Volume 11, Number 2, July 2000

Are Multi-Tiered Systems Morally Unjustifiable?

Anita Ho, PhD Candidate
Department of Philosophy, Univerisity of Alberta

In the last few years, discussions about health-care reform have dominated public and political debates in North America. While debates in the United States focus on how the government should slowly extend health-care coverage to everyone, discussions in Canada focus on the advantages and dangers of gradual privatization of health-care services. The task of this paper is to examine whether universal health care and private market can legitimately coexist. For the purpose of this essay, I shall focus my attention on multi-tiered systems and argue that not all multi-tiered systems are inherently problematic. While many have dismissed such systems by attacking the privately-funded tier, which allows the rich to purchase better or additional services, I think it is important for us to redirect our focus to the governmentally-supported tier. I shall argue that whether a multi-tiered system is defensible depends on the strength of the public tier. If various mechanisms are in place to ensure a strong public tier, which protects the interests of the least advantaged, multi-tiered systems can be justified.

Before examining different types of multi-tiered systems and their justifiability, I would like to state some of the background assumptions for this paper. First of all, following the liberal tradition, I assume that one of the roles of the government is to promote basic equality and liberty by minimizing undeserved or arbitrary obstacles that may prevent its citizens from achieving an equal opportunity to lead an autonomous life. Secondly, since having one's basic needs fulfilled is essential to remove such unfair barriers, I also assume that the government has to ensure that its citizens' basic needs¹ are met. Thirdly, I also assume that basic health is one of our essential needs, given that it is necessary to maintain our rational agency and carry out autonomous life plans. Basic health care, which is necessary for everyone to achieve or restore basic health, is thus also an essential need. Fourthly, since the only effective way to fulfil our basic health-care needs is by universal participation, given the high costs of medical care and the problem of free riders, I also assume that it is justified for a liberal government to use tax dollars to finance basic health care.

Granting that a liberal government has an obligation to provide basic health care², the question is whether such an obligation to provide basic health care precludes the possibility of multi-tiered systems. Many assume that multi-tiered systems are inherently "inegalitarian" and thus should not be allowed. However, this conclusion is simply too quick. The answer to this question depends partly on what kind of a multi-tiered system we are dealing with. It also depends partly on whether we are striving for radical or absolute equality. I agree that we should strive for equality of basic condition in trying to ensure that everyone has an equal chance to live an autonomous life. However, our goal to achieve basic equality does not imply that inequality above the basic level is never justified.

Keeping in mind the goal of achieving equality of basic condition, we can now examine the legitimacy of various types of multi-tiered systems. For example, we may have a multi-tiered system in which the government only provides limited coverage for some but not all citizens, and that the rest of the population have to purchase their own coverage. This system resembles the one in the United States. Only 25% of the population, mostly the poor and the elderly, receive any government insurance plan. While the Medicaid program was designed to provide health-care coverage for the economically disadvantaged, almost one-third of all people still have no health insurance whatsoever. For the rest of the population who do not qualify for Medicaid or Medicare (i.e., health-care insurance for the elderly), they have to purchase private insurance plan, depend on health-care plan offered through one's own or a relative's employment, or pay for their health-care services out of pocket.

Granting that one of the obligations of a liberal government is to ensure that its citizens' basic health-care needs are met, a multi-tiered system that does not provide a universal tier of basic services is unjustified. After all, those who are economically disadvantaged may not have access to medically essential services such that their well-being can be severely harmed³. Having a much lower chance to maintain and restore their functioning can also have significant impact on their ability to lead an autonomous life. In this way, a multi-tiered system that ignores the health-care needs of those who are economically disadvantaged is illegitimate.

However, just because one type of multi-tiered system is illegitimate does not imply that all other types of multi-tiered systems are also morally unjustifiable. I shall now turn to other types of multi-tiered systems that have a solid public tier and examine whether they violate our commitment to basic equality. First, we may have a system in which the government is the single payer that provides universal basic health-care services while the privately-funded "luxury" tier provides beneficial services that are beyond such level. Second, we may have a system in which people are allowed to purchase various uninsured and insured health-care services in the private market.

