Socialized Medicine: The Canadian Experience
by Pierre Lemieux

The Canadian public health system is often put
forward as an ideal for Americans to emulate. It
provides all Canadians with free basic health
care: free doctors visits, free hospital ward
care, free surgery, free drugs and medicine while
in the hospital -- plus some free dental care for
children as well as free prescription drugs and
other services for the over-65 and welfare
recipients. You just show your plastic medicare
card and you never see a medical bill.

This extensive national health system was begun
in the late 1950s with a system of publicly funded
hospital insurance, and completed in the late
1960s and early 1970s when comprehensive health
insurance was put into place. The federal
government finances about 40 percent of the
costs, provided the provinces set up a system
satisfying federal norms. All provincial systems
thus are very similar, and the Quebec case which
we will examine is fairly typical.

One immediate problem with public health care
is with the funding. Those usually attracted to
such a 'free' system are the poor and the
sick -- those least able to pay. A political
solution is to force everybody to enroll in the
system, which amounts to redistributing income
toward participants with higher health risks or
lower income. This is why the Canadian system
is universal and compulsory.

Even if participation is compulsory in the sense
that everyone has to pay a health insurance
premium (through general or specific taxes),
some individuals are willing to pay a second
time to purchase private insurance and obtain
private care. If you want to avoid this double
system, you do as in Canada: You legislate a
monopoly for the public health insurance
system.

This means that although complementary insurance
(providing private or semi-private hospital rooms,
ambulance services, etc.) is available on the
market, sale of private insurance covering the
basic insured services is forbidden by law. Even
if a Canadian wants to purchase basic private
insurance besides the public coverage, he cannot
find a private company legally allowed to satisfy
his demand.

In this respect, the Canadian system is more
socialized than in many other countries. In the
United Kingdom, for instance, one can buy private
health insurance even if government insurance
is compulsory.

In Canada, then, health care is basically a
socialized industry. In the Province of Quebec,
79 percent of health expenditures are public.
Private health expenditures go mainly for medicines,
private or semiprivate hospital rooms, and dental
services. The question is: How does such a system
perform?


The Costs of Free Care

The first thing to realize is that free public
medicine isn't really free. What the consumer
doesn't pay, the taxpayer does, and with a
vengeance. Public health expenditures in Quebec
amount to 29 percent of the provincial government
budget. One-fifth of the revenues comes from a
wage tax of 3.22 percent charged to employers
and the rest comes from general taxes at the
provincial and federal levels. It costs $1,200
per year in taxes for each Quebec citizen to
have access to the public health system. This
means that the average two-child family pays
close to $5,000 per year for public health
insurance. This is much more expensive than the
most comprehensive private health insurance
plan.

Although participating doctors may not charge
more than the rates reimbursed directly to
them by the government, theoretically they may
opt out of the system. But because private
insurance for basic medical needs isn't
available, there are few customers, and less
than one percent of Quebec doctors work outside
the public health system. The drafting of
virtually all doctors into the public system
is the first major consequence of legally
forbidding private insurers from competing
with public health insurance.

The second consequence is that a real private
hospital industry cannot develop. Without
insurance coverage, hospital care costs too
much for most people. In Quebec, there is
only one private for-profit hospital (an old
survivor from the time when the government
would issue a permit to that kind of
institution), but it has to work within the
public health insurance system and with
government-allocated budgets.

The monopoly of basic health insurance has led
to a single, homogeneous public system of
health care delivery. In such a public
monopoly, bureaucratic uniformity and lack
of entrepreneurship add to the costs. The
system is slow to adjust to changing demands
and new technologies. FOr instance, day clinics
and home care are underdeveloped as there exist
basically only two types of general hospitals:
the nonprofit local hospital and the university
hospital.


When Prices Are Zero

Aside from the problems inherent in all monopolies,
the fact that health services are free leads to
familiar economic consequences. Basic economics
tells us that if a commodity is offered at zero
price, demand will increase, supply will drop,
and a shortage will develop.

During the first four years of hospitalization
insurance in Quebec, government expenditures on
this program doubled. Since the introduction of
comprehensive public health insurance in 1970,
public expenditures for medical services per
capita have grown at an annual rate of 9.4 percent.
According to one study, 60 percent of this increase
represented a real increase in consumption. [1]

There has been much talk of people abusing the
system, such as using hospitals as nursing homes.
But then, on what basis can we talk of abusing
something that carries no price?

As demand rises and expensive technology is
introduced, health costs soar. But with taxes
already at a breaking point, government has
little recourse but to try to hold down costs.
In Quebec, hospitals have been facing budget cuts
both in operating expenses and in capital
expenditures. Hospital equipment is often outdated,
and the number of general hospital beds dropped by
21 percent from 1972 to 1980.

