Rethinking the Welfare State: The prospects for ... - e-Library

Health care 111
Qualified consumers: value of vouchers
We argue that an equitable, efficient, high-quality and financially sustainable health care
scheme would be universally available and would operate via an uncapped voucher
system in the form of a health card. However, unlike the current Canadian system,
citizens would make contributions based on individual usage of the health care system
through the existing tax system. 83 These contributions would be made on a sliding scale
according to income, such that individuals with the lowest incomes would be exempt
from the contribution, and all other persons would be assessed for their contribution
according to income level. Contributions would only exist, however, up to a specified
cap. Beyond this income-contingent ceiling, a catastrophic insurance system would
apply, relieving patients of the obligation to make copayments. This will ensure that
individuals who suffer from unexpected and expensive health problems are not put in
precarious financial positions.
There are three principal methods for altering demand-side incentives. 84 First, the
government could institute user fees for health care services. User fees are out-of-pocket
costs imposed on consumers upon point of contact with the system. Advocates argue that
fees deter unnecessary use of the system. However, for these fees to be effective, they
must deter only inefficient and unnecessary use and not necessary and appropriate use.
While most empirical studies find that user fees do reduce use, they show that lowerincome
individuals tend to be those most affected. Other evidence suggests that user fees
translate into poorer health outcomes for lower-income patients, and deter both efficient
and inefficient use. 85
A second approach for modifying health care services is through medical savings
accounts (MSAs). Although numerous types exist, a typical government MSA would be
to allocate each individual or family a yearly health care allowance, such as $4,000 for a
family of four. Over the year, the family would access the account to pay for health care
services. Any expenses above the yearly allowance would be paid out of the family’s
income, up to a catastrophic threshold like $8,000. Beyond this threshold, all health care
expenses, including prescription drugs, would again fall to the government. At year’s
end, left-over money could be rolled over into the family’s account for the following
year, or returned directly to them as a tax credit or cash. This policy provides a natural
incentive for a family to use services most efficiently.
Unfortunately, little empirical evidence exists to indicate whether or not MSAs do, in
fact, reduce overall health care spending. The system may encourage low-intensity health
care users to avoid over-utilization, but the majority of MSA policies leave the savings
with the individual, not lowering overall government costs at all. Moreover, highintensity
users experience no incentive, under this program, to alter behaviour, since
government covers all health care costs once catastrophic coverage is reached. In fact
some argue it is a “tax on the sick,” particularly for those with persistent high-cost health
care usage below the catastrophic coverage threshold and that, given patient-physician
information asymmetries, patients are not well-placed to make informed decisions about
their utilization of the health care system. 86
A third, more promising option for improving demand-side incentives is a tax-based
health care utilization charge. This charge comes in many forms; some involve a tax