Daily Prompt: Right to Health


Should the government or the private sector provide access to healthcare?

I would prefer a mixed system, and this is why:

The question could apply to the provision of health insurance and/or to health services. Let us first assume health insurance.

Without going into the math, there is a line of reasoning as to why unregulated private health insurance would not cover an entire population.

  • Given a number of private firms providing health insurance, they will be competing and attempting to maximize profits. Profits derive from the premia (or deductibles, or co-payments, etc.) which they receive from their customers, minus the total amount in claims which these firms pay out to individuals.
  • As firms compete there will be, roughly speaking, a limit on how much they can charge in premia (for various policies) without having customers defect to other insurance companies. Which brings our attention to costs.
  • To limit the total claims payable firms will try to select less risky individuals from a population. A person who, by family history, is clearly prone to cancer or heart attacks will not be desirable, and firms will avoid taking on that risk by charging much higher premia to those who they know to be risky
  • No one firm will want to have a greater proportion of risky customers than the others. This will make it difficult for those who are at higher health risk (such as the elderly and chronically ill), who arguably need the insurance more, to get insurance.

Furthermore, no one has perfect information about just how risky a person’s health is. Your healthiness will only be revealed over time, and this will make it very difficult to have any long-term insurance contracts; companies will not want to sign on a 20 year old, no matter how healthy-seeming, for 30 years. By the time they are 45 that person may have developed a health problem.

Then the company would be receiving premia acceptable to a healthy 20 year old, in exchange for covering the costs of an ill 45 year old – a fall in profits.

For the above reasons, countries which have private health insurance (such as the Netherlands) regulate their insurance markets. Although various private firms provide insurance policies, the government may do one or many of the below;

  • mandate that insurance companies have a percentage of risky customers in their portfolio (in proportion to the population)
  • subsidize the premia of high risk individuals
  • provide a fund which will compensate insurance companies with a higher number of risky people in their portfolio
  • set the cost of a basic insurance package

The list goes on; there are ways to make private health insurance work, given government regulation. And as insurance would still be private, when people must pay more for more coverage they will have incentives to pursue healthier behaviour.

Public health insurance is a shorter story. By receiving taxes, and then insuring a population out of those funds, public insurance does two things. There is the transfer of resources from the healthy to the sick, which is present in all health insurance systems, and then there is a transfer from the wealthy to the poor. Even if the poor pay as much healthcare taxes (which is not realistic; most healthcare taxes are progressive), they will likely receive more healthcare out of the system.

Low income is associated with poorer health. Public insurance is preferred in countries where they wish to ensure that poorer individuals (and high health risk individuals), who likely need healthcare more, can certainly afford it.

However, individuals cannot customize their insurance coverage according to their needs/desires. Also, guaranteed coverage will not give individuals the incentive to make healthier, preventative choices.

Now to consider the provision of health services.

Again, let us assume private provision of health services first. Whether the government pays for/subsidizes individuals’ use of private health services, or whether individuals pay for their use of health services,

  • private provision implies competition – this will almost certainly lead to greater efficiency in the use of resources
  • there will be a variety of health services available at different prices

If individuals pay for private health services,

  • some will not be able to afford services
  • some will be able to purchase higher quality services than would be offered under a public system

If the government pays for private health services,

  • it will be difficult to control costs. The government will be reimbursing/partially reimbursing  providers, while individuals use whichever private services they choose/can afford

Now assume public provision of health services. This will necessarily be publicly funded.  The services provided will be available to all the  public at approximately the same quality standard.

  • there will be no competition – this implies lower efficiency, the “run-away-costs” that you can sometimes see in government
  • there will be rationing – there are no prices in public health care, so this is the restriction to use
  • there may be a lower quality of service, due to lower efficiency with a given amount of funding
  • some people may overuse the “free” services

Overall, public provision implies longer waiting lists and possibly lower quality services than private provision; however, services are provided equally and costs can be controlled directly by the government.

In conclusion, completely private healthcare cannot function well.

However, with government regulation private elements (particularly in provision) may bring greater efficiency to a healthcare system, while remaining more accessible to the public.

Completely public health care can function well, but will have efficiency (cost) drawbacks in favour of greater equity.

In response to this prompt: my preference would be for a mixed public-private system. I would like the security of comprehensive public health insurance, with a provision for supplementing/opting-out with private insurance, as well as the greater efficiency of mixed public/private provision.

As a Canadian, I’d like to see public health insurance standardized across the country, and expanded to include areas we currently don’t cover (at least in Ontario), such as dental and eye care.