Since labor is the main component of health costs,
incomes of health workers and professionals have
been brought under tight government controls. In
Quebec, professional fees and target incomes are
negotiated between doctors' associations and the
Department of Health and Social Services. Although
in theory most doctors still are independent
professionals, the government has put a ceiling
on certain categories of income: for instance,
any fees earned by a general practitioner in excess
of $164,108 (Canadian) a year are reimbursed at
a rate of only 25 percent.

Not surprisingly, income controls have had a
negative impact on work incentives. From 1972 to
1978, for instance, general practitioners reduced
by 11 percent the average time they spent with
their patients. In 1977, the first year of the
income ceiling, they reduced their average work
year by two-and-half weeks. [2]

Government controls also have caused misallocations
of resources. While doctors are in short supply in
remote regions, hospital beds are scarce mainly in
urban centers. The gOVernment has reacted with
more controls: Young doctors are penalized if they
start their practice in an urban center. And the
president of the Professional Corporation of
Physicians has proposed drafting young medical
school graduates to work in remote regions for a
period of time.

Nationalization of the health industry also has
led to increased centralization and politicization.
Work stoppages by nurses and hospital workers have
occurred half a dozen times over the last 20 years,
and this does not include a few one-day strikes by
doctors. Ambulance services and dispatching have
been centralized under government control. As this
article was being written, ambulance drivers and
paramedics were working in jeans, they had covered
their vehicles with protest stickers, and they were
dangerously disrupting operations. The reason: They
want the government to finish nationalizing what
remains under private control in their industry.

When possible, doctors and nurses have voted with
their feet. A personal anecdote will illustrate
this. When my youngest son was bom in California
in 1978, the obstetrician was from Ontario and
the nurse came from Saskatchewan. The only
American-born in the delivery room was the
baby.

When prices are zero, demand exceeds supply,
and queues form. For many Canadians, hospital
emergency rooms have become their primary
doctor -- as is the case with Medicaid patients
in the United States. Patients lie in temporary
beds in emergency rooms, sometimes for days. At
Sainté-Justine Hospital, a major Montreal
pediatric hospital, children often wait many
hours before they can see a doctor. Surgery
candidates face long waiting lists -- it can
take six months to have a cataract removed.
Heart surgeons report patients dying while on
their waiting lists. But then, it's free.

Or is it? The busy executive, housewife, or
laborer has more productive things to do besides
waiting in a hospital queue. For these people,
waiting time carries a much higher cost than
it does to the unemployed single person. So,
if public health insurance reduces the costs of
health services for some of the poor, it increases
the costs for many other people. It discriminates
against the productive.

The most visible consequence of socialized
medicine in Canada is in the poor quality of
services. Health care has become more and more
impersonal. Patients often feel they are on an
assembly line. Doctors and hospitals already have
more patients than they can handle and no
financial incentive to provide good service.
Their customers are not the ones who write the
checks anyway.

No wonder, then, that medicine in Quebec
consumes only 9 percent of gross domestic
product (7 percent if we consider only public
expenditures) compared to some 11 percent in
the United States. This does not indicate that
health services are delivered efficiently at
low cost. It reflects the fact that prices and
remunerations in this industry are arbitrarily
fixed, that services are rationed, and that
individuals are forbidden to spend their
medical-care dollars as they wish.


Is It Just?

Supporters of public health insurance reply that
for all its inefficiencies, their system at least
is more just. But even this isn't true.

Their conception of justice is based on the
idea that certain goods like health (and
education? and food? where do you stop?)
should be made available to all through coercive
redistribution by the state. If, on the contrary,
we define justice in terms of liberty, then
justice forbids coercing some (taxpayers,
doctors, and nurses) into providing health
services to others. Providing voluntarily for
your neighbor in need may be morally good. Forcing
your neighbor to help you is morally wrong.

Even if access to health services is a desirable
objective, it is by no means clear that a
socialized system is the answer. Without market
rationing, queues form. There are ways to jump
the queue, but they are not equally available
to everyone.

In Quebec, you can be relatively sure not to
wait six hours with your sick child in an
emergency room if you know how to talk to the
hospital director, or if one of your old
classmates is a doctor, or if your children
attend the same exclusive private school as
your pediatrician's children. You may get good
services if you deal with a medical clinic in
the business district. And, of course, you
will get excellent services if you fly to
the Mayo Clinic in Minnesota or to some
private hospital in Europe. The point is
that these ways to jump the queue are pretty
expensive for the typical lower-middle-class
housewife, not to talk of the poor.

