Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 12 - Evidence

The Standing Senate Committee on Social Affairs, Science and Technology, to which was referred Bill C-13, to establish the Canadian Institutes of Health Research, to repeal the Medical Research Council Act and to make consequential amendments to other Acts, met this day at 11:08 a.m. to give consideration to the bill, and to examine the state of the health care system in Canada.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: We are back with our last set of witnesses on Bill C-13. Mr. David Hill will begin.

Mr. David Hill, President, Council for Health Research in Canada: We are here representing the Council for Health Research in Canada. Our organization is somewhat unique in that it is composed of several national health charities, such as cancer, heart, stroke and so on, and that is combined with most of the major health research institutes in this country.

We are here to tell you that we are supportive of this legislation that is before you. We have been involved in the evolution of the legislation. We supported it before the House of Commons committee, and we are here to do the same thing before your committee.

I would now turn our comments over to Dr. Ron Worton, who heads one of the research institutes that comprise our members. He is a member of the interim governing council of CIHR and has been closely involved in the development of the whole process, including the legislation.

Dr. Ronald Worton, Director of Research, Council for Health Research in Canada: Thank you, honourable senators, for this opportunity to meet with you today.

Although I have been a member of the interim governing council, my remarks today are not so much from the point of view of an interim governing council member as they are from that of the health research community. As director of a large research institute, and former chairman of the large department of genetics at Toronto's Hospital for Sick Children, I come to you representing researchers across the country.

The first point I should like to make is that this is probably the most exciting thing that has happened in medical research and health research since the creation of the Medical Research Council in 1960. The buy-in from the scientific community is enormous. I am sure you will recognize that there was some scepticism at the beginning about the creation of CIHR. That scepticism and unease was related more to the loss of MRC, which has been our line of support for so many years.

Now that the CIHR agenda is better understood, all the position papers are out describing how it will function. The scientific community has had input into the process and there has been an enormous buy-in across the spectrum. This initiative is driven, to a large extent, by scientists themselves as well as by the imperative to do more and better research. Moreover, this truly is transformative.

The Medical Research Council has been, to some extent, a reactive application. People would write grant applications and then submit those applications, and the best ones would be funded. That process has worked extremely well and has led to some of the best science in the world taking place in Canada. The CIHR adds to that. That is to say, it allows that process to continue to function. However, it also allows the development of a proactive agenda by creating institutes that have tremendous expertise in certain areas. It allows those institutes, through their advisory boards, to help shape and determine the research agenda for the country.

That has two important consequences. First, those expert bodies in each institute should be able to anticipate health threats and opportunities for research. I am quite convinced that, had we had a CIHR with an institute structure in the past, some of the problems we experienced dealing with HIV contamination and hepatitis C, and so on, could have been more easily dealt with by a proactive research agenda. So, secondly, this allows Canada to take a new approach to research, to fund the best research possible through its institute structure, and, at the same time, develop a proactive research agenda for the country. Thirdly, it will be more enabling because it is broader based. It includes all areas of health research, whereas the Medical Research Council of Canada was less broadly based. That will have tremendous importance for interdisciplinary research. Already, even in this interim period with a transition year, we see new research programs developing -- that is, interdisciplinary programs with basic biomedical scientists working together with clinical scientists who are working together with people in the community and in the social services community to develop new and innovative research programs that could not have occurred nearly so easily without the creation of CIHR.

You will see new and better research, more collaborative research, and more integration of the social, ethical and legal considerations related to the research enterprise incorporated into the whole research agenda.

Those were my main points. I would be happy to take questions at this time.

Ms Penelope Marrett, National Voluntary Organizations Working in Health: We are pleased to be here to talk about Bill C-13, and the opportunities that this presents to Canadians in their health. The National Voluntary Organizations Working in Health support Bill C-13 and are pleased to see that it passed in the House of Commons a couple of weeks ago. We are excited about its implementation and wish to commend the government for responding to a recommendation that we made urging the federal government to invest up to $500 million annually in health research.

[Translation]

As you already know, it has been confirmed on many occasions that Canadians view health as one of their biggest concerns. Many polls conducted over the years rate health as the number one priority for all Canadians. In 1998, a poll confirmed, moreover, that our public health system was one of the features that set us apart from other countries.

We recommend that the Act on Canadian Institutes of Health Research be proclaimed as passed by the House of Commons on March 22, 2000. This act is further to a promise made in the 1990 Speech from the Throne and in the federal budget of 1999.

To conclude, I would like to repeat my support for volunteer health organizations in Bill C-13. We are pleased to have been given the opportunity to assist in the development of CIHRs to date and we fervently hope that we will be able to play an active role in their development.

[English]

On a separate note, it is important to remember that national health charities contribute up to $300 million a year to health research in this country. That is about the same amount that the Medical Research Council of Canada has in their budget annually. We hope to continue to support health research not only through funding health research but also by becoming very active in the implementation of the CIHR.

The Chairman: Before turning to Senator Carstairs, I should like to ask Dr. Worton a question that arises out of something he said. In fact, many other people have told us the same thing. I wish to understand exactly what would be possible under the CIHR that is not possible under the existing system.

One gets the impression that the CIHR is making possible a series of voluntary interdisciplinary links that, presumably, could have taken place without the CIHR, if people had been motivated to do it. Every witness we have heard from is in favour of the bill. That is not the problem. However, I am trying to understand this from an actual, pragmatic standpoint. Can you give me an illustrative example of what is possible now that would not have been possible before? Is it simply that people are having a change of heart or a change in attitude toward greater cooperation because of this change? What is the real pragmatic change here?

Dr. Worton: You are absolutely right. The same model could have been followed and it could have been called the CIHR, with the exception of the broadening into health research. That required a new name.

When the networks of centres of excellence were announced and created as a program back in the late 1980s, that was the first opportunity that Canadian researchers had to network. Sometimes, that kind of networking must be driven from above. That is to say, people must be provided with an opportunity to do that.

I was one of three people who put together an application to create a genetics disease network, which has been in existence since 1989. When we first met, most of us did not know one another. We often knew the names but did not know the faces. By the time that network had been in existence for four years, 40 per cent of the publications coming from that network were collaborative efforts that contained names of more than one network member. That level of collaboration might have been 5 per cent before that network happened. Putting in place the structure to allow that to happen was a good thing.

I might add that, when we had our network reviewed by European and American scientists as part of the review process at the end of four years, the Americans simply shrugged and said that they could never do that in the in the United States because there are too many scientists in every discipline to be able to collaborate. We had 40 scientists; the equivalent in the United States would have been 400. They said, "We could never do that, because we have too many in one field and we are too competitive with one another, but we like what you are doing in Canada."

The Chairman: To that extent, the silos get broken down. I use the term "silos" only because it applies to the way a lot of academic disciplines work. You are saying that changing the structure, to formally recognize the fact that collapsing the silos is a good thing, is essentially a motivator, even though, had people been motivated similarly from the beginning, they could have done it without changing anything?

Dr. Worton: That is right.

The Chairman: To that extent, structural change has a psychological impact as well as an organizational impact.

Dr. Worton: It has already had a psychological impact.

The other difference is that, by organizing into institutes that have well-defined expertise -- for example, an institute for cardiovascular disease, if that is one of the institutes that is named -- the advisory committee for that specialized institute will be able to identify opportunities and health threats in that area.

They will likely have an annual meeting where the scientists funded through that institute will get together and, in a way, have the same effect that other networks have had in the past. However, all of the scientists in the country will belong to one or the other of these institutes.

The Chairman: As a layperson, I thought that had already happened.

Senator Carstairs: I will direct my first question to Ms Marrett, who has brought to the table this morning a position that was not clearly enunciated before today. There is a tendency to view this through a prism and determine that only the CIHR will contribute to research in Canada. Was $300 million the figure used?

Ms Marrett: That is right.

Senator Carstairs: Where is that $300 million directed primarily? Is it to cancer or heart research?

Ms Marrett: I do not have the breakdown of that figure. It was in a report from Statistics Canada, which did some research on this about eight months ago. However, I know that the National Cancer Institute of Canada, the Canadian Cancer Society, is one of the largest funders of cancer research in this country. We do not have a definitive breakdown. However, the amount does cover a number of different areas. To our knowledge, it is not just disease specific; it is an approximation based on a survey that was done, so we know that it is not complete. Many of the national health charities that are disease specific do fund health research in their particular areas. They are able to fund not only bio-medical, but a whole range of health research, such as psycho-social, among others. They fund some areas far more than others, depending, of course, on their ability to provide the funds for the research.

Senator Carstairs: My other question has nothing to do with Bill C-13, but I am curious. How do you make a particular disease "sexy" in terms of its being able to acquire research dollars? A friend and I have had some discussions about the issue and, quite frankly, we realize that women have generated a great deal of money for breast cancer research, whereas men, because they cannot seem to talk about prostate disease, have not been able to generate the same kind of research dollars. A group of us, whose husbands have had prostate cancer, have decided we should make it a women's issue. How do we generate comparable interest for prostate cancer?

Ms Marrett: That is a huge challenge. For any disease, there are several different factors that help to form the whole mould. One factor can be the media and what they do or do not do. How much will the media come on side? How much can you to talk about the issue publicly and frankly? How much does the Canadian public want to hear about the issue?

I know that a Canadian prostate cancer organization exists and is working with the Canadian Cancer Society and the CIC in collaboration on a number of different things, but as to popularising it I cannot tell you how best to do that. For some of the smaller disease groups that have the same struggles it is not very easy, but oftentimes it is necessary to get everyone on side within the community. That is one of the biggest challenges.

The Chairman: I would like to hear Dr. Worton's point of view as someone who is interested in receiving funds. How can a disease that is not "fashionable" become so in terms of fundraising? I compare that with an issue such as sick children, which is automatically "fashionable".

Dr. Worton: That is one question that I did not anticipate. However, I can say that prostate cancer is now a smaller problem than it was, because the breast cancer initiative has increased the awareness of prostate cancer and there are new major research programs addressing prostate cancer. It is also a matter of timing, because some genes have recently been identified that are responsible for prostate cancer. That opportunity opens up a new field of research.

I have been associated with the Muscular Dystrophy Association of Canada for many years and I am currently the vice-chairman of the board. We fight that "awareness" problem constantly. One of the ways to raise awareness is to make use of the influence of high profile individuals. For example, in the United States Gerry Lewis takes on this task. It is debatable whether or not he is the right person, but he has brought enormous support to muscular dystrophy research. In Canada we have had a series of different people. If it is possible to capture a well-recognized person, such as sports figure Kurt Browning, who was our Honorary Chairman for two or three years, an enormous amount of support can be garnered for an organization.

The Chairman: What has been described is a classic marketing problem, and I do not mean to be pejorative when I say that; but that is what it takes to capture the attention of the public.

Senator Carstairs: My second question has to do with a possible conflict concerning the president of the CIHR and the chairman of the interim governing council being one and the same person. Do you have any difficulty with that? If so, why? If not, why not?

Dr. Worton: I will address that first, if I may. It is certainly an issue that was discussed at great length in the interim governing council when preparing the first draft of this legislation. I believe that there are pros and cons. Some of the health charities have had the view that there should be a separation of power as between the president and the chair, but, although there was not unanimity around the table of the IGC, in the end a consensus to have one person acting was created. One of the reasons for having one person act as the president and the chair is that this is a government-funded organization and there must be a direct responsibility to the Minister of Health. That could be problematic if the positions were filled by two individuals.

