Zero-sum Health Care

Imagine there are 3 children gathered around a table. On the table is a plate containing 2 cookies. It is obvious to them that they can't each walk away from that table with one cookie. This is a simple example of a zero sum game.

Now imagine that every car you see on the road gets 20 km/L or better. No SUVs, no Hummers, although there are still commercial vehicles that are not so fuel efficient. The reason there are no other types of cars is that they've been legislated off the roads. If you've hidden one away and take it on the road the police will confiscate it. There are no economic incentives like carbon taxes; you just can't buy a vehicle that burns too much gasoline.

These are very simple scenarios to introduce the idea of health care in Canada. It came to mind when I read this article citing a study that, in essence, declare health care in this country to be a zero-sum game. There is only so much to go around, so if you place more over here there will be less over there. Just like cookies and children.

Health care delivery to each individual is to a large degree capped. You want more, you can afford more, but you can't get it. Just like banning gas guzzlers from the road. This is not entirely true in the real world since we do allow some health sectors to sell their products and services to those willing to pay. Two examples are dentistry and pharmaceuticals.

Well, fine, but is this good or bad? Is health care really a zero-sum game, like in the article I referenced above, and assuming the study is accurately quoted in the article?

Health care is a business. You pay and they provide service. Except because the government acts as an intermediary you do not pay the professionals directly. Instead the government(s) taxes us and then puts in place a tightly-regulated regime whereby the professionals and service-delivery institutions get paid. Of course you already understand this since every Canadian is well-versed in this topic, so I won't dwell on it.

The point here is that the market has been distorted with the best of intentions. Want more than what is available and you're willing to pay more? Too bad, get in line. Or, if you're able, get what you want across the border. But no SUVs on our roads.

Now let's consider what might happen if there really were a pay-for-service health sector, a private one, whereby those willing to pay don't have to stand in line or go without. The conclusion in the quoted study says that there is a fixed amount of health care to distribute so if some goes to this private sector, their customers will get more and the rest of the population will get less. I don't know how they arrived at this conclusion but it flies in the face of basic economics and markets.

First, we must acknowledge there is hysteresis in provision of health care. That is, there is a lag in increasing the capacity of the system, regardless of money, since it takes years to train doctors, nurses and other professionals. Attracting them from other countries is possible, but as we've already seen it has its limits. We can only move so fast. So if you open up some areas of health care to the private sector the study's conclusion must be true in the near term. Some professionals will move to the private sector because there is demand for what they can provide, and so the public sector will have less capacity. Nothing can change this in the near term.

Except that once you broaden your time horizons it is no longer true that the game is zero-sum. It never was true, it was only the latency at work. If it's properly managed, and it would have to be managed carefully to avoid the worst case scenario, the injection of new money into health care by those willing to pay for private care means that there is more money in the overall health care sector.

Under the current system the only way to get more money into the system is to allocate more tax revenue to it. This means increasing your taxes or taking away from other tax-financed sectors like, say, the military, roads and pensions. To get more health care without increasing the amount of money going to it requires decreasing the amount given for every procedure and salary. This would be like the children cutting up the 2 cookies so that each could get an equal portion of 2/3 of a cookie. Presumably the Canadian Federation of Nurses Unions, which funded the cited study, would not agree to this, and neither would doctors and hospitals. It is arguable this tactic has been taken about as far as it can without further deterioration in the system. Examples include c. dificile (less money spent on hospital hygiene), doctors emigrating to the US and other calamities.

So the only practicable way to get more money into the system, and therefore more delivered health care, is with a private option whereby those willing to pay are able to do so. This means there will be more SUVs on the road (to flog my analogy a bit more) if they pay us more for the privilege. While there may be some added congestion on the roads until we add more lanes, everyone else still gets to drive their cars and can even dream of owning a Maserati. But it will take time. Adding more slots into nursing and medicine programs at universities is pointless unless there is money to pay the graduates or they will either forgo the opportunity or else emigrate afterward. Private health care can be a way to accomplish this.

In conclusion, health care is only a zero-sum game when we allow our governments to distort the market, with our money, until that is all it can sustain. It doesn't have to be this way, and neither does anyone have to go without should there be a private option. How it's put into practice is most important. That and the political will, if we tell our governments we are willing to entertain the experiment. Until we face up to this basic fact of money, the politicians will do nothing and we can expect the deterioration to continue.