An Enquiry Commission on Health and Social
Services submitted a thick report in December
1987, after having met for 30 months and spent
many millions of dollars. It complains that
"important gaps persist in matters of health
and welfare among different groups." [3] Now,
isn't this statement quite incredible after
two decades of monopolistic socialized health
care? Doesn't it show that equalizing conditions
is an impossible task, at least when there is
some individual liberty left?

One clear effect of a socialized health system
is to increase the cost of getting above-average
care (while the average is dropping). Some poor
people, in fact, may obtain better care under
socialized medicine. But many in the middle class
will lose. It isn't clear where justice is to be
found in such a redistribution.

There are two ways to answer the question: "What
is the proper amount of medical care in different
cases?" We may let private initiative and voluntary
relations provide solutions. Or we may let politics
decide. Health care has to be rationed either by
the market or by political and bureaucratic
processes. The latter are no more just than the
former. We often forget that people who have
difficulty making money in the market are not
necessarily better at jumping queues in a socialized
system.

There is no way to supply all medical services to
everybody, for the cost would be astronomical. What
do you do for a six-year-old Montreal gift with a
rare form of leukemia who can be cured only in a
Wisconsin hospital at a cost of $350,000  -- a real
case? Paradoxically for a socialized health system,
the family had to appeal to public charity, a more
and more common occurrence. In the first two months,
the family received more than $100,000 including a
single anonymous donation of $40,000.

This is only one instance of health services that
could have been covered by private health insurance
but are being denied by hardpressed public insurance.
And the trend is getting worse. Imagine what will
happen as the population ages.

There are private solutions to health costs. Insurance
is one. Even in 1964, when insurance mechanisms were
much less developed than today, 43 percent of the
Quebec population carried private health insurance,
and half of them had complete coverage. Today, most
Americans not covered by Medicare or Medicaid carry
some form of private health insurance. Private charity
is another solution, so efficient that it has not been
entirely replaced by the Canadian socialized system.


Can Trends Be Changed?

People in Quebec have grown so accustomed to socialized
medicine that talks of privatization usually are limited
to subcontracting hospital laundry or cafeteria
services. The idea of subcontracting hospital
management as a whole is deemed radical (although
it is done on a limited scale elsewhere in Canada).
There have been suggestions of allowing health
maintenance organizations (HMOs) in Quebec, but the
model would be that of Ontario, where HMOs are totally
financed and controlled by the public health insurance
system. The government of Quebec has repeatedly come
out against for-profit HMOs.

Socialized medicine has had a telling effect on the
public mind. In Quebec, 62 percent of the population
now think that people should pay nothing to see a
doctor; 82 percent want hospital care to remain free.
People have come to believe that it is normal for the
state to take care of their health.

Opponents of private health care do not necessarily
quarrel with the efficiency of competition and private
enterprise. They morally oppose the idea that some
individuals may use money to purchase better health
care. They prefer that everybody has less, provided
it is equal. The Gazette, one of Montreal's English
newspapers, ran an editorial arguing that gearing
the quality of health care to the ability to pay
"is morally and socially unacceptable." [4]

The idea that health care should be equally distributed
is part of a wider egalitarian culture. Health is seen
as one of the goods of life that need to be socialized.
The Quebec Enquiry Commission on Health and Social
Services was quite clear on this:

    The Commission believes that the reduction of
    these inequalities and more generally the
    achievement of fairness in the fields of health
    and welfare must be one of the first goals of
    the system and direct all its interventions.
    It is clear that the health and social services
    system is  not the only one concerned. This concern
    applies as strongly to labor, the environment,
    education and income security. [5]


A Few Lessons

Several lessons can be drawn from the Canadian
experience with socialized medicine.

First of all, socialized medicine, although of poor
quality, is very expensive. Public health
expenditures consume close to 7 percent of the
Canadian gross domestic product, and account for
much of the difference between the levels of public
expenditure in Canada (47 percent of gross domestic
product) and in the U.S. (37 percent of gross
domestic product). So if you do not want a large
public sector, do not nationalize health.

A second lesson is the danger of political compromise.
One social policy tends to lead to another. Take, for
example, the introduction of publicly funded hospital
insurance in Canada. It encouraged doctors to send
their patients to hospitals because it was cheaper
to be treated there. The political solution was to
nationalize the rest of the industry. Distortions
from one government intervention often lead to more
intervention.

