also save on the above administrative costs. There is a greater possibility for planning and coordination. There is greater predictability and stability for insurers, providers and consumers. For instance, providers are more certain of receiving payment for their billings. Government has a single-buyer advantage, which it uses to control costs, such as physician fees and pharmaceutical prices. 5.2.1 Other Government Costs: While it might seem that dumping the responsibility for health care funding on the public would at least save money for the government, this turns out not to be the case. For example, the US government only pays 46% of total health care expenditures compared with 69.8% in Canada, yet the per capita cost to government is much higher in the US (US $1,881 vs. US $1,462). Other than the already discussed inefficiencies of the multi-funder systems, the following factors make a more privatized for-profit system very expensive indeed. Skimming of most profitable (healthier) patients by the private sector. Dumping of private patients who become unprofitable (sicker). Subsidies to the private insurers through income tax exemptions. Essentially, government is left providing service for the most costly patients, while the private sector naturally takes that portion of the business which is profitable, for that length of time that it is profitable. The American health care system works very well for those who don't need its services. The public's concerns about the consequences of for-profit provision of health care are well founded. 6.1 Quality at risk: Experts recognize that there is a serious problem in contracting for private services when the volume and quality of output are difficult or impossible to measure and monitor. In the case of health care, this is particularly true. The individual consumer may have difficulty in judging elements of quality. In the parlance of economists, there is a severe principal-agent problem with great asymmetry of information between the provider and the funder. The funder has no easy way of knowing the volume and quality of care. In a competitive situation with for-profit providers, there is a powerful incentive to cut corners on any components of care, which are difficult to monitor. Indeed, a competitive situation could have no other outcome. This is exactly what happens in the US with for-profit providers. For example, read the Wall Street Journal on the giant Columbia/HCA Healthcare Corp. ("Ex-Manager Describes the Profit-Driven Life Inside Columbia/HCA", May 30, 1997). American studies in prestigious medical journals confirm the health risk of relying on for-profit providers. A very large study published in The Journal of the American Medical Association reported that for-profit health maintenance organizations (HMOs) scored lower on quality of care for all 14 indicators examined. In a major study of renal dialysis facilities, the New England Journal of Medicine found that for-profit ownership was associated with statistically significantly higher mortality and lower levels of placement on transplant lists. Moreover, the introduction of a bottom-line mentality is not readily compatible with the delivery of care. It is not reasonable to expect health-care providers to compromise their ethic of care for the need to maximize profits. 6.2 For-Profit Provision of Health Care is Expensive: Supporters justify for-profit provision on the grounds of cost and access - money is to be saved and waiting lists are to be shortened. The savings would come about through greater efficiency and lower wages. However, greater efficiency and access has not proven to be the actual result in many studies. For-profit provision does not prove to be more efficient; a major study reported in the New England Journal of Medicine found that administration consumed more resources in for-profit hospitals than in not-for-profit hospitals, while the least resources were consumed in public hospitals. A very recent study in the same journal found a corresponding result for the cost of Medicare services to US governments. Per capita expenditures were higher in areas served by for-profits than in areas served by not-for-profits. Even Premier Klein had to admit that he didn't know if privatizing hospital services would save money for the Alberta government. The cost to the public funder is higher not only because of private inefficiency, but also because of the inevitable push to raise profits. If for-profit provision were to widen in Ontario, another peril to consider is heightened fraud by private suppliers. Medicare fraud is reported to be widespread in the US, where there is a heavy reliance on for-profit provision. For instance, in 1997, an audit by the Medicare inspector-general's office found 12% of payments "erroneous", while random audits of different states' Medicare billings have shown much higher rates of bogus claims (e.g., 26% in Florida). This additional cost to the system mentioned above will come at the expense of public health care delivery. In a for-profit system, taxpayers will either face higher taxes, or patients will face a lower level of services. In either case, the political support for the public sector will erode, thus threatening public universal health care. Furthermore, privatization often results in transfer of public assets to private hands at fire-sale prices - often to those closely connected to government or other powerful groups. 6.3 Privatization of delivery does not shorten waiting lists: Since the evidence shows that privatization of health care delivery costs money rather than saving money, then the public system will have less money to deliver health care services. If the same government money were spent on public provision, more people could be served, and the waiting lists would be shorter. Furthermore, if the private providers are able to charge extra for access, then queue jumpers will face shortened waits, but only at the expense of those who do not pay extra. Those who cannot pay privately will suffer even longer waiting lists. It should be noted that proponents of privatization have argued for supplementing public funding with private funding to shorten waiting lists. The claim is that removing private clients from the list will shorten it for the rest. This would only work if entirely new resources were made available to deal with the private clients, who will be dealt with first. However, many of the resources will be the same, such as the doctors, and some of the machinery and facilities. The result will be a realignment of the queue as resources shift from the public to the private sector. Moreover, there is a much more serious threat from allowing people to jump the queue this way; as they abandon the public system, they will withdraw their support for that same system. Indeed, any shift to private funding will have the same effect. The health care system will become politically and financially starved, as has happened in Britain. A two-tier system would evolve, with a widening gap between the two tiers. 6.4 The political risk of privatization of delivery: Privatization also creates new stakeholders with a powerful interest in sustained and continued privatization, irrespective of its costs to the public. Furthermore, as people come to depend more on private services their commitment to the public health care services wanes, which further undermines the political and financial basis for the public health care system (just as we have noted above with private funding of health care services). The latter point is all the more pressing in view of the growing economic integration with the US. Giant for-profit health care organizations from the US can use international trade agreements, such as the World Trade Organization (WTO) to lever their way into the Canadian health care industry, once private health care interests get their toes in the door. Solution The nursing community is united in our belief that we need immediate action to stop the privatization of our health care system. We call on the Federal government to live up to their commitment to the Canada Health Act by increasing CHST funding. Only in this way is the federal government able to justify a tightening of the rules of compliance re: the Canada Health Act. We urge the Premier of Ontario to impose a moratorium on further privatization of health care services, and we invite all other stakeholders (e.g., the Ontario Hospital Association and the Ontario Medical Association) to join in supporting this moratorium. We call on the province to act on the recent Health Service Restructuring Commission recommendations regarding primary health care (PHC). Having a comprehensive PHC system will ensure better utilization of other parts of the system. The real winner is the public. The public will have increased access to health care services, 24-hours a day, 7 days a week, all year round. There will be no need to wait for 6 hours in an emergency room for non-urgent care. We call for greater transparency re our health-care system. Too many decisions/policy directions are taken with little or no public knowledge/disclosure. We call for more accountability, and more effective accountability framework at all levels of funding, service and delivery.