The drawbacks to my choice are:

  • limited customization of insurance coverage
  • need for construction of economically viable opt-out/supplementation
  • partial incentive toward healthy choices, given viable opt-out/supplementation
  • initial friction between public and private providers
  • the political backlash (in Canada) to any private healthcare provision. The wealthy will likely opt-out or supplement, and even as this eases the burden on public services it will mean they get better service than low-income individuals
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50 comments

  1. A very well written and expressed post. I like the points you make and if you ever choose to run for office let me know and help you! 🙂 it would be a great thing for the country to have some people in charge that have not only heart but some common sense and the heart to share it. Just my thought. Thank you for sharing this post and all your posts this one is a change of pace and you did it well.

    1. Haha thank you, but politics might take me to an early grave! I wish we could have such people in charge as well.

      Thank you for your kind comment, I’m glad that “different” wasn’t “bad”! 🙂

      Lily

      1. I thought different was a good choice of words perhaps it wasn’t I will say it was awesome in its content and presentation! After reading many of your posts I would have to say it would be a great tragedy for the world to lose you to an early grave….

  2. Being in the trenches (and being someone who doesn’t do politics), I will tell you that (at least in the American system) competition does not provide better services. Too often competition leads to worse outcomes- when providers are competing for patients (sadly, there’s a race to the bottom effect where patients are given what they want- for example, controlled substances to addicts) rather than better care. This is just one of many failings of the private sector in health care. The public sector, in which I work, has a lot of flaws as well.

    1. I think that’s why I would prefer a mixed public/private provision, structured by government mandate. The Kirby Report is where I first read about this idea 🙂

      Lily

      1. Clearly the American and Canadian systems are very different.

        The fatal flaw in the American system is that it is set up to serve two purposes: 1) take care of patients, and 2) maximize profits. It’s not possible to serve two masters, so guess which one wins?

        1. Yes, I have heard some unfortunate stories 😦 The Canadian system may not be ideal, but I am glad I live here.

          Simply put, having both public and private provision will induce some competitiveness, even in public services. This should increase speed of care (an issue in Canada) and perhaps even quality.

          Private providers will be constrained in maximizing profits as, if they are too expensive, customers will just stay in the public system. Furthermore, those who choose to use the private system will be freeing up resources for those who remain with the public healthcare system.

          That’s roughly what I would like a politician to promote.

          Lily

  3. I come down strongly on the side of a national universal plan. Health care is a public service, and profit should have no part of it. As long as millions of people cannot afford health care, we don’t really have a worthy democracy.

    I don’t think the argument about government inefficiency holds water. We already have one of the most inefficient systems in the world, and quite a few government agencies are skillfully and efficiently managed.

    There are several ways a national plan can be formulated. I think in the US it might be good for wealthy people to be able to buy deluxe service if they wanted to. I’m not entirely sure what that would mean. Possibly fast access or same-day appointments, or something.

    1. Universal health insurance? That’s what I prefer, I’d just like to have public and private provision.

      Comparisons between Canadian, French, and German systems have shown that the introduction of some competition will increase efficiency. But I agree that the most important factor in provision would be providing supplementation/opt-out to the wealthy. That way, they will be happier and the public system will have more resources

      Lily

      1. If there is to be a measure of competition, it cannot derive from being able to choose which people to insure or treat.

        1. Oh, no it would be competition in quality in price. To build off of the Kirby Report, while public health care would be encouraged to raise its quality, it would remain the least expensive option, open to everyone.

          Then the private option would exist, prices somewhat constrained by the option of a free public sector, and would generally be the higher quality, paid-out-of-pocket (or insurance) option for the rich. Who are probably frustrated as is. Not that I can sympathize, but we do need their tax money!

          Lily

          1. OK, I understand. The poor dears must be given SOMETHING they can use to prove to themselves they are superior to Those People (as Krugman says).

  4. Very well written with so much analytical details. Beautiful!
    I intentionally avoided the issues of insurance when I wrote my post, simply because the health insurance companies are part of the reason for inflation in health services.
    The are setup to make profit, so all those schemes with their beautiful policies, even though could be helpful occasionally, are created on probabilities that are calculated in the favour of the insurance companies.
    Individuals should gain financial freedom by acquiring financial education and practicing it’s lessons. Relying on insurance companies for our health makes us vulnerable to manipulation.
    With wealth, anybody can receive treatment anywhere. Responsibility means having the freedom to take all the decisions that concern your priorities completely by yourself. There is no hard and fast rule to all of this, I just seem to have a unique opinion.
    Thanks for stopping by at my blog!
    I enjoyed reading you.

    1. Thank you for reading, and leaving such a great comment!

      I agree, left to their own devices insurance companies will just aim for profit, and this will not benefit people very much! This is troublesome because on the assumption (supported by empirical studies) that people are risk-averse, the presence of insurance brings us utility.

      I think that since people would rather have insurance, in case something bad happens, the firms definitely need to be regulated – or just have public insurance.

