Any discussion about health care must start with the harsh realities of the state of Medicare. In total, 28 developed countries, including Canada, guarantee access to comprehensive health care insurance regardless of ability to pay. Of the 28, Canada ranks second in age-adjusted expenditures as a percentage of GDP on health care. Despite that high level of expenditure, Canada ranks poorly in terms of access to technology and physicians, while Canadian patients wait longer than patients in most other countries and enjoy satisfactory, but not exemplary, outcomes from care.

While the solution to Canada's Medicare woes will require numerous changes, one of the most critical components is the introduction of competition from the private sector.

First, Canadians must understand that allowing private parallel financing of care is not a move away from the underlying principle of Canada's health care system - guaranteed access for all regardless of ability to pay. Rather, a private parallel health care system offers Canadians whose needs are not being met by the publicly funded health care program an option to choose otherwise. This both frees up some capacity in the public program and creates competition in the financing of care to the benefit of both those who choose to pay for care privately and those who do not. Put differently, having a private parallel system actually means a better publicly funded health care program.

Consider also that every other developed nation that has a universal health insurance program also allows the privately funded delivery of medically necessary services. The reasoning behind introducing such a policy is simple: a public monopoly in health insurance means a more expensive and lower standard of care than would be available otherwise.

More importantly, there are some countries that stand out among the 27 developed nations that have universal access health insurance programs and privately financed parallel health care sectors. Seven developed nations have no waiting lists for medically necessary care in their universal access programs: Austria, Belgium, France, Germany, Japan, Luxembourg, and Switzerland. Three developed nations outperform Canada across several measures of mortality related to health system performance: Australia, Japan, and Sweden. In all of these nations, individuals reserve the right to seek care on their own terms through a parallel private sector when the public program is unwilling or unable to meet their needs.

As the experience of other developed nations proves, a private parallel health care sector does not mean having to abandon universal access to care, nor does it mean deterioration or abandonment of the publicly funded health care program.

Claims that Canada?s situation is unique because of the limited supply of physicians (a parallel private health sector might increase wait times because physicians will be drawn away from the delivery of publicly funded services) are also misleading. Such claims rely on the assumption that Canadian physicians are unable to provide more services than they currently deliver through the public program, which is simply not true. The reality is that despite the relative lack of physicians in Canada, many Canadian physicians spend a good deal of their time waiting for access to operating rooms or are unable to treat patients because of provincial quotas and limits. In other words, there are idle physician resources in Canada that the public system is simply unable or unwilling to employ. Thus, a system that permitted these physicians to practice in both the public and private parallel sectors would not rob the public system of resources but would instead increase the number of resources available to Canadians in total.

With regard to the delivery of universally accessible services, in those countries where waiting lists are insignificant, private providers openly compete for the delivery of publicly funded care. In Sweden and Australia private providers have contracted with some regional governments to provide care for patients. Again, the reasoning behind a greater role for private provision of publicly funded services is simple: both economic research and international evidence have shown that the competitive private provision of services is more cost-efficient and produces a higher quality of care than the monopolistic public provision of services that exists in Canada.

Canadians who are still concerned about the effect of private competitive provision in the Canadian context should consider that the introduction of privately owned hospitals and a more competitive hospital sector in Sweden (away from a model similar to Canada?s) led to more cost-efficient delivery of services and to a reduction in waiting times for patients receiving publicly funded care. Consider also that introducing publicly funded contracts with private providers was a core component of a very successful package that dramatically reduced average waiting times in Spain (by roughly 68 percent) in the late 1990s.

The statements that private health insurance can only lengthen wait times and that private providers of public care do not improve the state of affairs have not held true in the developed world's most successful universal access health care programs.

Further, while those opposed to reform regularly try to make us believe that the only alternative to the program we have in Canada now is a "US-style" health care program (often distorting the US realities as well), the evidence discussed above clearly shows otherwise. To summarize: among the developed world's 28 most-developed nations that maintain universal access health care insurance programs, 27 (all but Canada) allow the private sector to finance medically necessary health care services and the majority of those 27 also allow the private sector to competitively deliver publicly funded/guaranteed services. The top performing universal access health care programs employ both policies, to the benefit of payers and patients alike, no matter their ability to pay.

While Canadians continually hear a great deal of negative rhetoric about private health providers and parallel insurance, the evidence shows that the introduction of both would improve the state of affairs in Canada for all individuals in need of health care, regardless of their ability to pay. While there are other reforms necessary to emulate the success of the world's most effective and efficient universal access health care programs, a greater role for the private sector in Medicare is unquestionably a step forward for Canada. Following the suggestions in the statements made against both will only continue to commit Canada to a health program that provides poor value for money.

links to other presentations by Nadeem Esmail

• The Economics of Medicare