My own view is that this is the best model to follow, and that was certainly the consensus of the IGC in drafting the legislation.

Senator Robertson: Returning to the issue of the $300 million that was referred to -- and I suppose there is about the same amount of money in the new body -- I have always been astounded and a bit concerned at the lack of cooperation among research groups. One never seems to know what the other is doing; I hope that somehow or other the new Canadian Institutes of Health Research will be able to develop a cooperative attitude among all researchers in the country, because, if we do not have that cooperation, we are wasting dollars.

A number of years ago, I had a medical intern in the office one summer. I wanted him to do some work with the voluntary organizations to see what cooperation existed. I will take as an example, research on anti-rejection drugs for transplantation procedures in heart, kidney, liver, vision, et cetera. Everyone seemed to be working in different directions with little coordination. I thought, "What a shame. What a waste of the public's money contributed to all those organizations."

I do not know if that has been fixed, because I have not followed up on it since that summer's work, but I believe that, somehow, we have to stop wasting research money through lack of coordination and cooperation among the different parts.

I know that there is a "protection of property" issue, and an attitude of "I don't want you to know what I am doing, because I am on to something good and maybe I will get there before you do". I would add to that, what I would call in street language, the commercial research that is going on in Canada.

Do we see any opportunity for a coordinated approach? Can we reach out with this new structure to have more coordination?You expressed that you already could see the coordination, but what about those outside your institutes? Is there any way that you can connect with those people? I have heard, and I am sure most of us around the table have heard, people grumbling about giving to so many groups.

There is certainly duplication, and some members of the public think that there is quite a little waste going on, because the public is catching on to this fact that there is a lack of coordination and a lack of cooperation. I hope I am totally wrong. I hope I am not being too rough on the systems. I feel uncomfortable about it.

I should like comments from both groups.

Ms Marrett: There is a great deal more cooperation going on with national health charities now than there ever has been. One reason that that has occurred is that during the last five years or so national health charities themselves have seen the need to cooperate on their common issues. They have actually come together on three common issues -- health research, health information and surveillance, and community patient support. They are in the midst now of talking about how to develop an alliance in order to become much stronger in their cooperative work.

One of the areas that they have talked about, interestingly enough, is the sharing of funding. Due to the advances that have occurred in research, oftentimes the researchers who apply for funding have already had an impact on something else. So the organizations are talking about how to ensure that we cooperate even more. We have a workshop coming up in mid-April to talk about this in more detail.

When the CIHR gets established, which we hope it will be, we will also work with the CIHR on ways to ensure that that cooperation continues, not just with ourselves as health charities, but with the whole research community itself. I am optimistic that that will occur more and more.

That is not to say that any of the organizations would stop requesting funds from the public to support the work that they do, and they do a lot of different work, because part of that work supports health research, but not all of it. There is always a need to respect what a community's responses are to their own community.

Senator Robertson: If you have printed information on that improved cooperation, I would certainly appreciate receiving some of it.

Dr. Worton, is there any way we can reach out to the commercial researchers, or are they totally silent?

Dr. Worton: The Medical Research Council of Canada, several years ago, initiated a series of partnerships with the industry, with pharmaceutical manufacturers, with the biotech industry and so on, to jointly fund research efforts. That is ongoing that has been recently renewed and expanded. That will continue under the CIHR.

The benefits of those partnerships work in both directions, actually. You bring commercial dollars in to help the research, taking some of the burden off government. At the same time, when they put dollars in they expect something in return in the way of access to the intellectual property and the information. Therefore, they can take advantage of that in developing their own businesses.

That is a mutually good thing to do, and it has been so recognized for a long time. That will continue.

With regard to the health charities, I could give you one example. My information is more anecdotal than global, but having been with the muscular dystrophy organization, I know that that organization has been at loggerheads with the ALS society for years and years, because to some extent they raise funds for the same overlapping set of diseases. Over the last three years, those organizations have got together and created one single research-funding program. They jointly fund research, but not only do they do that, they have partnered with the Medical Research Council of Canada, which is putting in $1 for every $2 from the health charities.

Therefore, the Muscular Dystrophy Association's $250,000 will be stretched into $750,000 this year for one specific program. The two organizations are sitting at the same table. Having done that, they will now move into the same office and share space. One must believe that the next thing could be a merger.

Senator Robertson: That is good progress. Thank you for that information.

With the research that your groups and institutes are doing, what will happen when you have a product that eventually should be distributed to the general public? How do you intend to do that?

I was told yesterday that you were not interested in the commercial areas. However, how would you have that commercialization happen? Would it be through royalties? The University of Alberta has done that in a couple of instances.

Dr. Worton: All of the universities now have technology transfer offices that deal with those issues. They determine when an invention or product could be patented or is marketable. Patenting is one way to handle it. Secrecy is the other way. If you do not tell anybody, you do not need a patent.

The process is to patent and to publish. You publish the information, making it available to everyone. If a commercial enterprise wants to use that information or that product, they must pay for it.

That commercialization can be done in several ways. One way is a royalty back to the university or whatever. Another way is a licensing agreement with some up-front money for the privilege of licensing it. A third way would be to create a new company and provide the university or hospital with equity in that company. That was a less common mechanism in the past, but I suspect it will be more common in the future.

Senator Robertson: Through royalties, Mr. Chairman, we could almost replace the government money in 10 or 15 years to help this research move forward.

The Chairman: Your third model, the creation of a company, is what has been done with World Heart; is that correct?

Dr. Worton: Correct.

The Chairman: I understand that the Ottawa Heart Institute formed a company which is effectively owned in large part by the Heart Institute.

Dr. Worton: I do not know about the ownership question, but certainly it was a spin-off from the Heart Institute.

The Chairman: They went that route rather than the royalty or up-front-payment routes.

Senator Callbeck: I have a question on the composition of the boards. We had several witnesses last night. One was Sharon Sholzberg-Gray, President and CEO of the Canadian Healthcare Association. She was recommending the inclusion of consumer or public representation on the governing council and other decision-making and priority-setting bodies of the CIHR.

As well, Ms Jeans, Executive Director of the Canadian Nurses Association, mentioned that the public must be involved in processes and governance of the CIHR, including participation in the proposed advisory boards. How important do you feel that it is to reach outside the research community?

Ms Marrett: From the perspective of National Voluntary Organizations Working in Health, which represents many Canadians across the country who live with particular diseases and disorders, either themselves personally or with their families, we consider this to be a very important issue. That is one of the reasons why we have been so pleased to be so involved with the development of the CIHR up to now. We look forward to being further involved with the implementation. We submitted some nominations to the government for the governing council, and we look forward to the announcement that will be made.

We believe that there are many different ways, though, of being involved, and there are different levels of decision-making. We do hope to see well-known Canadians on the governing council, and we do, also, expect that there will be public involvement at the institute advisory board level, as well as other decision-making levels. We are very confident that this will occur, and we are working closely with the CIHR implementation secretariat on some of these issues.

Senator Callbeck: Any other comments?

Dr. Worton: The process of selecting the governing council has been fairly open. We, as scientists, have been pleased with that, because there was a process of nomination. Some 400 people were nominated for positions on the governing council. I think it has now been through a committee structure, and the nominations have been brought down to a list of 40. Of that 40, 18 will be chosen. Two of the 20 positions are predetermined.

We are very pleased with that process. I am sure that there will be a mixture of scientists and well-known figures and smart people on that governing council.

What the balance will be, I guess, is not in the hands of the interim governing council, but rather in the hands of government at the moment.

The Chairman: Thank you, witnesses, for being here this morning.

Honourable senators, since our hearings last night, the staff and I, together with the steering committee, have developed a draft report. I believe that was circulated to you.

Before I discuss that, I would just like to make reference to the fact that I received two letters this morning. One was from Mr. Harry Daniels, the President of the Congress of Aboriginal Peoples, which is the aboriginal organization that represents Métis and off reserve people. The point of Mr. Daniels' letter, which has been circulated to you, is that, effectively, in the development of medical research in relation to aboriginal issues, in particular with respect to the aboriginal health issue, the Congress of Aboriginal Peoples has been excluded from many of the discussions. The focus has been on the views of the three national aboriginal organizations, the Assembly of First Nations, the Inuit Taparissat and the Métis National Council.

If the committee agrees, when we are finished with the report, I should like to write a letter to Dr. Friesen, as chair of the interim governing council, enclosing Mr. Daniel's letter. I would point out to him that it is important that the views of off-reserve people, in particular, be reflected in the work of the CIHR.

Second, there is a letter from the Canadian Medical Research Organization that indicates their strong support for the bill, and talks about an office of "clinical excellence", which is not directly under the CIHR. Again, it would be my proposal to send this letter, along with my covering letter, to Dr. Friesen, if we agree on that.

With that further information, I would ask you to look at the draft report. Senator Carstairs, Senator LeBreton and I, as the three members of your steering committee, reviewed it earlier this morning. I would now open it to any questions or comments that anybody might like to make.

Senator Carstairs: I did mention this concern to the steering committee, and that is specifically why I raised the matter with the last group of witnesses. In the final paragraph, it says:

The committee shares these concerns and therefore we urge the federal government to amend the act at the end of the President's first five year term...

I would really like to see us change that so that it says "seriously consider amending the act". We heard today that there might indeed be a conflict in reporting to the Minister of Health, if we divided these two positions between the chair and the president.

The Chairman: Let me give the other side. This is an issue where you and I are on opposite sides.

Much of the work that has been done on the governance of institutions of all kinds, for-profit, not-for-profit, and government institutions, has made that argument. I must say that the Banking Committee looked at this with everything ranging from the board that is managing CPP funds, through to corporations, through to some not-for-profit work we did. On the basis of the evidence we heard specifically on governance issues from a wide variety of groups, we came to the conclusion that the position of CEO and position of president/chair should be separated. We concluded that you should not have a position where the CEO is reporting to a board of which the CEO is also the chairman.

Despite what Dr. Worton said this morning, I would prefer to leave it the way it is. To be consistent with positions I have taken on a bunch of other issues, and I really believe it to be a trend of modern institutions, I would prefer to leave it the way it is. I am open to hear what the committee has to say.

Senator LeBreton: I support your position on this. It seems to me that it does not necessarily put the chairman or president positions in jeopardy. They really do, in most boards, have a different function, one reporting up and one reporting down.

The Chairman: Crown corporations are moving in that direction.

Senator LeBreton: If something should happen in the interim that would change our views, I suppose we could come back and address it. I support this position. Also, the workload is a consideration. If this body will work the way we hope it will work, it is matter of some efficiency to have two people.

Senator Robertson: Yes, I would support your position. I agree that there is just too much work to do, as well.

The Chairman: Any other comments on that issue or on the report.

Senator Callbeck: I agree with you.

Senator LeBreton: With respect to the question of "mental health", I felt strongly that we put that in.

The Chairman: We agreed to that after your comments.

Senator LeBreton: It was obvious from what the witness said last night that that is an area where we must get out from underneath that stigma.

The Chairman: I must write a note to Dr. Reading. In talking to my colleagues after the hearing last night, we all noted that his testimony last night was extremely impressive.

