The Role of the Public Sector in Health Care - Essay Example

The Role of the Public Sector in Health Care The Role of the Public Sector in Health Care Introduction In the United s health care is an issue that consumes much of their political discussion because as a people they have not come to the decision that health care is a responsibility of government to its people. In Canada it has been publically determined that the health of the people is the concern of the government. The Canadian system is based on the universal health care system, providing care for anyone who needs care and is a citizen or resident of the state. The need for valued healthcare on a broad level has been determined a responsibility of the state. The ethics and economics of this determination require collaboration between the various entities that are affected by this social decision. The following paper will give an overview of the background on why having a public healthcare system is an important social responsibility for a state. Once the foundation has been established through economics and ethics, the way in which the system works in Canada will be examined and reported. The paper will then go into a discussion of the economics of public healthcare through theoretical exploration. A comparison of Canadian and United States philosophical debates about the economic issues of a public healthcare system will be presented before a more thorough examination of the role of the public sector in healthcare concludes the exploration of healthcare in Canada as it is relates to economic perspectives. 2. Background There are many reasons for having a public health care system. Social reasons include the humanitarian aspect, the purpose of encouraging research, and in being a representational model for ethical governance. Economic reasons for providing health care are even more compelling. Although the best reason for providing health care is so that everyone is healthy, an economic basis for doing so is that productivity of the individual rises when they are healthy and illness has been prevented, thus the collective becomes more productive. In addition, public health care creates savings through preventing illness from getting to a point that the costs on the public system are higher and more damaging than they would have been should health care have been provided on its onset. The responsibility of creating a public health care, however, falls on more than just the government. Public health care systems need to be collaborations between business, government, health care organizations and individuals, and the consumers of health care who are the people of the state. In order for the system to work, there must be contributions in a variety of forms from all levels of society. The economic system of the health care system must be founded on this collaboration of entities, otherwise sustainability is not possible. There are good reasons for having a public health care system, but the practical application of theory to performance must be created in order to sustain its value. 2.1 Economic Perspectives on Providing Healthcare One of the reasons that health care is of importance within a society is because it has an impact on productivity. In order to calculate the losses incurred due to an illness, a wide number of factors must be considered. Not only do the costs of the illness come into play, but the loss of wages, the increase in personal expenses related to the illness and the losses of caretakers who must adjust their lives and economic position in order to care for someone who is ill. The losses on a public level include the increases in expenses to businesses which are significant when they temporarily lose an employee whose unique contribution is no longer available.1 The aspects of prevention and quality lifelong medical attention cannot be dismissed because they are a significant factor in the overall economic status of a society. 2.2 Economics and Ethics in Healthcare Adam Smith was an important economic theorist who framed much of the politicization of economics for the modern world. One aspect of his work, however, that has been largely ignored is that of the ethical responsibility of governments that must be established in order to create a valued economic standard. Clark quotes Smith by writing that “Adam Smith … recognized that free actions in a free market must be accompanied by an ethical system that produces considerable self-control, specifically one that “show us the propriety of generosity and the deformity of injustice, the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves”.2 In order to have a responsible and responsive economic system, ethical considerations must be placed in a position of importance when constructing society. In order to have a valuable economic system, a system of ethical behaviors towards the people of a state must be considered. Clark also examines the work of Gary Chartier who writes that it is time for economists to challenge themselves to looking at the responsibility of economic interests in collaboration with the ethical interests of a state. In referencing the debate in the United States over healthcare reform, Chartier looks at the construction of society as a whole rather than just through the idea of shareholder models of governance in corporate structures. When an economy is focused solely on the bottom line, the benefit of a capitalist society is lost and social anarchy becomes the norm.3 In discussing the economics of a public health care system, it must be made clear that social factors are relevant to how the calculation of the benefits of the system area evaluated. One of the problems within the United States with creating a public healthcare system is the perception that in giving over healthcare to governmental control there will be an interference with individual decision making capacities. The fear of a loss in freedom of choice overwhelms the discussion, ignoring moral and ethical frameworks that would suggest that it is irresponsible for a government to place its people in economic peril. Menard discusses the theory of libertarian paternalism in relationship to observing behavioral sciences in order to create a framework within which to discuss the public healthcare intervention. The theory is examined within the idea of an operational ‘nudge’ towards intervention. The theory of libertarianism paternalism is seen as freedom of choice that is desired, but then tempered with the concept of paternalism in which what is best for a society is conducted by a government that interferes where social injustice demands.4 An example of this theory can be seen in civil rights. Granting civil rights was not a matter of its popularity, but a matter of behaving with the condition of rightness. The greater good demands that action be taken even when a population perceives that its freedoms are being circumvented. The balance, of course, is how these interventions meet the needs of right without interfering in the right of freedom to an unacceptable point. 