Universal Private Choice: Medicare Plus – A concept of health care with quality, access and choice for all Canadians



MONTREAL, Wednesday, October 31, 2001

Senator Michael Kirby (Chairman) in the Chair.

Michael Kirby (Chairman) in the Chair: Senators, our next panel, from
the Montreal Economic Institute, consists of Dr. Edwin Coffey, who is the
former president of the Quebec Medical Association, and Michel Kelly-Gagnon,
the executive director of the institute. 


Thank you very
much for coming.




Mr. Michel
Kelly-Gagnon, Executive Director, Montreal Economic Institute:
you for accepting to hear us; this is an honour for us. I am the Executive
Director of the Montreal Economic Institute. The Montreal Economic Institute
is a private and independent think tank which is the Quebec counterpart
of the C.D. Howe Institute, or other similar organizations.


Our operations
began on June 1, 1999, and we operate on an annual budget of approximately
$500,000. For those who are interested in knowing more about the Montreal
Economic Institute, please refer to the blue corporate brochure that was
probably distributed to you.


Before presenting
Dr. Coffey and leaving him the floor, I would like to share with you a
brief observation, which is very simple but, I believe, nonetheless crucial.
I am sure you are aware of this observation of people as distinguished
and knowledgeable as you are. However, it is sometimes useful to outline
certain key elements, with a yellow marker or red pencil, to allow the
Canadian population to be exposed to this distinction when your report
is made public.


If we want
to have a rational and constructive debate on an eventual reform of the
health system, a distinction must absolutely be made between two very distinct
things: first, a state monopoly on health care insurance and production
in Canada, and second, the universality of health care. I use this term
not in a technical or legal sense, but to refer to the principle according
to which all Canadians, regardless of their income level, have access to
a reasonable basket of quality health care services within a reasonable


I make this
remark because, since I have been observing the debate on this issue, I
have observed that there are different groups, different people, and different
political parties who constantly maintain the confusion between the two
concepts. Both ideas may have merits. These are two distinct principles:
state monopoly is one thing, and universality in health care is another.


The experience
of the vast majority of OECD countries proves the point I am making, i.e.
countries like France or Germany have universality in health care without
the monopoly as we know it. If the report outlined very clearly this aspect
so that everybody could make the distinction in the future, you would have
accomplished something great.


Without further
delay, I am pleased to introduce Dr. Edwin Coffey.




Dr. Coffey
is a research associate at the Montreal Economic Institute, a retired associate
professor at the Faculty of Medicine of McGill University, and also the
co-author of “Universal
Private Choice
,” a publication of ours that inspired our brief,
of which I think we sent some copies to your committee. If that is not
the case, we can make sure to provide you with both French and English
versions of that publication.


Dr. Edwin
Coffey, Research Associate, Montreal Economic Institute:
First, I would
like to thank you for inviting us to share our comments and suggestions
concerning the state of Canada’s health care system and the roles and objectives
of the federal government in health care reform as proposed by your committee.


Rather than
reporting a litany of well-known problems and shortages in the system,
we will concentrate on policy options and suggestions for improving the
legislative and economic environment in which Canada’s health care system
is situated. Such improvements and modernization will permit and encourage
pluralistic and alternative methods of public and private financing, insuring
and delivery of medical and hospital services. We consider this to be the
best overall approach to achieving the goals and objectives of the first
five federal roles in health care described in your interim report on issues
and options.


We are generally
in agreement with these roles and objectives, but there are some minor
exceptions. For instance, in the financing role, under the transfer of
funds for provision of health services, we have suggested a rewording,
a bundling together, and a reduction of the objectives to three from four.
This would better motivate legislators to rescind the provisions in their
health and hospital insurance legislation that now prohibit private, alternative
health insurance and private contracting of medical services in hospitals.


