Canada's health care system needs private sector incentives to boost productivity
During the early-1980s a future Government Issues columnist, paid his way through university by working as a Pinkerton guard at several hospitals in the Montreal area.
During one extended assignment at Verdun's Douglas Hospital, he began emulating fellow security guards by watching television to wile away the long hours. Often full-time hospital employees would join him, mostly maintenance staff who had finished their work early, and needed to pass the time before punching out.
The joint television watching continued peacefully for several weeks. Until one day, the security guard discovered that full time hospital employees were paid more than twice as much as he was, despite that fact that both were watching the exact same programs.
The security guard and maintenance worker jobs required few qualifications, other than a warm body and four functioning limbs. Yet two very different sets of working conditions existed.
That's because maintenance workers in Quebec hospitals were for the most part unionized employees who benefited from generous working conditions paid for by the state, while security guards - although they worked at the hospital - were actually employed by private contractors.
One of the main priorities of the newly appointed Romanow Commission, charged by Prime Minister Jean Chrétien to look into the future of health care in Canada, should be to make recommendations about how private sector solutions can use to bring greater efficiency to the system.
During the 1980s governments were spending money like drunken sailors, so few people will be surprised that there was waste in Quebec's health care system. What is more noteworthy, is that the situation persists today.
After two decades of increasing pressure and continuous cuts, many tasks that could be performed cheaper by the private sector, are all still handled by the province's unionized hospital employees.
Quebec is not alone is this respect. Despite the strain placed on Canada's health care system, by an aging population, and years of supposed cost containment, many Canadian provinces continue to make cuts in services, rather than take on their powerful public sector unions.
While it is unclear how much money provincial governments could save by contracting out non-medical hospital services such as laundry room and cafeteria operations, maintenance work and so on, the fact that such obvious steps have not been taken in many jurisdictions, would give shivers to any private sector executive. That's because when obvious steps have not been taken to cut inefficiency, it usually means that there is plenty of other waste in the system.
One of the big differences between public and private sector managers, is that when companies such as Nortel and JDS Uniphase make job cuts in their operations, they start by slashing middle management positions. Existing employees might have to work harder to pick up the slack, but by making the cuts in management the core company structure is left intact, and most clients see little impact on service.
But provincial health care bureaucrats have dealt with budgetary pressures, not by trimming their own bureaucracies, but by slashing operations, closing hospital beds and cutting services to the public.
When complaints are heard from health care workers, the ones that are under the greatest pressure are front-line providers: doctors and nurses. There are far fewer hospital middle managers and health care department bureaucrats burning the midnight oil than their private sector cousins.
In an environment of increasing strain on public finances, there is no reason that public sector managers - notably those in the health care sector -- should continue to benefit from easy 38 hour weeks, and lifetime job security, when these luxuries are a thing of the past in most businesses.
According to the C.D. Howe Institute, things are going to get much worse before they get better. Demographic changes will put massive pressure on many provinces' health care budgets in the decades ahead.
In a report - titled Will Baby Boomers Bust the Health Budget? - Bill Robson, a vice-president at the institute calculates the implicit health care liability that the provinces will have to pay to deliver medical services to retiring boomers, at a stunning $530 billion.
Robson warns that the uneven weight of this liability across the country will put pressure on the federal government for more ad hoc increases in health care transfers to the provinces, similar to those agreed to by the Chrétien government before last fall's federal election.
But, warned Robson in a telephone interview, those ad hoc grants will solve little, if the problems underlying Canada's health care system are not addressed. If Robson is right, the Romanow Commission, will have its work cut out for it.
Hopefully Romanow will not repeat the mistakes of Quebec's inquiry into its own health care system The Clair Commission, which submitted its report to the province's then health minister Pauline Marois late last year.
During its hearings, Clair commissioners heard testimony about mismanagement and waste in the province's health care system. Rigid union regulations, massive absenteeism that resulted in 30 per cent of the system's total remuneration relating to hours not worked such as sick days, as well as other fringe benefits, were two of the primary culprits. Many of those testifying proposed contracting out to the private sector various support services.
Nonetheless, the commission refused to recommend any specific action related to these costs, despite the fact that in Quebec salaries comprise about 80% of the province's total health care expenditures.
"Since the majority of these employees already have job security, the Commission believes that a major confrontation with the unions (is not recommended)," says the report. To make up for the lack of funding one of the Clair Commission's main recommendations is that the federal government should put more money into the health care system.
The combination Clair Commission proposals amounts to an admission that Quebec is not taking all the action that it can to reduce its health care costs, and that Canada should foot the bill for its laxness. To put it another way, Canada would provide more money for Quebec not to improve health care in the province, but to subsidize its public employee's job security.
The blatant hypocrisy of the Clair Commission Report is all the more reason why, before Romanow looks into transferring more funds to the provinces, he first asks whether that is not like throwing money into an endless pit.
Canadians take public health care very seriously. Despite the fact that about 30% of medical costs such as eyeglasses, dental bills and so on, now fall outside the public system, and despite the fact lineups for services are getting longer, the Canadian public wants to keep Medicare. It is one of the few things that really distinguish us from our southern neighbors.
However, Canada's health care system needs private sector incentives to boost productivity. And sooner or later the public sector unions are going to have to start kicking in their share. Hopefully Romanow will recognize this early and not deliver a whitewash report, like that of Quebec's Clair Commission.
Peter Diekmeyer is a Montreal-based business writer. He can be reached at email@example.com
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