Senator LeBreton: We should also write to Mr. Upshall on the mental health side.

The Chairman: Yes. If there are no other comments, I would be happy to report this bill back to the Senate this afternoon, with the report attached that says that the bill be adopted without amendment but with the observations as attached.

Senator Carstairs: I so move.

The Chairman: Is it agreed?

Hon. Senators: Agreed.

The Chairman: Then I shall report the bill this afternoon.

We will move on now to our second set of witnesses, which takes us back to our broad health care study, and we have with us Ms Colleen Fuller, for the Canadian Centre for Policy Alternatives, Mr. Robert Evans, University of British Columbia, and Mr. Martin Zelder, from the Fraser Institute.

Mr. Zelder, would you proceed, please.

Mr. Martin Zelder, Director of Health Policy Research, Fraser Institute: Before I begin my remarks, there is a mistake in my brief which I should correct.

In the last paragraph of the text, at the bottom of page 7 in the next to last line, it should say, "Despite abundant evidence that government enterprise is inefficient compared to private enterprise...". I apologize for any confusion this may have caused.

The main point of my brief, and of my comments today, is that medicare, while intended to embody generosity and compassion, especially for the poor, does not live up to these noble intentions. It does live up to these intentions because it is defectively designed.

The compassionate ideal, of course, was that medical care should be free at the point of use for all Canadians. That seemed like a good idea at the time, but we have learned a lot since then. What we -- economists and public policy analysts -- have learned, is that "free" does not necessarily imply "compassionate".

What does "free" imply? It implies long waits for many vital forms of care -- much longer waits than in other comparable countries. The most recent finding: Canadians typically wait five months for a cranial MRI, whereas Americans wait only three days; and for a knee replacement, Canadians wait five and one half months, whereas Americans wait three and one half weeks.

Other studies find that Canadians wait longer than Swedes and Germans for urgent and elective cardiovascular surgery. The full details and references are on page 2 of my brief.

Canadian waiting is getting worse over time. Consider Table 1. Averaged across all specialities, waiting time has grown by 37 per cent -- or 3.6 weeks -- over the period from 1994 to 1998. During that same period, waiting time for chemotherapy grew by 44 per cent.

Why do Canadians wait so long? The long waits arise from two fundamental defects in the government's intervention in the medical system. These two defective elements are a badly designed insurance plan, and distorted incentives for spending health dollars in government-controlled hospitals.

The underlying problem with the insurance scheme is "moral hazard", or overuse. Economists first acquired a more precise understanding of moral hazard in the 1960s. The idea is that the existence of an insurance contract affects the insured individual's behaviour. More specifically, it means that an insured individual will use insured services to the point where the benefits to him or to her are far below their cost to society.

Because of the slow development of the theory of moral hazard, the founders of medicare did not realize how serious the problem might be. As leading medicare historian Malcolm Taylor describes the perspective at the time of Mackenzie King's thwarted 1945 plan:

No one really knew what a comprehensive public health insurance program would cost. ... there was no way of knowing what utilization would be if the total population were insured.

After the Saskatchewan hospital services plan of 1946 was in operation, "The costs of the plan... were considerably in excess of estimates", according to Taylor.

What the economists subsequently discovered was that co-insurance payments, or user fees, were a desirable and powerful mechanism to restrain moral hazard. However, even after this insight, and the warning signs noted by Taylor, medicare has persisted as an institution without user fees, for the most part.

Why has Canada not taken advantage of this growth in social-science knowledge? Perhaps it is because politicians have perennially attacked user fees. They have been emboldened by medicare's defenders in the academy, such as Professor Evans, who claims that user fees do not necessarily decrease "overall use" of medical services.

These claims have been thoroughly rebutted by one of the leading social-science research projects of the century, the RAND Health Insurance Experiment. The RAND researchers randomly assigned about 2,000 randomly-selected, non-elderly families to a variety of different insurance plans. The plans varied in terms of their user fee -- 0 to 95 per cent of the bill -- up to a maximum spending limit -- 5, 10, or 15 per cent of family income, or U.S. $1,000, whichever was smaller. The families were followed for three to five years in order to understand how assignment to different insurance groups affected health spending and health outcomes.

The RAND researchers found that those families who paid 25 per cent out of pocket, but never paid more than $1,000 per year, incurred annual health care costs, on average, of U.S. $826. By comparison, those in the "Canadian" group who paid nothing out of pocket, or 0 per cent co-insurance, incurred much higher annual costs of U.S. $1013. This means that a 25 per cent co-insurance rate led to a reduction in annual spending of $193 U.S, or a 19 per cent reduction.

The truly remarkable finding contained in the RAND analysis, however, relates to the change in health status among the families studied. Before-and-after comprehensive measures of health status permitted the RAND researchers to determine whether members of the "Canadian" plan, who received more health care, had better success in improving and maintaining their health than those who paid 25 per cent out of pocket or more. Extraordinarily, access to "free" health care did not benefit the "Canadians", with minor, albeit important, exceptions.

The exceptions -- those whose health was benefited by the "Canadian plan -- were the "sick poor", those with low incomes, who, at the start of the experiment, had high blood pressure, vision problems, dental problems, or anaemia. However, "free" care had no beneficial health impacts outside of those "sick poor", who represented approximately 6 per cent of the population.

In fact, when other changes in government spending are taken into account, the Canadian poor may actually have been harmed by free care. In 1984. economists Lindsay and Zycher, who are cited in my references, found that, prior to established program financing in 1997, each additional dollar of government health spending crowded out 31 cents of social welfare spending. It is seriously debatable whether the small fraction of that dollar of health spending that went to the poor made up for the 31 cents of welfare spending they lost.

In the RAND experiment, for the other 94 per cent of the population, free care provided no health benefits. This means that much of the additional health services currently consumed due to the zero co-insurance "accessibility" of medicare are wasted. Thus, we should provide free care to the poor, without making them worse off by cutting other social programs, but redefine "accessibility" to mean a 25 per cent co-insurance rate, up to some modest expenditure limit, for the rest of the population.

The fact that there is extensive moral hazard within the current system is reflected in evidence regarding the connection between government health spending and waiting time. Specifically, I analyzed whether provinces in which more public money was spent per person on health care had shorter waiting times over the period 1992 to 1998. Controlling for other underlying factors that differed among the provinces, I found that there was no statistical relationship between public health spending per capita and waiting time. In other words, provinces that spent more government money per person had no shorter -- and no longer -- waiting times than provinces that spent less. The amount of money did not matter. This reveals moral hazard in that it reflects money being spent on valueless care, and preventing money being spent where it is valued, and thereby increasing waiting times for higher-valued care.

Further analysis that I did showed that the money that is being spent is not being spent in the right places.

Specifically, waiting times could be reduced if existing spending were reallocated into spending on drugs and on what is classified as "other professionals".

These findings illustrate the second substantial defect of medicare: the inefficiency of government enterprise. Although they are ostensibly private non-profit firms, Canadian hospitals are government controlled, both in terms of overall funding and in terms of resource allocation within hospitals. Consequently, it is not surprising that more spending does not reduce waiting, and that existing spending is misallocated.

As University of Rochester economist Eric Hanushek stated, in commenting about the fact that the vast majority of public education studies find no connection between spending and student performance in American public schools:

If few incentives exist to reward improved performance, it should not be surprising to find that resources are not systematically used in a fashion that improves performance.

In other words, resources will not tend to be allocated optimally in a system that does not reward optimal allocation. With regard to hospitals, of the 15 studies that compare the efficiency of for-profit and government hospitals, eight find that for-profits are lower-cost for a given level of quality, while only three find the reverse and four find no difference.

Ultimately, medicare has proven to be an object lesson in the economics of government failure. Despite abundant evidence that medical insurance should involve a modest co-insurance payment for the non-poor, medicare does not. Despite abundant evidence that government enterprise is inefficient compared to private enterprise, medicare relies on government enterprise. In the end, Duplessis, in his concern about Mackenzie King's proposal, was right: "Health insurance is dangerous." Medicare, designed and perpetuated without adequate social-scientific understanding, endangers Canadian compassion and Canadian lives. Economists were slow to understand insurance. Now that they do, it is time to cure medicare.

Ms Colleen Fuller, Research Associate, Canadian Centre for Policy Alternatives: Honourable senators, I will not review my submission, but rather I will focus on some of the initial steps that should be taken to resolve some of the tension that surrounds the health care system. That tension, from my perspective, is between for-profit medicine and universal entitlement. The tension goes back to the very beginnings of medicare and, in fact, to the beginning of the last century. There are historical roots to this tension that have never been resolved and have led to the current impasse, or crisis. I believe that the crisis in medicare possibly has to do with funding, but more probably has to do with the unresolved conflict in the health care system.

It would be helpful in resolving this conflict if the federal government were either to embrace medicare and defend the Canada Health Act, or to say, with all honesty, to the Canadian people that they no longer believe that all Canadians are entitled to health care services on uniform terms and conditions.

The conflict within the federal government is apparent right now: On the one hand there is the Health Minister, who appears to be completely immobilized when confronted with some of the events that are taking place in Ontario, in Alberta in particular, and in Quebec and other provinces, but who, as the Minister of Health, appears to be anxious in some ways, I suppose, or at least willing to address some of the problems that are occurring. On the other hand there is the federal government, which has reined him in. That situation reflects some of the internal conflict within the federal government.

The fundamental principle of the health care system is the principle of universal entitlement. The system was organized to support universal access -- that was one of the very important principles when federal funds were released into the health system to support the construction of hospitals. Access was obviously an overriding concern. The laws that were passed to support medicare were primarily concerned with the principle of universal entitlement to a comprehensive range of services. That includes both the 1966 legislation and the Canada Health Act in 1984.

In 1984, which was a pivotal year in the health care system, the Canada Health Act was passed and, at the same time, there was a change in government that brought with it a change in the ideas of how the economy should be stimulated. It is fair to say that the Mulroney government was committed to an economy that was export-focused, or export-led, for economic growth. That is one of the reasons why they negotiated trade liberalization. Many of the objectives during that period clashed with the intent of the Canada Health Act and the goals that Canadians had for the health care system.

The underlying principle for the health care system, from about 1986 to the present day, has been that, to support the idea that health care goods and services should be exported, which is one of the things that Canada does well, there must be a health industry that can act as a platform into the global market. Thus, the principle is, "Domestic success precedes success abroad."

That also reflects the tension that I spoke about -- the unresolved tension between health as a profitable industry and health as a public service. I believe that the two do not go hand-in-hand.

The unresolved tension has so immobilized the federal government that in 1984, then Minister of Health Monique Bégin circulated regulations to the provincial health ministers. There was much controversy over those regulations as the provinces did not agree with the Canada Health Act. They felt that it was an incursion into provincial jurisdiction. Eventually, a writ was dropped before the regulations were passed and attached to the legislation.

Consequently, there were no regulations until 1986, when the Conservatives introduced the "extra billing" and "user fee" information regulation. That is currently the only regulation attached to the Canada Health Act.

As this tension exists within the federal government, there also exists indecision about the direction that they will pursue in respect of health care. Thus, we have the current situation and nobody knows how to interpret the act -- what are the criteria of the act? We do not have any guidance, except what occurred during the original debates in the House of Commons, surrounding the introduction of the legislation, because there are no regulations.

