David R. Henderson  

Price Controls and Black Markets in Canadian Health Care

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One high-ranking physician who works with doctors at several Montreal hospitals told The Gazette that obstetricians often accept cash offered by expectant parents to ensure their doctor attends the delivery, rather than having to depend on whichever doctor is on call.

"I've learned that it's current practice. ... Everyone within these hospitals knows about it," he said of the hush-hush payments. "It's systemic, and it has been so for a long time now."


This is from "Want fast care? Slip an MD some cash" in the Montreal Gazette.

When I teach a segment on Canada's extreme price controls on health care--set typically at zero for the patient--I ask my students what they think would result. What I'm expecting them to say, and they often do say, is that there will be queues for health care. But the common answer they often give is that there will be a black market with side payments to doctors. My usual response is that I have not seen evidence of this. Well, now there is evidence. Read the whole article.

The strange thing is that one doctor attributes this to privatization:

The black market for care is encouraged by the privatization of services, he said. Doctors feel underpaid and the demand for medical services in the public system outstrips supply, he said.

But these facts--doctors feeling underpaid and demand outstripping supply--apply to all of Canada's Medicare system. When I went up to my home town of Carman, Manitoba in 1988 to visit my father when he had a medical emergency, his doctor, when he found out I was from "the States" and that I had done some health economics, vented to me about how little he is paid for this or that procedure. And the queues for health care are so widespread that the Fraser Institute in Vancouver puts out an annual report estimating their length.

It's true that Canada's Supreme Court, in the 2005 Chaoulli v. Quebec (Attorney General) decision, found that it was a violation of the Quebec constitution for the government to prevent people from using private insurance to get health care when there are long queues. The solution was more private insurance and loosening the restrictions that prevented people from paying legally for health care. Maybe the doctor's argument is that doctors can choose between getting paid more by private payers or taking lower pay from the government and so they even things up somewhat by taking government payments and private side payments at the same time. Here's a test: is this happening in the nine other provinces to which the Supreme Court ruling doesn't apply? Here's another test: the first doctor quoted said that this practice has been around "a long time now." Longer than 5 years?

HT to Karen Selick.


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COMMENTS (29 to date)
Hyena writes:

To me, the Canadian healthcare system looks like "everyone gets the same insurance". So anyone who would have paid for additional services, would have purchased a premium plan in the US or simply supplemented here, will offer side payments.

Doctor compensation wouldn't much matter either, especially if the "additional service" requires no additional work on the doctor's part (e.g., seeing you first rather than last). The major cost is getting caught.

Doctor competition would matter, however, because it would tend to reduce the price of side payments, possibly eliminating them altogether.

Joe Cushing writes:

I'm surprised there aren't hospital ships off the shores of Canada.

Sam Schulman writes:
But the common answer they often give is that there will be a black market with side payments to doctors.
Is there not another answer, that there will be another black market where side payments are not in loonies but in political influence? (As we see now in the US with the queue of big companies seeking and getting Obamacare waivers from the HHS Secretary's office.) Any evidence of this?
Patrick R. Sullivan writes:

It's well enough known to have been part of the plot of this 2003 Canadian movie.

The bribery is remarkably well dramatized, expecially since it was done by French Canadian socialists. There's even a joke about the patient being a hockey player. The guy who played the hospital union thug deserved an Oscar.

Rick Weber writes:

@ Hyena, I couldn't tell you for sure, but I think the Canadian health insurance market is typically dominated by short and long term disability policies--policies to make up for lost income while waiting in line.

Of course plenty of Canadians cross the border to get care and I understand that many Canadian doctors do cosmetic work for 9-10 months of each year (once they've maxed out their income from "free" health care). Hopefully Americans start seeing Canadian doctors as cash-patients as the American system gets more screwed up.

A promising opportunity for patients and doctors is MediBid, a startup that helps cash paying patients find doctors.

Brett writes:
And the queues for health care are so widespread that the Fraser Institute in Vancouver puts out an annual report estimating their length.

So? The significance of the wait time between seeing a general practitioner and seeing a specialist is pretty meaningless without context (like how it compares to the wait time in the US).

Moreover, as long as outcomes are close, better, or identical, and people aren't dying in large numbers for lack of treatment, then it's not really a problem.

The solution was more private insurance and loosening the restrictions that prevented people from paying legally for health care.

I wouldn't go that far. What they ended up doing was loosening restrictions on private insurance . . . for the procedures in question. But nobody is buying it, apparently.

Here's a test: is this happening in the nine other provinces to which the Supreme Court ruling doesn't apply?