      Either way, financial education would be hugely important. Whether choosing which regulated firm to sign on with, or whether arranging your finances (or extra insurance) around a public insurance system, more education would be beneficial to everyone!

      I would hesitate to say that wealth could solve this problem. It is impossible for everyone in a society to be wealthy, and those who do not have the opportunity to gain wealth, or who are unlucky, won’t be able to take advantage of being in the top 20% (10%, etc.) of an income distribution.

      Wow, I really enjoyed reading through this comment! Thank you for visiting!

      Lily

      1. You are very welcome! I’m glad you enjoyed reading through the comment. We may not all have equal opportunities, neither may everyone be able to acquire wealth, like you rightly pointed out. Yet, we all have both the chance and the choice to be hopeful and to reach for our dreams.
        Very many things are not up to us to resolve but those that fall within our jurisdiction, we must not compromise. I wish you the very best in life!
        🙂

    1. I’m glad if I managed to impart some knowledge, I was hoping to pass on some of what I have learned in my healthcare economics course so far.

      And thank you for visiting and commenting – again, I’m really glad to hear I passed on a few facts!

      Lily

  5. It is so interesting to hear this sort of discussion from Canada. Here in the US, “the Canadian system” is held up in all sorts of conversations, lectures and papers as the paradigm of goodness and the direction of choice.

    1. Oh gosh, no. We spend a ridiculous amount of money for what we get – the Western Europeans’ greater efficiency (and less conservativism about trying new policies) makes me green with envy.

      After all, I’ll be a tax payer soon. And I’d rather be paying good money, rather than ending up with all our waiting lists and funding issues!

      Lily

  6. I don’t prtend to know anything about this subject, but I’ve always thought we take our National Health Service for granted here in the UK. There is still the possibility to go private too and to get private health cover if you can afford it. But the care my grandma recently received under the NHS was astonishingly good with many staff going out of their way to make a 92 year old as comfortable as possible. Of course the current conservative government is doing its best to destroy it right now…

    1. I don’t know much about the UK either! Only what I read in another post about this prompt, which said that the NHS is very good in some places, and not very good in others. Which I supposed has people in different places frustrated?

      Your current conservative government has also taken away the Governor of the Bank of Canada! Haha oh well, the guy who is next in line has apparently been groomed for the position. His son is in my year and program here at university. Some awkward stories, there 😛

      Lily

  7. Universal health care for everyone funded by those best able to pay for it. If the capitalist wants a healthy workforce to make the goods and provide the services that make them rich it makes sense that they should pay to keep the workforce healthy. No workforce no profits. And don’t try and sell me the line that there would be no profits if they had to pay for healthcare. There’ll be no profits if there is no workforce to buy the products and services they produce. If those at the top of the pyramid scheme we call capitalism had a little less excess capital so be it. Seems like money well spent to me.

    1. That’s an interesting thing you mention about the ‘typical worker’ versus the ‘capitalist’. It has been proven that an extra dollar given to a low-income person will be used more efficiently that an extra dollar to a high-income person.

      Redistribution is important since the rich simply don’t value another dollar as much! However, if the rich paid for everything then lower-income people would have no reason not to free-ride on the healthcare system. I believe that they need at least some incentive – because no one is perfect 🙂

      Lily

      1. Not sure I know what incentive the poor need. Being poor is probably all the motivation they need. I don’t think anyone wants to be poor. Poverty, like wealth, is passed down through the generations.

        1. Ohh, no I mean that if something is free then why not take as much as you want? Hence the rationing in public healthcare. So if the rich were paying for healthcare entirely, it would really be free to the poor, and this could lead to problems of overuse, and further rationing, not to mention the resentment of the rich.

          I’m not one of them, but the sad thing about a democracy is that everyone has to be somewhat happy.

          To address poverty I think the Canadian government needs to adopt a whole other series of policies- that could be a new article, haha

          Lily

          1. I live in the UK. We have the NHS. Healthcare, free at the point of access. In 2007/8 we spent 7.8% of GDP on public sector healthcare and a further 1.4% in the private sector. That’s 9.2% of GDP on healthcare. Most recent figure I could find for Canada have you spending 9.9% of GDP. I think public sector healthcare is more efficient, you certainly get more for your money, regardless of you financial status. My friends father has prostate cancer. He would not be able to afford treatment if he lived in north America. My father had bypass surgery. Has health issues to this day. He’d be dead now if it wasn’t for the NHS. We, that majority, the relatively poor, are being forced into healthcare for profit in this country. They’re slowly trying to privatise the NHS. I can see a future for the UK where we have a US style healthcare system; spending 15% of GDP on healthcare that is only accessible to the rich. I go back to my original point. We need to force those who are bleeding the workforce poor to contribute more of the countries GDP to healthcare. How much of the the US healthcare spend is profits going to the shareholders of the companies who front the services? I think access to affordable healthcare is a basic human right denied to the majority of the worlds population by seekers of profit.