A third lesson deals with the impact of egalitarianism.
Socialized medicine is both a consequence and a great
contributor to the idea that economic conditions should
be equalized by coercion. If proponents of public health
insurance are not challenged on this ground, they will
win this war and many others. Showing that human
inequality is both unavoidable and, within the context
of equal formal rights, desirable, is a long-run project.
But then, as Saint-Exupery wrote, "Il est vain, si
l'on plante un chine, d'espérer s'abriter bientôt sous
Son feuillage." [6]

   1. Report of the Enquiry Commission on Health
      and Social Services, Government of Quebec,
      1988, pp. 148, 339.
   2. Gerard Belanger, "Les depenses de sante par
      rapport a l'economie du Quebec," Le Medecin
      du Quebec, December 1981, p. 37.
   3. Report of the Enquiry Commission on Health
      and Social Services, p. 446 (our translation).
   4. "No Second Class Patients," editorial of The
       Gazette, May 21, 1988.
   5. Report of the Enquiry Commission on Health
      and Social Services, p. 446 (our translation).
   6. 'It is a vain hope, when planting an oak tree,
      to hope to soon take shelter under it."


Socialized Medicine
by Dan Smoot

In 1884, Prince Otto von Bismarck, Chancellor
of Germany, instituted the first modern program
of socialized medicine. It was called compulsory
national health insurance.

Bismarck hated Communism. His motive in
introducing socialized medicine in Germany was
to buy the loyalty of the German masses as a
means of keeping them from becoming Communists.
Bismarck adopted "nationalistic socialism to
end international socialism"--to use his own
words. To use other words: Bismarck was the
first leader of a great nation to fight
Communism by adopting Communism.

The German citizens paid more for their national
compulsory health insurance than they had paid
for private insurance before Bismarck came
along -- and they got less in return.

Bismarck's scheme failed miserably to provide better
medical care for the people of Germany; but it did
become an important feature of the German militaristic
state; it helped pave the way for Hitler a generation
later; and it furnished a pattern with which practically
every other nation in the West - -including
America -- has experienced.


British Experience

England first started experimenting with socialized
medicine in 1911. The experiments were a failure, as
they always have been everywhere.

But government never retrenches. When government seizes
power and money from the people in order to promote
their welfare and then makes matters worse for them,
government always argues that it didn't have enough
power and money to do enough promoting.

In England, for example, when Lloyd George's rather
moderate experiment in the Bismarckian type of national
health insurance was abandoned, the nation went all
the way into communized medicine.

The National Health Program which became the law of
England in July 1948 is modeled on the Soviet system
created by Lenin.

In less than two years, there were more than half a
million people on the waiting lists for hospitalization,
while some 40,000 hospital beds were out of service
because of a nurse shortage. The hospital shortage
in Britain has become so acute that many mentally
deficient and helpless, aged people are unable to
secure institutional care, The only effective means
of easing the shortage is to deny hospital admission
to the old and chronically ill who cannot be
discharged once they are admitted.

In industrial centers, some British doctors have as
many as 4,000 registered patients each. Such doctors
can give each patient only three minutes per
call -- three minutes overall, for consultation,
diagnosis, prescription, filling out official forms,
and maintaining proper records for governmental
inspectors.

Twelve percent of all British taxes go into the
national health program. Thus the wretchedly inadequate
'free' medical services in Britain actually cost the
average Englishman considerably more than an American
pays for the most expensive private health insurance
and hospitalization plan.

Over and above what the British themselves have put
into socialized medicine, one must consider also the
billions of dollars which America has pumped into the
British economy as loans and outright gifts. And
still the thing is a failure. Why?

Whenever government enters a field of private activity,
that field becomes a political battleground. Whenever
you mix politics with medicine, doctoring becomes a
political instead of a medical activity.


"Something for Nothing"

But the primary reasons for the inevitable failure of
socialized medicine can be found in the patients
themselves. When people are forced to pay for something,
whether they want it or not, they are inclined to use
as much of it as they can in an effort to get their
money's worth.

There are endless stories about Englishmen who trade
their government-issued eyeglasses, wigs, and even
false teeth, for beer. There are housewives who trade
government-issued medicine for perfume and cigarettes.
And there are some who pick up extra money by selling
the gold fillings out of their teeth -- getting them
replaced by government dentists and then selling them
again.

Malingerers are people who pretend to be sick in order
to get sick-pay, Social Security benefits, free
hospitalization, or a rest at government expense.
Hypochondriacs are people who think they are sick,
but aren't. There are countless thousands of such
people. No system has even been devised for definitely
identifying them, for weeding out the unnecessary or
unreasonable or dishonest demands made upon the medical
care services -- no system, that is, except the one
existing in a free society where a person must pay his
own doctor bill or is controlled by provisions of an
insurance policy which he himself has bought.

No compulsory health insurance program has found a
means to discourage racketeers or petty complainers
who make useless trips to the doctor and monopolize
professional time that should be spent on people
really needing care.

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