It's hard to say. I've heard complaints about Quebec's provincial health care plan before.

Of course plenty of Canadians cross the border to get care

That's mostly a myth - the numbers of Canadians coming south is pretty small, according to this study.

Most Canadians I've spoken to don't generally complain about it. You might end up waiting longer if your problem doesn't require immediate attention.

Mike writes:

RE: Joe Cushing writes:

I'm surprised there aren't hospital ships off the shores of Canada.

I had a similar thought. If Joe is thinking the same way I am, hospital ships would become a logical free market solution to problems which emerge from single payer health care. The reason you don't see hospital ships already in Canada is the U.S. is the hospital ship permanently docked south of their border.

Should the U.S. go to single payer and health care gets rationed with no outlet for getting American health care we would not have an American health care system to flee to. For those who do not want to fly to India for surgery I would foresee some entrepreneur outfitting a soon to be decommissioned cruise ship into a combination hotel and hospital ship.

If the government tries to create obstacles because it doesn't like the competition the hospital ship would anchor outside international waters and passengers and patients could be ferried out. Surgeries would be performed and recovery by American health care providers and lodging for loved ones would be provided like a hotel accommodation. The cost of the procedure might even be less than the cost on the mainland as laser corrective eye surgery gives testament.

There is a precedent for such an outcome. When Indian gaming broke the Nevada monopoly on gaming (analogous to single payer health care) the unintended consequence was some states allowing riverboat gaming (like hospital ship health care) as long as the casino was docked on the river but not permanently built on dry land (anchored offshore in international waters).

Pierre writes:

I've never heard about paying a Dr. to get speedier service before. Believe me, I would have paid a few times in the past (I'm Canadian.) But "queue jumping" is incredibly common. If a patient is there because of a Worker's Compensation Board (a British Columbia entity) or ICBC (a BC government owned monopoly car insurer) claim then they go to the front of the queue automatically. I'm pretty sure politicians never have to wait for an appointment or a test.

As for the rest of us, well, we have to wait a bit longer. It's one thing to have to wait because you can't afford it, but it's infuriating to have to wait when you can afford it, but you can't afford to travel out of country or out of province.

Personally I've had insane waits for routine examinations: 3 months for a cardiac ultrasound, for instance (a physician friend told me that the maximum recommended wait for this procedure is 1 week.) My brother was told he'd have a 13 month wait for an MRI for his back, a necessary prelude to surgery. I get infuriated when people laud the "free" Canadian health care system. Those kinds of waits aren't just annoying, they can be deadly, at worst, and at best they are merely harmful. Delaying necessary surgery doesn't mean that the ailment goes into stasis: it continually gets worse until treated. So long delays mean treating patients well after the optimum time for treatment has passed.

Our system isn't laudable; it's a bad joke.

Pierre

Pierre writes:

@Joe Cushing,

Medical tourism is big business in Canada. It's especially big business for things that are either illegal in Canada, such as paying for a surrogate mother, or for things that have huge waits, such as orthopedic surgery. We go to India for that!

Pierre

Pierre writes:

@Brett, I don't know how many Canadians travel to the US for medical treatment on their own initiative. I wouldn't be surprised if the number was low. But as I mentioned above medical tourism is big business here. Primarily we go to India, it seems.

However, Canadians get treatments by the thousands in the US each year, paid for by provincial medical coverage. Canadian provinces send cases that they can't deal with to the United States. Thousands of cases. Every year. I know my own province of British Columbia will frequently ship tricky maternity cases to nearby Washington state. Hundreds a year, actually. And if a child has a particularly rare and hard to treat condition it's not at all uncommon to see fundraising drives by friends and neighbours to raise the money to send them to the US for treatment. Often those cases are simply not treatable at all in Canada.

Pierre

Pierre writes:

One more comment:

When Vancouver hosted the 2010 Olympic Winter Games the health authorities in the lower mainland (Vancouver and surrounding cities) canceled thousands of surgeries over fears of traffic congestion and the need to leave room in the system for possible higher demand. This wasn't done on a hospital by hospital basis, but across the board. I seem to recall the numbers being in the 3K range.

Pierre

Karen Selick writes:

My husband knows a man who lived for many years in part of Ontario right next to the Quebec border. He had many French-Canadians among his co-workers. He has told us for at least 25 years that it was common practice for Quebecers to pay their doctors an annual "gift" to ensure good service.

By coincidence, I had searched for articles referring to this practice about a week before this Montreal Gazette article appeared. I found nothing.