In the same
section, we suggest the promotion of sustainable reform and renewal in
the public, private, and mixed public-private systems of health care and
health insurance. This will better ensure quality, access and free choice
in health services than simply providing stable funding of the status quo,
which does not necessarily ensure sustainability nor foster reform and


Under the infrastructure
role, we have suggested a rewording of the final objective concerning the
planning of human resources. This would motivate the provinces and territories
to remove unreasonable restrictions on the free movement and location of
physicians and allied personnel, and encourage the provinces to rely less
on outmoded practices of central planning and social engineering.


Finally, we
would direct your attention to the Montreal Economic Institute’s recently
published proposal for health system reform in Canada, entitled “Universal
Private Choice: Medicare Plus, a concept of health care with quality, access
and choice for all Canadians”
. This approach to universal access
through parallel public and private health care and health insurance systems
is somewhat like the European approach. I had originally said “surprisingly,”
but I scratched that out. It is compatible with most of your committee’s
objectives. It awaits a rigorous field trial, however, and an evaluation
along the lines suggested for pilot projects under the federal role in
research and evaluation.


That concludes
my introductory remarks, and we would entertain any questions.


The Chairman:
I have a question on your latter point. Would not the kind of pilot project
you want violate the principles of the Canada Health Act as they now stand?
The pilot projects for primary care reform that the federal and provincial
governments agreed to a little over a year ago were all to be consistent
with the Canada Health Act.


Dr. Coffey:


The Chairman:
The kind of pilot project you are talking about requires a change because
it would be outside the Canada Health Act.


Dr. Coffey:


The Chairman:
Unfortunately, the Canada Health Act does not give the minister the right
to allow certain things to be done outside the act on an experimental basis,
in other words, not to change the act, but to say, “Here is a new way of
looking at the delivery. Let’s try it, even though it violates the Canada
Health Act. We will allow it to happen purely as a pilot project.” The
minister does not have the flexibility to do that. I am not arguing that
he should not have that flexibility; I am just telling you that he does
not. In order to do the kind of thing you are talking about, there would
have to have that flexibility, right?


Dr. Coffey:
That is right. We would have to do what all the other countries in the
world have essentially been doing for 40 years, that is, experimenting
with health systems financing.


The Chairman:


Dr. Coffey:
Unfortunately, since the Medical Care Act, we have not had any health system
experimentation in Canada.


The Chairman:
Health system financing experimentation?


Dr. Coffey:
In financing, yes.


The Chairman:
Now you could not do that. Prior to ’84, you actually could. You could
have experimented.


Dr. Coffey:
Well, you could not in Quebec.


The Chairman:
No, you could not. In any event, you cannot because of the Canada Health


Dr. Coffey:


The Chairman:
All I am saying is, people did start experimenting in the late 70s and
early 80s.


Dr. Coffey:
Yes. I suppose we might consider that they are approaching an experimental
model in Alberta, if they are able to move it forward.


The Chairman:
On that, by the way — and I look at Senator Morin and Senator Keon when
I say this — when we made our western circuit, we heard from people running
private clinics in Manitoba, Alberta and British Columbia. The people from
Manitoba and British Columbia both said that the last place they would
go to start a private clinic would be Alberta, because of the famous Bill
11. It so constrains their options.


Dr. Coffey:
That is right.


The Chairman:
In fact, they said it was much worse than if Bill 11 had never been introduced
in the first place.


Dr. Coffey:
Yes. Newfoundland would be the ideal place.


The Chairman:


Dr. Coffey:
They have no prohibition against private health insurance, for one thing.


The Chairman:
Is that the only province?


Dr. Coffey:
No, there are six provinces that forbid private health insurance. In Newfoundland,
I understand that even physicians who opted into the provincial plan can
still opt out on an individual basis, if they and their patients are agreeable.
Unfortunately, with the state of the economy, there is very little demand
for private services.


The Chairman:
You can always offer a choice, but there is no chance that anyone will
take it, right?


Dr. Coffey:
More or less, yes.


I would like to come back to the single-payer concept that was
referred to earlier. Do you not think that having multiple payers will
increase the complexity and the cost of the system? One of the major problems
for U.S. providers, where they have multiple insurance companies, is that
dealing with all the various plans does increase the complexity and the
administrative costs. What is your opinion on that?


