The inefficiency of health care rationing--and a solution

Abstract

One of the main problems with a single-payer health care system, such as Canada's Medicare, is that it causes health care to be rationed. Under Medicare, the provincial governments negotiate physician compensation with provincial medical associations. The provincial governments typically fund hospitals by setting global budgets for government-run regional health authorities. For any medical care from doctors or hospitals that is covered by Medicare, the government-set price to beneficiaries is zero. The result is a shortage: at any given time, some patients want more medical care than is available. Therefore, medical care is rationed; people wait for medical services. Government funded systems typically use triage to ration access to services: the more serious the illness, all else equal, the shorter the wait. Nevertheless, there is a wait, and it is often substantial.