Tom West writes:

However, Canadians get treatments by the thousands in the US each year, paid for by provincial medical coverage. Canadian provinces send cases that they can't deal with to the United States.

I always thought of this as smart behaviour. It makes a large amount of sense to use US excess capacity on an as-needed basis.

It's not much publicized, but American hospitals also occasionally ship patients to Canada under exactly the same circumstances.

Medical tourism is big business in Canada.

Actually, it's small business in Canada. To my mind, surprisingly little. But the truth is that Canadian healthcare is, in general, good enough. Our survival and health rates are very close to the US's in almost everything. However, that is "in general". Individual cases vary. (i.e. I got my cardio-ultrasound in 3 days in non-emergency condition. However, I live in a major urban area.)

The reality is that as a Canadian, I probably pay about twice as much in taxes as someone in the US would pay for an equivalent health-care plan. The other reality is that a lot of other people who wouldn't have much in the way of healthcare, have fairly decent healthcare. So, do we slight the healthcare I could afford in order to pay for another's?

In general, the Canadian answer has been a pretty resounding yes. For better or worse, it really does seem to be something that binds our social fabric.

Chad writes:

Anybody have some tips for bribing Canadian doctors? It sounds like some of the people in the article didn't get what they were hoping for after passing the envelope...

Brett writes:
I always thought of this as smart behaviour. It makes a large amount of sense to use US excess capacity on an as-needed basis.

I don't really see the problem either. It's not like the provincial plans working out rates for US providers is anything new, and why not use excess capacity?

Assuming those numbers are true, of course. I'd like to see some proof, Pierre, particularly since the whole "Canadians coming south" is a frequently used canard by conservatives here in the US.

i.e. I got my cardio-ultrasound in 3 days in non-emergency condition. However, I live in a major urban area.

"Urban area" is the key. You get a lot of whining from rural folks, complaining about the lack of access in sparsely-populated rural areas.

Pierre writes:

I do live in a major urban area. Nevertheless the waits here are long.

The Canadian system doesnt bind us together, except in the "misery loves company" sense. My eyes were really opened when I experienced private care, in South Africa! I was able to get house calls, a free office visit bevause they couldn't explain what was going on (I didn't ask for it to be free, they offered), and an appointment with a neurologist within 3 hours of making it. It's been 10 years since then, and I like to joke that I'd still be waiting. It's worrisome to me that I'm only off by one order of magnitude. I don't know if having my treatment delayed by weeks to months would have made any difference in my making a full recovery but I'm happy to not have to find out.

There's nothing wrong, much, with the quality of the care. It just takes far too long to get access to it. Anyone who's had to live with severe pain knows how difficult long delays can be. Anyone waiting on joint replacement who gets months added on because their surgeries are canceled multiple times not only lives with pain, but also with the real possibility that their health will deteriorate while they wait.

And then we have the absurdities of preemptively canceling thousands of surgeries because of the Olympics. I can't believe that private med would take that kind of risk. How many of those people suffered worse outcomes?

So we provide the same mediocre system to everyone because we have to. The trade off for universal coverage is universally slow and rationed coverage. We're not getting it cheaply, either: Within 20 years health care costs are predicted to consume over 60% of Ontario's budget and I seem to recall BC's numbers being much the same.

Pierre

Tom West writes:

You get a lot of whining from rural folks

I don't think it's fair to call it whining. The complaint *is* for a real problem. The question I have is how does the US handle it? Are rural doctors really paid 30-50% more in the US? (The back of the envelope calculation I heard at a presentation to equalize doctor availability.)

The Canadian system doesnt bind us together

Well, Tommy Douglas, founder of healthcare, *was* voted "Greatest Canadian", so I think you might underestimate Canadian's pride for the system, at least in abstract.

To be honest, I think there is a significant psychological unifying effect in the declaration that *every* Canadian is valued enough that we're willing to provide him or her with healthcare. i.e. there life means something to us, not just their productivity.

Oddly enough, the US has a lot of programs that do provide healthcare to those who can't afford it, but perhaps because of the resentment and problems around them, they seem to net very little of the same psychological payoff that the Canadian system does.

The trade off for universal coverage is universally slow and rationed coverage.

Agreed. Rationing is the price for universal coverage.

We're not getting it cheaply, either:

Well, we *are* getting comparable outcomes at about half the price of the U.S. *and* we're covering all of our citizenry, so I in comparison, we do pretty well. No miracles, but pretty well.

Peter Finch writes:

I once got through a Nova Scotia emergency room in 8 hours because I paid cash. (I needed Xrays after a car crash.)

