Letter to the Editor (Surrey Leader) - December 9, 2006

Dear Editor,

This is in response to a letter (“Supply Demand Health Care”)

When proposing Supply and Demand solution for health care, the write of the letter forgot to consider a little economic nuance referred to as “elasticity”. Let me explain. In essence, the concept of supply and demand works well when there is a scale of options for just about any price point. Using the restaurant food analogy employed by the letter writer, if one does not have enough money to buy caviar he could always revert to ordering piles of bread, or if going to Four Seasons is prohibitively expensive one could always consider Denny’s or McDonald’s.

When one’s ample choices to spend as little or as much he wants are met with ample offerings ranging from lobster to haggis, the system works like a charm. In this case, supply and demand are referred to as “elastic” by people with large craniums at UBC. Now, let’s consider health care.

A rich person and a poor person have just broken their arms. Both want their arms fixed ASAP. Who gets the service? There are no scaled-down solutions outside of a hard white cast, and neither is prepared to wait for another minute, they are united in unbearable pain. Suddenly, our demand side just become “inelastic” i.e. either patient is willing pay what it takes. The poor is willing to mortgage his house just to get his hands on that white cast, there are simply no alternatives and the concept of “market” price simply ceases to exist. Unrestrained, suppliers are free to set prices at will.

Let’s consider the supply side. It is hardly more elastic with their ranks controlled by medical schools seats and residency openings. Remember you need years in school and a licence to practise, a way more restrictive process than opening a restaurant. Now, with medical school, residency and licensing, the process is controlled by governments in consortium with a little cartel called the Canadian Medical Association. Result: inelastic supply and even higher prices.

In conclusion, industries that exhibit inelastic traits beg for regulation. Just look at California where they tried to de-regulate another inelastic commodity called electricity in the late 90s. Now Californians pay sky-rocketing tariffs, some lost their shirts and Enron brass found themselves behind bars – splendid!


Respectfully,
Alex Posoukh, Surrey

Letter to the Editor (Surrey Leader), December 7, 2006

Dear Editor,

This is in response to your recent editorial on health care (“The Popular Choice”)

Reading your latest salvo in the health care debate, one could not help noticing a certain lack of balance in your latest instalment.

Firstly, measuring health care costs versus total public expenditures is less objective than measuring them to our total national income, a much more objective measure. The very nature of total public expenditures is dependent on various levels of desired taxation and commensurate services. Consequently, comparisons between health care costs and total public expenditures could vary wildly and widely in response to drastic changes in various governmental policies relating to taxation and services. Just imagine cutting one’s food budget by 20% through forgoing junk foods. Will this not result in dramatic increases of carrots costs when compared to the remaining food budget? Have carrots become less affordable? Of course not!

When we use GDP, we don’t run into such issues as the cost of carrots remains the same versus one’s total income. By this measure, our health care costs have hardly budged over the past ten years, growing at mere 1.5% per annum in growth adjusted dollars, and all increases are due to introduction of new drugs, therapies and treatments. There is hardly a crisis, as Canada annually spends $60 BILLION less when scaled against the US system while producing better health outcomes.

Secondly, if we believe that our public system is breaking, why do we lean on private solutions? According to World Health Organization, best health outcomes with no wait lines are exhibited by France and Sweden, the very systems that already incur more in public health care expenditures than Canada. Would promoting heavier private expenditures be simply illogical?

How do the French manage their system and yet spend roughly the same? The answer is surpsingly simple: they have 50% more doctors per capita and these doctors make considerably less than ours. Can we replicate their system? Not likely. Can we improve? Probably. This depends on the will of our governments, as one cannot expect much cooperation from the Canadian Medical Association. Their new leader, Dr. Day of False Creek Surgical Clinic, will do much better with private although it is unequal in access and certainly no less expensive. Just check out his fees and compare them to fees paid by the government for identical procedures. Will his efforts reduce wait lines? Not in our lifetimes, but he will certainly do better financially. Who can blame him?

Respectfully,
Alex Posoukh, Surrey