            1. I think that you might want to read a little more about public vs. private efficiency, though it is true that public healthcare is more affordable for those with lower incomes. And I’m sure those procedures would be affordable in Canada, we have universal health care.

              Well if their healthcare would only be accessible to the rich, and offers no benefits to the poor. it will be impossible for them to do that, right? Since most people are not rich they would not want such a system.

              I am not sure about shareholders in the US, but I doubt many of the private healthcare institutions are publicly traded and distribute shares.

              It is possible, given that most of the world’s population is in developing countries, that the majority of the world does not have access to basic healthcare because it is not profitable. I don’t know the statistics. But my article was written about developed countries – in countries with a weak government/taxation system many public services will not be viable.

              And in developed countries, I am not sure you can say that seekers of profit deny basic healthcare to people. As we live in democracies there are not enough of those “who are bleeding the workforce poor” to carry through policies that deny healthcare – given that the workforce poor are not voting for those policies.

              In democracies, we have ourselves to blame for policies which do/do not pass. Perhaps money is behind advertising of one side of an argument – well, we need to be critical thinkers.

              Lily

  8. Always worth reading someone actually thinking about how the system works, rather than just spouting preformed opinions!

    One of the things you describe did happen in the U.S. between 1970 and 1990: the insurance companies went cherry-picking for the healthy customers, and got rid of their high-cost customers by locking them into health plans that accepted no new members (so their costs just kept going up).

    I’ve noted to those arguing that more competition would solve all our healthcare woes here in the U.S. that we do not have a transparent market, since purchasers of health insurance cannot tell beforehand how much their plans will cover their medical problems, so laden with details and exceptions are they.

    One related field to consider as a model is education, where, at least in the U.S. (I don’t know about Canada) we have a public system which the majority of children use, but various private schools for the well-off and emphatically religious to use. The mix sometimes works well, but can degenerate if the number of students in private systems becomes substantial, reducing support for taxing the public to support the school past a critical level.

    1. I didn’t know that had happened in the US – it must have been hard on a lot of people. And you make a really good point, not only do insurers lack information about people, people lack information about insurers! So there are no long term plans without those price hikes…

      I also didn’t know that support for public schools was a problem in the US! We still have state-funded Catholic schools, which has opened a religious can of worms, but I’m not sure anyone has ever questioned our public schools

      Lily

      1. There are area in the country where a history of racism led to private schools for whites and badly-funded public schools for blacks going back more than a century. And forced racial desegregation and busing in the 1950s-1970s led to many whites either fleeing to the suburbs (leading to spatial segregation) or stuck their kids in private schools.

        That’s the old story. The newer story is that people on the right have been trying to set up charter schools, use home schooling, or try to get state funding for religious schools (usually not allowed) to avoid exposing their kids to sex education and evolution.

        1. Oh boy. So at least they are less racist now…? And funny, I’ve was in a Catholic school since my grandparents are religious, and we still did sex ed and biology!

          Lily

          1. Things have improved; the problem is that race and socio-economic status are still related, so it’s hard to tell if you’re seeing racism or just a disdainful attitude toward people at the bottom. Or, to bring in an example from a completely different sphere, one of the questions in the last election was whether the racists against Obama were a bigger or smaller bloc of voters than the evangelicals against Romney the Mormon.

            Not having gone to a Catholic school, I am curious: to what extent were abstinence and birth control methods covered?

            1. Freakonomics had some good stats on racism vs. classism. Admittedly, there are some things (like naming a child Chastity, or speaking an inordinate amount of slang), which people could change to mitigate some discrimination. But it would only be a small improvement if everything else stays the same 😦

              I think they mentioned abstinence as the only way not to get pregnant? And I think my health teacher mentioned birth control. But birth control is a popular acne treatment, so doctors introduce it to girls, and overall the knowledge about birth control was everywhere.

              Hard to tell where it came from, but we knew the deal! Kids were sleeping together anyways.

              Lily

  9. Very interesting and ery well-researched. Read it all closely, but one word jumped out: incentive. I cannot agree that paying more brings more incentive to be healthy – though you termed it better. France is said to have the world’s best healthcare. It is also free, and the French are among the top 3 healthiest nations – with the Japanese, who also have public healthcare – I understand
    Spain and Greece are also in the top 5 of best healthcare in Europe, In Spain it is public and free for a healthy population. Greece – used to be, might still be. Population is also comparatively very healthy.
    Best regards.

    1. Yes, I think that the problem of incentives is one of the private-proponent’s main arguments in favour of private healthcare. I just think that equity is more important!

      I wish we had a healthcare system like France. They get so much more for their dollar.

      Lily

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