Canada not the right model

By Robert Letovsky

Earlier this year, Vermont became the first state to move toward a single-payer insurance model (i.e., one in which the government provides health care) when Gov. Peter Shumlin signed H.202 into law. The Green Mountain State isn’t alone: Montana’s governor, Brian Schweitzer, announced he would also look at bringing such a system to his state.

Though a last-minute amendment retains some provisions for private insurers, H.202’s proponents have made clear their true goal is to transition to a Canadian-style socialized health care system; Gov. Schweitzer’s plan is based on that of Saskatchewan, his neighbor to the northwest.

As someone who grew up in Canada and has lived in the United States for the last 25 years, I’m amazed that Vermont and Montana would attempt to emulate a system that has serious flaws. In my experience, the drawbacks far outweigh the benefits of universal coverage.

For instance, there’s a common perception that American families pay high private insurance premiums while Canadians get their coverage for free. The reality is that Canadians pay a substantially higher tax rate at both the federal and provincial level compared with their peers south of the border. Even then, there can be substantial out-of-pocket costs: In 2009, Quebecers paid about $1,100 of their own money on expenses not covered by the state.

So much for free, eh?

Then there’s the notion that a hard cap on total health care spending set by the government will introduce rationality into the system. This suggests a fundamental misunderstanding of the way government works. Once medical care becomes just another line item in the budget, it has to compete with other stakeholders for a piece of the pie. Is government-provided health care more important than police, firefighters or schools?

In reality, socialized medicine substitutes rationality for rationing. Bureaucrats – in Vermont’s case, a panel of five experts chosen by the governor – determine how much to spend and on what procedures. This is why you sometimes hear of Canadian citizens heading to the United States to get a much-needed service instead of waiting in pain in the Great White North.

But at least everyone will have access to health care, right? Not if Quebec is any example. When demand threatened to exceed the capacity for treatment in Quebec, the government simply capped the number of permits available to family practice doctors. Two hundred thirty-eight graduates in family practice from the province’s medical schools competed for 220 permits. Almost 25 percent of the Quebec population does not have a doctor, and lack of access to primary care physicians leads to flooded emergency rooms.

The most interesting argument regarding Vermont’s move is that it will serve as an economic boon to the state. Proponents project that businesses battling burgeoning medical costs will flock to the state despite a doubling of the payroll tax because they’ll no longer have to pay insurance premiums. It’s an interesting hypothetical; allow me to propose another.

Vermont rolls out H.202 on Jan. 1, 2016. On Jan. 2, thousands of out-of-state residents move to Vermont, declare residency, and claim their rightful access to medical services. The state announces that it won’t ration care by limiting access, and costs skyrocket. Faced with a bond rating downgrade in the face of a huge deficit, the Legislature approves a tripling of the payroll tax instead of a doubling.

Vermont’s not quite as attractive to businesses now, is it? No one knows what will actually happen, and until someone does, it’s safe to say that no firm of any significant size will invest in Vermont if it has choices elsewhere.

Instead of moving toward a government takeover of a large part of the economy – as Vermont has done, Montana is considering, and the United States as a whole moves toward President Obama’s Affordable Care Act – why can’t the state encourage market-based alternatives like health savings accounts and more pricing transparency? Instead of trying to eliminate insurance companies altogether, decrease state-by-state regulation and allow insurers to operate nationwide.

Universal insurance coverage for all is a laudable goal, but achieving it with the top-down Canadian model will only create a health care system that’s universally poor in quality.

Robert Letovsky is a professor of business administration and accounting at Saint Michael’s College in Colchester.