Manifesto for a Genuinely Competitive Patient-Centred Healthcare System

Research Paper proposing a refocusing of the respective roles of the public authorities and of the competitive sector in order to avoid the conflicts of interest that undermine the efficiency and effectiveness of the current system

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This Research Paper was prepared by Marcel Boyer, Professor Emeritus of economics at the University of Montreal and Distinguished Senior Fellow at the MEI. The MEI’s Health Policy Series aims to examine the extent to which freedom of choice and entrepreneurship lead to improvements in the quality and efficiency of health care services for all patients.

Highlights

This Paper aims to sketch the outlines of a healthcare system that would combine patient-centred care, a refocusing of the respective roles of the public authorities and of an independent sector, and the establishment of competition between different care providers. The universal nature of the healthcare system in no way requires that the provision of care be ensured by a governmental quasi-monopoly, legally protected from all possible competition. The creation of new ways of providing treatments, potentially more efficient and more effective, rests on the system’s ability to discard those that have become obsolete. Too little creative destruction, in contrast, leads to the inability to think outside the box in order to imagine solutions to the problems plaguing the healthcare system.

Chapter 1 – Improving the Healthcare System’s Performance

• The proposed reforms emphasize the protection of citizens, patients, and taxpayers, as opposed to suppliers, interest groups, or public authorities.
  Within the new configuration of the healthcare system proposed here, the main responsibilities of the public authorities are identifying the needs of citizens, arbitrating between goods and services and between groups, designing funding methods, and managing contracts and partnerships.
• The main responsibilities of the independent, competitive sector are to produce and dispense healthcare goods and services as effectively and efficiently as possible, by mobilizing the best technologies, human resources, and organizational structures.
• This division of roles between the public authorities and the competitive sector avoids the conflicts of interest that undermine the efficiency and effectiveness of the current healthcare system.
• Canada is the odd man out with its needlessly rigid application of the Canada Health Act, as many socially democratic countries have far more private, for-profit hospitals (and beds in such facilities) than Canada does.
• The emergence of competitive markets for contracts to provide healthcare services requires the participation of a sufficient number of healthcare organizations to the process of calls for tender.
• Innovation, both technological and organizational, must rest upon an explicit process through which experimentation and change become normal.
• The level of social acceptability for desirable changes will depend on the existence of institutions that allow individuals, organizations, and the different levels of government to manage the risks and opportunities related to the constant evolution of the socio-economic environment.

Chapter 2 – Challenges to Overcome and Errors to Avoid

• The first challenge is the implementation of processes to spell out the new roles of the government and the competitive sector. The resistance from labour and professional unions to such a redefinition of their members’ roles will be a tough hurdle to overcome, but not an impossible one.
• The role of the competitive sector must be governed by contracts signed with the government, clearly defined and coupled with performance incentives. In this context, the second challenge to be faced consists of designing appropriate incentive contracts resistant to capture.
• The third challenge is collecting relevant information in order to fairly evaluate the performance of providers from the competitive sector in the provision of healthcare goods and services in accordance with their respective contracts.
• The fourth challenge is introducing an appropriate level of competitive intensity throughout the healthcare goods and services system. This will require strong and convincing communications efforts regarding the foundations and principles of competition.
• The social cost of capital and infrastructure must be properly understood and accounted for in order to correct the mistaken notion that for-profit companies produce at higher prices than public or non-profit companies because of the need to make a profit.
• It is important to properly understand the different forms of organization that make up the competitive sector. The presence, real or potential, of these diverse kinds of companies constitutes the basis of competition.
• In the context of public calls for tenders, it is important to ensure that all competitive sector care providers—of various types, forms, and structures, be they for-profit or non-profit—are able to compete to win contracts to provide healthcare goods and services.
• Social development and economic growth can be obstructed by the inertia of the status quo. It is important to understand why and how, and also how competition can help challenge it, when this proves necessary or desirable.

This healthcare system reform project aims above all to consolidate, solidify, and reinforce the public authorities at the service of citizens. The institutions and mechanisms required for healthy competition at the service of citizens are well known. Political leaders will fear, with reason, that implementing reforms which are demanding in the short term will provoke a negative reaction and compromise their re-election. A strong popular movement will be required in favour of politicians who will show courage and leadership by attacking the true causes of the underperformance of our healthcare system.

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“When it comes to health care, all industrialized countries, however varied their sociocultural traditions, are faced with common challenges. The aging of the population, the growing cost of medical technologies, disruption of the labour market, and the healthcare deficit, combined with the population’s demand for guaranteed access, and rapid access, to healthcare services, constitute major trends. All countries are trying, by enacting reforms, to reconcile sometimes contradictory objectives: they seek quality care, effectiveness, and equality, all while maintaining the sustainability of the system in a context of budgetary restrictions.

