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

Issue 14 - Evidence, May 10, 2000

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 3:52 p.m. to examine the state of the health care system in Canada.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we are here to continue our study on the health system in Canada, to determine what needs to be done to improve it and to understand the federal role in health policy and the health care system.

Our witnesses today will deal with comparisons between the Canadian system and systems in other countries. You will recall, from our outline, that the first phase of the study is an overview of all of the major issues. Starting in the fall, we will do an in-depth study of several of the issues, including a comparison between Canada and other health care systems and what Canada can learn from them. Our purpose today is not to do an exhaustive study of a comparative nature but rather to understand, at the overview level, some of the similarities and differences.

Our witnesses today are three members of the academic community, Ake Blomqvist, from the University of Western Ontario, and Mark Stabile and Colleen Flood from the University of Toronto. They have just completed a study that looked at international comparisons, in part for the Ontario Medical Association, I believe, who have been one of the sponsors. Their purpose today is to give us an overview of comparisons. As I said, we will be looking at this issue in much greater depth down the road.

Professor Blomqvist will talk about a paper called "Health Care System: Some International Comparisons," in which he is looking at European comparisons.

Mr. Ake Blomqvist, Professor of Health Economics, University of Western Ontario: As a person with a longstanding interest in comparative health policy, I certainly appreciate the opportunity to appear before the committee. I will look at the health care system in a couple of the selected countries that appear in the table, which is from the material that may have been distributed to you. I have chosen the United Kingdom and the Netherlands because I think their health services systems differ from the Canadian one, particularly in important institutional respects.

You will also see from the overhead that one very important way in which these systems differ from the Canadian one is in terms of cost. I will say a few words about one part of the American system, which, as you may know, is the most expensive health care system in the world. Their per capita spending is close to U.S. $4,000 as compared to Canadian spending of around U.S. $2,000 per capita, with corresponding differences in terms of the share of GDP that is devoted to health services. The other countries, of course, are also interesting in the sense that they do show the possibility of running a modern and, apparently, fairly serviceable health services system with far fewer resources than Canada uses. In terms of percentage of GDP, the United Kingdom spends less than 7 per cent of GDP on health services as opposed to more than 9 per cent in Canada and as much as 14 per cent in the United States, which is the most recent figure.

One set of numbers that I have not shown in this table has to do with the significance of health care for the elderly in these various countries. The percentage of total health services spending that is accounted for by spending for individuals over age 65 in these countries is in the neighbourhood of 40 per cent. Thus, given that the proportion of people over 65 is a much smaller proportion of the total population, that translates into spending for people over 65 in an amount, on average, of four times as large per capita as spending on people under 65. Given the coming demographic changes in Canada, this is an issue that in the long term will be of concern.

When I teach my comparative health system classes, I typically start with a diagram of the type that I have just put on the board. I stress the difference between the health services system and an ordinary market, in which buyers, who in the health services system would be patients, simply buy the services of sellers, who are the providers -- in other words, the doctors and hospitals that supply health services. In ordinary markets, the providers supply the services, and in this case the buyers pay the money directly to the providers. This is the sort of supply/demand model that economists study. The way in which the health services system is different institutionally, in a major way from a regular market, has to do with the existence of a third party that does the funding -- in other words, the insurer, who, of course, may be either public or private. Therefore, most of the payments for services provided by doctors and hospitals in health services systems do not come directly from patients. Instead, they come from either the private insurer in the system or from the government, in systems with public insurance such as the Canadian system. In turn, the payments from the buyers come in the form of insurance premiums or taxes, from the patients or users to the funding agency, which may be the government or private insurers.

Given this unusual organizational set-up, in comparison with the standard economic market, much of what is distinctive about the analysis of the health services industry, or the health care system, has to do with institutional arrangements that involve the third-party funding agency. On the one hand, there are institutional arrangements between the insuring agency -- the insurance plan -- and the patients on the other hand.

Are there user charges? What does the insurance plan, whether it is explicit or implicit, specify about what is included in the coverage? What is not included? All of these questions relate to this link between the patients and the third-party agency that does the funding. An important question, of course, for patients is whether they have any choice among insurance plans. In a system such as the Canadian one, there is no choice. In many other systems, including the British system, there is some degree of choice even though it is largely a public system.

The other link where institutional arrangements become exceptionally important is the relationship between the third-party funding agency, the government, or the insurance plans, on the one hand, and the providers who provide the services to the insured clients on the other hand. Here, you get into issues such as the rates that providers are paid, the determination of these rates -- whether through competition or through negotiated regulated prices -- and the inclusion of managed care, as there is now on the increase in the United States. In other words, are there rules imposed by the insurers to control the way in which the providers provide the services that the users benefit from?

A very important issue has to do with the link between primary care providers -- the family doctors or general practitioners that represent the first line of defence of the health services system or the first point of contact between patients and the health services system and the arrangements between those primary care providers -- and those who provide what is by far the most expensive portion of the total health services budget, namely hospital services and the services of specialists. In other words, how do the primary care providers regulate the access of the patients to the very expensive hospital and specialist services that account for such a large portion the total cost?

This corresponds, then, to my typology for characterizing the health services systems that I am looking at in terms of three kinds of institutional arrangements. What is the nature of the funding agency? What is the nature and the organization of the provision of primary care -- the services of family doctors, general practitioners, or primary care in general? How are hospitals, specialists, and medical services funded? How is the access of patients to hospital services and the services of specialists regulated?

Recently, a couple of issues have become much more important -- and perhaps my typology should be updated. There is the issue of pharmaceuticals, which, as you may know, at the present time actually in the aggregate costs as much as the total amount spent on physician services in the Canadian system. How is the utilization of pharmaceuticals determined, and what explains the very rapid increase in cost of pharmaceuticals in some countries?

Obviously, there is also an emerging issue in respect of an aging population -- long-term care and nursing home care -- and what determines the rate of change in the cost of those kinds of services.

To illustrate how this typology is used in characterizing the health services systems, I will reiterate how the Canadian system is organized in those terms.

As far as the insurance or funding is concerned, we have a single public tax-financed plan; as to the relationship between the insured and the insurer or the funding agency, we have zero user fees. I have shown a last line that indicates "quality of coverage." I hesitated for a long time whether to include a question mark after "quality of coverage," but the issue relates to waiting times under the plan, access to the most advanced technology under the plan, and so forth. In other words, what can we say about the quality of the insurance coverage that we implicitly have under the Canadian system in comparison with the coverage that other people have in other systems?

Primary care in Canada is provided by family doctors or general practitioners, as the British terminology is, who are paid in accordance with the principle of fee for service. I assume that everyone knows that "fee for service" simply means that when a patient goes to the doctor a schedule is consulted at the end of the visit, and the schedule indicates the fee for each service that was provided to that patient. That dollar amount, then, is the basis for the doctor's income, when the billing takes place, of the provincial insurance plan, monthly.

It is also, of course, the case, though I have not listed it here, that a considerable portion of primary care in the Canadian system is now supplied through hospital emergency rooms. As you know, from the viewpoint of public policy, an important issue is the question of what the appropriate role of provision of primary care through emergency rooms should be.

