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

Rethinking the selfare state 112
credit, others provide a taxable benefit. Aba, Goodman and Mintz propose in a Canadian
context that individuals using a covered health care service receive a receipt detailing the
full cost of the service. 87 At the end of the year, the government would issue individuals a
TH form listing all the health care services used over the year, with 40 percent of the total
cost included as income for tax purposes. Under this system, the maximum a family
could pay a year would be 3 percent of any annual income above $10,000. Families with
an income below $10,000 would not be taxed. Aba, Goodman and Mintz estimate that 60
percent of all health care system users would pay the maximum fee allowed under this
plan. For those earning less than $ 10,000 per annum, 100 percent would pay the
maximum of $0; between $10,000 and $30,000, 95 percent would pay the maximum,
averaging individual contributions of about $280; and between $60,000 and $100,000,
only 4 percent would pay the maximum, averaging contributions of about $797. As a
result of the incentive to reduce utilization, the authors estimate that Canada’s total public
expenditure on health care in 2000 alone would have fallen from $46.7 billion to $40.4
billion, a saving of 13.5 percent. In the same year, the new tax would have raised $6.6
billion in revenue across the country. Aba et al. make a simple, yet persuasive, argument
regarding the implementation of a tax-based user fee. They state that, “our rationale [for
requiring co-payments] is that a certain proportion of an individual’s expenditures on
health care ought to be regarded as a basic consumption expenditure, akin to food and
shelter.” 88 As noted earlier, most universal access OECD health care systems apply user
fees or co-payments of some sort.
Tax-based health care co-payments offer advantages over traditional user fees and
MSAs. Using the existing tax system, the plan would be relatively easy to administer. It
would include a built-in exemption for low-income families, minimizing the negative
effects of encouraging reduced utilization and so payments would be scaled both to
utilization and income levels. Unfortunately, similar to MSAs, high-volume users receive
no incentive to alter treatment patterns, as they continue to face the maximum health tax
annually—again seemingly a “tax on the sick.” 89 Again, critics argue that because of
patient-physician information asymmetries, patients are poorly placed to regulate their
own utilization levels.
Qualified suppliers; mode of remuneration
The benefits of a voucher system are contingent on maintaining a broad scope for
individual consumer choice. Accordingly, as open a market as possible ought to be
maintained for health care providers. A major issue in Canada in this respect is the socalled
“privatization” of the health care sector—to which there has been much public
opposition. This issue unfortunately conflates the questions of who should provide health
care services with who should pay for them. Over 30 percent of total health care services
are already privately paid for and provided. Physicians and specialists operate private forprofit
practices; pharmaceuticals are produced and dispensed by for-profit providers;
most medical technology is supplied by for-profit firms; laboratory testing is done by forprofit
providers; much institutional care is provided by for-profit entities. Only the
hospital sector is the exclusive preserve of public or non-profit entities. We see no reason
why for-profit entities should be prevented from participating in this or indeed any other
segment of the health care sector. The issue of what health care services the state should