% fortune -ae paul murphy

Explaining the health care disaster in Canada

September 2011 featured a leadership race in the Alberta Conservative party - with the winner, Alison Redford, inheriting a legislative majority and thus the premier's job. All six of the candidates faced a continual barrage of complaints about the health care system and all six promised to find the money and policies needed to fix it - with four offering magical handwaves; one promising to break federal law to bring in private money; and Ms. Redford committing to increased public spending on nursing care.

(Note that Ms. Redford's commitment to nurses had nothing to do with health care and everything to do with winning - in fact Ms. Redford won because her two most expensive promises, one to the teacher's union and the other to the nurse's union, combined with party rules allowing people to join and vote on the pretty much the same day, bought her thousands of union votes.)

Leadership race cynicism aside, Alberta conservative governments have spent, with only a brief respite during the early years of the Klein administration, about thirty years throwing money at health care - with the result that fiscal 2014/15 nominal program spending amounts to $18.3 billion. Divide that $18.3 billion among 4 million Albertans and you get a per capita cost of $4,546 - about 76% more than the average paid by Kaiser Permanente's American membership in 2010 - the last year before the Obamacare increases hit.

Two notes:

1 - The $18.3 billion is a budget number for Alberta healthcare. Real costs are considerably higher because there are multiple parallel systems (e.g. WCB, Blue Cross, separate federal plans covering the RCMP, military, natives, and MPs); services to out of province patients are billed separately; capital depreciation is largely unconsidered in the budget number; the cost of collecting the taxes used to pay these monies is never considered; and double billing, while illegal, is widely practiced through "recovery" of some medical expenses from home, business, and auto insurance carriers.

2 - Kaiser's nominal individual premiums have effectively doubled since, but now reflect the expectation that the generally healthy who previously sought insurance against the cost of a medical catastrophe will instead rely on the Obamacare requirement that insurers accept people with pre-existing conditions - because they can now get full coverage at average individual rates after being diagnozed or injured.

We don't know what we get for the money because outcomes information is not generally available, but we do know that tens of thousands of Albertans don't have regular access to primary care; that significantly more than a hundred thousand Albertans are on long waiting lists for rationed services; and that an Albertan facing eight to twelve months of diagnostic or treatment delay here can have the situation resolved in the United States in a week or two.

To put that comparison bluntly consider this: if it were possible to outsource all of Alberta's health care to Kaiser Permanente using existing American infrastructure magically ported to Alberta, the province would save well over eight billion dollars per year on today's costs; Albertans would have next day access to medical services; a long wait would mean next week; patients would have full legal recourse for incompetent or inadequate treatment; performance data would be largely public; doctors could generally rely on test results; hospitals would treat patients as customers rather than costs; and, GP clinics would be spacious, clean, and welcoming instead of small, dingy, and hostile.

Correlation does not demonstrate causation, but even the most doctrinaire Friend of Medicare should be able to see that throwing money at the system hasn't worked - and therefore that it might be time to try something else.

Understanding that something else starts with the events of 1985, because that's when provinces facing the financial effects of Trudeau's 1984 Canada Health Act discovered an unpleasant reality: none knew enough about system operations to make informed decisions.

The reason for that was simple: prior to 1985 Canadian health care had been run as a modified insurance scheme with government paying funded claims, providing envelope budgeting to hospital operators, and generally staying well away from day to day system operations. As a result all ten provinces had hired pretty much interchangeable people to implement pretty much interchangeable health care data processing systems - none of which produced much in the way of usable systems management information. Even fifteen years and billions of dollars in strategic systems development later, no provincial health department could adequately advise its minister on even the basics of system operations - things like the cost of the health care procedures it paid for; the rankings achieved by its providers on outcome quality; what provincially funded hospitals did for patient outcomes in terms of bed counts, patient days, budgets, or services; or which diagnoses or practitioners were long term, system wide, cost drivers.

This lack of information empowered the opinionated - and, in particular, many political players recognized that health care nationalization had too much media support to meddle with and so responded to the consequent cash crunch by blaming it on bad people rather than bad policy: usually claiming the ability to control future cost growth by rigorously weeding out fraud, waste, and abuse.

There is fraud, waste, and abuse in the system but it's mostly expressed through properly authorized and accounted for programs that go unquestioned - and not through individual or institutional malfeasance. All ten provinces, for example, still structure practitioner payments around, and together spend billions enforcing the use of, health care coverage cards - cards Canadians are required to obtain and show to prove eligibility for services to which, by law, all Canadians are entitled.

The same unconscious class contempt that leads politicians to believe that fraud, waste, and abuse constitute real problems in health care despite not knowing anyone actually guilty of any of it, affects thinking and decision making among senior bureaucrats. Most, for example, think themselves honest but uncritically accept "Roemer's law" - a cynical elevation to natural law of the observation that all new health care facilities are soon back logged. In reality Roemer's observation characterizes a system failing to meet reasonable patient expectations, but 90s bureaucrats who saw it as demonstrating widespread patient and practitioner malfeasance (i.e. as proving that doctors create their own demand, with patients complacently going along) created today's widespread practitioner shortages by cutting medical school enrollments as a way of reducing future health care service demand.