With respect to hospitals and specialist care, Canada has a system where even hospital-based specialists -- the ones who treat their patients in hospital -- are paid on the same fee-for-service basis as primary care providers. In that respect, Canada differs from many other countries where the payment to hospital-based specialists is different. In part, this is because there is always an ambiguous economic relationship between fee-for-service reimbursed specialists and the very expensive infrastructure facilities that they need in order to earn their living, namely, the hospital facilities that they need to treat their patients. What incentives do we have to ensure that there is an efficient combination of the use of specialist services and the very expensive component of the health care system that hospitals represent when the payment is from two different pies? Hospitals get paid directly from provincial ministers of health, whereas the doctors that work in the hospitals get paid from a different budget.

Let me say a few words about how a couple of the countries on my list differ, in terms of this organization, from the Canadian system. Remember that the U.K. system is much less expensive than the Canadian one. We spend 9 per cent of our GNP on health services. The British spend something like 7 per cent of a smaller GDP; thus, they have a health services system that is less expensive than ours. Whether the quality is the same is a different question, of course, but at least it is a lot cheaper.

As far as insurance is concerned, the U.K. system is similar to the Canadian one in the sense that there is public, single plan coverage. It is financed out of taxes. There are no user fees for NHS services in the United Kingdom. As far as I am aware, the United Kingdom and Canada make up the list of countries that have zero user fees for everything. Most other countries do have user charges, but the United Kingdom and Canada do adhere to the policy of zero user fees.

Contrary to the Canadian case, there is a substantial private insurance sector in the United Kingdom, under which about 10 per cent of the population has private coverage, contrary to the case in Canada. I think it is illegal in all provinces for private insurers to offer plans that cover the same things that are covered under the public plan. In the United Kingdom, there is no such prohibition; as a result, there is a substantial private insurance sector in the United Kingdom.

Note, however, that in the terminology that I like to use, anyone in the United Kingdom who has private insurance has in fact paid twice for health insurance. First, they have paid the taxes that entitle them to the services under the NHS. On top of that, they have paid the insurance premium that is giving them private coverage. There is no opting out in Britain. If you buy private coverage, you still have to pay the taxes to belong to the NHS. In that sense, private insurance does remain relatively small in the United Kingdom for that reason, in part.

From the viewpoint of lessons for Canada, perhaps the most important difference is the system used in the United Kingdom to pay for the services of primary care. In the United Kingdom, primary care is provided by general practitioners who operate under a contract with the ministry of health. I am not sure technically if it is contract with the NHS, or with the government, but it is a contract with the public sector.

Each general practitioner in the United Kingdom receives payment at the end of each month dependant solely on the number of individuals who are signed up with that doctor over the month; payment is not made according to the volume of services that the doctor has provided for those patients. Payment is based on the number of people on the doctor's list regardless of the volume of services that the doctor has provided.

In order for such a system to function, it must be the case that any given patient can be signed up at any time only with one doctor. It also has to be the case, in order for the British system to work, that every patient has to be signed up with one doctor. The rule, or system, that regulates this is referred to as "gatekeeping," under which you cannot have access to hospital services or pharmaceuticals, or any other services offered covered under the NHS, except under referral of your general practitioner. Thus, patients have an incentive to ensure that they are signed up with a general practitioner in order to assure that they do retain access to other services under the NHS.

There is an important feature of a system of capitation in the viewpoint of an economist. In a fee-for-service system, doctors have a financial incentive to provide a large volume of services, because the larger the volume of services they provide the more money they make. In a system of capitation, the doctor has no such incentive. The amount of money paid monthly to a doctor is independent of the number of units of service that is provided to patients.

Notice, also, that there is an important feature here, one that is necessary for the system to function: Patients do have the right from time to time to switch from one GP to another if they are not happy the GP with whom they are currently signed.

Senator Carstairs: One question. How do they make use of emergency services under the capitation?

Mr. Blomqvist: As far as I am aware, there are no provisions for substituting. You must be on a primary care provider's list in order to have access to any kind of hospital service or pharmaceutical. As far as I am aware, there are no lists for emergency departments, which means that, presumably, you can get treated at an emergency department in an emergency, if your GP is not available or whatever. I would assume that the GP contracts probably do provide for backup services, such as is currently being debated in Canada. However, I am not familiar with the exact details of that.

Ms Colleen Flood, Professor, University of Toronto: Most of them do not cover emergency care. They do not cover emergency care, so people can access emergency services just as they do here.

The Chairman: Emergency care is really treated outside the system, literally as something you treat specially because it is an emergency.

Ms Flood: However, some GP clinics are setting up side by side with accident emergency clinics to try to encourage people to go there first, rather than going to the hospital.

Mr. Blomqvist: Regarding hospital care, they have a system similar to the Canadian one in some respects, when it comes to the decision as to which hospital gets how much money. The decision is basically an administrative one within the management of the NHS. I characterized it in my paper as a political decision in the Canadian system. The difference in the U.K. is that specialists who work in the hospitals are salaried employees of the hospitals. The ambiguity to which I referred vis-à-vis the economic relations between the hospital-based specialists and the hospitals in which they work that we have in the Canadian system does not exist in the same form in the United Kingdom. The specialists in the U.K. who work in hospitals are salaried employees of the hospital. I do not know of a study of how that changes the dynamics of decision making between the hospital managers and the doctors, but it would seem to me that it is likely to change that dynamic in a very substantial fashion.

In the interests of time, I will not say anything much about the reforms in the United Kingdom. My written submission does go into some details about those reforms. I think they are extremely interesting, but perhaps Ms Flood will say few words about that.

The Netherlands is a very interesting case, perhaps not so much because of the way the health services system is in fact organized at the present time but because of the extremely comprehensive proposal for reforming the Dutch health services system that existed in the early 1990s. It is not clear how far that reform has progressed. There is considerable political wrangling at the present time in the Netherlands. It was a very interesting set of reform proposals.

The key thing there was that what the Dutch were prepared to do under this reform proposal was basically move from pretty much a unitary system of public health insurance, at least for people with low incomes, to a system where everyone would be insured on a compulsory basis. However, there would be a number of competing managed-care plans in Holland through which people could get their public insurance.

The funding would continue to be basically government funding, with a small private premium component. However, the public funding was going to be made available to various insurance plans, which would compete for the public funding. This is referred to as managed competition. I refer to it as managed competition among multiple managed-care plans.

The Chairman: As you have described that, that is exactly what a voucher system is. It is the same as that which one hears about with respect to a voucher system for education.

Mr. Blomqvist: That is exactly right. It is also very similar, for those of you who followed the shenanigans in United States in the mid-1990s, to a version of the Clinton plan. This is not completely an accident, because the health economist whose name is most often mentioned as the originator of the Clinton plan is Alain Enthoven, who turns out to be of Dutch ancestry and was intimately involved in consulting with the Dutch when they formulated their plan.

