What is the best way to pay for health care? As a professor of health policy, I am frequently asked to comment on proposals to change how health care is financed. The rationale varies, as do the goals. Extend coverage? Control costs? Encourage appropriate utilization? I frequently resorted to the policy analyst’s creed – “one size does not fit all”. Yet it seemed that it might be helpful to clarify what sizes the tailor might need to serve.
One starting point for our work was the pressure in Canada to consider using Medical Savings Accounts. This arose from the assumption that people would abuse ‘free’ care, and that the best way to attain cost control was to use economic principles. Working with colleagues in Manitoba, including co-author Les Roos, we determined that the assumptions were flawed. Average expenditures were misleading, since most people used very little health care. The top 1-5% accounted for the bulk of costs. Our work directly influenced health policy in Canada, and was cited in both the Romanow and Kirby reports. My other co-author, Kenneth Lam, did a thorough job of analyzing updated Manitoba data on the distribution of health expenditures for his PhD thesis.
Particularly, as the US debates over health reform (“Obamacare”) intensified, I was struck by the passion with which people were making similar arguments. Our findings suggested that the insistence on competitive insurance models, for example, seemed potentially harmful – escalating total costs, while not covering those most in need of care.
Our paper in Canadian Public Policy, “Four Flavours of Health Expenditure”, thus took the highly risky approach of trying to be conceptual. We divided health costs into four categories, only three of which are captured in health expenditure statistics. The first, public health, may include efforts to preserve clean air and water, as well as policies directed at ‘determinants of health’ (e.g., ensuring people have food and shelter). Indeed, several of the case studies in my new U. of T. Press book (Case Studies in Canadian Health Policy and Management) deal with such issues (e.g., contaminated water in Walkerton, Ontario). Our paper focused on the remaining three categories – routine care delivered to the population, potentially catastrophic expenditures that were not predictable in advance, and potentially catastrophic but predictable costs (e.g., pre-existing conditions). We suggested that these raised different issues, and hence that policies that could work for one category might not work for others. We concluded that universal single payer systems were most appropriate for dealing with this last category of expenditures (and had advantages for the other categories as well). We illustrated this with data from Canada, particularly Manitoba. As an experienced academic, I know it is much easier to publish straightforward data analysis than to try to use this data to make conceptual leaps, and we are grateful to CPP for publishing our paper. We hope that our paper can help policy makers ensure that the way we finance health care fits as many sizes as possible in ensuring coverage for everyone needing care at an affordable cost.
Raisa Deber, Kenneth C. K. Lam and Leslie L. Roos: Four flavours of health expenditures: Implications of the distribution of health expenditures for financing health care. Canadian Public Policy. 40(4), December 2014.