28 September 2001 - 30 September 2001

Healthcare Funding

Chair: The Hon Michael H Wilson PC

(A joint conference with The Canadian Ditchley Foundation)

Over a brilliant, sunny early autumn weekend at Langdon Hall in Cambridge, Ontario we enjoyed the generous hospitality of the Canadian Ditchley Foundation for what proved to be a thought-provoking debate on healthcare funding.  With expertise in at least six national healthcare systems around the table, sharing of experience and best practice naturally featured strongly in the debate.  But we reminded  ourselves at regular intervals during the conference of the dangers of seeking simply to transfer the lessons learned in one healthcare system to another.  Often the same words had different meanings in different countries and national cultures and traditions played an important part in determining the outcomes.  Notwithstanding these caveats we sought to draw some conclusions from our combined knowledge and experience for future policy in this important field.

We began by asking ourselves why Governments were so heavily involved in healthcare.  Their current interventionist role was, in historical terms, a relatively recent phenomenon.  The general view was that Governments had responded to overwhelming demand on the part of their citizens who wished them not only to be regulators and standard setters but also to fund the service from public revenue.  One participant claimed that Government responsibilities had grown incrementally without clear planning and forethought, and this was one of the reasons for the present confusion over their role.  Direct Government involvement was seen as a potential problem for the politicians responsible for healthcare (“a bedpan can not fall off a trolley in the NHS without its echoes being heard in the corridors of Whitehall”).  The present degree of frustration, concern and unrest over perceived inadequacies in the system would continue to generate pressure for change.  Many of us could see a good case for freeing hospitals and other providers from direct control and management by the State.

We looked in some detail at the claim that costs were rising faster in most countries than the ability to absorb them without distortion to other parts of the economy.  Increasing life expectancy with higher costs of care in the last years was cited as a significant factor although some participants argued that the largest consumers were not necessarily the old.  In the USA 50% of the population were responsible for less than 3% of total healthcare expenditure.  10% consumed some 70% of expenditure.  Technological advances (for example the ability, and now the duty, to try to save babies weighing 500 grammes compared to the previous limit of 1,000 grammes) were also thought to be a cost driver although we were reminded that some technologies, like keyhole surgery could serve to reduce costs.  And we were generally wary of viewing healthcare expenditure in isolation.  Health expenditure could be a major benefit to the economy by ensuring a fit and active workforce.  Equally, seen in the broader context of social care, funds spent on improving health could be offset by reduced expenditure on, for example, long term care for the elderly.  One of the problems for Governments lay in the fact that calls on healthcare resources were demand led and resulted from millions of decisions, over which the Government had little control, by individual citizens.

Another issue which divided us was the role of the market in healthcare.  Should healthcare be described in the language of products and consumption where the role of the market was to send accurate signals about demand and supply, or was healthcare a public good with public interests and ethical and moral dimensions which overrode market considerations?  Strong views were expressed on either side with the advocates of the market maintaining that, in the long run, healthcare would prove no different to other areas of the economy where it had been thought that state monopolies were the natural order of things.  A key point was the alleged need to ensure that the incentives in any system were correctly aligned with the desired goals.  All too frequently systems were vitiated through perverse or misaligned incentives, whether for patients, clinicians or administrators.

The idea that rising costs of healthcare were at the root of the present crisis was challenged by at least one participant.  Turning the argument on its head, it was possible to make the case that the problem was that healthcare funding was rising too slowly to meet the desires and expectations of patients, physicians and suppliers.

This led us naturally towards consideration of another issue on which we were unable to capture consensus:  the role of patients.  The generally accepted view was that they were now more demanding.  Younger people, in particular, attached importance to choice.  Others argued that while patients were now better informed – some via the internet had researched their own ailments in more detail than their physicians – this should not necessarily feed through to increased pressure on resources.  There was wide agreement that in any reforms the main thrust should be to make our systems more patient based or at least more patient oriented.  The old command and control approach had had its day.  In our search for the right approach, a participant argued for the patients voice to be heard above patient choice.  Another warned that we should try to ensure that benefits were distributed fairly and that the articulate greedy should not gain at the expense of the inarticulate needy.

Information Technology was seen as a critical element in any improvement to both healthcare and its funding.  The ability to follow a patient through the system and know accurately and immediately what treatment had been given and what costs incurred, was considered to be essential. It would also help to build bridges between the “stovepipes” within which existing lines of treatment tended to operate.  But like many other desirable investments the effects might only appear in the longer term and it was therefore difficult to persuade administrators (who looked for shorter term returns) or Finance Ministries (who objected, almost on principle) to provide “up front” finance for projects of this kind.  A voice of political experience commented that health departments would be treated like any other – funding would be “last year plus a bit” and if you wanted any project money then you had to find it within your own resources.

