There’s room for competition in public healthcare

June 16, 2017

Carol Propper is a professor of economics at Imperial College Business School, London

Do competition and choice improve health care? Or is health care just too complex and emotive an area to respond to market forces? All health care systems are grappling with the same problems: how to meet public expectations and deliver high-quality care amid rising demand and costs. Making more use of markets to deliver health care is one of the big challenges of our age – essentially, whether to reform systems that have traditionally been heavily controlled and regulated and which offer patients and users little choice.

Modernizing health care has obvious appeal; competition in the rest of the economy is generally beneficial. But health care in Britain (as elsewhere) is a political hot potato, and in Britain, any reforms which encourage competition and choice are viewed as covert attempts to privatize our revered NHS (National Health Service). But I believe competition brings many benefits.

Healthcare markets are not that special. Or rather, there are many markets which are also complex – financial markets, for instance. We may need help and guidance in making choices such as picking the right pension or insurance policy, but the market doesn’t benefit from being locked by a top-down authority. The same logic can be applied – with care – to the health-care industry.

In Britain – similarly to Ontario – the health system is primarily funded from the public purse and all citizens are entitled to health-care services. Private insurance is limited. So there’s little competition between insurers to cover patients. But in such a system, there can be competition between health-care suppliers for consumers – the patients themselves (advised by their family doctors). Reforms in England have sought to increase competition between hospitals for public funds. The bottom line is these have benefited patients – but introducing more choice and competition also means the rules of the game need to be carefully designed and monitored.

More than 10 years ago, patients in England were allowed to choose where they would be treated, as part of market reforms. As a result, they began to move toward hospitals that provided better-quality care, such as those with better survival results, lower rates of infection or shorter waiting lists, for instance. Patients, with the aid of their family doctors, broke free of the “postcode lottery” which had tied them to whatever was offered locally. At the same time, well-performing hospitals gained greater autonomy. This led to tangible increases in quality for no extra cost, and patients spent less time in the hospital.

Canada already has a private provision, which would allow this kind of competition, but doesn’t yet have the mechanisms in place to encourage that choice.

But NHS – created in 1948 as a top-down structure – is dangerously close to our hearts, and policies that introduce competition and choice become politicized very quickly. Competition is seen as privatization, rather than harnessing forces to improve delivery. I’m not suggesting we dismantle our tax-financed system or our strong commitment to equity in the delivery of care. But I am suggesting that we allow providers of care to have more autonomy at the margins, and freedom to make decisions unfettered by centralized bureaucratic control.

Reform of health care in Britain has become a political football, and initiatives to fund private suppliers – with public finance – have become confused with privatizing the whole service – which isn’t happening. But this creates substantial political push-back, even though the private sector has a role to play in most areas of health care.

But there’s never a free lunch in this game. If you are going to promote competition, you need to beware of monopolies – which are seldom in the public good, but rather tend to entrench vested interests. Just as mergers in the wider economy tend not to benefit the general public, nor do they in health care, although this is a sector which likes to merge. So you need an authority that looks very carefully at mergers and assesses whether they are in the public good.

In Europe, we have the Dutch example to follow. Health care in the Netherlands isn’t such a politically-charged topic. And for 20 years, the Netherlands has encouraged competition and choice in health insurance. They now also have 10 years’ experience of competition in the delivery of health care. Taking a lesson from the Netherlands might be useful for Canada, too.

Special to The Globe and Mail


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