The concept of publicly financed competition serves as a possible strategy for controlling expenditures and improving the efficiency of the health care system in Ontario. Potential cost savings, although rough estimates, for a 10-year period range from $1.0 billion to $1.6 billion, depending upon the model structure. This paper investigates the assumptions and structure of a publicly financed competition proposal and addresses legislative issues concerning the feasibility and desirability of such a system.
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References
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EvansR.G.1982. Health care in Canada: Patterns of funding and regulation. In The Public/Private Mix for Health, McLachlanG. and MaynardA., eds., London: Nuffield Provincial Hospitals Trust, 369–424.
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MuldoonJ.M. and StoddartG.L.1989. Publicly financed competition in health care delivery: A Canadian simulation model. Journal of Health Economics8: 313–338.
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The term “modality” is used in Canada to refer to the combination of financing and organization within a health care delivery plan.
12.
The assumption of one multispecialty capitation-reimbursed group practice in each area is an assumption made to simplify the model structure, but it is not a necessary condition for operationalizing the publicly financed competition proposal (see note 15). In addition, it is the organization as an administrative entity that is reimbursed on the basis of capitation. Physicians within the organization may be reimbursed by this method or in some other way, for example, by salary or through profit-sharing.
13.
This assumption is consistent with evidence in the health services research literature. For additional information see: CunninghamF.C. and WilliamsonJ.D.1980. How does the quality of health care in HMOs compare to that in other settings?The Group Health Journal1: 4–25; WareJ.E.RogersW.H.1986. Comparison of health outcomes at a health maintenance organization with those of fee-for-service care. Lancet2: 1017–1022.
14.
The inclusion of modality-owned hospitals represent another variant in which potential savings may be greater than they are in the environment depicted here. However, the amount of institutional charge required would be much greater also.
15.
The simulation results for a single community were extrapolated in the following manner. An estimate of the number of cities and regions in Ontario with populations of approximately 80,000 was obtained. Data from Statistics Canada indicate that there were about 36 cities or regions in which publicly financed competition could be introduced. For areas with a population of less than 100,000, the capitation modality considers the entire population as its potential market. For areas with a population of more than 100,000, the capitation modality considers only a portion of that population (100,000 people) to be its potential patient population. Each area is assumed to have only one plan in the capitation sector, which rules out competition among capitation plans and renders the estimates of provincial savings conservative. Based on this standardization, the introduction of the competitive proposal would affect approximately 3.2 million people in Ontario. This was approximately 35% of the Ontario population in 1986.
16.
Lower hospital utilization rates in the capitation modality is a common finding in comparisons of capitation and fee-for-service modalities. See: LuftH.S.1981. Health Maintenance Organizations: Dimensions of Performance, New York: Wiley; ManningW.G.1984. A controlled trial of the effect of a prepared group practice on use of services. New England Journal of Medicine310: 1505–1510; HastingsJ.E.F.1970. A comparison of personal health services utilization. Canadian Journal of Public Health61(4): 289–296 (an interim report on the Sault Ste. Marie study). For more information on how reduced hospital utilization rates can be translated into reduced costs see BarerM.L.1981. Community Health Centres and Hospital Costs in Ontario, occasional paper 13, Toronto: Ontario Economic Council.
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HomeJ.M.1984. Publicly financed competition in Canadian health care delivery: Discussion. In Proceedings of the Second Canadian Conference on Health Economics, BoanJ.A., ed., Regina: University of Regina, 144–153.
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BujoldG.1987. Alternative delivery modalities in Canada: Problems, potential, and policy. Ibid: Appendix C-3.
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Canada. 1984. Canada Health Act. Bill C-3, Ottawa: Ministry of Supply and Services.
21.
In the analysis, the health status of the two population groups is assumed to be identical; hence, no allowance is made for an adjustment in government payments if the two modalities treated patient populations of different health status. In principle this difficulty can be overcome by employing age-sex, health-status adjusted capitation rates. However, to adjust capitation rates for these factors entails much more research on both consumer behaviour and health status (in particular its relationship with costs). This is an important area for further research. See: McClureW.1984. On the research status of risk-adjusted capitation rates. Inquiry21: 205–213; AndersonG.F.1986. Paying for HMO care: Issues and options in setting capitation rates. Millbank Quarterly64: 548–565; ThomasJ.W. and LichtensteinR.1986. Including health status in Medicare's adjusted average per capita cost capitation formula. Medical CareXXIV: 259–275.
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LeeL.1986. Alternative Delivery Modalities in Canada: Problems, Potential and Policy. Conference brief to the Burlington Working Conference on Alternative Delivery Modalities in Canada, Hamilton: Centre for Health Economics and Policy Analysis, McMaster University.
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See SeidelmanW.E.MooreC.A. and McLeanD.W.1982. Paying for primary care: Innovation in Ontario. Canadian Family Physician28(5): 893–894.
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WolfsonA.D.1981. Report on the Sault Ste. Marie Study, Toronto: Ontario Ministry of Health.
25.
It is assumed that the reason the consumer sought care elsewhere was a result of location at the time of illness and not the result of dissatisfaction with the current choice of modality.
26.
For example, out-of-region use charges could be omitted from the annual calculations, and data on place of service could be used to decide whether out-of-region use was dissatisfaction or location at time of illness.
27.
For provincial legislation and regulations see: Ontario. 1980a. Health Insurance Act197: 697–736; Revised Statutes of Ontario, 3, Toronto: Queen's Printer; Ontario. 1980b, Regulation 452 under the Health Insurance Act, 197–497; Revised Regulations of Ontario, 4, Toronto: Queen's Printer.
28.
Some argue that free choice of provider could be replaced by free choice of modality.
29.
Except in the case of Ambulatory Care Incentive Payments (ACIP) to HSOs.
30.
Ontario. 1989. From Vision to Action. Report of the Health Care System Sub-Committee of the Premier's Council on Health Strategy, Toronto: Queen's Printer.