In addition to the federal government's clarifying its own position on medicare, we need to develop regulations to clarify the intent of the act, which is the national framework for our health care system. Those regulations must be developed in full public view and with public participation.

Back in the early 1990s, there were conflicts between Health Canada and several provinces, including both my province of British Columbia and Alberta, over the issue of extra billing and user fees, or "facility fees" as they were called then. Diane Marleau, when she became the health minister in the new Liberal government, also inherited a piece of legislation with no regulations and no clarified intent. She tried to confront some of the provinces that were introducing facility fees.

Some of those facility fees, by the way, were not simply deterrent fees. In Alberta, the fee for cataract surgery was $1,275. I suppose you could call that a deterrent fee, because, if you could not afford it, you certainly would be deterred from getting cataract surgery.

Marleau confronted Alberta over the issue of facility fees; however, there was no help in the legislation to deal with such a thing as facility fees. So Marleau issued a letter, a formal ruling I suppose you would call it, to her provincial counterparts on the issue of facility fees. She said that facility fees or user fees applied to hospital services were a violation of the act, and that those services -- acute care, chronic care and rehabilitation -- were covered by the criteria of the act, regardless of venue.

From my perspective, "regardless of venue" was the most important thing that she said in that ruling. "Regardless of venue" means that those hospital services being delivered in the eye clinics or in the health resource group hospital, or wherever, are covered by the criteria of the act. That means no user fees, no extra billing, no means-testing, nothing. Everything is supplied as part of the public health insurance plan.

Marleau was the first and last minister to clarify the intent of the act. To this day, no one has overturned her ruling, but she did not get the support of the federal government that she required in order to push forward that interpretation and ruling. In fact, her successor, David Dingwall, in his 1996 report to Parliament, contradicted her position. He said that, because of health care reform, all these services are going into the community and, unfortunately, once they are outside the hospital, they are no longer covered by the criteria of the act. It was not as formal a position as Marleau had taken, but it contradicted her position.

Marleau's position and her ruling have not been, to this day, formally embraced by the federal government. In my opinion, Marleau's ruling should be upheld by the federal government since it is the only ruling that has ever come out of Health Canada on the criteria for the application of the act. It would certainly clarify some of the outstanding issues that we are confronting now around things like Bill C-13.

I also think it would be helpful -- in fact, I think it is necessary -- to begin considering removing health care from the Canada Health and Social Transfer. I say this for a number of different reasons. First, the federal government has no idea how those cash transfers are being spent. They could be spent on post-secondary education, on health care or social assistance, being the three areas within the CHST portfolio. Most likely, they are spending it on health care but at the expense of other very important programs. For that reason, I think that health should be removed.

The second reason is something that happened when the CHST was introduced. There were nine amendments to the Canada Health Act as a consequence of the CHST. Most of them were minor amendments, changing references to EPF funding and cash transfers. The one important amendment was the repeal of section 6 of the act. Section 6 was the only part of the Canada Health Act that obliged the government to dedicate funding to what were termed "extended health services." Extended health is now the fastest growing part of the health system. It includes home care, nursing home care and ambulatory care. Basically that covers home care, community and long-term care.

The repeal of that section from the Canada Health Act has removed the government from that area, in spite of the rhetoric that comes from the federal government about home care and a national home care program and so on. The government has actually cut their legs from underneath them by repealing that section of the act. If they had not done that but had upheld Marleau's original ruling, we would not need to talk about a separate home care and community care act.

Finally -- and I know this is extremely controversial, but I will say it anyway -- we need to consider a constitutional amendment to divide jurisdiction in health care between the provinces and the federal government. I know the provinces would squeal about that, but the provinces have done nothing but squeal about the federal government's involvement. The Constitution has not been clear about jurisdiction in health care.

This question was addressed in 1948 by the Rowell-Sirois commission. They recommended that the jurisdiction be left undefined so that there could be a potential for cooperation between the provinces and the federal government. That was wishful thinking. It has never come about. We need to consider shared jurisdiction and shared funding and conditional funding to the provinces, with 50-50 jurisdiction and 50-50 funding.

If that happened, some of the other problems we are confronting now would be more easily addressed. I am not saying they would be solved, but they would be more easily addressed.

Mr. Robert G. Evans, Director, Population Health Program, University of British Columbia: Mr. Chairman, I will not quote Maurice Duplessis or try to enter into a constitutional discussion. That is not where I want to go.

The phrase that came to mind as I was thinking about these issues goes back to Sir Isaiah Berlin who distinguished two different styles of intellectual approach or ways of understanding the world under the phrase, "the fox and the hedgehog." The fox knows many things and the hedgehog knows one big thing.

In dealing with this set of issues, we might want to think about the approach of the hedgehog in looking at the fundamental principles and structure of our system. We know "one big thing" surrounding the effects and the success of a universally funded system.

When we come to think about how the system must be improved and adapted to changing circumstances, then we are in the position of the fox. There is no magic bullet. Actually bullets tend to kill people, rather than make them healthier. There is no dramatic stroke that we can take to somehow change the system for the better. We probably could change it for the worse, as with bullets. There are a number of things that, if we are clever enough, we can do to make the system work a lot better.

I ran across a paper by Professor Contandriopoulos of the University of Montreal that has just arrived in Volume 1, No. 1, of the Canadian Journal of Policy Research, which has just come out from under embargo. His paper on the situation of the Canadian health care system draws an important framing distinction. He says that we are in circumstances in which, like every other health care system in the developed world, we are engaged in trying to think through reform to deal with a crisis. These problems are universal. Any structure, any approach, that treats medicare in isolation from the rest of the world is almost certainly misleading.

On the other hand, while we share the common problem of adaptation and reform, we are in a peculiar circumstance in that we do not live on the shores of the Baltic; we live next to the United States. The journal volume which I referenced is dedicated to all the issues and problems surrounding continental integration. Contandriopoulos raises the question: Is it possible to have, in an integrated North American environment, two systems for health care based on totally different principles? He draws from that the notion that, yes, it may continue to be possible, but it will require continuous political management and will. If you simply let things slide, if you approach the problems with an attitude of benign neglect, and one sometimes has the feeling that our governments have done that, then the natural forces take you in the direction of an American style system.

That system last year was described by the editor of the New England Journal of Medicine, in introducing a series of articles on the American system, as at the "most costly," by a very long margin, the "most inefficient," by a substantial margin, and the "least equitable" system in the developed world. That is the direction in which natural market forces and natural integration will take us, unless we are continually prepared to deal with our system consciously, actively and thoughtfully.

Furthermore, not only is the American-style approach all of the things described in that New England Journal of Medicine editorial, but at the moment it also seems to be rather helpless and hopeless, judging from articles coming out in the New York Times. Managed care seems to be failing, and they have nowhere else to go.

Canadians are in this peculiar environment in which we must continuously maintain the existence of the system, as we must the existence of the country of Canada itself, by acts of will. We cannot rely on natural forces to do it for us. That is a fundamental perspective that Professor Contandriopoulos lays out in a particular way.

If we accept that, what then? Do we not have a crisis? If 80 per cent of the people in the country think we have a crisis, then we have a crisis. There is no doubt about that. Whether the crisis is what they think it is or not is another set of more complex questions, but there is a problem here.

We might approach it in the spirit in which a physician might approach a patient's crisis. Providing we are not in the emergency ward and bleeding to death -- and we are not, despite the rhetoric -- the physician would take a history, do some tests, gather some data, and try to formulate a diagnosis. When that was done, the physician would think through an approach to therapy with perhaps several different therapies in mind, but the structure of history-diagnosis-therapy seems to be a rather good one.

Is that what is going on now? No, it is not. We have people rushing forward energetically and loudly proposing therapies. Then they work back to look for a diagnosis that will be consistent with the therapy they have recommended, so they make that up. "Forget about history and tests. We are in a crisis and we are busy here."

This is the pattern of behaviour, which I think all of you will be able to see around you. This pattern comes from the fact that, rather than having a common objective -- I have used elsewhere the notion of the death of a steersman -- and trying to find out how best to get to that objective, we are instead in a world with multiple agendas with very different purposes being hooked on to our health care systems.

Forty years later, heaven forbid, we are back here talking about user charges again. Those recommendations come out of separate agendas that are not connected with what might be a broad, loose, ill-defined, overall objective of efficiently providing effective and equitable care. We actually do believe in such care and we do try to achieve it, but private objectives are driving many of the recommendations for changes in the system.

I would link those private agenda objectives under three heads. I think you can hold onto them in your minds quite quickly -- and I do apologize for not having comprehensive notes. The three heads are: "Who pays?"; "Who gets?"; and "Who gets paid?"

"Who pays?" has to do with tax finance versus private insurance versus user pay. The more you use tax finance, the more you take the money from the healthy and wealthy, because the wealthy pay more taxes, in general, and the healthy do not use as much health care. The more you rely on private finance, the more you take the money from the unhealthy and the unwealthy. Therefore, there will be a continuing contest between the healthy and wealthy on the one side and the unhealthy and unwealthy on the other side over the most appropriate form of financing.

This is in no way peculiar to Canada. There is no extensive evidence from the European Community or the United States. It is a political judgment. The distribution of the burden -- "Who pays?" -- will be heavily dependent on the particular sources of financing.

The "Who pays?" question is critical to the sources of finance. The issue of taxation versus private finance is an issue of whether you want the heavier burden to lie at the lower or the upper end of the income distribution. Some very interesting work on that has come out of the University of Manitoba, and I have some coloured charts if anyone wants to look at them.

"Who gets?" is related to that. Do you get access based on your ability to pay or on your adjudged need. The answer is never exactly one or the other, but the more heavily you rely upon, say, a two-tier system with a user-pay component, the more you will find that the ability to pay is driving access. There are no mysteries about this. Economics is not really a science, but sometimes you can maintain a firm grasp on the obvious. The "Who gets?" is the question that is driving the arguments over a two-tier system in this country.

Then "Who gets paid?" has to do with both the kinds of people and the kinds of organizations that can get access to the market. Is there a space for private insurance, for example, or not? If so, then how much do they get paid? Again, the arguments over extra billing, double billing, facility fees, and so on, all arise out of efforts by care providers to get around the semi-effective bargaining over the costs, which you get from provincial governments but which private systems are incapable of providing.

The notion that you require a public, political and governmental will to mobilize a general view of what we want in our health care system -- and that general will is out there, as we all know -- and to mobilize that against the fragmenting forces of "Who pays?", "Who gets?", "Who gets paid?" is what makes the role of government essential in this whole thing.

That points to why, as Colleen Fuller says, a policy of benign neglect leads to continuing deterioration.

To go back to the history again, throughout the history of medicare, and even before, there has been continuous rhetoric, political theatre, about the crisis in the system. The Financial Post invited me to its first "Crisis on Medicare Forum" in 1974. They held them every couple of years after that until people got bored with that title; then they started to find something else.

The combination of rhetoric of "crisis" with rhetoric of "cost explosions" is as old as our program. The debates over whether more private funding would have some effect, positive or negative, are at least that old. You must understand the important role played by this rhetoric in debates over resource allocation and relative incomes from the beginning of the plan. You do not want to take it at face value.