The current form of the Dutch system does provide an interesting piece of empirical evidence for those in Canada who claim that a system that mixes private and public insurance will inevitably lead to an inadequate standard of public insurance. In Holland, something like a little over 60 per cent of the population, those with low incomes, are covered through a universal public plan, whereas everyone above that income level or who is self-employed has to get private insurance if they want to have any health insurance at all.

Given that patients are treated in hospitals both from the public plans and the private plans, and there are physicians who treat individuals both from the public and private plans, this does provide a test case for those Canadians who claim that introducing any element of private insurance will inevitably lead to a decline in the standards of the public plan. I am not sure of comparisons that have systematically addressed this issue, but since the Dutch system is a relatively stable one that seems to have a substantial amount of political support it would seem, at least on the face of it, that this is an example of a system where private and public coverage coexist, and it has not led to the demise of the public system.

I will stop there. Let me simply refer to the additional material that is contained in my written submission. I talk there a bit about the American Medicare plan, and what I wanted to do was basically ask the question: If you had a medicare plan such as the plan that covers every American over 65 in the United States, and if you made the United States a country of universal health insurance, publicly financed and arranged, simply by expanding the coverage of their Medicare plan to the entire population, how different would that system look from the system that we currently have in Canada?

Mr. Stabile will focus on that comparison, so I will simply end there.

Mr. Mark Stabile, Professor, University of Toronto: As Professor Blomqvist said, I will speak only about the American and Canadian health insurance systems.

While the majority of Americans receive their health insurance through private insurance plans, offered primarily through their place of employment, a substantial number of Americans also qualify for public insurance. The two largest public insurance programs in the United States are the Medicare program, which serves individuals aged 65 and over, as well as the disabled and people with permanent kidney failure, and the Medicaid program, which serves the poor. The Medicare program is a federally run program while the Medicaid program is run by individual states. Twenty-five per cent of Americans claim either Medicare or Medicaid as their primary source of health insurance.

I will focus on the Medicare program because of the useful comparisons that can be drawn between that program and Canada's public health insurance system. Of course, as was noted, one major difference in the two programs is that Medicare primarily serves the elderly, who use considerably more health care resources that the general population. Also, as you know, the Canadian health insurance system has universal access.

Almost all Americans aged 65 and over are eligible for Medicare. In 1998, 35.5 million people were enrolled in traditional fee-for-service Medicare, and an additional 4.2 million were enrolled in a managed-care Medicare program. It is interesting to note that the total population covered by Medicare actually exceeds that covered by all the provincial health care programs in Canada combined.

Medicare consist of two parts, A and B. Part A primarily finances in-patient hospital services; Part B helps pay for the cost of physician services, out-patient hospital services, and medical equipment. Part B is optional, but almost everyone takes it. In 1998, 97 per cent of people enrolled in Part A were also enrolled in Part B.

As noted, the program is primarily financed through taxes on employees and employers, as well as through general revenues and some small additional premiums. Let me quickly talk about those premiums. There is no premium for Part A. The 2000 rate for Part B is a premium of U.S. $45.50 per month. There are also deductibles and co-payments, and they actually can be quite large. There are also items that are not covered at all by traditional fee-for-service Medicare, and perhaps the largest expense would be prescription drugs purchased outside the hospital.

The U.S. has a private insurance market that works alongside Medicare. It allows individuals to insure themselves against some of the costs involved with using the Medicare system and against items such as prescription drugs that are not covered under Medicare. This type of insurance is referred to as medigap insurance, so-called because it fills the gaps in Medicare.

State-run insurance departments approve medigap policies, which are then sold by private insurance companies. Medicare-eligible Americans generally purchase medigap in one of two ways. They either purchase it individually on the private market or they receive it from the current or former employer. Sixty-six per cent of the fee-for-service Medicare recipients have medigap coverage, and about half of those with medigap coverage receive it from a current or former employer.

Many individuals choose to purchase their policy through an employer because employer contributions to employee health care policies are exempt from the taxable income of employees. An extensive amount of research in the U.S. shows that these tax subsidies not only encourage individuals to purchase insurance through an employer, but also they encourage people to buy more insurance than they otherwise would.

What medigap does essentially is reduce the out-of-pocket cost of using the health care system. Individuals with medigap coverage face fewer out-of-pocket costs when using the health care system than do individuals without medigap coverage. If people respond to price incentives, we might expect, then, that individuals with private medigap insurance will not only use more of the services that are covered by medigap but will also use more of the services that are covered by Medicare, the public insurance program, since they face a lower out-of-pocket cost of doing so. Studies in the U.S. support this hypothesis. In a study by the Congressional Budget Office, researchers found that private medigap holders use 24 per cent more in-patient hospital and physician services, those services covered by Medicare, than did individuals who did not have medigap.

I want to draw, then, some parallels between the Medicare-medigap situation in the U.S. and our provincial health care system here in Canada. Like U.S. Medicare, each of the provinces has public insurance, which covers hospital and physician services. Unlike U.S. Medicare, these services are available to the entire population, not just to a targeted segment of the population. The provinces offer first-dollar coverage. As was noted, there are no direct deductibles or co-payments required when using the health care system. However, as with U.S. Medicare, there are items that are not covered by provincial plans but which are becoming an increasingly important part of health care. Prescription drugs purchased outside the hospital make up a large part of these costs, but there are several other items as well. These items are out-of-pocket costs associated with using the health care system, and although they are not labelled co-payments they serve essentially the same role, which is to share the cost of health care between the user and the insurer.

For example, if you go to the doctor because of a sore throat and find out you have strep throat, the doctor can diagnose your illness but you will require antibiotics at private expense to effectively treat it. The Ontario Health Insurance Plan will cover one standard eye doctor's visit every two years, but purchasing prescription lenses plays a large part in correcting your vision.

As a result, many Canadians acquire supplemental health insurance to cover some of the items not covered under the provincial health care plan. In 1996, close to 60 per cent of Canadians claimed some form of supplemental health coverage, and I understand that number is now over 70 per cent.

Most Canadians purchase this insurance through an employer, and about 60 per cent of working Canadians claim that their employer offers them some kind of benefit such as this. There is evidence to suggest that one reason this might be the case is because of some subsidies similar to the U.S. that are offered if you purchase this health insurance plan through an employer.

Economists who study the insurance industry have found that individuals behave differently when they have insurance than when they do not. Since individuals face fewer out-of-pocket costs when they have insurance, they may use those services covered by the insurance more often. Likewise, an individual without insurance coverage who faces a higher cost for a particular service will use it less often.

I would point out that like the Medicare/medigap system in the United States, the public health insurance system and the private supplemental insurance system in Canada complement each other and for the most part do not act as substitutes for one another. We are effectively cost sharing our health care expenditures by bundling goods and services, some publicly financed and some privately financed. As previously noted, perhaps the clearest example of this is bundling publicly financed doctor services with privately financed prescription drugs.

What effect does this bundling have on how people use the health care system? Some evidence shows that individuals with private supplemental health insurance in Canada not only use more privately funded services but also more publicly funded services. In particular, a study shows that Canadians who had supplemental health insurance visited the doctor 10 per cent more often than individuals who did not. This result holds even after we adjust for the fact that individuals who have supplemental health insurance tend to be wealthier than individuals without supplemental health insurance and for differences in how individuals access their own health status.