Dr. Coffey:
This is, of course, the reason for experimenting with multiple providers
and multiple payers. We do not have a Canadian base of knowledge to answer
that question properly. Looking at Europe, where there are multiple providers,
multiple payers and public-private parallel systems, it seems to work.
Competition is a great leveler of administrative costs and so on. If you
had health plans, health insurance, and even hospitals competing, if you
had a completely open system with competition among hospitals, the management
would certainly be efficient. That would be particularly true if the funding,
both public and private, came with the patient rather than from the health


It has been said that 75 per cent of any health care delivery
system in a country is historical, and the reason that all these countries
have private insurance and a private delivery system is historical. For
example, in Britain, when the system was brought in there, there was so
much opposition from the MDs and the “upper class” – Britain is far more
class conscious than we are — to alleviate their fears, they brought in
private health insurance. That was an historical compromise.


Dr. Coffey:


Apparently, that was true in most European countries when these
systems were brought in. In Canada, we do not have an upper class, I suppose
— in any case, it was not brought in. Apparently, the main reason is historical,
and our national health care system is also based on history. We really
have the Saskatchewan system in Canada.


I am not too sure we can follow what is being done in Europe as closely
as that, as it was not a matter of logical, rational choice. It was more
a matter of compromise when these national health schemes were brought
into existence.


Dr. Coffey:


Could we have your comments on that?


Dr. Coffey:
One of the interesting things that I have observed over the last year or
so is the stuff coming out of Sweden — and I assume you have looked at
that – and particularly out of Stockholm. We had a conference here in Montreal
last fall, and the data coming out of the Stockholm experiment were very
revealing. When I came across these data, which is the first time I have
really seen anything on paper, I was very surprised.


For instance,
all the nurses’ unions in Stockholm are forming private companies now and
contracting with governments as private providers, and the nurses are happy.
Their morale is up, their productivity is up, and they are not so hung
up on seniority. If you are a really good worker with a lot of skills,
you move up a level in salary, and so on.


The other interesting
thing is that of the seven — I think there are seven — large hospitals
in Stockholm, one was sold to a private hospital company, and in the first
two years, they were able to reduce their costs by 30 per cent.


The Chairman:
I think that was St. George’s Hospital


Dr. Coffey:
Yes. That is right, St. Goran’s. I guess that is “George” in English. That
is one of the first impressive figures that I have seen. This is all with
public money, this is an internal market concept, so that it is publicly
funded, but the hospital is privately owned and managed, and their services
are all contracted out to private operators. The ambulance service is contracted
out, and the nurses, the lab techs, diagnostics, and even many of the physicians,
are now forming small groups and contracting for services.


One of your
senior members in the corner there will be interested to know that the
average wait for heart surgery in the private hospitals is now two weeks,
compared to 15 to 25 weeks in Sweden’s public hospitals. These are in the
outlying regions, where they are very conservative and still very much
into the status quo of the social democratic model.


My final question is, how is this hospital funded? How is St.
George’s Hospital funded?


Dr. Coffey:
It is funded through patients who bring their funding with them.



So the money follows the patients. 


Dr. Coffey:
Yes, it is public money, but it follows the patients.


They are not necessarily coming from group primary care or a
private care system? They do not have to be referred, necessarily?


Dr. Coffey:
That is my understanding.


Mr. Kelly-Gagnon:
I do recall we spoke with a gentleman who referred to Mr. Johan Hjertqvist,
the gentleman who was working on the design and study of this so-called
“Stockholm experiment,” and he was explaining to me that their equivalent
of our “communauté urbaine,” their greater metropolitan areas, have
the flexibility to deliver services in different ways, so they can make
comparisons. The federal government in Sweden will impose and monitor certain
norms, but the delivery will be at the so-called “municipal level” — a
greater municipal level. He mentioned that this hospital, St. George’s,
does not allow extra billing, so there is no way that somebody could jump
the queue by paying extra.


it is still a fairly social democratic scheme, but with different kinds
of features. They have been around now for a couple of years, and I can
say that in 2002, our institute aims to conduct an extensive joint study
with the Swedish institute to try to collect trial data, and really detailed
data, about how they are proceeding with this. We may even do some fieldwork
and so forth, because I think that the Canadian public is rightfully sceptical
of any major reform. We need the literature and textbooks, but maybe we
need to do some fieldwork to really monitor things.