2.3 Public Sector Roles in Healthcare There are a number of roles that must be put into context with healthcare from the public sector. Utilities fall into these roles because without good, clean water and a solid infrastructure for power, human health deteriorates. The public sector is responsible for creating systems so that healthy living can be accomplished. This also means facilitating the production and distribution of food. All of the elements that sustain life, shelter, warmth, food, and water all must be given help in relationship to producing and distribution to the people of a community. The public sector does this through infrastructure of roads, building, and through regulations that support the distribution of these products. The public sector also participates in creating regulations about wages and labor so that the people can afford to live healthy lives. While this is not a perfect system, the role of the public sector is to look at the needs of industry and the needs of the people and do what they can to give advantages to both so industry can survive and support its workers. One of the problems of modern life is the belief that corporations are entities and as such are given benefits in relationship to their survival. On the other hand, there is an ethical problem that has arisen in which entities are given rights and privileges, but are not held responsible in a meaningful way for their transgressions against law and nature. One of the challenges of the 21st century will be to look at the nature of corporate responsibility in order to make it more in line with the benefit of the people rather than an untouchable entity. The United States economist and head of the Federal Reserve from 1987 to 2006 Alan Greenspan created a structure in which corporations were given autonomy and rights but not held criminally responsible for their actions. The opinion of Greenspan was that corporate importance to society outweighed transgressions. This problem must be addressed at a global level in order to put power back into the hands of government to administer the production of society for its people.5 Contractual negotiations on healthcare are an important part of the system. In order for a public healthcare system to work, healthcare providers must be willing to contract with the state to provide those services. This requires a shift from a demands based approach to a needs based approach. Blaug writes that “needs based analysis helps to identify distinctive features of healthcare. It also proposes a link between the recognition of needs and personal motivation, and argues that the salience and nature of needs in healthcare is an important motivational factor for healthcare professionals”.6 Creating beneficial contractual support for the healthcare system must be a balance between the needs of the state and the needs of the healthcare system so that its people can survive, the system is paid for, and there are not loses at the mercy of an unfair contractual system. 3. Theoretical Aspect Marchildon, McIntosh, and Forest write that the primary threat to the sustainability of the health care system in Canada is there is a great deal of concern in relationship of the financial capacity to be a detriment to the organizational and epistemic capacities. They argue that it is necessary to move past the economic theory and embrace the theory of agency in order to understand the organizational capacity. The epistemic capacity can only be understood through taking the theory of agency and complimenting it with theories of convention. In working with complimentary theories, the basis of sustainability can be discovered.7 2.1 Neoclassical Theory Neoclassical theory begins with its capacities for framing the agents of economic through the calculating, substantial, and individualistic rational. The second capacity for this theory is to allow for market coordination of the behaviors of individuals. There are four main implications that are assumed under this theory: decisions by individuals will form supply and demand, prices will adjust as decisions are made until there is a formation of compatibility, the apex where supply and demand meets the price adjustment is the formation of the market, and groups of people in the form of businesses, public organization or other configurations will each have sole objectives that they are pursuing. This last implication does not consider the relationships that are within the group.8 The neoclassical theory is used to begin to analyze the nature of the health care system in Canada in order to define the way in which users affect the supply. In the neoclassical model the patient is framed as both the consumer who creates the demand as well as an investor who is interested in increasing their health capital. The doctor is the provider, the business from which the demand is fulfilled and through which the investment is made. The hospital produces health services according to the demand that is created through the doctors. In this model of healthcare services, the demand is created and the supply provided for through independence from public sector intervention. The reason that this model does not work is because there is an assumption of a perfect market and of perfect competition. According to Marchildon, McIntosh, and Forest economic observers agree that this environment does not exist and therefore does not well describe the way in which the economics of healthcare can be expressed. There is no good economic theory that can be proposed to describe the healthcare system. One of the problems that emerge is the deficit of knowledge by the patient which is held in the possession of the doctor. The doctor, in truth, not the patient determines the demand. Demand is created by supply rather than the other way around. The more curative measures are created to attend to the various illnesses that are observed the more the demand will occur in relationship to what is available. In addition, another reason that this theory becomes unworkable is that prices are not dependent upon supply and demand as they would be