“The remedies proposed, which take different forms from country to country, combine the introduction of competitive mechanisms, a decrease in the level of care provided, and some amount of decentralization.

“The hospital system is central to the issue. In order to make this system more effective and more efficient, certain countries decided to open the door to the private sector and market mechanisms. The often ideological debate between supporters and opponents of this strategy rages in many jurisdictions.”(1)
– Marcel Boyer, 2008

“This can be seen by the strong reactions to the recently published report of the Task Force on the Funding of the Health System, chaired by Claude Castonguay,(2) which some criticize for suggesting a greater participation of private providers as a way to solve the health care system’s problems(3).”(4)
– Marcel Boyer and Yanick Labrie, 2008

Introduction(5)

Despite substantial reform efforts and much economic, political, and scientific analysis work, published for decades by the MEI among others, the observations made in 2008 in the epigraph regarding the need to reform the Quebec healthcare system remain unchanged in 2025.

This Research Paper aims to clear a path to such a reform and to sketch, in the spirit of a true manifesto, the outlines of a healthcare system that would combine:

1. patient-centred care,
2. a refocusing of the respective roles of the public authorities on the one hand, and of an independent, private, competitive sector on the other, in the provision of healthcare goods and services, and
3. the right to challenge those who provide care through the establishment of competition between different care providers of various kinds (for-profit and non-profit).(6)

Despite a stated desire to maintain the quality of our current health system, it has been eroded to the point where this desire has become synonymous with preserving the status quo, rather than protecting the rights of citizens, patients, and taxpayers.

Yet, the numerous difficulties encountered by our healthcare system must not blind us to the fact that we still have one of the best healthcare systems in the world. Faced with the need to reform the system, we must not throw out the baby with the bathwater.

On this topic, we can consult the Grands repères project of Quebec’s Commissaire à la santé et au bien-être (CSBE), which states: “At the moment, the healthcare system is facing major challenges that threaten its viability and hold back the improvement of its performance. The solutions to these challenges are known, but are slow to be implemented.”(7) The CSBE adds that it wants to “equip the population and decision-making bodies in order to encourage an informed debate and support the ongoing improvement of our health and social services system.”(8)

But if we want to maintain, and indeed improve, the desired characteristics of our health system—accessibility, universality, affordability, efficiency (providing care at the best possible cost), and effectiveness (achieving our objectives as best we can)—we will have to make radical changes to the way things are done.(9)

Despite a stated desire to maintain the quality of our current health system, it has been eroded to the point where this desire has become synonymous with preserving the status quo.

This Paper shows one of the paths we could take to get there: keeping our chosen goals in mind, being conscious of the challenges involved in allocating our limited resources, and agreeing to reconsider the status quo, up to and including our organizational practices, in order to think outside the box.

A word of warning is required: this Paper is not the result of a commission of inquiry with a multi-million dollar budget, but rather an informed reflection on our healthcare system, based on an understanding acquired over decades of the issues and challenges we are facing. It does not seek to measure or quantify everything, but rather to better understand these issues and challenges at their source, setting aside the constraints of a status quo that has developed in a more or less consistent and informed manner since the system was created.

If, as the CSBE points out, our healthcare system “is facing major challenges that threaten its viability and hold back the improvement of its performance,” then we need to take a step back to return to its roots and rethink it on the basis of more sustainable and performance-generating mechanisms.

The universal nature of the healthcare system in no way requires that the provision of care be ensured by a governmental quasi-monopoly, legally protected from all possible competition. In Canada, due to this quasi-monopoly, our health systems suffer terribly from the power of political, professional, corporate, and union interest groups, which impede the effective search for best practices and true accountability, to the detriment of citizens, be they patients or taxpayers.(10)

Multiple factors can influence their structures, costs, and results. Social, political, economic, and cultural factors must be taken into account. Raquel Fonseca (UQAM), Pierre-Carl Michaud (HEC Montréal), and their co-authors showed in a recent academic paper(11) that the differences in the shares of healthcare expenditures as a portion of GDP and in the health levels of citizens between the United States and Europe was largely due to significant differences in risk factors, mostly exogenous.

The healthcare covered by public plans varies from one country to another and from one region to another, and many treatments are excluded. However, according to the OECD’s most recent data, the share of total healthcare costs, all treatments combined, that is covered by patients, above and beyond what public and private insurance cover, is 9.3% in France, 11,1% in Germany, 14.0% in Denmark, 23.6% in Italy, 13.0% in Sweden, 15.2% in Canada, 14.6% in the United Kingdom, and 10.9% in the United States.(12)

If we want to maintain, and indeed improve, the desired characteristics of our health system—accessibility, universality, affordability, efficiency, and effectiveness—we will have to make radical changes to the way things are done.