I would note in conclusion that the health care systems of both the United States and Canada are partially publicly financed and partially privately financed. Often these health care services are effectively bundled such that both private and public spending are required to obtain effective care. Differential access to private insurance results in differences not only in the use of privately financed care but also in the use of publicly financed care. It is important to note that prescription drugs, which are privately financed when purchased outside of the hospital, are the fastest growing component of the health care system.

The implication of the current cost-sharing arrangements in both the United States with the Medicare program and in Canada with its supplemental and public health insurance program is that the interactions between the two systems will play increasingly important roles in health care delivery both in the United States and in Canada.

Ms Flood: All developed countries, with the notable exception of the United States, have a common goal in mind with their health care systems, and that is to ensure that everyone has access to a comprehensive range of high quality services on the basis of need and not on the basis of ability to pay. That is basically the redistributive goal that most developed countries, apart from the United States, have. Despite this similar objective, countries differ significantly in what health services they include in the basket of care that they cover or the range of services they cover. They also differ in how they determine what is in and what is out of the public basket.

They also, as Professor Blomqvist has discussed, differ in terms of their configuration. For example, European countries like the Netherlands, France and Germany rely on social insurance and significant regulation of private insurers and private providers. They achieve their redistributive goal by regulating the heck out of private insurers. Another group of countries, like Canada, the U.K. and New Zealand, relies on government control of financing, what is known as the "single payor" model, to ensure access for everyone and to keep control of prices and utilization. Those are the two most common modes or models of financing.

The first really important point to note is that while we all think that health care reform is something that bugs the hell out of Canadians it actually bugs the hell out of everyone else in the developed world as well. Every health care system struggles with these issues all the time. This should come as no big surprise given the enormous complexity of health care systems, the size of the health care systems and all the vested interests that are involved in health care systems. Therefore, it is important and fabulous that you will actually be studying the different health care systems that exist because a detailed study will certainly inform the debate so far, which is much about ideology and very little about evidence.

Every health care system struggles with the same essential problem, I think, and that is essentially that your health care needs are limitless. What is "need"? It is a contextual and relative concept. I could spend all my resources trying to perfect my health. I could demand that society does that to improve my life expectancy. Really, there is no end to what I could have the medical system do for me.

Once we say that health care is so important that people should not be denied it because they cannot afford it, that they should not be denied it because they do not have the money, then we have the problem that because people do not have to pay they expect that all their health care needs, however those are defined, should be met. That is the basic problem that we have. We want, as a matter of access and as a moral matter, to provide everyone with health care, but then we have the problem that they want more and more and more.

Even more important than what individual patients want is the fact that they rely on physicians to tell us what our health care needs are. That is what we do. Doctors tell us what is wrong with us and then tell us what we need to fix it. They diagnose, and then they tell us what we need. This is the gatekeeper function that Professor Blomqvist mentioned. This is really the key problem. In most health care systems, physicians have absolutely no incentive to be sensitive to the cost of the services that they tell you we need. They are the ones who control the services, diagnose us, and tell us what we need. They have no incentive to be concerned about whether they tell you to have 600 lab tests, blood tests, go to the doctor, go to the specialist, come back again next week, nothing.

I have studied health care systems in detail in the U.K., New Zealand, the Netherlands and the United States. For a very small fee, you can buy my book. I am happy to answer any questions that you have about those systems. However, in this brief time, I want to just point out the unique features of the Canadian system and then move on to what are actually a bit more prescriptive comments than I normally make, which I have actually distributed to you. It is a piece I wrote for policy options about how to fix Medicare. I will comment on that, but I just want to first say what makes Canada unique.

Canada is unique because it has this very strong protection in the Canada Health Act of medically necessary hospital and physician services. That is unique. No other country does that. It prohibits extra billing and user charges for these medically necessary hospital and physician services.

Some countries, like New Zealand and the United States, have significant user charges to see a family doctor. I am from New Zealand. When I go to the family doctor, I have to shell out $40. Most of the middle class and wealthy people have private insurance to cover that family doctor visit. Other countries, like the U.K., New Zealand, Australia, allow people to jump queues in the public sector by buying private insurance and buying care in the private sector. These countries allow their physicians to work in the public sector and top up their salaries by working in the private sector.

The kind of care that is provided in the private sector is basically easy care, that is, the "ectomies" -- tonsillectomies, adenoidectomies, et cetera. It is not oncology it is not acute care.

Other countries, such as the Netherlands allow private insurance. However, it is important to realize that this is a very different kind of private insurance than the kind that advocates here are talking about. It is very different. In the Netherlands, they have to have compulsory coverage for catastrophic care. You might have noticed the big figure for the Netherlands, which is 11.5 per cent, when the averages are around 2 per cent and 3 per cent. That is because they provide all this long-term care for all their population compulsorily.

The richer 40 per cent of those in the Netherlands can buy regular kinds of care from private insurance -- but private insurance cannot cherry-pick. They can not do just the "ectomies"; they have to do everything. It is not such a lucrative thing when you have to provide the whole range of care.

Because there is such a strong commitment to equity and what they call solidarity in the Netherlands, all hospitals treat the same those who have social insurance, that is, public coverage, and those who have private insurance. Physicians consider it unethical to allow people who have private insurance to jump queue. They do not have the kinds of laws that we have, the regulatory framework through the Canada Health Act, but they achieve it through other means -- that is to say, through ethical norms, essentially. There is a very strong commitment to solidarity. Even though they have all this private insurance, it is necessary to look beyond that to see what actually happens in the country.

In Canada, because of this very rigid boundary set by the Canada Health Act between hospital and physician services, which are protected no matter how useless they are, and other kinds of health care services, there has been significant passive privatization. Technology has developed. With it, the locus of care has shifted from hospitals into homes. There has been movement toward more drug therapy. There is more reliance on medical equipment and care provided by other kinds of health care professionals, not just physicians. We have seen a great deal of passive privatization and these services and goods are not protected by the Canada Health Act. Thus, they fall into a sector of mixed and varied private and public financing, which varies from province to province.

This passive privatization process, together with fiscal constraints, is largely responsible for the shrinkage of the public share of total health care expenditure in Canada from 74.6 per cent in 1990 to 69.8 per cent in 1997. This figure of 69.8 per cent of public spending on health is significantly lower than New Zealand's figure of 77.3 per cent and the U.K.'s figure of 84.6 per cent. There is a big difference. However, it is about the same as in Australia but significantly higher than the U.S. figure of 43 per cent.

I wish now to make some more prescriptive comments, if I may, for reform of the Canadian system in light of what I know about these other health care systems. I think the way to go about this is to ask: What is our ultimate objective here? Is it the redistributive one of ensuring that everyone has access to a range of health care services on the basis of need and not ability to pay? If we can agree on that, that is a big start. If we can agree on that, then I think the principles that should guide reform are three. They are accountability, integration and flexibility.