in other markets.9 Marchildon, McIntosh, and Forest write that “decisions that engage the health expenditures are disassociated from financial responsibility, and fees are administered by the state”.10 This reduces the role played by prices in the scheme of examining the healthcare economy. One of the core problems that come from this theory is the idea of agent in the process. In an ideal environment an agent is someone who maximizes utility through rational consideration. In neoclassical theory the agent can be someone who constructs rationality or who is consistent in how actions are taken. The later does not require the decision making process to be actually rational, only that it is accepted as the norm and appears rational because of that acceptance. Once again Adam Smith can be referenced in the discussion of agent as according to Smith the idea of character must be established before allocation of responsibilities.11 The example of this is seen in healthcare in the doctor as agent who makes decisions made on the basis of his education, even when that education may have an alternative set of knowledge from which to determine treatment. An example can be seen where a pill is given as a tranquilizer when a glass of wine would work with less side effects and dire outcomes. The difference is the agent controls the distribution of the pill, but not that of the wine. 2.2 Convention Theory Convention theory rejects the idea of substantial rationality in favor of procedural rationality. This makes it very different from agency and incentive forms of theory. Convention allows for the emotions of a patient as they rationalize their decisions, the code of ethics that a doctor will adhere to, and the idea of equity as it relates to coverage in a system with illness as a risk. The epistemic capacity of a system allows for the knowledge that comes from experience within a system and the trust that comes from the development of that knowledge.12 There are two types of actors that are not a part of the convention theory perspective. The actor is not of the homo sociologicus variety in which behavior determines norms and conventional actions as prescribed by socialization. Neither is the actor a homo oeconomicus. This means that he or she is motivated to maximize their own utility. This actor resides in between these two frameworks, both sociologically motivated and economically motivated. Trust relationships and knowledge based frameworks dictate how this actor will make decisions, supporting his or her beliefs about what is best for the system.13 However, one of the problems which emerges where all of the actors are concerned, including the public sector, is that there is a lack of utilization of research evidence in order to form policy and assist in decision making. This occurs across all key decision making groups. Knowledge translation does not seem to be the primary focus in the decision making process which is one of the reasons that there are serious deficits in policy decision making.14 Marchildon, McIntosh, and Forest write that “Convention theory, as applied to health economics, identifies two conventions at the heart of the health system: an activity convention, which regulates the State-doctor relationship, and a quality convention, which regulates the doctor-patient relationship”.15 A third convention must also be taken into consideration. The budgetary convention “regulate(s) the relationship between guardians and spenders of budgets within an organization by sharing responsibilities between them”.16 Control comes from the spender overseeing the actions of the budgetary convention, and the budgetary convention watching over the activity convention. The convention theory is the best way in which to examine the nature of a state provided healthcare system, but it must also take into consideration the neoclassical theories in order to discover a middle ground where the economic basis of the system is established. The overriding theories show that the supply and demand dynamic has credible implications to how the system of healthcare is structured, but it is inefficient in fully describing the dynamics because the market is not a perfect structure through which to create decisions formed upon realistic conventions. The convention theory, on the other hand, allows for the emotions and the sociological perspectives that are needed to understand how the decision making process is created where healthcare is concerned. 2.3 Efficiency Debates The debates that are offered for policy are based on three specific types of efficiency debates: cost efficiency, technical efficiency, and allocative efficiency. Because of the structure of the market and the social equity that is involved, most nations will select to have a publically funded system form healthcare. For the purposes of these debates it is important to measure productivity. However, this measure is difficult to quantify. Two approaches have been used to measure productivity. The first approach is through the use of statistics which provide flexibility and versatility, but are difficult to control in relationship to the technicalities. The second is based upon index numbers, but this does not measure specifics but through assumptions. This means that the debate is difficult to create because the measures do not exist to adequately express the situations that arise.17 The strongest debate that must be made is in the efficiency of the system. Theories abound in relationship to how efficiency can be measured, calculated, discussed and approached, but none of them are adequate to create answers to the problems that are growing in the system. The current economic system requires that there be a way in which to measure inputs and outputs, but this has proven to be difficult and no real measure has been formulated. In order to sufficiently engage in this debate it will be necessary to come to a solution on how to measure the system, including emotional and sociological factors. This will provide some way in which to classify the system for success, failure, and change. This has yet to have been defined, however, and the system continues to fall short because of this problem of measurement.18 3. Comparison of US to Canada Perspectives Canada has publically supported healthcare where the United States, to date, largely does not. They have care for their elderly and care for those who are disabled, but general care that is intended to prevent greater illness and to improve productivity through medical attention is not available. In looking that the choices that the