On the other hand, while the presence of "crisis" rhetoric and "over-funding" rhetoric and "over-cost-explosion" rhetoric does not necessarily mean that those things are going on, it does not mean that they are not, either. That is sort of the standard noise pattern of the system. What really has been going on, throughout the history of medicare and contrasting with the previous decades, is that the system has actually been fairly well controlled. Costs have not exploded, for example, the way they have in the United States, where the principles that Mr. Zelder has so ably articulated have been taken into heart in constructing their system and have produced the most costly, most inefficient system, as I described.

Our system embodied a great deal of inefficiency -- there is no question about that -- and stayed within reasonable cost bounds until the collapse of our economy in the 1980s. It has been the fiscal pressures that have triggered the crisis, rather than the system itself.

A spokesman for the CMA once said, "There is nothing wrong with the Canadian health care system, but we really do need to get a new economy." That was factually correct but somewhat impractical to put into practice. We have been wrestling, for the last ten years, with how to adapt a health care system that is rather stubborn about funding matters to live within a more constrained economy. Despite all the rhetoric of boom, we are not actually doing better in economic growth terms than we were prior to 1980. This just a situation that fosters the expression: "We have been down so long it looks like up to me." Things look good in the past few years compared to where they were in the previous 10.

The economy we have is the one we have to live with, so that is where the issue of the fox comes in. How do we go about trying to find ways of rebalancing the health care system and making the sorts of innovations that we know need to happen.

Here is an interesting contrast.

We have a crisis in the health care system, both in hospitals and in drugs, but they are different crises. Drug costs are running away with the farm. They are exploding; they are going out of sight. Hospital costs have shrunk until the last year or two. They have shrank because provincial governments have had control over hospital costs. They did not have control over drug costs, however, and the costs they could not control are going to the moon. They, by the way, have lots of user fees involved in them, and they are simply going to the moon. The hospital costs, where there are no user fees, have been falling.

That does raise an issue of balance. A lot of the drug costs, by the way, are actually increases in prices rather than increases in quantity or effectiveness. A lot of that is just plain old price increases. Conventional economics has badly misrepresented those prices. There is a new thesis that has just come out of B.C. that demonstrates that rather conclusively. That is being examined next week.

Much more of the drug costs than people realize is just plain old price escalation. The market does not control that.

On the other land, in the hospital sector, we have squeezed out an enormous amount of unnecessary utilization that was there since the beginning of the plants. The patient days per thousand population have been dropping like a stone with all kinds of innovations in surgical day car and other sites and facilities being brought in that should have been brought in long ago, and that were finally brought in by fiscal pressures. Man never reads the writing on the wall until his back is up against it.

What we need to do now is to start taking those processes forward. In the notes that are being distributed to you, I have distinguished between large-scale and small-scale fox type activities. For example, Toronto's national newspaper announced a crisis last winter when the emergency wards were overflowing. You all read the paper; you know it was a catastrophe.

The funny thing was that no such crisis occurred in Alberta. Why not? It was not the user fees. Alberta's public health people had carried out for two years an immunization program against the flu in their long-term care facilities. Consequently, they did not have a crisis. Perhaps Toronto should be thinking of that.

That is by no means the only answer. There are many issues around how people in long-term care are looked after. We need some major changes there. One thing we do need there more space; we do not need more space in acute care. That is wrong. Do not look at where the problem is; look at where the problem came from, before you start figuring out a therapy. That is a good basic rule, but that is sort of micro-level, important, but specific-intervention stuff.

On the macro level, the National Forum on Health predicted, among other things, that unless we got a public pharma-care program that was universal and publicly funded, there would be no way of getting drug costs under control. That prediction is looking pretty good. Are we happy with that? The decision seems to have been taken not to go that route, and those costs will continue to escalate.

What we are seeing now, and we saw it in the Quebec plan, is a lot of effort to move the costs from one person's budget to another. Move it off the public budget and move it onto the private sector. Move it to the private insurer; now move it back to the individual. Bring in user charges. That will keep it all under control. No, no. Give it back out to the public and let the public take control of it.

If you engage in a policy of trying to shift costs rather than finding solutions to control costs, you will never succeed in controlling costs. The program of shifting from A to B induces the program of shifting back from B to A, and the costs keep escalating. The Americans have demonstrated that in spades for 30 years. Mr. Zelder is right: we have learned a lot in 30 years. One of the things that we have learned is that that does not work.

What do you do? What you have to find -- and this will take fairly aggressive government action -- is a way of using the information we already have, both on how to do things right and on how to do the right things. That will require, and hear I start to overlap a little with Ms Fuller, more coordination between the federal and provincial governments. I think that the Prime Minister has said -- although I am not sure publicly -- that the EPF arrangements of 1977 were a mistake, because they disconnected the federal government and the provinces.

A basic proposal would be for the federal government to ask the provincial governments what their real priorities are, and they do not have to be the same in each province: "What are your key priorities? Where is the shoe really pinching? We will come to the table with two things: One, money, to help with that; and, two, a willingness to discuss how we will know if our money has been successful in addressing the problem." In other words, some mechanism of joint accountability is required. I do not mean report cards to the population; I mean some way of knowing when you do new stuff and when you bring in new money that you have a strategy for what you will do with the money and how you will know if you have been successful. That does not seem to me to be an unreasonable thing to ask for as a general proposition. I believe that is the way we have to go.

On drugs and on home care, you really still do need universal programs, and they can be cost-saving. Down at the micro level, you need <#0107> I do not want to use the word "banal," because they are important -- things like immunization programs in long-term care. In the mid-range, you need the structure for better federal-provincial cooperation over target selection, identification of the key problems, putting in the money that we now have, and determining if you have been successful -- feedback.

Given those things, we stand a good chance of not drifting into the American catastrophe.

The Chairman: Thank you very much to all three of you. It has been a long time since I have heard three witnesses who were in such complete agreement.

I will resist the temptation to lead off the questioning, because we might never get to anyone else, and I will call upon Senator LeBreton.

Senator LeBreton: In her presentation, Ms Fuller underscored what she believed to be the present debate. She said that the present debate is health as an industry and health as a public service. How will we ever resolve that? What do you think of that statement? How do we, as a country, in a global economy, maintain our identity and our pride in our health care system, and also approach this as "health as an industry"?

Mr. Evans, would you comment on that? Then perhaps Ms Fuller may have something further to add.

Mr. Evans: We all use words in different ways. When I teach health economics, I teach that the health care sector is an industry, in the sense that it absorbs resources and produces commodities and distributes those to people on various terms, but that it is not a business.

You can use the terms anyway you like, but all I mean by that is that the health care sector has the production structure of an industry, but that the incentives that bear on people in that sector are different from normal business incentives. In Canada, as everywhere else in the world, it is predominantly built around not-for-profit hospitals and not-only-for-profit professionals, but it has a significant component of for-profit organization, particularly in the areas of drugs, equipment and so on.

The question then concerns which parts of the sector you want to have organized on standard business principles and with standard for-profit motivations. What are the consequences of doing that, if your objectives are to get to people the care that they need?

If your overriding objective is that people should get what they need, regardless of their ability to pay for it, then that is not something that conventional markets are well adapted to do. When we say that health should be a service, that is what we are saying. We are not saying something about how it is produced and what the industrial structure is, we are saying what do we want the outcomes to be?

The structures should be made to produce the outcomes rather than the other way around. Markets are made for people, not people for markets. You want to choose the appropriate structure to get the result that you want.

Much of the opposition to the intrusion of standard business principles for profit operation has been based on people's concern that it leads to patterns of outcome that are not what they want. A nice way of describing this is through a term introduced by Professor Uwe Reinhardt of Princeton University. That term is the "BSYC".

Has anyone heard of the BSYC? It is a "biological structure yielding cash". There are a number of them around this table and in this room. They can be securitized, and are, as portfolios of covered lives, and they can be used as a basis for generating derivatives, which are then traded in financial markets. Professor Reinhardt, who is a professor of corporate finance, or finance generally, has produced some interesting descriptions of what happens when you start trading portfolios of securitized BSYCs.

You do not get quite the same results as you do when you try to run health care as a public service.

Ms Fuller: I was referring to for-profit health care as opposed to a public service. I agree with Mr. Evans that our terminology is fluid on some of these questions. I am not opposed to a health industry, per se.

However, there is no resolution between the delivery of health care as a way to earn a return on investment and the delivery of health care in a way that upholds the principle of universal entitlement. I am talking about services, not the manufacture of medical equipment or the manufacture and distribution of medical devices and things of that nature.

I am not opposed to the private sector's being involved in the delivery of health services. The system that we have had historically, and should continue to support, is a system that is accountable to the communities in which the services are delivered, and is mainly delivered through the publicly funded non-profit sector. The non-profit sector is much more limited in terms of its ability to earn revenue than the for-profit sector, for obvious reasons. It cannot go to the stock market or to investors, and it cannot incur debt. That is the way in which the for-profit sector is able to earn revenues in addition to user fees.

I support the delivery of services through the private sector, but not through the for-profit sector, so I would say, yes, let us support and devise ways to develop an industry, but not the development of tools that allow people and investors to earn a return on an investment.

The Chairman: I must ask you a question. I have a huge problem with the underlying logic of your position. You jump from saying that you favour universality -- so do I, which would mean that everyone gets the same service -- to a conclusion about the person who delivers that service.

Consider a case, for example, where everyone in the country had a voucher, or some kind of credit card, and every time they went for medical assistance the bill was ultimately sent to the government, which would give you all the elements of universality you want. How does that possibly have any implication for the person who actually provides the service? Whether those who provide the service are not for profit, are for profit and losing money, or are for profit and making money, is absolutely unconnected.

You said it perfectly a minute ago. It was a little less obvious in your paper. However, I was troubled by it in your paper. I find a lot of people leap to the conclusion that, if something is universal, that says something about the delivery system as opposed to saying something about what it really is, which is a service being available to people.

I have a difficulty with that leap, which I regard as absolute non-logic.

Ms Fuller: You must look at the source of profit in health care.

The Chairman: Just a minute. Your objective, as clearly stated by you, and by all Canadians, is that everyone wants to have access to the service.

Ms Fuller: Right.

The Chairman: No one around this table would object to that. How does that say anything at all about the person who should deliver the service? They are two separate ends of the issue.

Ms Fuller: First, if you are talking about a public payer, the public purse is not a bottomless well. You do want to have some control over expenditures in health care. Thus a voucher is not offered to people with the message that they can choose between this service over here, which will be delivered by a non-profit entity at cost, with 10 per cent for overhead, or whatever it is, and that service over there, where the same service will be much more expensive. Governments will not do that, and, as a taxpayer, I do not think they should do that. There should be some cost control in the delivery of health care.

Second, when investors put their money into something, they expect a return on their investment. That is just the way it works. They do not want to put their money into something and then suffer a loss. If you invest in an entity that will deliver health care, you expect to earn something back.

The Chairman: Of course.

Ms Fuller: The way that you will earn something back should not be from the public purse. I do not believe that.

The Chairman: Your leap of logic is that you have two separate issues. The first is that you do not believe that for-profit organizations should be paid by the public purse, in which case, as an aside, virtually every large corporation in this country is in trouble by virtue of that definition. We will set that aside. They are separate issues that you have linked, although in your current explanation they are clearly divorced.