We spend a great deal of money on health care. It absorbs 9.2 per cent of gross domestic product, which amounted to $86 billion in 1999. If we were contemplating a successful company of this size, we would have astute managers managing that company. We would see them changing and moving and responding to the dynamics of the system. However, within the public health care system, managers do not have the same incentives to respond to changes and to evolve continually so as to improve performance. When I mention this comparison with the private sector, it is not to advocate privatization -- not by any stretch -- because the goal of the health care system is redistributive not efficiency. That does not mean that we should not try efficiently to achieve our redistributive objective. That seems to me to be the difference here.

We have to consider ways that we can ensure better decision making and better management of our publicly funded system. The best way to do this is to improve the accountability of decision makers.

Everyone acknowledges that throwing increasing amounts of money into the health care system is not sustainable in the absence of economic growth. Putting more and more into it means we spend less and less on other things, such as education, income support, job development, et cetera. If more money is not the sustainable answer, then more accountability and better management must be. Although the phrase "managed care" has been tainted with the excesses and inequities of the U.S. system, I think the concept is still sound. It is to monitor doctors' decisions to ensure that the most cost-effective service is selected to treat a particular health need. It is necessary to ensure that doctors have incentives to select the most cost-effective service for a particular health need and that they prioritize health needs, because, obviously, some health needs are more important than others.

To date, Canada's approach has not been better management but, rather, to reduce the resources available to the health care system. Thus, there are fewer hospitals, fewer hospital beds, fewer nurses and less technology. The hope is that doctors faced with these limited resources will allocate resources appropriately. We need to do better than this. We can by improving accountability.

Improving accountability is vital, as all systems faced with the imperative to contain costs have strong tendencies to shift costs rather than to improve performance. In Canada, the U.K., New Zealand and in many other countries, cost shifting has manifested itself in long waiting times and long waiting lists and shifts to informal caregiving. Health policy analysts and economists -- and I have fallen into this on occasion -- have become unduly fixated on health outcomes. Unless we can measure it, it does not matter. As a result, we have dismissed concerns about waiting lists and informal caregiving unless it has a measurable impact on health outcomes. We have failed to take account of real people's anxieties and concerns about growing waiting times and have discounted the burden of providing informal care, along with the personal and financial impact of that. We do not even measure the direct loss of salary or wages while waiting or providing informal care, given that this is not a cost that is absorbed by the health care budget. Ordinary people know that there are real costs for them, and health decision makers must be more responsive to the concerns of the people they represent, to ensure the long-term sustainability of the system. Without it, support for medicare has and will continue to wane, and there will be continued cause for more private financing, which undermines the larger redistributive objective.

Canada is unique in largely precluding a two-tier private insurance system, such as exists in the United Kingdom and New Zealand. That is an important accountability mechanism, as it includes everyone in the same system so that the middle class and the wealthy use their voice to advocate for maintaining the quality of the public system. I think that is an important point. In the U.K. and New Zealand, countries that have this supplementary private insurance system, which I reiterate again is quite different from what happens in the Netherlands, waiting lists are far, far longer. In fact, they are five times as long as a percentage of the population in New Zealand and three times as long in the U.K. Arguably, once there is that kind of private insurance, perhaps the middle class and wealthy lose their incentive to lobby for improvements in the public system.

Including everyone in the same system seems to me to be a good starting point. I think Canada does well in doing this, but I do not think it is enough alone.

Decision makers must be accountable both in the short and the long term for the consequences of their decisions. The Canadian system is characterized by fracturing of accountability amongst different levels of government, health authorities, hospitals, nurses, physicians and other providers. With all due respect, governments do not have much incentive to put in place mechanisms to make themselves more accountable, unfortunately. Perhaps the only way to negotiate this dead end is to devolve decision making to locally elected, or government-appointed, health authorities, and then concentrate on accountability measurements to ensure their performance.

I cannot obviously give you the whole blueprint here. If I could, I would be a millionaire.

However, some success has been met in other countries with performance agreements between governments and health authorities setting out government objectives in terms of health outcomes, waiting times, et cetera. They require ongoing evaluation and monitoring of these health authorities performance. Once these kinds of contracts or agreement between government and health authorities are in place, some improvement on those things that you are concerned about seems to take place.

We need more information in order to do this. We all know that. We also should think about other accountability-enhancing mechanisms. I talk about a few things like mandatory consultation and a health ombudsman or health care commissioner. I will not go into that too much.

The other important principle to guide reformers is integration. If there are incentives for health authorities to be good decision makers, then the authorities must be given the tools to make good decisions. They must have control over a budget for wide range of health care services. They must control the budget for the doctors and for drugs and for home care and for hospitals in order that they can make effective substitution decisions. We still have many silos of financing, which means that we often have very silly decisions made about who gets what kind of care.

The final principle that should guide reform is flexibility. The Canada Health Act is wonderful in terms of its core values, but it is a product of the 1950s and 1960s, when hospital and physician services were seen as the boundaries of the system. Technology has overtaken the Canada Health Act.

We need to think about the process by which we decide which services are publicly funded and on what terms. We need to have a better decision-making process to decide what is in and what is out, and it must be flexible because this will change over time. It must be ongoing, so there are some home care services that should be publicly funded, some physician services that should not. Some hospital services should be publicly funded, and some should not. Sometimes, we should have user charges; sometimes, we should not. However, we must have a process to decide that on an ongoing basis.

Those countries that try to set in stone structural reforms invariably lurch from one reform to another, which is also set in stone. We have seen this around the country with different types of reform, but you see it particularly in other countries. In the U.K., a health economist there calls this the "periodic re-disorganization of health care systems." If you try to set something in stone, it will not be flexible enough to respond to the underlying dynamic changes in technology and changes in demographics. There will be problems. Things may be fixed for a year or so, but there will be another big problem in five years time.

There must be flexibility in the system. In my opinion, the flexibility must come on the supply side. If the health authorities have good incentives, or if the departments have good incentives to make good decisions, there will be a lot more flexibility about what happens on the supply side, whether they want to contract for profit hospitals or not-for-profit hospitals, or home care providers, whoever. Provided they would have the right incentives to do the right job and we have a commitment to eke quality and solidarity through public financing, we should be much more open to flexibility and how we actually configure the supply side.

I think it is time to reform the Canada Health Act -- although Monique Bégin would not want me to say that -- to expand its boundaries, without losing its commitment to solidarity and equity. The principles of accountability, integration and flexibility must be incorporated into the Canada Health Act. We need to ensure that the values that underpin medicare, very important values, are sustained, but not necessarily in its present structure.

The Chairman: I thank the three of you for a very fascinating overview. When the committee studies these countries in detail, we will be having you back again.

I will ask the three of you a question.

As I listen to the three of you, and I read some of your testimony before, it seems to me that you are all advocating three principles. I will use different language than Professor Flood used, but it seems to me that your three principles are the following.

First, treat the health care system as a whole. We use the term "health care system" when we speak of it in politics. However, the reality is that medicare is covering less and less of the health care system because more and more is being done outside hospitals anyway. Professor Stabile talked about glasses not being covered but the eye doctor is, and so on. That is a good example.