The legitimacy of the first type of multi-tiered system that allows people to purchase uninsured health-care services is based on two premises. The basic and publicly-funded tier fulfils the government's obligation to meet its citizens' basic health-care needs and thus helps promote an equal basic condition for all. At the same time, the privately funded tier recognizes the right of individuals to deploy their private disposable resources to purchase non-basic services if they so wish⁵. However, the difficult task in making funding decisions for such a system is to distinguish basic from non-basic health care. This is a complex deliberative process in which everyone who will be affected by these funding decisions⁴ reflect on a combination of issues in making allocation decisions. Bearing in mind the goals of achieving equality of basic condition and maintaining rational agency, people in the deliberative process need to examine how various diseases and injuries may hinder their achievement of such goals. Granting that conditions that may lead to premature deaths, severe disabilities, and pain or suffering have severe impact on one's chance of achieving equality of basic condition and maintaining rational agency, procedures that are designed to treat, prevent, or care for such conditions may thus be prioritized over procedures for other conditions.

However, explanation of what constitute basic health care does not stop here. Given that resources are scarce, people also need to examine the cost-effectiveness of various procedures, as well as the relative cost-efficiency of one procedure compared to an alternative method. Although this "criteria list" is by no means exhaustive, these criteria provide a general guideline in deciding what kinds of services should be funded and provided on the macro and micro levels respectively.

Certainly, in a society where resources are scarce, certain beneficial services that are of lower priorities would not be funded. Now the question is, should such services be available in the private market of a liberal society? For example, does our commitment to basic equality forbid buying and selling uninsured services in the private market if not everyone can afford to purchase them?

Private Market for Uninsured Services

One way to look at the issue is to see how we treat other uninsured and possibly "luxury" goods and services. In welfare states such as Canada, after citizens have discharged their civic duties by paying their taxes, those individuals who can afford other luxury items such as jewelry and designer goods are allowed to use their disposable income to purchase them. A commitment to basic liberal equality requires welfare programs that are necessary to meet citizens' basic needs to ensure that everyone has an equal opportunity to lead an autonomous life. However, it does not imply that unequal access beyond the basic level is unjustifiable. Respect for autonomy, which is another important principle of the liberal state, demands that government regulations do not impose too many restrictions on how people may use their disposable income. This implies that taxpayers should be allowed to purchase non-basic or even "luxury" services that suit their concepts of a good life, as long as they do not harm others by doing so. If taxpayers are allowed to purchase other luxury goods even though not everyone can afford the same luxury, then by analogy it seems that these individuals should also be allowed to purchase other non-basic health-care services, if they so wish. For example, if a hospitalized patient would like to have her own private room, or if a patient with back pain would like to have daily massage in addition to his physiotherapy, respect for autonomy requires that they be allowed to purchase such services in the private market.

One may ask, if resources are scarce and we want to respect one's right to use one's resources, why do we stop at allowing people to purchase non-basic services? Perhaps we can use the aforementioned arguments to also support a second type of the multi-tiered system, which allows individuals to purchase various insured health-care services in the private market. If a wealthy individual has paid her taxes to support the public tier, respect for her liberty seems to demand that she should be allowed to purchase not only uninsured but also insured services in the private market, if she so wishes.

Private Market for Insured Services

While the aforementioned type of multi-tiered system seems to promote autonomy by allowing those who can afford private health care to purchase services "on their own terms," it is often attacked for its apparently inegalitarian implications. Some argue that allowing individuals to purchase insured services in the private market is morally repugnant. They claim that basic health care should not be a luxury to be rationed according to one's ability to pay. It is not just another item in the marketplace to be selected according to choice and wealth. In fact, if we already have established that one of the most important roles of the liberal government is to promote basic equality by minimizing undeserved disadvantage, then it seems that private markets for basic services cannot be allowed. Under such a system, it seems likely that access to higher-quality services will depend not on needs but on one's ability to pay. For example, some worry that under a multi-tiered system the rich may be able to jump the queue and receive faster services, or that the poor will be covered by a public insurance scheme that is severely restricted while the rich can enjoy a much wider range of high-quality procedures. In a nutshell, there is a general worry that multi-tiered systems allow systemic inequities and further disadvantage those who are already in unfortunate conditions.