The lack of information combined with fiscal urgency and the acceptance, at both the political and bureaucratic levels, of a class distinction between governors and the governed made it easy for federal organizers to sell provincial bureaucrats on an idea taken from Lenin's 1920s playbook: enforcing facility nationalization by seizing control of the facility's workload via state mandated five year production plans. As a result one province after another adopted something called "health care regionalization" - a process under which government appointed friends generally unencumbered by health care expertise to regional boards; gave those boards a mandate to remove waste, duplication, and fraud from the system; and used its own control of regional funding to bless program funding as the prefered mechanism through which the boards would control which institution or practitioner group did what and for whom.

Program funding then became the king rat of Canadian health care: unobtrusively eating the heart out of the system while enabling increased secrecy, driving up cost, and imposing ever more stringent, and less health care oriented, burdens and restrictions on practitioners.

The attempt to rationalize services by forcing institutional specialization - a "you do hearts, he'll do livers", kind of thing - treated hospitals as purely procedural centers and silently assumed that patients would always be routed to the hospital funded to deal with whatever problem the patient needed help with. Since, in reality, GPs use hospitals to firm up diagnoses prior to embarcking on treatment, one immediate result of the new funding regime was a brisk trade in midnight cab rides as often desperately ill patients were shuffled between hospitals in the search for matches between funding and diagnoses.

When boards responded to the publicity this drew by telling general practitioners to verify doubtful diagnoses or lose admitting privileges, they enforced a dramatic downgrading in GP, Hospital, and nursing roles while setting off nearly exponential growth in specialist billings, third party testing costs, and treatment delay - thereby creating today's waiting lists, inflicting serious harm on patients, and triggering enormous increases in system costs.

More recently, program funding has been driving the next step in the evolution of the system: the move to the Stalinist one big factory model. At the administrative level service differences combined with the fact that the governing legislation recognizes provincial, not local, boundaries drove collapse of the regions - so health care for 4 million Albertans is now controlled by one appointed board with multiple administrative layers between them and the nominal customer.

The board's program funds are, of course, the service provider's budget funds; and so a process in which hospital bureaucrats sell program delivery to provincial bureaucrats offering program funding is now driving dramatic growth in hospitals with well connected administrations and a size headstart in their markets - but because program funding imposes harsh cost accounting boundaries, it's common for Canada's larger hospitals to have entire wards left empty by funding change right alongside rushed 24 x 7 construction projects in support of newly funded programs.

Many consequences go beyond mere dollars: for example a program to provide 24 heart transplants for Albertans leaves the 25th recipient to die on the waiting list for next year's budget; leaves both teams (because the funds would be split between Edmonton and Calgary) without the volume needed to achieve fluid competence in the procedure; and leaves staff - most of whom entered their professions for idealistic reasons - to mutter bitter jokes about the slaughterhouse experience CEOs need to run institutions in which available but unfunded resources cannot be applied in patient care.

Unfortunately that CEO has to deal with the reality that his funding is for program delivery, not patient care; that the rules under which his customer determines whether program funds are properly spent reflect accounting and administrative priorities, not patient outcomes; and, that any attempt to get off the growth treadmill will let his competitors bid for the hospital's continuing program funding, and thus ultimately destroy both his institution and his own career.

Systems evolve in response to external forces - and the evolution of Canadian health care since 1984 has been governed by the nationalization agenda behind Trudeau's Canada Health Act. Thus the process that got us where we are was triggered when policy makers substituted the government customer for the health care customer; accelerated when practicality forced regional boards to adopt program funding; and was realized when the invisible hand responded by shuffling the market's value criteria to recognize that the bureaucratic customer buys compliance and pays for documented health care expenditures, not positive patient outcomes.

Look at the operation of almost any health care program and you'll see the result: the paperwork is meticulous, the patient's welfare administratively incidental. That's why the average GP now spends just about as much time on paperwork as patients; why retests and patient transfers are now more financial than medical decisions; why tens of thousands of practitioners are working well above their long term sustainable stress levels as they try to use human flexibility and ingenuity to game the system in defense of their patients; why the public sees nothing substantive on outcomes quality; why costs keep rising; and why various kumbaya schools of immigration gaming are successfully staffing a health care time bomb in smaller communities and institutions across the country.

So how can we fix this? First recognize the obvious: the health care market in Canada now operates between bureaucrats with no patient representation - and because markets produce more of whatever the customer pays for, trading in documented program spending de-emphasizes health care while producing more and more program spending.

To change this, what we need to do is change the market: let the government write the check, but have the individual health care customer decide who gets it. Do that, and the market will produce more of what that customer wants: better outcomes, faster responses, and long term cost stability.

But, how? return full control of hospitals and other institutions as nearly as possible to their original owners; end all program funding; free practitioners to serve their patients instead of bureaucrats; publish comparative performance data for everyone in the system; and, restrict government's role to paying the bills.

It's simple; except it's not. None of this will be easy: service quality takes years to achieve; leftist idealogues, major media players, and today's financial winners will all oppose every change; and, breaking through the assumption that the ruling classes know more about what people need than the people do will be the hardest thing of all - but it can be done, and if we want to fix the system, it has to be done.


Paul Murphy wrote and published The Unix Guide to Defenestration. Murphy is a 25-year veteran of the I.T. consulting industry, specializing in Unix and Unix-related management issues.