United States has made in not providing universal healthcare there is a clear path of deficits that connect lowered productivity to inadequate social services. The humanitarian and social benefits to providing healthcare to the masses have been shouted down in support of the idea that freedom to choose would be severely damaged should the state provide medical care. On the other hand, a significant portion of the GDP in Canada is spent on domestic healthcare benefits. In 2007 the expenditures for health care reached 160 billion and the ration within the GDP was 10.6%. Healthcare expenditures are growing faster than incomes, thus the percentage of the GDP that is spent on healthcare will continue to grow while it will become less sustainable and affordable. The Canadian government pays for 70% of the healthcare in the state with 30% being paid for privately.19 While the program of government funded healthcare has a great deal of social capital, the costs are high and this causes some problems. 3.1 Canadian Healthcare The purpose of having a government supplied health care system is to minimize the impact of illness on the overall social system. Compassion is important as are the humanitarian reasons for having a healthcare system, but there are also larger social and economic reasons for having a publically funded healthcare system. In having a public health care system a state gives honor and value to the well-being of its people. The system in Canada is called Medicare, but unlike the system in the United States under the same name, it is intended to be universal coverage for all Canadians. In 1962 it was recommended for all provinces within Canada that they should put into place universal healthcare. By 1972 this had been accomplished. The Canada Health Act of 1984 set five principles into place: 1) healthcare in the provinces was to be administered on a non-profit basis under public authority, 2) medical coverage must be comprehensive and cover all necessary procedures, 3) all insured residents should have the access that they need to medical care, 4) the care is portable so that travel between provinces does not interrupt care, and 5) all citizens will have reasonable access to care.20 The role of government is to provide systems through which the healthcare program is administered, creates access, and insures that all people can participate. The people who are covered include citizens and legal residents. In other words, everyone is covered who lives in Canada. All necessary medical procedures, including infertility, are covered under universal healthcare. Most of the funding for the programs, as much as 94%, comes from the governments in the provinces. They do have the option to not be a part of the system, but currently all provinces are voluntarily providing universal healthcare.21 Funding of the program is based on contributions from the public through taxes. Hospitals are funded by the government with doctors being private entities who are paid by the government for their services. The funding comes from taxes on income, which are defined as the following: 15% on the first $43,561 of taxable income, + 22% on the next $43,562 of taxable income (on the portion of taxable income over $43,561 up to $87,123), + 26% on the next $47,931 of taxable income (on the portion of taxable income over $87,123 up to $135,054), + 29% of taxable income over $135,054.22 Further income taxes are taken in the provinces under the following schedule which ranges from 7% to 17% depending on income and the individual rates in the province. These are the taxes that are used to fund the healthcare system, both from a local and federal level. 3.2 United States Healthcare System At this time, the Patient Protection and Affordable Care Act has been put into law, but has yet to be enacted. Most of the initial programs under this act will begin in 2014. This program is intended to be an insurance based program that can be affordable to almost everyone in the United States. This means that while universal healthcare will still not be available, insurance systems will be in place that everyone must take part in. This will be based on income.23 The present system is based upon participation in insurance systems that vary widely and are mostly provided for by the employer. The employer may pay some, part, or none of the insurance premiums that employees must pay. This can mean thousands of dollars in insurance premiums per year. Insurance can be denied if the insured has used too much of it and can be canceled if the payer proves to be too much of a risk. While there have been many improvements in the system in the last fifteen years, the costs of healthcare are still way to high in the United States. The costs of healthcare cost widespread damage to the people. One of the first disturbing statistics is that more than half of the bankruptcies in the United States are caused by the costs involved in paying medical bills and trying to manage a major illness or injury. Most of these bankruptcies occur because the person is insured, where if it is someone who is uninsured the odds of a charitable organization writing off the costs are much higher. Being insured does not mean that the costs of illnesses are mitigated in the United States because of 80/20 plans or worse, as well as high cost deductibles. The major issues in the United States are based on too many people having no access to care and those who do not having the ability to pay their ‘share’ in relationship to the insurance plan that they have in place. Healthcare is a problem in the United States because illnesses are not being caught early enough and prevention is not in place because of the high costs of health care.24 Conclusion The quality of healthcare in Canada is higher than in the United States because prevention is possible and ongoing care throughout life occurs without interruption. In order to examine the economic theory that can help to frame healthcare in Canada is important to look at the emotional and social elements as well as the statistical evaluations because statistics are not adequate to fully express the input and output of healthcare. While neoclassical theory of economics can express a portion of an evaluation of healthcare, the best framework currently exists through convention theory. Convention theory takes into account more than just the actions of agents, but helps to place why they act somewhere in the middle of the discussion. Assessing healthcare is a complicated problem but is essential. 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