I agree that we need to ensure that people who are sick and economically disadvantaged should have access to essential health care. As I have mentioned, a liberal state ought to provide a decent level of health care for all. Nonetheless, this commitment to protect people's well-being and basic equality does not imply that it is illegitimate to allow the rich to purchase private services.

Two arguments support my view. First, the consistency argument shows that we cannot disallow private health care if we allow other essential services or products to be purchased in the private market. For example, education, food, and housing are all closely connected with basic well-being, self-esteem, and quality of life. However, people in a liberal welfare state are not prepared to argue that we should all live in public housing, or that we should prohibit people from pursuing higher education if not everyone can afford to do so. Given that we allow people to purchase such services in the private market regardless of unequal access, by analogy we should not forbid people from buying private health care with their disposable income.

Second, Rawls' difference principle (Rawls 1971) can also justify the multi-tiered system I have in mind. As a liberal egalitarian, Rawls admits that a commitment to basic equality does not imply that all inequalities are problematic. His difference principle allows certain inequalities, if they can in fact benefit those who are most in need. In this way, theoretically speaking, unequal access is not necessarily unjustified. If multi-tiered systems can benefit the least advantaged, their inequity can be justified.

So, how may this be possible? Two arguments of efficiency may show why the presence of private market can be beneficial to the least advantaged. First, one may argue that, the presence of a parallel private system could provide the public tier a point of comparison (Gratzer 1999, 181). The information collected in the private system relating to treatment utilizations, costs, and outcomes could pressure administrators in the public tier to watch their own results and motivate them to be more efficient and effective⁶. This increase in efficiency implies benefits for patients who use this system. Secondly, if we allow the rich to purchase essential services in the private market, those who can afford such services may purchase them in private facilities, thereby shortening waiting lists in the public tier. This implies quicker or more efficient services in the public tier for those who depend on it. Since there will be less people using the public tier, it also implies that more resources can be spent on each patient who does need or use the public system. So even though there is still unequal access in the private sector, a multi-tiered system can be justified on the ground that it raises the baseline position of the least advantaged in the public tier.

However, opponents may refute this by comparing results in the American and Canadian systems. Although the per-capita total health spending in the United States is the highest in the world, there are still millions of Americans who cannot afford private insurance and are thus uninsured or underinsured. In comparison, all Canadian citizens, landed immigrants, and established refugees are eligible for public-funded health care regardless of their income levels. At the same time, infant mortality rate and life expectancy in the United States are worse than those in Canada. So it seems that there is actual proof that the least advantaged fare worse in the American multi-tiered system than the Canadian one-tiered system, and thus a multi-tiered system is unjustifiable even if we appeal to Rawls' difference principle.

Certainly, if it is impossible for a multi-tiered system to benefit the least advantaged, or that multi-tiered systems necessarily run into conflict with the government's obligation to provide basic health care to all, then unequal access to basic health care will be rejected by liberals. Opponents of the American system should not equate that system to the one I am advocating. As I have argued earlier, the American system does not have a solid public tier in place to ensure that everyone's basic health-care needs are met and is thus unjustified. However, the system I am supporting does provide universal basic health care.

In redirecting our focus to a multi-tiered system that has a solid universal public tier but allows people to purchase insured and uninsured services, some may still worry that the presence of a private system will eventually undermine the strength of the public tier. First, they may argue that the presence of the private tier would undermine the political support of the best affordable health care for the public sector. For example, if wealthy Canadians can seek health care in private facilities, there will be less pressure for the government from this powerful group to maintain high-quality services or increase coverage in the public tier. In fact, one may worry that the rich will start to lobby for lower taxes and reduce coverage. Second, one may worry that the establishment of private facilities may bid health-care providers away from the publicly funded tier, thereby creating shortages in the public sector. In this way, the presence of a private market may affect the strength of the public tier, so that my argument that a multi-tiered system may still maintain a strong universal public tier may collapse.

I argue that the effect of the presence of a private system on the public scheme is not as straightforward as my opponents may believe. As Globerman and Vining (1996) point out, linkages between public and private financing efforts are very complex. They caution those who simply assume that the presence of private insurance necessarily lead to less public financing. After all, the existence of a predominantly privately funded system in Canada did not prevent the implementation of an essentially all publicly funded program in 1960s. They also dispute the assumption that the emergence of private health care may bid the best health-care providers away from the public sector, thereby creating shortages in the public sector or leaving the less qualified practitioners in the public sector. They point out that the long-run supply of medical staff is relatively elastic (Ibid, 88). It is unlikely that there will be a shortage of doctors working in the public sector simply because of the presence of the private sector.

