OP-ED: Adam Smith’s “saline solution” for Canada’s health care system

Canada’s health care system is on life support, but many of its patients are languishing on wait lists, getting slowly sicker and in many cases simply dying untreated. Sick patients are frequently subjected to poor care – if they get care at all – while frontline health care workers are subjected to overwork.

The average waiting time from referral to treatment was 27.7 weeks in 2023. In some parts of Canada, such as Nova Scotia, where the average wait time was 56.7 weeks or over one full year, it takes significantly less time to create a human than to treat one.

Not to mention the other 631,527 Canadians who were waiting for surgery last year. As the World Population Review notes, Canada has the world’s tenth-largest economy, yet we come eighth-to-last among “developed” nations in hospital bed availability, with only 2.5 per 1,000 inhabitants.

As shown in a poll by Angus Reid, three in five Canadians consider our health care system poor, with one-third agreeing that increased privatization would improve health care delivery.

And that brings us to Adam Smith, the famed 18th century Scottish economist and moral philosopher. By shaking Smith’s “invisible hand,” the Canadian health care system could finally tap into the power of market forces to drive efficiency.

The antediluvians who still believe health care and competition are incompatible should consider boarding the Smith ship, and fast, because Canada’s current health care system is about to go under. To call our health care universal is to satirize it.

Smith’s 1776 magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, has undoubtedly passed the test of time. But can it still last long enough to get a kidney transplant in the Canadian health care system? Let us find out.

In The Essential Adam Smith, Prof. James Otteson of the University of Notre-Dame describes the three major themes of Adam Smith’s political economy.

The first is the “Economizer” argument, suggesting individuals will seek out the most economical use of their resources to achieve their objective. Since health care is “free,” many patients rarely think twice about the costs of visiting the doctor, even if it’s over an issue Tylenol could fix. In doing so, patients effectively divert the precious time our scarce practitioners could spend on more immediate cases.

The second of the three big Smithian claims illuminated by Otteson is the “Local Knowledge” argument. Only we ourselves know best what opportunities and resources are available to us; therefore, the individual is in the best position to decide how they wish to allocate and expend their resources – not another person or organization, and least of all the government.

This should hold true for all matters, including health care. Publicly funded monopoly systems like Canada’s, however, do not permit such decision-making because critical economic connections have been broken and costs are not transparent.

This, in turn, dampens innovation in medical treatments, processes and medications. Every year, thousands of Canadians travel to access the newer and much faster treatments readily available in the U.S. – expending their own hard-earned savings to do so.

Smith’s third key economic idea, the “Invisible Hand,” is his most widely admired, cited, and misunderstood, takeaway. “Every individual…neither intends to promote the public interest, nor knows how much he is promoting it,” Smith outlines in The Theory of Moral Sentiments.

“He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

Smith’s overarching point was that in pursuing their individual self-interest rather than virtue-signalling about some unachievable utopian goals, people actually do promote the public interest: starting companies, creating jobs, coming up with life-improving inventions, treating the sick. And, if allowed to do so, allocating their own resources towards looking after their own health.

The free market’s dynamics encourage the production of the goods and services that are in demand. A zero-competition monopoly is intrinsically handicapped at achieving better standards, because it has few if any incentives to seek better outcomes.

Canada’s monopoly health care system eliminates the most powerful incentive of all: the spending power of consumers. Government-sourced funding that is generally budget-based surrenders the usual power of the purse to incentivize performance, quality, and operating efficiency. Robbed of this essential economic instrument, Canadian patients become supplicants, the system free to ignore them – as it habitually does.

Clearly, not all of Smith’s free market ideals could be implemented immediately. A mass overnight privatization of all hospitals would almost certainly be infeasible and impractical. But the more competition that could be introduced to Canada’s health care system, the more the quantity of health care provided could be increased and the more its quality improved.

Who knows, an unleashed Canadian health care sector might finally be able to find the cure to cancer. And not just that, but to actually treat Canadians with cancer in a timely manner. That would be the actual touchdown pass, caught and carried by none other than Smith’s Invisible Hand.

The original, full-length version of this article was recently published in C2C Journal.

Alicia Kardos is a student in economics and political science at the University of Toronto.


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