Economic Efficiency and the Canadian Health Care System

Abstract

In this chapter the authors examine the compatibility of the objectives of universality and public funding which are two important pillars of the Canadian healthcare system, with the objectives of cost effectiveness and more generally economic efficiency. The authors note that under some very innocuous conditions, markets and other economic based mechanisms such as second price auctions are characterized by economic efficiency and cost effectiveness. For the particular case of healthcare, some additional features that must be considered in the design of the mechanism are that healthcare services and products are valuable if, when taken together they constitute the components of a needed procedure, and otherwise they are worthless to the individual; and timely completion of procedures is what is valued, delays and waiting not only prolong suffering but may eventually prove to be more costly to the system if the condition worsens. They recommend a market-based mechanism, encompassing these features, that utilizes mobile agents representing patients and their medical needs. In order to incorporate the basic goals of universality and public funding, the agents will participate in virtual auctions using a needs based ranking as the currency for making bids.