Private delivery of surgeries is a step in the right direction

Two professors recently showed a remarkable lack of understanding about business, economics, and the source of the high standard of living enjoyed by first-world citizens that live in capitalist countries. The professors do not seem to understand that economic success is a prerequisite for a society to accumulate the resources required to pay for health care. In a recent opinion piece in The Calgary Herald titled “Private surgeries a step in the wrong direction”, Lorian Hardcastle of the University of Calgary and Ubaka Ogbogu of the University of Alberta argue against the private delivery of surgeries in Alberta. Here are the concerns they discussed and the quite different reality that I see.

Impact of a profit margin

The authors claim that services delivered in for-profit health care facilities cost more than the same services delivered in non-profit health care facilities due to the need for a profit margin at for-profit health care facilities.

This higher cost assertion is blatantly false. The profit margin at for-profit health care facilities is much less than the cost of added bureaucracies and inefficiencies at non-profit or government-owned health care facilities.

In countries where for-profit health care facilities operate alongside non-profit health care facilities, we observe similar fees for services at both. We also observe highly cost-conscious health insurance carriers contracting with both. At for-profit health care facilities, some of the net income is paid to investors as dividends. At non-profit health care facilities, the net income pays for the larger bureaucracy and pro-bono services.

I see no indications, contrary to what the authors claim, that non-profit health care facilities provide a lower cost of service.

Public subsidies for privately-owned health care facilities

The authors anticipate public subsidies for privately-owned health care facilities. I don’t know what would motivate the Alberta government to provide public subsidies. Such subsidies would be counter-productive to the government’s cost-containment goal in contracting for delivery of health care services.

Allowing private capital to build and operate health care facilities to deliver surgeries at the publicly-set cost of service for surgeries performed avoids Albertans paying higher taxes to create the public capital to build the same facility. What is not to like about that arrangement?

This subsidy argument appears to be a red herring introduced by the authors to scare Albertans in the absence of a cogent argument.

Privately-owned health care facilities offering enhanced services

The authors worry that privately-owned health care facilities offering enhanced services will be a problem. Our government-owned health care facilities offer adequate to excellent care. We are all pleased by that. However, patients vary widely in their expectations of health care service in the same way that we hold widely different expectations for other products and services we consume. I see no reason to restrict privately-owned health care facilities from offering what patients want and can pay for.

Offering patients choices is an argument for privately-owned health care facilities not against them.

Unionized health care workers

The authors appear to believe that the use of unionized health care workers in government-owned health care facilities somehow adds to the quality of health care delivery. They also seem to believe that non-union health care workers are at risk of being exploited by the government or the owners of privately-owned health care facilities or that they deliver substandard care.

I think this is a red herring argument introduced by the authors to confuse Albertans in the absence of a cogent argument. If someone is unhappy with a non-union employer, they can resign and work somewhere else. I have no data to suggest that unionized health care workers are somehow happier or more effective.

Capitalist vs. non-profit delivery of health care services

The authors promote the supposed virtue of non-profit, state-dominated delivery of health care services. They accuse the Alberta government of protecting investors at the expense of patients and taxpayers.

We have decades of experience with non-profit, state-dominated delivery of health care services in Alberta, the rest of Canada, and most other first-world, capitalist countries. There’s significant concern that we are all on an unsustainable health care path as:

1.      Waitlists continue to grow.

2.      The cost to manage chronic conditions continues to increase.

3.      Costs consume an increasing share of government revenue and GDP every year.

I commend the Alberta government for wanting to try a dose of capitalism in health care. Capitalism is serving us so well in the rest of our society outside of health care services.

How can the authors credibly suggest that the benefits of capitalism do not apply to the delivery of health care services?

Contract terms for private health care facilities

The authors are concerned that the contract terms private investors in health care facilities will insist on will be onerous in the event of early cancellation of the contract due to a future change in government. I am not at all surprised that investors making a major $200 million commitment would want some compensation in the event of early cancellation.

The solution to this issue is not to cancel a contract. The government can choose not to renew it if, at the end of the contract term, the government is unhappy. Not entering into a contract in the first place is not a solution because it precludes patients and taxpayers from garnering the cost and service benefits of privately-owned health care facilities.

Claiming non-existent risks related to the likely contract terms is another red herring introduced by the authors to scare Albertans in the absence of a cogent argument.

Capitalist vs. state-dominated delivery of services

The authors suggest that the benefits of capitalism somehow do not apply to the delivery of health care services despite widespread evidence that we all reap the benefits of capitalism in Canada every day.

We observe the benefits of capitalism with its free markets and competition all around us in first world countries. Prices are lower, the selection is deeper, shortages are rare, and quality is higher. We have come to routinely expect that situation.

If the non-profit delivery of services is so advantageous, why have capitalist countries, including Canada, emphatically rejected this idea? That is because country after country has learned that non-profit delivery of services changes management’s focus from customer service, quality, and efficiency to pleasing powerful political figures and lining their own pockets.

We observe the dysfunctional state-dominated delivery of services at China’s State-Owned Enterprises (SOE). The SOE continue to lose money despite repeated cash infusions from the government. These losses are ultimately borne by Chinese taxpayers. Meanwhile, China’s private sector outperforms the SOE sector year after year.

We have observed the same phenomenon for decades in socialist India where millions have died due to poverty and starvation in an economy dominated by SOE that deliver losses, high cost for services, and low quality.

The authors' infatuation with non-profit delivery of health care services ignores the benefits of capitalism and the devastation that the SOE has inflicted on many countries.

Conclusion

Albertans should say Yes as quickly as possible to private capital to build and operate health care facilities to deliver surgeries that will reduce the waitlists for services at government-owned health care facilities. Saying No means paying higher taxes to create the public capital required to build and operate the same facilities or allowing the waitlists for services to lengthen.