In line with practices in almost every area of our public and private lives, two elements are crucial: first, the clarification of the respective roles of
citizen-consumers, citizen-suppliers, and governments (regulation, protection, and oversight); and next, competition between the producers and suppliers of goods and services.

The healthcare reform needed today must reaffirm the pursuit of a social system that truly respects citizens and rests not on a set of structures, but on a suite of services (education, healthcare, and social security).

Several social, economic, political, and medical phenomena are at work, and demand the major changes proposed below in order to, once again, preserve and even improve the complex balance between system accessibility, universality, affordability, efficiency, and effectiveness.

• First, healthcare goods and services mobilize substantial human and material resources, in addition to capital for investment, servicing, and maintenance of infrastructure, notably hospitals. These resources could be allocated differently to other goods valued by the population, which increases their value and therefore their opportunity cost. Not only is the cost of buildings and health equipment (development and maintenance) higher, but the cost of staff—doctors, nurses, administrators, and support staff—has also increased. Therefore, it is not possible to continue to provide the care the population wants in the context of a system designed for another era. While our healthcare system may have been well adapted to the needs of the population in the past, when it was set up, its performance in today’s world poses serious problems.
• Next, thanks to the progress of medical science in recent decades, we can now treat considerably more conditions than before. The demand for care has increased accordingly, and is practically unlimited.
• Finally, people are living longer in good health, without those extra years augmenting the human resources available for the provision of healthcare goods and services, among others. On the contrary, the retirement age has tended to fall rather than rise. The active proportion of the population has shrunk, which increases pressure on the available resources to satisfy the needs of a growing senior population.(13)

The last two of these phenomena, namely more treatable conditions and more people to treat with limited resources, have favoured the emergence of a “tragedy of the commons”(14): resources commonly accessible for free or at low prices, because they are subsidized, will always end up being overexploited.

In a commons, several rights holders have the privilege of using a given resource, and no one has the right to exclude another rights holder. When too many rights holders have these privileges, the resource is likely to be overexploited and thus wasted, which leads to the tragedy of the commons. The collapse of fisheries, overgrazing of meadows, and pollution (use) of the air are classic examples of this well-known tragedy.

The universal nature of the healthcare system in no way requires that the provision of care be ensured by a governmental quasi-monopoly, legally protected from all possible competition.

On the other hand, a well-established, powerful, and rigid status quo prevents the implementation of different, potentially more effective and efficient ways of doing things, and leads to a tragedy of the “anticommons”(15): common resources governed by too many vested rights (veto rights) will always end up being underused and therefore wasted. Property, in an anticommons situation, can be seen as the mirror image of property in a commons situation.

In an anticommons, several rights holders each have the right to exclude the others from using a scarce resource, or to prevent any change to its usage, and no one has an effective privilege of use. When too many rights holders have such powers—veto rights or rights to prevent any change in the use of the resource—then the resource is likely to be underused (sheltered from potentially more efficient and effective concurrent uses) and thus wasted, which defines a tragedy of underuse or a tragedy of the anticommons.

An anticommons can arise anytime governments define new veto rights or absolute or powerful rights of oversight over the use of a resource. Once such a context arises and stabilizes, redefining rights by regrouping them as sets of usable rights (expropriation, redefinition of governance rights, abolition of veto rights) can be slow and difficult, requiring vision and courage of political leaders, traits which are sadly too often lacking.(16)

Public administration that is protected from any kind of competition, encourages excessively centralized governance and too little modularity and innovation.

Public administration that is protected from any kind of competition, whether constrained by multiple union and corporate stakeholders and decision-makers or conducted jointly with them, as is the case with our current healthcare system, encourages excessively centralized governance and too little modularity and innovation. The lack, or complete absence, of flexibility in discovering and experimenting with better practices prevents, or delays unnecessarily, gains in efficiency and effectiveness, and therefore productivity gains. The healthcare system’s potential—human resources, equipment, facilities, and investments—is therefore wasted, giving rise to a tragedy of the anticommons.

The creation of new ways of providing treatments, potentially more efficient and more effective, rests on the system’s ability to discard those that have become obsolete. Too little creative destruction, in contrast, leads to the inability to think outside the box in order to imagine solutions to the problems plaguing the healthcare system.

How, then, can we make our system perform better (Chapter 1)? And if we do go down this reform path, what challenges will have to be faced, and what confusions or mistakes will have to be avoided (Chapter 2)?

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