I believe there
are three criteria under which we should look at the reform. There is the
outcome in terms of cost, the outcome in terms of what I would call “patient
empowerment” or patient choice, and the health outcome. Sometimes, costs
can go down and the patients can be relatively happy, but they do not know
that the choices they have made will have negative or adverse consequences
for their health over the years.


If we were
able to monitor a reform based on these three criteria, be it the Stockholm
plan or any other, then we would really know if that is the path that Canada
should take.


Dr. Coffey, I want to pursue with you this very interesting tangent,
that is, when you compare the European experience with multiple private
companies with the American experience, the Europeans, as you said, have
been able to “deliver the mail” at a much lower proportion of GDP than
America. I am told that they fundamentally achieved that by taking a shot
at the medical profession, whereas America’s free enterprise system had,
and continues to have, many medical high rollers. In Europe, they found
a way to just wipe them out. Can you confirm that they are all capped?


Dr. Coffey:
Yes. Going back to the Swedish study, they reported on three specialties.
These were 40 private physicians working outside the hospital and 20 public
physicians working within the hospital. Ophthalmology costs in the public
hospital were 28 per cent higher; similarly, for ear, nose and throat specialists,
the costs were 17 per cent higher in the public hospitals than in the private;
and in general surgery, internal medicine and dermatology, the costs were
13 per cent higher. There is no question that, through competition, they
were able to lower the costs of the specialists.


However, you
cannot have your cake and eat it, and if you really want competition, you
have to be prepared to learn how to provide the best skills that are going
to satisfy both sides.


It is interesting
to just read the conclusion of that Stockholm experiment.


The Chairman:
Who did the evaluation? Was it the hospital itself?


Dr. Coffey:
No, no.


The Chairman:
I wanted to be sure that this is an objective piece of analysis.


Dr. Coffey:
Most of this work has come from the gentleman that Michel referred to,
Johan Hjertqvist, who is an economist working on this project with the
Stockholm Council.


They say in

opponents of the privatization reforms had predicted that the private sector,
by seeking to make a profit for shareholders, would drive costs up and
efficiency standards down, the opposite has in fact been true. Across the
board, private contractors in Stockholm are operating with less staff and
on smaller budgets, while providing the same treatments to more patients
than their public counterparts. As a pilot program for testing the potential
effects of competitive market mechanisms on public health care systems,
Stockholm’s internal market has proven the ability of the private sector
to dramatically out-perform state-administered facilities by reducing costs,
improving care, and saving lives.

The Chairman:
You were here when the professor from McGill was speaking?


Dr. Coffey:
I heard the tail end of it.


You did not hear the argument going back and forth?


Dr. Coffey:
Yes. That is why I read it.


The Chairman:
This is a question you may not know the answer to, but it would really
help me if you would think about this. Let’s suppose we wanted to try three
experiments in which you would continue with a single payer model, but
the structure could be quite different. There would be some element of
competition between the institutions, et cetera. You would want to run
an experiment that was replicable, in the sense that whether it turned
out to be good or bad, you would be able to draw reasonable conclusions
that were sustainable. Similarly, you conduct a drug experiment in the
hope that it is replicable, and people will not shoot it down by saying
you picked the wrong bunch of patients, or whatever.


I do not know
if you would do it with a general hospital or a specialized clinic that
does joint replacements or whatever.


Have you given
any thought to what those experiments or trials would look like? Assuming
we had the ability to ignore the Canada Health Act and to get a province
or a community to do it, what would you do?