Mr. Evans: My response to your question would be that you are absolutely right: one does not follow from the other.

I agree with the chairman that the objective of universality does not imply anything one way or the other about the delivery of the services. That is quite correct.

The concern arises from a number of other aspects of the delivery of health care, which would be in place whether or not you had a commitment to a universal public system. After all, the Americans used to have a delivery structure that was much like ours, long before either of us got into the business of trying to develop public insurance programs.

The issue comes down to the protection of vulnerable interests in a situation in which patients in general do not know their own needs. This vulnerable interest language goes back to the Ontario Attorney General's commission on the professions. They got that right about 20 years ago.

When you are dealing with people whose motivations are strictly for profit, that is what the words mean. It is as Vince Lombardi said, "Profit is not the most important thing; it's the only thing." These people develop strategies for enhancing profit. If they do not, then the shareholders will see that their replacements do.

Those strategies have been put nicely in a flyer that came across my desk last week for a conference sponsored by KPMG and one of the other accounting firms. They talked about growing and promoting the evolution of the consumer into a steadily wider range of potential services. That is exactly what we are seeing with for-profit motivation in health care. You see it in the day-care surgery clinics providing cataract services in Alberta -- and in B.C. as it turns out. They are going on very quietly, but it is happening. Those services provide the publicly funded care straight up, paid for my medicare, and then they start sneaking in extra stuff on the side, making claims that are not in fact justifiable about the flexible lens that they will sell you $700 but that costs approximately <#00A3>25 to produce. That enhances their profits.

The worry is that when I go to see a physician, I want to know that that person is worried about my interests, not his or her profits. In general, in Canada, and in most parts of the world, that is what you get.

The Chairman: That argument I understand. That is a completely different issue, however.

Mr. Evans: That is right. Your point is valid, I think.

Senator Carstairs: Mr. Zelder, in the development of your paper you make much about waiting lists. You compare a number of studies that have been done between Canada and the United States and other countries.

It is interesting, though, that always the great deficits are between the American system and the Canadian system.

How do you explain, then, why Canadians have a longer life span and lower infant mortality rates? In fact, Cubans also have lower infant mortality rates than Americans. How do you explain that, while saying that we have this enormous wait for testing? Is there no relationship between testing or the availability of tests and good health?

Mr. Zelder: As I am sure Professor Evans would agree, the finding is that in developed countries the consumption of health care is not strongly related to life expectancy and other broader measures of health status. However, the question seems to be an important one.

Currently, we are involved in an empirical project at the Fraser Institute where we are looking at waiting times for cardiovascular surgery and cancer radiation treatment. We are looking at the provinces that have longer waiting times for those two types of care to determine if there is a higher mortality rate. In fact, the preliminary results indicate that they do and that there are adverse outcomes. They do not show up at the national level when you encompass all causes of disease and death across all age groups, but they do show up in these particular areas. I believe that to be cause for concern.

Senator Carstairs: The other issue that I would like to discuss is the whole concept of user fees. In my, perhaps naive, opinion, I believe I do pay user fees -- they are called taxes. I pay them at the provincial level and at the federal level. What I hope to buy with those taxes is access to quality health care when my family and I need health care services. Why is that not a good system of user fees?

Mr. Zelder: I have not explained myself clearly, then. I was attempting to make the distinction between up-front payments and payments made at the time of use. The point is that, yes, up-front payments are made through the tax system, but payments are not made at the time of use of the health care system. The idea of the system is that you make this up-front payment through tax dollars and premiums in two provinces and then you have access to the system for free out of pocket from that point forward. Access to the system is limited, as the waiting list data indicate.

The point about user fees is that a user fee is a fee at the time of use -- a fee connected to a particular "doctor visit" or surgical procedure. We do not have those fees in the system. We have up-front fees or payments. Yes, there is payment of a sort for the system, but it is in a way that causes it to work poorly.

Senator Carstairs: Let me give you a specific experience. When I was pregnant with my first child, I went to a gynaecologist-obstetrician who charged a user fee to some young women who went in at that same time, but I was not asked to pay anything. They were asked to put money on the table. I became curious and asked, "Why are they asked to give money and I am not asked to give money?" The explanation was simple, "You will pay at the end, because we will send you a bill and we trust you to pay that bill."

The visits to an obstetrician's office are, of course, regularly repetitive. I would see many of the same faces at each of my visits. Then, I noticed that these women dropped off. They dropped off because they could not pay the fee that was required of them at this office. I thought that our system was different and therefore better.

Mr. Zelder: I appreciate what your experience suggests and what intuition suggests to many Canadians, but what I am trying to convey most urgently is that, in fact, that intuition is largely misleading. Yes, low-income people are deterred from consuming care that improves their health if they are required to pay user fees. However, it is not so for the non-poor, who, under this system, are consuming some care that does not benefit their health. The RAND studies indicate that. We should provide no barriers to low-income people in pursuing health care, but, yes, we should erect barriers to those whose incomes can allow it.

Senator Carstairs: That does not make any sense to me, because the wealthier one is in Canada, the healthier one is. Who will pay these user fees? It seems to me that everyone will have to be removed from the equation: the welfare recipients and the working poor and then the middle class, upper middle class and the wealthy people, because they take better care of themselves as they have the financial means to do that, to eat better and lead healthier lives, et cetera. Now who will pay the user fees? It seems to me that there is no one left to pay.

Mr. Zelder: I can assure you, from my own experience and those of my loved ones, that the middle class are not immune to health problems and they too need to use the medical system. All strata of society use health care. To suggest that the poor only use it is just not correct.

Senator Carstairs: I did not suggest that. I asked, "Who will pay these user fees?"

Mr. Zelder: I suggest that everyone in society, except for the poor who should be excluded from paying user fees, will pay these fees under a sensible system.

Senator Carstairs: I am in the top 1 per cent of the income system, so I will not pay user fees, because I will not use these fees.

Mr. Zelder: Of course you will pay them. Everyone who goes to see the doctor must pay them. If you are a high-income person and you go to see the doctor, you will pay user fees.

The Chairman: The issue, Mr. Zelder, which you gloss over, is essentially one that concerns the determination of the dividing line. What is the means by which it is decided that an individual is on one side of the user fee line or the other side?

In the opening statement of your document, Mr. Zelder, there was mention of the "free care ahead" and "no beneficial impacts outside of those sick poor who are approximately 6 per cent of the population". Now, in response to Senator Carstairs' questions, it is suggested that there would have to be a way to make the service available free to the kind of people that the senator indicated would drop off their visits to the obstetrician because they could not pay. Surely the dilemma is determining the mechanism by which the decision is made as to who gets paid and who does not get paid?

One of the underlying tenets of universality, although it was not mentioned explicitly by Ms Fuller, has always been that there shall not be a means test. I do not see a clear way to accomplish your dividing line objective without, in fact, a means test. I noted that in Mr. Zelder's paper care was taken not to use that term. In fact, there is no description of how the dividing line would be drawn.

First, am I correct in saying that under that scheme there would have to be a dividing line? Second, how would the line be drawn? Third, am I right that it is impossible to draw a line without a means test?

Mr. Zelder: Yes, there would be a dividing line to make the system work as to who would be exempted. Yes, to do that would require a means test.

The Chairman: The means test would have to be used.

Mr. Zelder: Yes, the means test would have to be used to exempt low-income people from paying user fees. To ensure that they are not harmed financially then, yes, the means test would be necessary.

The Chairman: How would that be done?

Mr. Zelder: The test would be based on income and assets. If there were people whose income was lower than a certain level and lower than certain asset holdings, they would not pay out of pocket to access the medical system.

The Chairman: I will return now to the comment on the waiting list issue or the issue in response to Senator Carstairs regarding the differences between the Canadian and the American systems. Senator Carstairs mentioned the lower infant mortality rate and a variety of other things. Surely that has been driven by the universality issue that Ms Fuller talked about. Thus, you are actually proposing that we reinstitute a means test, which was one of the underlying things that was taken out when medicare was started. The real suggestion being argued for right now, after I clear away all of the various arguments, is that a means test is the solution to the problem.

Mr. Zelder: Yes. As I have already said, I believe that a means test would have to be the basis for a compassionate policy.

The Chairman: All right. That one sentence crystallizes what I thought you were trying to say.

Ms Fuller: The means test was dealt with in detail by the Royal Commission on Health Services because it was one of the proposals from the insurance industry and the Canadian Medical Association that people be means-tested to determine whether or not they would be subsidized by the government. The proposal was rejected flat out by the commissioners at that time, not only because of the fact that they felt that Canadians would look at means-testing as a demeaning experience, which it is, but also because of the whole infrastructure that would be required to provide the appropriate support in the effort to determine eligibility for public subsidy. They prepared complicated tables that showed how many people would have to be means-tested according to the proposals from the insurance industry and the Canadian Medical Association. They predicted that, were they to take that route, by the mid-1970s 70 per cent of Canadians would have to be means-tested.

The Chairman: That is the point that Senator Carstairs was making when she questioned who would be left to pay if everyone is exempted.

Ms Fuller: Exactly. That was their calculation at the time and I have no idea what it would be today. They had a very elaborate argument that they countered the insurance industry and the CMA with on the issue of user fees.

The Chairman: Professor Evans, is there anything you would like to add on this one point?

Mr. Evans: It is probably worth noting that Mr. Zelder has talked a lot about the data from the RAND experiment. It is worth noting that that experiment excluded everyone over the age of 62, thereby excluding the most vulnerable parts of the population. Essentially, it showed that people did respond to user charges, but it did not show that the global effect of that response was to affect total costs. That is why we find that, despite heavy user charges in the United States and despite heavy user charges for pharmaceuticals in Canada, those costs actually escalate much faster than the costs in a public system.

Mr. Zelder: That is simply false about there being no effect on total costs. The data clearly indicates a 19 per cent reduction in total costs.

Mr. Evans: We are using different words. We are talking about total costs in different terms. I am talking about the costs of an entire system -- American or Canadian.

The Chairman: What do you think Mr. Zelder is talking about?

Mr. Evans: I believe that he is talking about the total costs of the people in the experiment.

Mr. Zelder: I am talking about total spending on health care; it fell by 19 per cent when a 25 per cent co-insurance payment was set.

The Chairman: Yes. I understand what you are saying.

Senator Robertson: Generally speaking, most Canadians have felt that we have a health system and that the Americans do not have health system. Rather, they have bits and pieces all scattered around.

I am worried about where our so-called health system is going and would like to ask each one of you to describe an ideal health system for Canada. Considering the financial aspects and all the problems we have, what do you think would be an ideal health system?

Mr. Evans: An ideal health care system is one that you do not need, speaking as one with considerable experience.

Senator Robertson: I do not believe that because you do not need to go.

Mr. Evans: I am speaking as a patient. I am speaking as one who has done more field work in the last five or six years than anyone should ever want to do. Do you want to know about waiting lists? I can tell you from a patient's point of view about waiting lists, frequency of visits and a host of other things. The best indicator of how a patient is doing, is how frequently the specialist reschedules the visits. When the appointments are two or three times a week, it is not good -- forget the user fees. When they are stretched out to two or three months, that is good. Thus, I know clearly that the best kind of health care system is the one that I do not need. That is a sense a frivolous answer, but it ties in with the point that was made about the things that we need to do, other than the health care system, to try to improve our health.