Preventive medicine was another example of the need for long-term investment.  If we wanted a health service rather than a sickness service we should put as much effort into preventive as curative medicine.  Investment in basic science, pharmacogenetics and other areas of disease prevention would pay big dividends in the long term.  In an open democratic society it was, however, difficult to deal with some major behavioural causes of mortality like smoking or obesity.  Direction was politically unacceptable.  Education and persuasion were the only realistic avenues, with physicians carrying more public credibility than politicians.

We noted with interest the wide variation in the consumption of medicinal drugs.  France was at the top of the league with consumption 300% higher than, for example, the UK.  This was a major cost-driver, and it was by no means clear that such high consumption resulted in better health.  One participant claimed that only 2% of new drugs had any real additional medical benefit.  Interest was expressed in the recent establishment in the UK of the National Institute for Clinical Excellence which was specifically tasked to give advice on the cost-effectiveness of drugs.  Some argued that NICE would be even more authoritative if it was completely independent of Government. 

Against this general background, three groups looked in more detail at funding questions from the point of view of patients, providers and purchasers, and made some recommendations for future policy.

From the patients’ point of view it was generally accepted that the first step was an attempt to define the underlying values in a health system.  This supported the view expressed by an experienced politician, that healthcare was overwhelmingly a political issue.  There were some who argued for rapid fundamental reform while others maintained that “unapologetic incrementalism” was the only sensible way forward.  There was consensus around the proposition that there was no single solution (magic bullet).  The issue should be tackled on a long term basis which argued for politicians to be kept away from the detail and from too many initiatives.  Recommendations to (absent) Health Ministers included:  an emphasis on educating voters and patients about the options available and their cost;  co-payments used in conjunction with a progressive fiscal system;  a medical savings account for each citizen;  greater investment in primary care;  a reversal of declining investment in scientific research and education;  a patients’ charter;  and tackling the vested interests of those involved in the system.

The providers’ group defined “providers” as all those parties which contributed to, and were involved with, the patients, journey and put forward the following recommendations:

a         Greater use should be made of incentives to move over time from the existing muddled patchwork of care to patient centred, integrated and flexible delivery systems;

b         Regional solutions should allow patients to make choices designed to suit the community’s particular needs within a framework of national standards.  The concept of equity/fairness should not be equated with identical services being provided everywhere.  “Not all inequalities are iniquitous”.

c         Benchmarking against best practices and outcomes should be used more extensively.  “Competition through comparison” was desirable as it would be likely to enhance quality of care and thus value for money.

d         The various roles of Government as regulator, standard setter, purchaser, provider, planner and funder should be more transparent.  Segregation of these functions would lead to clear accountability, improved governance and more effective checks and balances; 

e         Independent, professional consultative bodies (eg NICE in the UK) could play a constructive role in making the difficult choices, and gaining acceptance for them, on which services the public sector should provide and which not;

f          IT offers great potential to enhance efficiency, quality and experimentation/innovation in healthcare systems, subject to appropriate safeguards for privacy and security and documented protocols about the sharing of information;

g         IT systems would be more effective if they were built from the bottom up; involved all stakeholders at the outset and were designed on a clinician-centred basis.

The purchasers’ group suggested a five point plan:

a         The provision of a “core” service.  But given the difficulty of defining such a core (Oregon, Dekker, and experience elsewhere) it would be preferable simply to accept the currently provided services as the core and then debate and decide, as new advances were made, whether they should be added to it;

b         Services outside the core should be provided within the system but be available only on payment out-of-pocket or by insurance;

c         The service should be delivered through a purchaser/provider split.  The purchaser would write contracts and agree them with the provider including not only the cost, but also the quality and outcomes sought.  Competition between the providers, and the entry of new providers, would not be excluded.  Providers could be public or private and should be run as independently as possible from Government.  Purchasers should seek to shape the system by setting goals and outcomes over a number of years.

d         Co-payments, user-fees and deductibles should be considered.  One method might be to keep track of an individual’s use of health services during the year and treat them as taxable income up to a certain level.  The effect would be redistributative, progressive and educational in showing patients how much the treatments cost against the level of their contributions.

e         Devolution.  It would be desirable to move budgets and fees as far down the line as possible away from national negotiations over fee levels with medics.  The aim would be to get the right provider supplying the service in the right, most cost effective way.