We overheard complaints about our preferential treatment from the waiting room, including from a guy with a badly broken arm who'd been there all day.

The funny thing was that the place was chock full of diagnostic equipment - it looked positively American - but it was _way_ understaffed. It was like nobody had bothered to match the two resources.

I grew up in Canada and now live in the states. There's no way I would trade my current healthcare for what I had in Canada. But then, I'm not the type to decline to pay for health insurance. People who do that are, no doubt, better off in Canada where they aren't allowed to make that mistake. Canada does okay, statistically, but there are demographic differences that contribute to Canada looking better than it should.

Aaron writes:

One reason that Canadians like Canadian healthcare is that there is a massive amount of propaganda regarding the universal system. We were taught from a young age (though schooling, the governments "a part of our heritage" television ads etc.) that universal healthcare was something that made the country special.

I live in the states now, and the difference in the healthcare system is one of the reasons I don't wish to return. My best friend tore his ACL in Canada when he was 18. It took two and half years for him to get knee surgery. They gave him a brace, but while he waited for surgery he had smaller incidents that destroyed his knee a little bit more each time.

Pierre writes:
Well, we *are* getting comparable outcomes at about half the price of the U.S. *and* we're covering all of our citizenry, so I in comparison, we do pretty well. No miracles, but pretty well.

First off, I'm quite skeptical of this claim of "comparable outcomes." How are they measured? Does Canada get comparable outcomes compared to Americans that get treatment or compared to Americans that don't get treatment? I have no proof, but I strongly suspect, that if you took an American with an equivalent* health insurance program and compared his outcomes for various problems with a Canadian that you'd find the Canadian is only comparable on *some* outcomes. I'm confident that Canadians that need emergency care, or care for immediately life threatening illnesses, get that care promptly and their outcomes are acceptable. What concerns me is the very much larger percentage of Canadians that experience health deterioration while waiting for treatment. It's not possible that having to wait for a year or more for back surgery, knee surgery, hip surgery, etc. would have no effect on patient health, taken in the aggregate.

Pierre

*measuring equivalent plans would, of course, be quite difficult.

Chad writes:

I used to think we Canadians had some of the best health care in the world (I have lived in both rural and urban areas). Then I tried private health care in several other countries. Wow. That'll disabuse ya.

Tom West writes:

How are they measured?

I'm not an expert, but the usual metrics I've read about (and found Canadian outcomes usually every so slightly worse, occasionally slightly better) are along the lines of "% living 6 months after a [type x] heart attack" or "% living 5 years after [type y] cancer", etc.

Hospitals do a lot of these comparisons to try and find best practices, and the studies are often cross-border because hospitals don't care where the best practices come from.

Then I tried private health care in several other countries.

The question is not can you get better healthcare through private means - if you can afford it, the answer is absolutely yes. The question is can you get better healthcare for a comparable cost. Canada could literally not afford to double the medical spending to bring it up to American standards.

Really, what it comes down to is if we stripped the healthcare coverage from the sizable number of Canadians that could not currently afford it, we could use that extra money to buy better healthcare for those who could. Is this a route Canada wants to tread?

Or, the question to ask our Canadian expatriates is, if you were earning a median Canadian household salary in the States (about $51K), could you afford better healthcare in the US than you would get in Canada?

Warning - cranky alert: Of course, the Libertarian answer might well be, "I'm not earning a median salary, so why should I be concerned about what they can afford?" Or, if I'm being marginally fairer, "The loss of freedom to pay for medical care is immoral, while the loss of healthcare for the poor would simply be unfortunate."

Pierre writes:
I'm not an expert, but the usual metrics I've read about (and found Canadian outcomes usually every so slightly worse, occasionally slightly better) are along the lines of "% living 6 months after a [type x] heart attack" or "% living 5 years after [type y] cancer", etc.

Yeah, I already said I'm not surprised that Canada might do reasonably well when measured that way. I'm interested in other metrics:
- what are average waits for various orthopedic surgeries (typically these have very long wait times in Canada);
- if the waits are longer in Canada than elsewhere, what are the results of these longer waits with respect to quality of life outcomes (eg: if someone has to wait an "extra" 3 months does this have a lasting impact on them? How is that "extra" time valued, because it's a cost to the person, but not to the State. Etc.)
- how long does it take to get a diagnosis for a disorder/disease in Canada vs. elsewhere.