There is also "international" evidence to support my argument that multi-tiered systems do not necessarily sacrifice the quality of services in the public sector. While the American system, which is often held up as the only counter-factual to a universal system, has got a bad name, the multi-tiered system I have in mind does exist in other places such as Hong Kong and has received popular support. The efficiency of Hong Kong's health-care system is apparent from various indicators of health, such as life expectancy and infant mortality rate (Ho 1997, 10; Fan 1999, 556). What is interesting about this system is that, while Hong Kong's basic health care indicators compare favourably with developed Western countries, Hong Kong spends much less resources on health care. Its private health expenditure assumes a much higher proportion of the total health expenditure (45.7%) than Canada (30.2%), Australia (30.6%), and the UK (15.9%), and that the total health expenditures only add up to 4.6% of its GDP, which is substantially lower than most other industrialized countries (Fan 557)⁷. The public sector in Hong Kong nonetheless manages to provide a decent minimum level of essential services to all, while the private sector provides some of the same and other additional services for those who can afford such services.

What is interesting about the system in Hong Kong is that the "low spending" does not translate into "low quality" in the public tier. Studies have shown that the quality of the public-funded tier is comparable to that of the private sector and is highly regarded by the public (Hsiao et al 1999). In fact, in some sense the governmentally funded tier in Hong Kong is often considered the "better" tier. Public hospitals, for example, are often better equipped than private hospitals. Although there are more patients per room and also longer waiting time for non life-threatening treatments in the public hospitals compared to the private facilities, public hospitals in Hong Kong have more advanced and expensive equipment. Given that medical and technical experts are required to operate some of these equipment, public hospitals also have highly trained experts. While patients who use private facilities in Hong Kong do receive faster services, it is unclear that they are receiving "better" services, since mortality and morbidity rates are comparable between these two tiers. As Lok San Ho points out, a recent study conducted by the Census and Statistics Department in Hong Kong shows that 90% of patients admitted to public hospitals do not have any private insurance coverage precisely because they feel that they have already been effectively insured under the public tier (Ho 1997, 19). In a nutshell, even though patients who cannot afford services at private facilities may have slower access to certain treatments compared to the rich who use the private facilities, the general consensus in Hong Kong is that public-funded services for non-catastrophic illnesses or injuries should be reserved for the lower-income population and that the waiting lists would be much longer if the rich also join the queue in receiving 'free' services.

So it seems that allowing the rich to purchase private services does not necessarily compromise the government's duty to ensure that the citizens' health-care needs are met. In fact, it may be the better system to protect the lower-income groups because it allows them quicker access to essential services than in a one-tiered system. In this way, unequal access in a well-designed multi-tiered system even for basic services can be justified. If the governmentally financed tier provided essential health care for those who could not afford or obtain private insurance, the fact that the wealthy could purchase private insurance would not be such a problem. In other words, the main problem is not that we want to make sure that the rich do not get private insurance. What we are appealing to is not egalitarianism of envy, which tries to achieve equality by lowering the status of the well-off, especially since that does not promote the welfare of the least advantaged. Rather, the goal is to adopt egalitarianism of altruism, i.e., we want to achieve equality of basic condition by improving the status of the worse off. This goal can be obtained by providing comprehensive insurance for those who may otherwise have to go without. In this way, the problem is not multi-tiered systems per se, but one that lacks a solid public tier that provides coverage for everyone who depends on it.

Possible Safeguards

So now the question is, what can we do to ensure that a multi-tiered system can work? I suggest that we can use three levels of quality-control mechanisms to protect the quality of health-care services in the public sector. First of all, quality control can start at the 'individual' level. Given one's professional responsibility to promote the best interests of one's patients, each health-care provider in the public tier⁸ should be responsible in ensuring that the quality of services provided in that tier is acceptable. They should engage in funding deliberations with administrators to ensure that various allocation policies can address patients' needs. Regarding control of physicians' professional standard, peer reviews within the medical profession may provide check and balance and thus quality control.

