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Enter Stage Gabbing

Enter Stage Gabbing

Same story, same result

By Steven Martinovich

The Professor(November 24, 2008) A federal election recently came and went and most Canadians didn't notice that an issue which has dogged federal and provincial politics for years was largely absent – that of health care spending.  For good reason, perhaps, given the amount of money already being dumped into the system. Recently the Canadian Institute for Health Information reported that health care spending, the largest percentage of which goes to hospitals, will hit $171.9 billion in 2009.

To give you a sense of the increase in funding over recent years, the CIHI estimated that spending hit $102.5 billion in 2001. As a proportion of gross domestic product, spending was 8.9 per cent in 1997. This year it has hit 10.7 per cent, a new record. Adjusted for inflation and population growth, spending is expected to grow by 3.4 per cent in 2008, compared with an estimated 2.8 per cent for last year.

Among OECD nations, Canada is among the top spenders on an age-adjusted basis on health care but continues to produce some of the worse results. The extra $69.4 billion in extra spending since 2001 hasn't noticeably improved access to doctors or technology, nor reduced waiting times. The answer, of course, by many is simple: dump even more money into the system.

Unfortunately the problems of the health care system aren't financial -- that could be remedied with simply increasing funding -- but the way health care is delivered in Canada. As experts point out, Canada is one of only two nations in the entire Western hemisphere that relies exclusively on a taxpayer funded system. The other one is Cuba. Not surprisingly both systems aren't doing particularly well.

Inexplicably our governments remain hostile to introducing a significant private sector presence in the health care delivery industry. Other nations, which include France and Sweden -- hardly bastions of free market economics, permit user fees, private insurance and hospitals alongside their universal taxpayer funded systems, but most Canadian politicians – even the allegedly free market friendly Conservative government – refuse to even consider the notion.

There are a number of different proposals that could fix the system, all of them decried by one group or another as a betrayal of Canadian values. We could gradually move to medical savings accounts, used by Singapore in one of the world's most efficient and beneficial health care systems.

We could also move to a system like the American federal government's Federal Employees Health Benefit Plan, a system with a benefits package that provides its members' choice, holds down costs and offers quality care. Under that system, where the government pays for 75 per cent of costs, beneficiaries get to choose from competing plans that range from generous fee-for-service plans to low cost HMOs. Private insurance covers the rest.

While federal and provincial governments argue over money and lobby groups fight to protect a failing system, Canadians are open to radical change. Numerous polls have found that a majority of Canadians were open to some level of privatized health care. The argument is often made that health care is so important that only a government mandate can insure that people receive health care, that ordinary people cannot help themselves with such a complex system.

Canadians, however, are increasingly rejecting that view. They realize that more money may correct some problems in the short-term, but the need for funding now will pale in comparison in a decade or two when the baby boomers begin making extensive use of the system. The same problems will once again crop up but this time there will be far fewer taxpayers to cover mounting bills. If only our politicians were as forward looking or brave enough to consider alternatives.

Time to stop rewarding failure

(November 17, 2008) It turns out we're not so different from our American cousins after all. The nightly newscasts south of the border have been filled with reports in recent months concerning government bailouts of the mortgage industry, banks, credit card companies and now probably the auto industry. At least one trillion dollars will have been committed by the end of this year, a staggering number given the U.S. federal budget for 2008 called for $2.9 trillion in total spending.

We're not immune from handing out taxpayer dollars to business in Canada. For years various levels of government have handed out billions in grants and loans, often to save failing enterprises. It would appear that big business is once again lining up at the trough. In recent days it's been reported that the Canadian auto industry is looking to Ottawa and Toronto for another $1 billion.

As the Canadian Taxpayers Federation pointed out this week, Canadian taxpayers have already given the auto industry $782 million in loans and grants since 2003 alone. One loan, $175 million given to General Motors in November 2003, isn't due until December 31, 2055 – essentially an interest free loan with no payments for two generations. And people complain about the terms of sub-prime mortgages.

Government refers to these type of announcements as 'investments' but the more jaded would use 'corporate welfare,' the term coined by former NDP leader David Lewis in 1972.  Stakeholders will of course defend corporate welfare as necessary. They argue that it's important for government to use taxpayer money to rescue failing businesses or attract new business. The end result, they'll tell you, is that the tax base is expanded and new jobs created, or at a minimum saved. Perhaps, but corporate welfare also raises several concerns.

At the risk of sounding like a capitalist, market decisions should be made by the market, not politicians. It is the market and its participants that are best suited to determine where investment money should go and what products should be bought. People who commit their own money – whether as consumers or investors -- weigh risk against an expected reward. There is a reason why the North American auto industry is troubled – it is making expensive products that fewer and fewer people want.

Corporate welfare is also a tax on success. Successful businesses are taxed and money they could have used to invest in their operations could potentially go to their less successful peers. It's an even more egregious situation if the company that's being taxed is also one that receives no subsidies from government. Does the idea of contributing towards the success of your competitor sound remotely fair?

As any parent with a teenager can tell you, free money is also a powerful disincentive. The auto industry is long experienced in feeding at the public trough and seemingly builds into their financial forecasts the amount of money they can wring out of government with a few well placed observances of how attractive other locales are or how troubled times are.  What the responsible of us do once we leave our teenaged years – carefully plan for our financial futures – seems alien to the legions of executives at the auto makers. Ultimately it all comes down to the fact that an industry is demanding that someone else foot the bill for their lack of planning, foresight and the unattractiveness of its products. It is taxpayers who end up paying those costs and at $1 billion they won't get off easy this time. It is money that should instead be invested in the real concerns of Canadians, such as health and education, debt repayment or tax cuts. If governments really wants to invest in the future of Canadians, the money is better spent directly helping its people.

Thanks for reading,

Steven Martinovich


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