Dr. Coffey:
I am a great believer in gradualism, and I think one of the prudent courses
would be to use a specialty group, maybe a group of cardiac surgeons, or
a multi-specialty clinic. You could think of places like the Mayo and the
Cleveland Clinic and so on, long-established, multi-specialty clinics of
high quality. We do not have too many of those institutions in Canada.
They are mostly in university hospitals. However, those could be encouraged,
and already, people are starting to think about the possibility of a really
first class, good quality specialty clinic that would offer services in
the areas where the waiting lists are the longest, which are orthopedics,
cataracts, heart, and maybe diagnostic. For instance, the McGill Imaging
people have opened a new, private diagnostic centre in Montreal.


The Chairman:
Owned by the university?


Dr. Coffey:
Well, most of them are university people.


Owned by the physicians.


The Chairman:
Owned by the physicians, though, not owned by the university?


Dr. Coffey:
No, it is a privately owned diagnostic clinic in Westmount Square. They
have the latest in modern imaging equipment and top-notch physicians to
interpret the results. A lot of people, many of my acquaintances, who have
gone there are extremely happy. The results are handed back to the referring
doctors very quickly. They are electronically linked with the hospitals,
so they can get the image transmitted immediately to the Royal Victoria
or the General, if they wish.


However, that is not an experiment.


Dr. Coffey:
True, but if you wanted to run an experiment on private diagnostics or
imaging, this is the sort of group that, augmented, could say, “Sure, we
will make a contract with the regional health board and come to a financial
agreement to do diagnostics on 1,000 patients this year at a certain set


The Chairman:
I believe that that is how the clinics in Alberta work. I will give you
an interesting example. I think all of us found the witness from a private
radiation clinic in Ontario very interesting. They do exactly what I talked
about. They actually rent the radiation facilities from Sunnybrook Hospital
from 6 o’clock to 10 o’clock at night, when they are never used. They are
only paid by OHIP, by medicare, and they do not take any private patients,
so there is no element of private pay. What they are basically doing is
extending the use of that facility by four hours a day, five days a week.


Dr. Coffey:


The Chairman:
They focus primarily on breast cancer, and they are now expanding it into
prostate cancer. They caused the waiting list for breast cancer radiation
in Toronto to plummet.


There are these
isolated examples, but if we are going to really change the system, I think
we need a little better scientific proof. I started life as an academic
too, so I am trying to get my mind around how do you actually do that.


Dr. Coffey:
Yes, well, as I said, we have not really been legally allowed to do any


The Chairman:
No, right.


Dr. Coffey:
So we are babes in the woods, and when we travel to other countries, they
say, “What is happening in health system reform or financing in Canada?”
I say, “This.”


Mr. Kelly-Gagnon:
You can experiment on a geographical base, where a particular province
or a particular community could try some of these things we have been talking
about. You can also have experimentation with a segment of the population,
and I am referring here to the nursing homes, or other segments of populations
where they are already used to having a certain range of services available
to them.


It might be
just a small step, because I am looking at it not only from the perspective
of what is intellectually interesting, but of what I would call “real politics.”
We have a certain political context in Canada with which we might agree
or not, but that is not the issue. It is there. I think that nursing homes
and similar facilities might be more willing to, say, allow an old lady
of 85, who is almost blind because of cataracts, but who has managed to
acquire a small pension, to have quicker access to certain services within
the nursing home.


Listening to
the professor from McGill, it seems that even he acknowledged that something
could be done in that area.


We are into some really interesting stuff here with this whole
question of capital for new endeavours. The public hospitals in Canada
now really cannot raise capital, the banks will not lend them money, and
they are not allowed to go into debt. Therefore, the idea of forming a
corporate structure that will build a new hospital, or whatever you want,
and rent it back is really coming to the fore. I am not raising it to debate
it with you, but I just wanted to put it on the table so you can keep it
in mind when you move forward with some of your interesting ideas. Thanks.


Dr. Coffey:
Is this applicable to the private sector, or just the public hospitals?


No, it is a hybrid of some kind. I know, for example, that one
major public hospital in Ontario is currently flirting with the private
sector to build a new hospital that they will rent back, because they cannot
raise the capital to build it themselves.


The interesting
thing is, these fellows who are starting their private clinics have no
problem going to the bank and raising the money.