Your second principle is that we need to put in place incentives for the primary care people, GPs, to use services efficiently, in a systemic sense, and to deal with specialists and what they recommend in drugs. Some of you put it in different ways. Professor Flood talked about monitoring doctors' decisions. Professor Blomqvist talked about some of the examples elsewhere. He talked in particular about capitation or the gate-keeping system, both of which have built in incentives. The principal, it seems to me, is that you want incentives for the primary care physician to think of the system cost as a whole, not merely his costs.

The third principle, which I guess was more clearly put by Professor Blomqvist in some of his examples, was that competition among providers beyond the primary gatekeeper may in fact be a good thing. He talked about fund holding. A number of you talked about regional health authorities, which may be competition under some equivalent kinds of name.

Am I correct that the basic argument that all three of you would make, although based on different countries and using different words, would be those three principles? If I am not, help to tell me where I am right or wrong.

Second, has anyone done a document or report that would address, for instance, my second principle, to provide doctors and primary care givers with the incentive to use the system efficiently? Is there a compendium somewhere of all the incentives that have been used in the world on that one point, or is there a compendium that deals with how you can get an element of competition among providers through the voucher system, fund holding or a variety of idea?.

Professor Flood, I would ask you to begin. Are my principles basically the points that the three of were you trying to make?

Ms Flood: Yes. I would comment about the third one, regarding competition on the supply side. I am advocating that you have to think about incentives for the actual insurers, or the buyers of care -- the decision makers. They can be fund holders. They can be health authorities. It is whoever holds the money.

The Chairman: Returning to Professor Blomqvist's initial model, you think that, rather than necessarily driving the incentives to the suppliers, you would drive them to the individuals who provide the money to the suppliers.

Ms Flood: Yes.

The Chairman: It would not matter whether that is a government or HMO, et cetera.

Ms Flood: Yes. On the supply side, there are many different health care markets. They do not all look the same. For some markets, there is just never going to be competition -- for example, psychiatric service. For other markets, long-term care, for example, there is much opportunity for competition between providers.

You must have a smart decision maker, a smart buyer, who will decide over time whether to provide the services themselves, whether to own the hospitals themselves, whether to contract out to competing hospitals and home care providers. That is the nub of it.

Ms Flood: Therefore, in the U.K., they have decided that the budgets cannot really be wrestled away from the doctors, that it is better to give the budgets to the doctors themselves. Now, community nurses have large primary care groups and they bundle them altogether. They will decide how to buy the care from hospitals, the home care and the drug budget, et cetera, and they will manage it. Other countries have used government-appointed or elected health authorities to try to do this. None of these countries, apart perhaps from the fund holders, has thought very hard about how to actually make good decisions. If good decisions are not made, then it is a waste of time.

Mr. Blomqvist: I think that there is a hierarchy amongst your principles, Senator Kirby. I very much agree with the concept of integration -- what Professor Flood calls integration. There has to be a single controller of the overall budget. That controller actually, effectively, makes the decisions for the patient on the mix of inputs -- the hospital services, pharmaceuticals, physician services and so forth. That can be a capitated GP who is a fund holder, but it can also be an insurance plan that competes with other insurance plans. As long as there is integration in that sense, it can also be a district health authority who purchases care on behalf of its insured population. Integration is one element; and the other, in the United Kingdom, is the purchaser/provider split that was part of their reforms, in addition to the fund holding business.

Another element is competition, which is necessary either in order to ensure price competitiveness or to make sure that quality is maintained. If there are controlled prices, for example through capitation, then the only way to ensure that the fund holding GPs will, in fact, provide adequate care, is by leaving the patient the option of going to some other GP if they are not satisfied.

The competition can be between competing insurance plans, if you want to allow that. However, there must be some kind of competition amongst these integrated agents. The purchaser/provider split does not allow that and does not provide that, except that there is political accountability in those systems.

Ms Flood: Right.

Mr. Stabile: I think that all three incentives for GPs are comprehensive. Regarding the incentives for GPs, it is important that we think they are the right idea in some cases and the wrong idea in other cases. There are incentives that can be applied in many areas. Those include the supply-side incentives, such as doctors and insurers. Also, in some cases, they can insure the actual patients themselves. There is room for incentives to be placed on everybody in the system.

Another area is the competition among providers. Competition in the U.S. allows the flexibility that Professor Flood was talking about. In HMOs, they change all the time; when something does not work, they change it. When drugs become part of something, they change it because they have the flexibility to do that. We have been running a system that is a good one but, it does not have as much flexibility. It is important that there be flexibility in the system.

Senator Fairbairn: Have any of you been following the situation in Alberta regarding the health act?

Ms Flood: Yes.

Senator Fairbairn: Having listened to your remarks, can you relate that to some of your remarks? Of course, you are aware that there has been a lively and vigorous debate, which is probably far from over. I guess ask the question because, perhaps, you are telling us that the health act, which is wonderful, also is a product of almost a by-gone era and that there is a necessity to change it, not destroy it.

Obviously, change comes with difficulty and I am wondering how you would relate the Alberta experience. Is it something that you see as compatible with our health care system as we know it, or, as some of the top concerns of people in the province will indicate, do you see that it will not reduce costs and waiting lists? Will it lead to enhanced services and health care? It is an issue that is happening in Alberta, but it certainly reaches out to concerns all across the country.

Ms Flood: I have looked at Bill 11. When I first heard about Premier Klein's proposals, people that I know were agitated about it, and I thought they were being ridiculous. I thought that they were being too ideological; I did not see a problem with contracting out to competing hospitals -- private or not-for-profit. However, I had it eat my words when I went to look at Bill 11, because, as you may have picked up, my big concern is to ensure that equity is achieved through public financing. I would like it expand public financing to drugs and home care and other things. I am much more open to flexibility on the supply side. In looking at Bill 11, the definition of enhanced health care services includes the kinds of services that are meant to be covered under Canada Health Act and are meant to be publicly funded.

Thus, if a physician says that the MRI service is not medically necessary for a patient, he may actually be saying that the patient is being over anxious. The doctor determines what is medically necessary for the patient. The doctor may say to a patient who is not covered under a publicly funded system that if the patient wants to step down the hallway to the private medical office, the service can be provided privately -- fee-for-service basis -- and quickly. Once I saw that, and I realized that this was allowing two-tier private financing for enhanced health care services, I had to eat my words and e-mail everyone to tell them that they were right. In respect of the actual concept of contracting out to competing not-for-profit and for-profit providers, I am not ideologically opposed to for-profit providers. If the "cat can be skinned" more efficiently that way and if there is a possibility of doing it then I am in favour of it. If it means opening it to private financing, which seems to be what Premier Klein is allowing through his definition of enhanced health care services, I think that is wrong and it really is contrary to the values that underpin the Canada Health Act.