The ideal system is one that we, in principle, know. We can express it quite clearly. We want a system that provides effective, not ineffective, care. That is not something that patients are usually able to judge, but that is what we want. We want effective and compassionate care that is humanely delivered to those who need it and not to those who do not need it. People who want care when they do not need it are often diagnosed as having Munchausen's syndrome, a form of mental illness. We want the costs kept as low as is reasonably possible; we do not want to pay excessive prices to anyone. We want to spread the burden -- and here we get into controversy, but I believe most Canadians want to spread the burden of paying for that care, more or less in terms of ability to pay rather than in terms of the capriciousness of illness.

I believe that you would get, not universal, but quite a broad agreement on that general statement of ideals. When we progress beyond that, then we reach the point of discussions on how to achieve that. We have gone part way on the financing side, but every royal commission -- and I participated in one; I have had that privilege -- and every other form of public commission that has looked at this has said, "There has to be more explicit management and a better information base to ensure that the care that we are providing is in fact effective, as we hope, and that it is going to the people who need it, as we intend."

We have made considerable strides in that direction but there is still a long way to go. That does not put us behind anywhere else in the world. I am sick and tired of the "bronze medal syndrome" in Canada, which is always to look ahead to see who the leaders in the race are. In a number of respects I think we are, but that does not mean the race is anywhere near over.

Senator Robertson: Mr. Evans, in your perfect health care system, where will the services be delivered? I am not only thinking of a semblance of where it is most appropriate, but how would you like to see the services delivered? Most people think of the health system as the medical profession and the hospitals. With that fact in mind, how would you develop the services?

Mr. Evans: I would certainly want to see more of what is now happening, which is to move the services out of the hospitals, if by "the hospital" we mean a place with a whole lot of in-patient beds. There have been dramatic changes in that respect and there could be substantially more. Acute-care use has been reduced sharply but some of the studies at our shop and other places suggest that, with the appropriately supported home care, you could get still more, particularly medical, not so much surgical, cases out of the hospital.

Surgical cases can be moved to non-in-patient facilities. Whether they be free-standing or coordinated under a general administrative umbrella called a hospital or a regional authority is a question of what works best in a particular setting. When possible, it is preferable to have people awake rather than asleep, and sitting up rather than lying down.

In respect of long-term care, which is the toughest nut to crack -- that is where the least progress has been made <#0107> the public told those of us on the B.C. Royal Commission loud and clear that they want to go home. That is why our report was called "Closer to Home." To the extent that it is economically practical, it is preferable to have services delivered in the home, or delivered in facilities that are as home-like as possible. There are obviously both economic and clinical constraints related to that; nevertheless, that is the direction that should be taken.

I strongly believe that the health systems that we know all tend to move the site of care to the most highly trained professional. This is as true in Sweden as it is in the U.S. and in Canada. That seems to be the logical thing to do. However, we have known for 30 years that a great deal of primary care could be provided by nurse practitioners rather than family practitioners. We have proven several times over that a high school graduate with 20 months training can perform most general dentistry. Those sorts of developments, which were actively pursued in the early seventies, were choked off when we suddenly found that we had a dramatic increase in physician supply, brought about by a falling birth rate rather than any plan to increase physician supply. That continued until about eight years ago. It choked off the whole area of re-balancing the type of people who supply health care.

We now have the opportunity to re-open this issue, but there are two constraints. First, all the medical schools are telling us that there will be a shortage of doctors in the future and that, as such, the answer is to "grind out" more doctors. If we do that, we will loose the opportunity for another generation. Second, nursing has changed a lot in 30 years. Nursing leadership now is much less interested in what they might pejoratively call "becoming junior clinicians," and yet that is where the need exists.

The solution is not to provide alternative types of services in alternative types of settings. A significant advantage would be gained by substituting more appropriate but less extensively trained personnel. When I was a graduate student in the U.S. and then back here in Canada, I always received my care in clinics. The balance of care was downloaded to the person who had the necessary competence but not beyond that. We made that same recommendation in the B.C. Royal Commission 10 years ago. That is part of the change in the mix. As you well know, however, the resistance to that is quite intense.

The Chairman: The resistance is on the part of unions -- or "professional associations," as they prefer to be called. I do not use the word "union" pejoratively, but that is what they are. That is the source of the resistance. What I hear you saying, Professor Evans, is that there is not a lot of disagreement in the country in terms of what the objectives should be but that many of the most economical and efficient ways to achieve those objectives are blocked by "entrenched interests" who are arguing for their own private interests above and beyond the broader public interest. Is that a fair one-sentence summary?

Mr. Evans: Yes.

Mr. Zelder: At least three elements make up an ideal health system: first, a user fee for the non-poor; second, non-collectively bargained doctors fees; and third, hospitals that are run without government control of funding and allocation of resources.

Ms Fuller: I will speak as a patient. From a patient's perspective, an ideal health system is one that supports patient autonomy -- not just patient autonomy but individual health autonomy -- which patients are losing, to some degree, as a result of changes that are taking place. Patient autonomy and patient education are very important.

Another characteristic of an ideal system is cooperation among funders and providers of health care. That does not exist nearly to the extent that we need.

I agree with some of the recommendations that came out of the Seaton commission -- not all of them, but a great number of the recommendations regarding the delivery of health care outside of the acute care sector, outside of hospitals, in our communities and in our homes. Community-based care is an ideal level of health care delivery. Institutions should not be the only places where people can access health care services.

There also must be a high degree of public accountability in the provision and funding of health care.

Senator Robertson: I have always felt strongly that health services should be delivered as much as possible in the community -- at schools, at the workplace, and at home. It is our own fault, I suppose, that hospitals are so strong.

I am among the few who wonder how much more money the health system needs; the money is being spent in the wrong places, in my opinion. We place the majority of health services under a hospital roof because a hospital is the first 50/50 cost-shared unit. Now, we are having trouble pulling these services out. We are not doing very well across the country in terms of pulling those services out from under hospital roofs. Surely, with today's technology, the hospital should only be taking care of critically ill people, people whose life is threatened or people who suffer from invasive processes. The remaining can be accommodated in less expensive environments.

I will read your answers carefully, but I also think there must be horizontal funding in health regions and not vertical funding of every little thing that goes on now.

Senator Callbeck: My question concerns the federal-provincial funding relationship.

Dr. Evans, you said that we need to do the right things in the correct manner. You mentioned the idea of the federal government asking the provinces about their priorities, and that the federal government will want to test the outputs or how effectively the money is being spent.

Ms Fuller, I assume that you believe that cost sharing is better than the block funding. I would like to hear your comments on the federal-provincial health care arrangement.

Dr. Evans, in respect of federal funding to the provinces, what percentage of the money should be coming from the federal government?

Mr. Evans: I would start with a 50/50 split, but I do not know the answer to that.

What I am referring to is new money. I am not talking about shifting from block grants and tax points all the way back to the pre-1997 environment. That does not seem to be realistic. However, it is a question of saying, "We have new money to bring to the table and you have new or old problems. Let us see how we can match those up." As to whether the federal contribution should be 50 per cent, or larger or smaller, that gets into federal-provincial fiscal negotiations and I do not feel I have any competence in that area. However, I would urge the principle involved therein.

I am not sure whether your question was a broader one about what proportion of the funding for health care should be coming from the federal government. Were you also addressing that issue?

Senator Callbeck: Yes.

Mr. Evans: First, for medicare-covered services, the original 50 per cent was not a bad idea. However, it is important not to buy into this nonsense of it being down to about 13 per cent. That seems to be political posturing that is difficult to justify on moral grounds. You do that by throwing in everything in health spending, not simply the things that are covered by health care. You do that by ignoring the whole issue of tax points, which is an important part of the whole picture. You also do that by doing some black artwork on how you can crank out the CHST and allocate it among the different components.

From my point of view as an economist, it would be a good idea if you were to segregate the CHST amount, so that it made sense to allocate x-amount for post-secondary education, x-amount for health, and so on. I expect, however, that that is the comment of a complete political neophyte and that it would not make any sense to try it.

It embarrasses me when newspaper reporters or radio interviewers ask me: "What is the federal contribution at the moment?" I reply, "I do not jolly well know. You choose your assumptions and use whatever number you like." Transparency would be better served if we had a better way of segregating money. However, transparency is not always a political virtue. Am I getting anywhere with your question?

Senator Callbeck: Yes.

Ms Fuller: There have always been arguments between the provinces and the federal government about the issue of funding and whether it would be conditional funding, and so on. One of the things that was reinforced, unfortunately, with the introduction of the Canada Health Act was the idea that funding would be used as a club to force compliance with national principles or criteria. In the original discussions about medicare during the 1960s, funding was seen as an enabler; in other words, funding would enable provinces to maintain national standards. However, now, even when Canada is reporting to the UN or to whomever, it refers to net federal funding as something that will force compliance <#0107> in other words, if there is no compliance there is no transfer of funds. We need to re-establish a much higher level of federal financial participation in health care funding and to rethink the principles of that funding. Is it only to bash the provinces around or is it to enable them to uphold these conditions in a fair way?

The idea of 50/50 funding is not 50 per cent of Ontario's total health bill, 50 per cent of B.C.'s, and so on, but 50 per cent of national expenditures, which, in theory, would help the provinces meet those national standards.

Mr. Zelder: I agree with Professor Evans that it is impossible now to know how much the federal government spends. As to how it should be divided between the federal government and the provinces, again, that is outside of my bailiwick.

I would caution against the system of matching grants that preceded established program financing. As I mentioned in my paper, a study found that that system reduced the price of health spending for the provinces, because of the matching grants, so they shifted money away from other social programs. There was a distortion. I would discourage the idea of matching grants and recommend more the idea of block funding for health. However, it would be nice if it were transparent.

The larger issue involves reducing the share of public funding. There is a lot of concern about accountability. However, we do not have accountability because there are limited incentives for accountability in the current structure -- that is, incentives that exist when private firms either stay in business or go out of business based on how they serve their customers.

Mr. Evans: There was a lot of rhetoric back in the early seventies about 50-cent dollars and the irresponsibility that this generated in the provinces. There were two problems with that. First, as Colleen Fuller has suggested but did not spell out, the actual formulas were not 50 per cent cost sharing, except at the national level. For each province, the amount of money it received depended on the national pattern and not on its own pattern. If you were spending beyond average for the other provinces, you were not spending 50-cent dollars, you were spending 100-cent dollars.

The Chairman: As Ontario and Alberta did?

Mr. Evans: Yes. Furthermore, the actual record from the early seventies is not one of provincial profligate spending on the health care system. There was a lot of worry about it at the time, but it was probably misplaced. When you look back at the historical record, there was a dramatic slowdown in the expansion of spending right after the introduction of medicare coverage for physicians in 1970-71. There was a lot of concern at the time, based both on a misunderstanding of how the formulas actually worked and on the fact that there is always a lag in the production of the statistical data.

Senator Robertson: It seemed back then, when the funding was more equally shared, that the commotion we hear today about getting political credit was non-existent. I worked back then and I do not remember people bashing either the province or the federal government because of the way the spending was split. Back then, the political arms were treating health care as a non-political issue, which it should be. However, we have moved away from that. It would be awfully nice if we could get back to that. Perhaps your separate funding for health might be the first step in keeping it isolated from everything else.

