Health Care Markets and the Health Care Guarantee

Health care is not a rational market, driven by supply and demand. Nor is it uniquely a consumer market, but a multi-faceted one, usually with doctors serving as gatekeepers, “mediating between the requirements of the patient and the capabilities of the system,” writes Toronto consulting economist Paul Jacobson. The system is susceptible to market failure in health care finance, provision and other issues. Unfortunately, health care fails all the tests of market efficiency, yet it is simplistic to suggest, as some analysts have, “that the delivery of health care should be no different than the delivery of bread.” Bakeries run on a supply and demand basis, and all customers are considered to “have the same need for bread.” Customers line up to buy bread, with no queue-jumping. However, the Kirby Committee’s proposal of a health care guarantee, allowing patients who exceed waiting limits to seek care in another jurisdiction at government expense, is an important policy proposal, equivalent to allowing the customer to buy bread elsewhere at higher prices if the government didn’t bake enough bread. With a shortage of both bakers and ovens, the result is competition for resources rather than an improved bread market. The same is true for health care. In Canada, we have a shortage of appropriate health care ovens and bakers. According to a 2003 OECD study, Canada has a comparative shortage of physicians, 2.1 per 1,000 population, compared to an OECD average of 2.9.