Mr. Blomqvist: I have not looked at the actual legislation but I would like to add that the notion of actually reducing waiting lists by making contracts with private providers is something that some of the county councils in Sweden did a number of years ago. There has not been, to my knowledge, any criticism in Sweden to the effect that this was incompatible with the core values of the Swedish health care system. It did reduce waiting lists very expeditiously.

Ms Flood: People do not understand, often, the distinction between financing and delivery. Public financing is key; we have always had private delivery. Now we are just debating whether not-for-profit or for-profit is so evil.

Senator Fairbairn: You make a good point about what the public understands and what it does not. You indicated that we need to consider other accountability-enhancing mechanisms directly linking decision makers to the citizens that they represent, and mandatory consultation by health authorities with community that they represent. You also suggested that physicians will always have some level of discretion about what service to provide and to whom. There is a need for continuing public input into what should be the basket of services that are publicly funded.

How, in your mind, do you see that kind of public input and mandatory responsibility of health authorities to check in with communities? When we are talking of change, this is a critical element because, undoubtedly, many people rely on the opinion of their doctors, or others in the system, and may not understand when we get into change and what that may involve.

Ms Flood: That is true, but it is absolutely key to take the public along with it.

Senator Fairbairn: How do you do that?

Ms Flood: There are many ways of doing it. Professor Blomqvist was talking earlier about competition between HMOs. I call that exit. You can take your voucher and shift it to another one. That is a mechanism of accountability, where I can move from a GP fund holder to another GP fund or I can take my government voucher from one health authority to the other one because I do not like the way they do their business. I call that exit. That is one mechanism of accountability, but I do not think it will ever fly here.

The other mechanism of accountability is what I call "voice," which is basically what I am talking about here. Voice is whereby people, health authorities, government authorities, and government decision makers are more responsive to the people they are meant to represent. Let us look at how other countries have engaged in reform.

In New Zealand, which I am most familiar with, the health authorities were required, through the agreements they negotiated with governments, to engage every year in mandatory consultation. They had to go out into the community and have things such as focus groups to discuss what the health care priorities should be in any particular year, where the needs were, and so on, from year to year. This has proved to be very effective. They also have what they call a core health services commission that travels around the country discussing with people what should be publicly funded and what should be in or out. They have given up trying to provide a definitive list, but they at least come up with what they think should be priorities that they inform the government about. The government then negotiates that with health authorities. This helps them. They say, "This year we will focus more on aboriginal health or on infant mortality. These have to be the priority areas this year to which we will direct more spending."

A number of countries have a health care commission or a health care ombudsperson. If a person has a complaint with a physician or a health authority, that person does not need to come running to a lawyer like me. The ombudsperson is there to help deal with concerns and complaints -- for example, is someone is worried about where they are on a waiting list, or worried about this, that or the other thing. However, that is messy. Exit is nice and clean. It is this nice market thing, but it is actually very complicated. Voice, political accountability is messier, harder to do, but ultimately probably more appropriate for Canada.

Mr. Blomqvist: Something that I have always thought is an undersupplied area where the federal authorities in every country can be extremely helpful has to do with systematic technology evaluation. This is not just evaluating potential expensive new technologies, but it is also deciding what should be included: what are the costs of different kinds of interventions, even relatively mundane ones; what are the benefits; what is the scientific consensus with respect to that? Those issues, it seems to me, could go a long way towards creating some degree of consensus and acceptance of these principles.

Mr. Stabile: We are starting this in Canada. We are beginning to realize that there are differences in the way people use technologies across the country in general. There are some recent reports that have shown that we use technologies in very different ways in Ontario versus British Columbia versus other provinces, so there is not consensus -- never mind among the patients -- even among the medical community. As we move towards that, I hope this information will help the process along, and CIHI is starting this.

Senator Carstairs: I have a couple of general and then a couple of specific questions. It seems to me, when I look at studies comparing Canada with the Netherlands, the United Kingdom and Japan, I am struck with the fact that we have very different geographies. Have there been any studies done that evaluate the amount of money we spend per capita in Canada and its relationship to our geography?

Mr. Blomqvist: I think there have been some studies in places like Sweden where you have similar inequalities between the cost of health care in major urban centres and in remote rural areas. I am not particularly familiar with those, but I know that the levels of health care cost per capita at comparable standards are very different because of all the county councils, and some are very large and thinly populated while others are urban.

I guess I should stop there because I do not know anything specific.

Ms Flood: I do not know either. It is a good question: To what extent is geography a problem? A number of countries have this problem of dense urban centres and then hardly anyone out in the boonies. New Zealand and Australia have these problems. The problem is getting physicians out there. It is a real problem when you are paying them on a fee-for-service basis and they can all cluster in the urban areas and do not actually need to go out. If you pay them on a capitation basis, they will be out there.

Senator Carstairs: Of course. That is the whole point. I come from a province, Manitoba, in which we have one very large city, and then we have Brandon, and then nothing else really in terms of any significant grouping of people. Everyone has to be flown, in an emergency situation, into Winnipeg. That has to add to our costs considerably in comparison to the Netherlands, where, quite frankly, you can take an ambulance ride almost anywhere in the country.

Mr. Stabile: There are studies that compare, in particular, Manitoba to some of the U.S. states that have similar population distributions, and we are doing okay compared to them, in terms of cost spending. They tend to spend more.

Senator Carstairs: The other issue that is of concern to me is capitation. I think it has been clear that, if every physician that was a general practitioner particularly or family physician were on capitation, you might be able to establish the protocols for testing, for technologies, for all kinds of things, but frankly there is not any incentive now. If a woman had a difficult pregnancy, yes, she might need eight ultrasounds, but in a normal pregnancy probably one ultrasound is adequate. What do you do if that patient demands six ultrasound during her treatment and threatens the doctor that she will go elsewhere if she does not get those six ultrasounds? At $125 each, which was the price when I last looked, that becomes a significant drain on the health care system. How do we get to capitation?

Ms Flood: It depends on the form of capitation. You have to make a decision about how much the family doctor is going to be responsible for, and to what extent. You can go the whole hog and make them responsible for basically all hospital services, drugs, X-rays, and so on, or you can make it more manageable because obviously there is only so much financial risk that they will be able to bear. When GP fund holding started in the U.K., they just extended it to drugs and lab tests and X-rays and elective surgery. If you want to extend it further, you have to get them to come together and be in larger risk-bearing groups. There also has to be a mechanism whereby if, for example, a GP is in a particularly needy area there will be a risk-pooling mechanism to top him up. If a physician is in an area where every third person has HIV, then obviously there will have to be more of a capitated budget. Figuring out how to risk-rate and weight those capitated budgets is the biggest impediment to capitation. However, the Netherlands is a great place to look to actually figure out how to do this. They have done a lot of work on what you have to figure out to make that work.

Senator Carstairs: I would say the biggest difficulty is the culture of the physicians. We can go back to when we started this process in 1965. Tom Kent was very clear in his presentation the other day when he said, "Sure, we would have liked to have gone to capitation. We could not. There was not a culture among the physicians in the country and a willingness to move to capitation." How are we going to set the stage so that physicians will move to capitation?