Dr. Coffey:
That is right, yes.


However, a public hospital cannot raise the money because the
banks will only lend a very small amount.


Dr. Coffey:
We have not tried to raise money for a private hospital, although there
is a group in Montreal that is really rooting for that. They think we badly
need one.


The Chairman:
To follow up on Senator Keon’s point, we were in Vancouver last week and
heard about a new hospital in Abbotsford that will be built just the way
Senator Keon has described it. It will be built by a private contractor,
and just like an office building, the province is going to lease it back.
The province simply found it easier to deal with the capital cost by leasing.


Dr. Coffey:


The Chairman:
Unfortunately, the way governments keep their books, capital expenditures
have to be recorded in the year that they are made, so if you spend $100
million on a hospital, you record it in year 1. If you spend $10 million
a year on lease payments for 10 years, you record it as $10 million a year,
and therefore, given the need to keep the deficit down, they are moving
to a system in which hospital construction will essentially be a lease
buy-back proposition.


By the way,
interestingly enough, there was considerable opposition from unions, Friends
of Medicare, and groups like that. That is not surprising.


This may be quite naive, but if I understand correctly,
private equals profit, for which you need to reduce costs, which equals,
from what I heard here, happier. That means the patients are happier, plus
you have more workers, more nurses on staff, and we suddenly have a lot
of doctors in the private sector, where it was not possible in the public
system. Is this, under the private system, available to everybody? I understood
the machines that were being rented from 6 o’clock to 10 o’clock at night
were. Is that available to everybody?


Dr. Coffey:
Yes. If you look at this Universal
Private Choice
proposal, the “raison d’être” of that study
is to make private choices available to all Canadians, rich or poor. That
is unique, and that is why I am very enthusiastic about this, because not
only does it fit the political spectrum, it fits the economic spectrum
as well. You can find a place in there, I feel, that will answer any of
those needs. Low-income persons can still have, for instance, a government-issued
health voucher with which to buy a basic private health service if they
want more choices. Of course, we do not really worry about the rich, because
they can pretty well do what they want — they can leave or whatever. It
is the poor people whom we are trying to empower, so they can go to hospitals,
doctors and clinics with the purchasing power to make those people shape
up. If they do not give good service, if the doctor does not give them
enough time, they have the power in their pocket to go elsewhere. It is
the same with the hospital.


It does bring
in a competitive environment, but not a mean-spirited environment, because
everybody has a choice. It seems to provide the kind of balance that I
think Canadians are looking for. They do not want big differences in the
choices that are not available to all.




Mr. Kelly-Gagnon:
I would also like to clearly point out the fact that one must avoid having
— I am not saying you had it; I am just making a general comment — a
statistical conception of resources, i.e. to think that there is a pie
and that it must be shared.


The power of
innovation and research at the technological level must never be underestimated,
i.e. if people have an incentive, there will be an incentive at the technological
level to improve the machinery.


The example
I always use is that of a VHS VCR to watch movies at home: we bought one
in the early 80’s, and it cost $1,200 at the time. I bought one last week
of a better quality than the one my parents had at the time, and I paid
$129. Why the price reduction? Because companies had an incentive to improve
the technology.


the importance of improving managerial techniques must never be underestimated.
Companies like General Electric, for example, have completely reengineered
their practices. In addition, we sometimes take certain things for granted:
we build them this way because we always did.


However, there
needs to be a motivation or incentive to change these managerial practices,
as did nurses in Sweden, who were given a better role in cases where doctors
had traditionally been called for. It was not only about the number of
nurses or dollars, but about the way these nurses worked. A better role
can even be given to nursing aides where regular nurses were called for.


This is possible.
Let’s be honest. It is possible to do so within a public system, but the
incentives are much less powerful. One must therefore really think in terms
of doing more with less. It is never just a buzz word; it is the reality
of the entire market economy of the twentieth century, and even the previous
century, that showed that production practices were consistently improved,
if I may say so.




The Chairman:
I thank the two of you for coming. That was a very fascinating discussion,
as you can tell.

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