Private health care in Alberta discussed at SACPA

By Dale Woodard on March 20, 2021.

Health care is truly a commodity like no other.
This week’s Southern Alberta Council on Public Affairs guest speaker Christopher McCabe, CEO and executive director of the Institute of Health Economics, presented on the topic of private health care.
In discussing the issues and questions of the role of the private health sector in Alberta, McCabe cited an paper written by Kenneth Arrow in 1963 called “Uncertainty And The Welfare Economics of Medical Care.
“(It) identifies why health care as a commodity is unlike almost any other commodity,” said McCabe. “Most specifically why we shouldn’t expect unregulated markets to be particularly good at delivering health care in an efficient manner and in a manner that optimizes social welfare.”
“Health care breaches all of the requirements of commodity for it to be well suited for provision by unregulated free market. Which is not to say that it cannot be efficiently and equitably produced and provided through market mechanisms, it’s just we need regulation. But what drives this is uncertain.”
McCabe noted the most obvious distinguishing characteristic of an individuals demands for medical services is that it is irregular and unpredictable, not steady in origin, such as food and clothing.
“We don’t know if, when or what health care we require. In fact, we’re all very happy if we don’t require health care. Life is going well if we don’t need health care.”
McCabe said most of us, because we’re not trained physicians, do not have the knowledge or the expertise to interpret our symptoms.
“Our ability to judge what we need and the quality of what we’ve got and to attribute our subsequent health to what we received in health care is very limited.”
That’s not true of most commodities, said McCabe, using an vehicle purchase as an example.
“In most commodities we purchase them with confidence about what we’re buying. We can buy a car without having to commission an expert on our behalf,” said McCabe. “Once we’ve bought the car, we pretty much know whether it’s delivering what we were promised when we bought it.”
Which isn’t the case with medical care, he said.
“In terms of free market, we do not have perfect knowledge. We also are not able to freely enter and exit the market, which is an aspect of competition to drive down prices.”
“As an individual buyer, if I attempt to move into the health care market, I pretty much have to accept the price I’m given because I don’t have enough purchasing power to bid that price down no matter how in excess of a fair return on investment I may think that price is.”
“That’s what’s different about health care and why we might not expect a market to be a good model.”
McCabe referenced a survey done by Colleen Flood and Tom Archibald in 2001 on private health.
“It’s a survey that shows lots of acts of private health care are perfectly legal in Canada,” he said. “There are variations of what is legal across Canada between provinces, but there are lots of scope for private practice from a legal perspective.”
Flood and Archibald concluded the problem is that the sorts of subsidies required from the public sector and the private sector to make private health care profitable are not readily available, said McCabe.
“That’s quite different from it being illegal. Something not being economically viable is not the same as it being illegal. There is a question about whether we should be spending public dollars to support private industries that are not economically viable without that investment.
“It’s a decision as to whether we believe having private health care is socially important and there are many people who believe it is and the choice that it gives some people in society is an enormously important thing.”

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