Ms Flood: We will have to buy them off. It is the only way that ever worked in any country. They will have to be given the kind of capitated budget that will give them the autonomy and money they will want to make them feel good about it.

Senator Carstairs: In other words, if they are getting $85,000 on average after costs, we have to offer them $100,000 a year guaranteed?

Ms Flood: It would be worth it in the long run.

Senator Banks: Tell that to the NHL.

Mr. Blomqvist: The other thing that I have been wrestling with here, and I am not sure if that was part of question, is trying to imagine a way of doing this by degrees. In other words, is it possible to offer people the option, if you are a doctor, to either go to capitation or to stay on fee for service? If that is done, then patients must be given the option of either going to a capitated doctor or to a fee-for-service doctor. If you do that, and if you think you save money by going to a capitated doctor, then you have to compensate the patient for going to the capitated doctor. Are we prepared to do that?

Ms Flood: Why do you have to compensate the patient?

Mr. Blomqvist: In order for a capitated system to work, a person must basically agree, first, not to go to any other doctor during the period of contract and, second, agree to abide by the doctor's recommendation. If a patient does not like the doctor's recommendation, the patient does not go to a specialist.

The Chairman: You cannot doctor shop.

Senator Carstairs: One trade-off surely would be that you are always going to have service. Right now, we have a disproportionate number of Canadians using walk-in clinics and hospital emergency rooms, at enormous costs. You could build that in.

Ms Flood: Quality of care and continuity of care are good things about capitation. More concern is given to ongoing health.

Mr. Stabile: We are in a tough situation. One of the things that allowed the U.S. to move towards more capitation was the fact that they found themselves with more doctors than they needed. When they found themselves in a situation of excess hospital capacity, excess doctor capacity, they were in a situation where they could say, "Listen, we are going to offer you a bigger chunk."

The Chairman: That is buying off when you have excess supply. The principle is the same.

Mr. Stabile: It is a much easier situation than we have now.

Senator Banks: I am anxious to hear how the management that you have mentioned would work. I come from a show business background, and I believe this problem to be insoluble. I think it is precisely analogous. The problem of the dynamic and incompatibility between the artistic director of the ballet company and the manager of the ballet company, or theatre or orchestra, is insoluble. It is like Northern Ireland. How would it apply to health care? I am seeing a manager saying to a doctor, "Well, you can't see that guy again," or, "You can't suggest that he go to this specialist." The doctor would say, "I am a doctor." This is notwithstanding that the manager may also be a doctor. There will be a friction there.

Ms Flood: Friction, in my opinion, is fine. Friction is probably fine because there must be some resolution, some balancing. The manager is representing societal interests. There are society's larger interests and then the individual patient's interest.

Senator Banks: He is a benevolent dictator.

Ms Flood: There is a balance that has to be reached between what is in the best interests of us as a society and what is in the best interests of individual patients. Individual patients, as I have said, will want everything. We all want everything when we are sick. It is all fine when we are not sick, but once we are sick, we want all the bells and whistles. We want everything, including the white rabbit out of the hat. At some point, there must be a balance. You raise a very good point on the difficulty between managers and physicians. It is like herding cats. Physicians do not like to be managed.

The point is, though, that we have not even tried. We do not have a culture of it because it was never done. Of course there will be difficulties at first. It will be hard. Managed care is problematic in the United States. That does not mean we should not be doing it.

I liked the U.K. fund holding initiative. I think it was working well. It is a shame that Blair has decided to -- well, he has actually exploded it. They have made it too big now. They are too big a group to do anything effective. You can give the physicians autonomy, give them the power to make the decisions, give them the budgets and encourage them to make decisions, and that is the other way to go.

Mr. Stabile: It also goes back to the question of how much information we have about how people provide care across the country. We can say to a doctor, "Look, we have 200 other doctors who do the same thing you do and they do not use as many resources and do not have patients dying on them. Why is your use so different? We have other doctors who behave differently without the same outcomes. Why is your use different?"

Ms Flood: If I were a patient, I would really like to know that, actually.

[Translation]

Senator Gill: Health services have been improved. Everyone agrees with that. Life expectancy has increased, the infant death rate has decreased, etc. However, we have taken away people responsibilities. Earlier on, someone mentioned disorganization. From time to time, some disorganization is necessary to allow people able to become more responsible. We dig ourselves in even deeper by not making people able to shirk their responsibilities. The government takes charge of all care, and costs. In what direction should we go to try and make families responsible? People should become somewhat more responsible and we should not leave all of that up to the government.

[English]

Mr. Blomqvist: One of the disappointing fields of medicine, in my opinion, has been the notion of trying to instil in populations healthier habits to reduce health care costs. I think we all feel good about things like ParticipAction and smoking cessation programs and the like, but the evidence that that has had a significant effect on health care costs is not great. The other option for doing this is trying to give a break on the insurance -- in other words, lower premiums or lower taxes for people who have healthier habits, like non-smokers. Again, I do not think the evidence is particularly encouraging when it comes to that.

I honestly think there is not much of an option other than having societal evaluations of new technologies when they come in and then simply making a social choice that either you get this technology or you do not. For the opportunities of actually getting people to prevent ill health, the evidence is not there.

Ms Flood: You are talking about perhaps the possibility of user charges and things like this.

Senator Gill: Yes.

Ms Flood: The problem with health care is the doctor. Essentially, you go in to see a doctor to tell you what you need. The doctor mediates your exchange with the larger health care system. That is why focusing on patients and charging patients more is not necessarily the best way to go. There is just no evidence that supports this. In New Zealand, they have user charges just to go to see your doctor. We really have problems with health outcomes. We have worse infant mortality. We have concerns about access to care for people on lower incomes. Even though there are government subsidies for the poorer people, they still have to pay about 50 per cent of the cost. You do not want to stop people actually getting into the system, because often they cannot self-diagnose. You want them to get into the system, but then you need the physician to mediate their relationship with the rest of the system.

Inspiring healthier habits and trying to get them to be healthier needs to be encouraged from inside the physician-patient relationship. The physician needs to be telling patients to quit smoking, for example. Physicians will have more incentive to do that if they have more incentive to be concerned about the total costs of care for that patient.

Mr. Stabile: This is particularly important with children and the poor. Studies that have looked at whether using more health care actually helps you be healthier have found very few results except with children and the poor, where there is a lot of evidence that you have to get the children looked at by the doctor. The results are actually very noticeable.

The Chairman: That is a wonderful line to close on.

Tomorrow, we open with CIHI, the Canadian Institute for Health Information. One of their opening points is that there appears to be, in many ways, not a very strong correlation between consumption of health services by an individual and whether that person is in fact healthier, which is counter-intuitive to many positions.

As you can tell from the questions, we could have gone on for several hours. Thank you very much for this terrific overview. We will be back you to in the fall when we get into a much more intensive study of what we can really learn from other countries.

In the meantime, in thinking about it, if you find that you have a compendium of options or policies that have been used to deal with the incentive systems in a variety of ways, I would like to see one, even just in bullet points. That would be great. Thank you very much for attending.

The committee adjourned.