All these recommendations were subject to qualifications and caveats, but the broad outlines were thought to provide ideas and food for thought to those involved in this important and complex area where ethical values, technology, administration, economics, politics and last but certainly not least, individual people, often under great stress, are involved.

My final word of thanks goes to our generous hosts, the Canadian Ditchley Foundation, and to all those participants, some of whom travelled long distances to join us at a time when travel was not easy, for making this such a valuable and memorable conference.

This report reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.


Chairman:  The Hon Michael H Wilson PC

President and CEO, Brinson Canada Co


Mr John Banks

Vice President and Secretary, The Canadian Ditchley Foundation

Professor Åke Blomqvist

Department of Economics, Social Science Centre, University of Western Ontario

Professor Paul Boothe

Deputy Minister of Finance and Secretary to Treasury Board for the Province of Saskatchewan

Mr Robert Christie

Deputy Minister of Finance, Government of Ontario

Mr Terrence Corcoran

Financial Editor, National Post

Dr David Dodge

Governor, The Bank of Canada and lately Deputy Minister, Health Canada

Mr Jeffrey C Lozon

President and Chief Executive Officer, St Michael’s Hospital, Toronto

Dr Michel G Maila

Executive Vice-President and Head of Risk Management Group, Bank of Montreal

The Hon Yves Morin

The Senate of Canada

Dr David Naylor

Dean of Medicine and Vice Provost, Relations with Health Care Institutions, University of Toronto

Professor Dorothy Pringle

Faculty of Nursing, University of Toronto

Mr Grant L Reuber

President, The Canadian Ditchley Foundation

Mr Ronald S Ritchie

Chairman, The Canadian Ditchley Foundation

Mr William B P Robson

Director of Research, C D Howe Institute

Mr Roy Romanov

Chairman, Commission on the Future of Health Care in Canada

Ms Alison M Savage

Risk Management Officer, Bank of Montreal

Mr Graham W S Scott

Managing Partner, McMillan Binch

Dr Munir A Sheikh

Associate Deputy Minister, Health Canada

Mr Donald A Stewart

Chairman and CEO, Sun Life Financial Services of Canada Inc

Dr Michael Walker

Executive Director, The Fraser Institute

Ms Margaret Wente

Columnist, The Globe and Mail


Mr François Lagrange

Chairman, National Commission for Privatisation


Mr Gay Mitchell

Fine Gael spokesman on Health in the Dail Eireann


Dr Keike G H Okma

Senior Policy Adviser, Ministry of Health, Welfare and Sport


The Rt Hon Virginia Bottomley JP MP

Former Cabinet Minister responsible for Health

Sir Nigel Broomfield

Director, The Ditchley Foundation

Sir Andrew Burns

High Commissioner for the United Kingdom in Canada

Professor Sir Cyril Chantler

Chairman, General Medical Council Standards Committee

Dr Stephen Dunn

Policy Adviser, Strategy Unit, Department of Health

Miss Val Gooding

Chief Executive, BUPA

Dr Anne Grocock

Executive Director, The Royal Society of Medicine

Dame Deirdre Hine

Chairman, Commission for Health Improvement

Dr Chai Patel

Chief Executive, Westminster Health Care Limited

Miss Carol Robson

Deputy Director, The Ditchley Foundation

Mr Simon Stevens

Senior Policy Adviser on Health Issues, No 10 Downing Street

Mr Nicholas Timmins

Public Policy Editor, The Financial Times

Mr John Wyn Owen

Secretary, The Nuffield Trust

Mr Nicholas D York

Senior Economic Adviser, Department of Health


Mr Richard Cauchi

Program Manager, National Conference of State Legislature

Dr Gregory L Eastwood

President, Upstate Medical University, State University of New York

Mr Louis I Freedman

Commissioner, Massachusetts Division of Health Care Finance and Policy

Professor Theodore R Marmor

Professor of Public Policy and Management and Professor of Political Science, School of Organisation and Management, Yale University

Mr Robert O’Leary

Chairman and CEO, The Sagamore Group

Mr David Parrella

Director of Medical Care Administration, Connecticut Department of Social Services, Medical Care Administration

Dr Thomas C Ricketts III

Program Director, Health Policy Analysis and Rural Health, Cecil G Sheps Center for Health Services Research, University of North Carolina

Mr James T Sykes

Senior Adviser for Aging Policy, Medical School, University of Wisconsin