Someone else said that there is no doubt the money goes to health. However, in the budget, higher education, for instance, becomes an issue in a have-not province. From where does the money come? We are in real trouble here.

Perhaps we should have a health budget. I am not concerned so much about the national health care budget but I worry about the per capita issue that is happening now. The smaller provinces cannot possibly keep up with quality health care on a per capita basis.

Mr. Evans: It is a scale of economy.

Senator Robertson: It is a scale of economy but they will not be able to do it. It would be nice if we could get back to where it was not a political issue.

The Chairman: I wish to ask a couple of questions -- first, with respect to the tax points and, second, on the public funding position of Mr. Zelder.

I have a question on the tax points question, and it is not to say, "I told you so."

I have the advantage that, in 1977, when I was deputy chief of staff to the prime minister, I argued passionately against EPF on the simple ground that -- and Senator Fairbairn was with me in the PMO at the time -- having been in the government of Nova Scotia and having watched what happened when we moved to block funding for municipalities, it was self-evident that once you gave the money to the provinces via block funding, whether it was cash or tax points, you automatically lost any ability to influence where it went.

With that as background, does it make sense these days, when one thinks of the federal contribution, that one should include tax points that were given away 25 years ago? This concerns your question about how much money the federal government is contributing. It involved a tax cut by the feds and a tax increase by the provinces. However, it was done 25 years ago and it has not been earmarked since then.

When any of you three are doing calculations, do you seriously include that money as part of the federal contribution to health care, or is that ancient history?

Mr. Evans: It depends on the purpose for which you are doing the calculation.

If the question is federal leverage over the provinces under the Canada Health Act, then the tax points could not matter less; they do not exist. If the question is, "Could you get them back again and change them into something else?", the answer is "No". That is water under the bridge. Like Cassandra, being right at the time, old boy, does not get you any extra benefits, it just makes people mad at you afterwards.

On the other hand, if your point is some sort of general, moral or political point that the federal government contributes so little that they should butt out and shut up and not bother us while we get on with doing what we want to do, then on that level the tax points are relevant. That is to say, if you are talking about political or moral credibility or the right to be heard, then the federal government does have a right to be heard because it did give up all that money. It did not just give it up 25 years ago, it is giving it up every year. The effect of that decision continues. In that level of discourse, it seems important to emphasize it.

When we went through the national forum exercise, we invited a number of experts from within and outside government to advise us on whether, if the cash component went to zero, there would be anything left. The answer that came back loud and clear was, "It is the cash, stupid!"

The Chairman: Right. That is part of the camp I have been in.

Mr. Zelder: You will be pleased to know that I agree with everything that Professor Evans just said.

With regard to the federal government's leverage, I have done some calculations concerning, given the current CHST contributions, as to whether it be in the financial advantage of any province to opt out of medicare. It appears to me that, at present, both Ontario and Alberta would save money by opting out. That is, if they said, "We will forego all CHST transfers but we will put in place a system based on the Rand health insurance experiment; we will have 19 per cent lower health spending," that saved health spending would exceed the CHST that they would lose. I believe that pressure is real and that it is growing.

The Chairman: I wish to move to Mr. Zelder's comment on public funding. If I must pay $500 for something -- that is, if I funnel it through a third party, which is what I do when I buy insurance and other things -- other than pure ideology, why do you place such great emphasis on why public funding is so awful?

Mr. Zelder: The reason for that is the difference in behaviour of managers in publicly run firms versus privately run firms. That difference has been well documented in economic literature; it is not a matter of ideology. It says that government-run enterprises do a worse job than the enterprises run by private interests. That is true in all service industries. A comprehensive study was done. Out of 50 studies, only two showed that government firms performed better. My own analysis of the hospital question shows that, in the majority of cases, private firms deliver care better than do government-run firms. That is my concern about getting the public sector out of the health business, namely, that it would lead to improved care.

The Chairman: You argue that it is not ideological, that it is based on empirical evidence; correct?

Mr. Zelder: That is right. It is economic-based.

Mr. Evans: We do not have enough time to comment here in detail, but there are several different confusions there. One concerns the notion that whatever works in one sector of the economy necessarily works in another. It is a general pattern across the developed world that countries do not rely primarily on government-run firms to run their private economies. They do not rely on private firms to run their hospitals. There are very good reasons for that. We have recently had a look at some of the evidence on this.

Mr. Zelder's view of the evidence could be described as idiosyncratic. However, it is it not widely held by many people in the United States, let alone outside. There is a confusion between "government-run," which would include, say, veterans administration hospitals in the United States or the systems of mental hospitals that we used to have in this country, and "government-funded." It is certainly true that government exerts a great deal of influence on hospitals through the funding mechanism, but to suggest that the Vancouver Hospital or the Toronto Hospital is run in the same way as a government department would seem to be naive.

There is a whole series of things that one could say about that. This is like the problem of taking a textbook off the shelf and saying, "one size fits all." There is an old story about the graduate student at the University of Chicago who fell asleep in class and suddenly realized that he was being asked a question. He jerked awake and said, "I'm sorry, professor. I didn't hear the question but the answer is that the money should be controlled."

Senator Fairbairn: I would not want you to get away today without asking you an Alberta-focused question. I am from Alberta. Listening to you today raises all sorts of questions in my own mind. We have a fairly ferocious battle going on there.

One of the things that makes the debate difficult for people to understand is the phraseology, the words that are used -- "private" and "public", "for profit" or "private".

According to the bill, hospitals can contract out to private institutions for certain things. Private institutions will be compensated for those services. The premier told us that Albertans need only take their health card with them, that that was all that would be required of them.

The question that keeps being asked is this: If that is the case, are there penalties in the bill for these private institutions if they try to encourage the purchase of other kinds of treatment? Why would a private institution want to get into this business if no profit was involved?

That piece of legislation is causing elation in some quarters and great concern in others. There is a lot of misunderstanding about the terms and, because of that, about why it is even being done, particularly when there are papers that show that the cost issue will not be particularly addressed by this nor will the waiting lists.

Do you have views on this?

Mr. Zelder: I am the only person in this country who has comprehensively studied this issue and has read all of the studies on the performance of private hospitals versus government hospitals. I have clearly pointed out that there are some studies that show that government hospitals perform better, unlike Professor Evans and other of that ilk who say that there is absolutely no evidence that private hospitals perform better. That evidence is compelling, despite the misinformation that you have been led to believe.

You asked: Why would a private profit-making firm get into this business? They would do it because they can provide the service at a lower cost. That is the only reason a firm would do so. Patients will not come to private firms if they are not getting as good or better care than they are receiving in public hospitals.

This is a perfect opportunity to test to see if this empirical evidence, which is hardly idiosyncratic, will be demonstrated to be the case in Alberta. It has been disappointing to me that such a modest reform has created such a storm of distortion by so many organizations.

Mr. Evans: It may be that Mr. Zelder has read a great deal more than everyone else, because he has certainly found things that other people have not found.

It is interesting that the bill says that there cannot be any private hospitals in Alberta. It starts off by saying, "No person shall run a private hospital." That is not the issue. They can run facilities that do things that hospitals do, but they are not to be called hospitals.

Senator Fairbairn: They are called private surgical facilities.

Mr. Evans: That is right. That is interesting language.

The Chairman: Senator Robertson can correct me, but somewhere in the late seventies the provinces changed from having departments of welfare to departments of social services, so that there was no longer anyone on welfare but the programs remained the same.

Mr. Evans: That is not a bad analogy. The other thing that is extremely tricky is the whole issue of what "private" means. A professor at the University of Toronto did an extensive monograph for the National Forum on Health on what "private" means. Sorting out the language required quite a monograph. In the paper that some of my colleagues and I have done commenting on the Alberta situation, we used a substantial amount of space at the front end to talk about precisely this point, namely, what it was that was bothering people and what different people meant when they talked about "private" and "public."

Those who say that a substantial part of the health care in this country has always been provided by private physicians are absolutely correct. On the other hand, those physicians are not, in general, units of a multinational for-profit corporation; they are private practitioners in private offices. If they were part of an organization that was primarily interested in its biological structure yielding cash, then I suspect that we would be a lot more nervous when we went to see our physicians. We are nervous enough as it is.

The clarification of the language is not impossible, but does take time. It does take several words to sort it all out. In debate, a lot of the discussion has been deliberately attempted to obscure those words.

For my own part, I see no problem at all with the issue of purpose-built special clinics. The notion that they might be more cost effective than just mixing people in with the general run seems to be quite plausible. However, that does not seem to be the issue. The concern about moving out to free-standing facilities is not really the issue. The issue concerns the for-profit orientation and the opportunities that are provided for that motivation to slop over into essentially extra-billing, which is exactly what is happening not only in the Gimble clinic -- and I was told about this by a group from Elder College to whom I spoke last week -- but also on the North Shore of Vancouver and in Victoria. I do not know the extent, but it is operating on the basis of, "Yes, we have the regular public service that you can get for your card, but there is a special extra service. We will put this lens into your eyeball. It will be there forever. Do you want the ordinary one or the high-quality one?" This is not a decision with which consumers should be faced. It would be as if you had private rooms in hospitals -- as we have had for years, and they create no problems for anyone -- but you were told, "If you are willing to take and pay for a private room, then we can get you in for your surgical procedure a little faster." Would we find that troubling? I think we would.

If the "private service" is completely detached from that which is therapeutically important, no one has a problem. However, if the two are linked together, which is what is the most profitable strategy, then we have a problem. That is what is happening in Alberta and that is what the opponents of Bill C-11 are concerned about, namely, that it extends the opportunity for linking together insured services and uninsured services and making the access to the one conditional upon the willingness to pay at whatever price is set for the other. That is cunningly crafted to work its way around the Canada Health Act by the letter of the law, but it is trying to drive a truck through the principle.

Ms Fuller: The question that you asked was: Why would anyone want to get into this business if they could not earn a profit? That is a question that I have asked as well. Following from that question is another one, namely: From where will the profit come? That is the challenge for the people in Alberta with regard to this private hospital. I will call it a private hospital because that is what it is.

There is a lot of tiptoeing around some of the words in the legislation. The government is saying that you can take your Alberta health card and get the services, but what services will be publicly insured on the health plan that will be delivered by the hospital? The hospital will make money from the public health insurance system, from the Workers' Compensation Board, from privately insured patients, and so on. Its source of revenue will be varied. It will not be only from the public purse, it will be from other sources as well.

What I am concerned about with the hospital and with the Gimble eye clinic is that upgrades, and so on, are being offered. When patients go into a Gimble eye centre, they can get a softer lens and little bits and pieces of goodies, and so forth, that are not covered by the public health plan. That is what the people of Alberta are trying to grapple with as well; namely, that if the services are covered on the public health plan is it a problem that the company delivering the services is either for-profit or not for profit? If all the services were to be available without user fees or extra-billing, and so on, that is one question. However, I do not think that is the intent of the hospital.

As you said, why would they do that if they could not earn a profit? The challenge and the dilemma of the hospital is: Where will they earn their profits?

The Chairman: I wish to thank all of you for a fascinating two and one quarter hours. We appreciate you taking the time to be with us today.

The committee adjourned.