Questions like those seem to be unanswered, but maybe I'm not looking hard enough. They aren't easy questions to formulate, let alone answer, but I can't help but think that Canadian outcomes on some of those measures could be significantly worse than places that have private treatment as an option.

Canada could literally not afford to double the medical spending to bring it up to American standards.

Canada can't afford to spend what it is spending now, nor can it afford to continue to increase spending along historical lines.

Really, what it comes down to is if we stripped the healthcare coverage from the sizable number of Canadians that could not currently afford it

If we stopped paying for the healthcare of people that could afford it we could pay for healthcare for the people that cannot afford it without having to spend 60%+ of our public budgets on it.

The natural comparison for a "free market" healthcare system is always the US, but the US doesn't have a free market in health care (this was true even before Obamacare.) It's got a crazy hodge-podge of regulations and rules and the utterly nutty restriction on selling insurance across state lines.

That said, depending on which state, it's likely I could afford better health care on $51K/year in the US than I get now. But really, I have no idea what I'm paying for healthcare now, so I can't reasonably compare insurance rates with the US.

Pierre

Tom West writes:

First, there is a really nice wikipedia page on comparisons between the two systems

It's likely I could afford better health care on $51K/year in the US than I get now.

I did a little research and math.

It's estimated that 22% of Canadian taxes go to healthcare. [Taken from an anti-universal healthcare site.]

A single earner earning $51,000 pays $9,500 in provincial and federal income taxes [income tax calculator]. So, we get an annual figure of about ~$2,500 for the "cost" of universal healthcare for the median income.

So, what is the employer + employee cost of a half-decent, but not spectacular $0 deductable family plan with a child in the US cost? Any American readers care to give some rough numbers?

Now, to be fair, the equivalent setup would be should be with a large HMO, which manages your care in the same manner as Canadian healthcare, but Pierre, you did say you thought you could get better health-care for the same money.

Tom West writes:

-- Note, my previous post with the links has been held for moderation. In the interest in keeping the conversation alive, I'll repost without the links active.

First, there is a really nice wikipedia page at http://en.wikipedia.org/wiki/Comparison_of_the_health_care_systems_in_Canada_and_the_United_States on comparisons between the two systems

It's likely I could afford better health care on $51K/year in the US than I get now.

I did a little research and math.

It's estimated that 22% of Canadian taxes go to healthcare. [Taken from an anti-universal healthcare site.]

A single earner earning $51,000 pays $9,500 in provincial and federal income taxes [from an income tax calculator]. So, we get an annual figure of about ~$2,500 for the "cost" of universal healthcare for the median income.

So, what is the employer + employee cost of a half-decent, but not spectacular $0 deductable family plan with a child in the US cost? Any American readers care to give some rough numbers? My strong suspicion is maybe a factor of two ($5K) more.

Now, to be fair, the equivalent setup would be should be with a large HMO, which manages your care in the same manner as Canadian healthcare, but Pierre, you did say you thought you could get better health-care for the same money.

Tom West writes:

Oops. I forgot sales taxes. Let's assume they're 10% of income (there's no sales tax on rent/mortgage). That's about another $5K in taxes which makes for another $1,250 going to medical care.

So, the question is what would $3,750 buy you in terms private medical care coverage in the US?

(And agreed that healthcare insurance in the US is a maze of twisty little passages, all alike, but since when has Canada adopted any US economic models without making them even worse :-))

Aaron writes:

@Tom West - The extent of health insurance coverage for a given price says nothing about the quality of health care you can afford. There are a slew of other variables, many of them valued differently by each individual.

Pierre writes:

@Tom West, I'll do some research later but your numbers seem low to me. Current spending in BC is somewhere north of 40% of our budget on health care, and government spending isn't the only spending: BC charges a premium for insurance (modest, $50/month for a single person, with subsidies for low income individuals), and I've never worked at a job that doesn't provide extended health benefits; insurance that covers all the things that our public coverage does not.

Pierre

Chad writes:

The question is not can you get better healthcare through private means - if you can afford it, the answer is absolutely yes. The question is can you get better healthcare for a comparable cost.

Try Singaporean healthcare. Cheaper, faster, higher quality. Until you experience shopping for healthcare like shopping for groceries at your local supermarket, you have no idea what's possible...

"The loss of freedom to pay for medical care is immoral, while the loss of healthcare for the poor would simply be unfortunate."

The tradeoff is unnecessary. Why not have competitive healthcare providers, let people buy whatever they want, and give cash to poor people so they can participate in the market, too? We would all get better care that way. The idea that everyone has to suffer so that poor people can have healthcare is bizarre.

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