Such quality control can be strengthened on an 'organizational' level. For example, the College of Physicians and Surgeons, medical schools, and various medical institutions can be given the responsibility to ensure that all the practicing doctors, regardless of whether they work for the public or private tier, are competent in their field. For example, medical councils may instigate continued medical education as a requirement for continuation of registration to practice. In promoting the interests of not only patients but also health-care providers, various medical institutions may also act as watchdogs for various public facilities to ensure that they are receiving adequate financial and medical resources to keep up the quality of services in such facilities.

Perhaps the most important quality-control mechanism happens on a 'public' level, which bears the responsibility to ensure that the first two levels are in place. Without public control, we can imagine that individual health-care providers or even the College of Physicians and Surgeons may not fulfil their responsibilities. To ensure that the first two levels are in good order, evaluation and review committees consisting of medical professionals, independent ombudsmen, and publicly elected officials may be given the responsibility to monitor quality-control efforts and inspect various public facilities regularly. To get a real sense of the patients' perspectives, they may also invite input from the users of such facilities in evaluating these facilities to ensure that the interests of the public are served. For example, patients and their family members may participate by filling out comment cards regarding their treatments and other services. Such measures can increase the public awareness of the quality of services in the public sector, and also put pressure on the government to keep up the quality of health-care services.

To conclude, it seems that allowing the rich to purchase additional or faster services is not inherently problematic. Unequal access to basic services is only a concern for liberals if such inequality does not promote the good of the least advantaged. In other words, a multi-tiered system is unjustifiable only if it compromises the role of the government to meet its citizens' basic health-care needs. If it is possible that a well-designed multi-tiered system has a solid public tier to ensure that the least advantaged have access to basic health care, multi-tiered systems in a liberal society can be justified.

Reference List

Braybrooke, David. Meeting Needs. Princeton: Princeton University Press, 1987.

Daniels, Norman. Just Health Care. Cambridge: Cambridge University Press, 1985.

Fan, Ruiping. "Freedom, Responsibility, and Care: Hong Kong's Health Care Reform," Journal of Medicine and Philosophy 24, no. 6 (December 1999): 555-570.

Globerman, Steven, and Aidan Vining. Cure or Disease? Private Health Insurance in Canada. Toronto: University of Toronto Press, 1996.

Gratzer, David. Code Blue: Reviving Canada's Health Care System. Toronto: ECW Press, 1999.

Ho, Lok San. Health Care Delivery and Financing: A Model for Reform. Hong Kong: City University of Hong Kong Press, 1997.

Hsiao, William. "Improving Hong Kong's Health Care System: Why and for Whom?" Hong Kong: Hong Kong SAR Government, 1999.

Rawls, John. A Theory of Justice. Cambridge: Harvard University Press, Belknap Press. 1971.

¹ It is beyond the scope of this paper to explore various complex issues of the notion of needs, such as what exactly constitutes a "need." For a full analysis of the concept of needs, see David Braybrooke, Meeting Needs (Princeton: Princeton University Press, 1987).

² For the purpose of this essay, I shall use the phrases "basic health care" and "medically necessary services" interchangeably.

³ Even those who are not currently poor are at risk. Those who depend on insurance plans offered by their or their relatives' employment may end up having no coverage if they or their relatives lose their jobs.

⁴ This includes health-care providers, citizens, government administrators, and so on. Without going into details, I suggest that ongoing discussions among these groups and individuals are essential to find out the interests of the (potentially) sick and of society as a whole. They can also help us to decide what are the most efficient and effective measures to address such interests.

⁵ It is also practically impossible to prohibit individuals from purchasing such services in the private market without various invasive measures that violate liberty. After all, there are private clinics and hospitals in other countries. Unless the state is prepared to also ban people from going out of the country, it simply cannot stop all its citizens from purchasing private health care. The only difference will be where these people may purchase their services.

⁶ Gratzer calls this the "Federal Express method of health care reform." By direct comparison, the courier forces the post office to be more accountable and to find new ways to lower the costs of services (Gratzer 181).

⁷ Canada's total health expenditures, for example, add up to 9.6% of its GDP.

⁸ Certainly, health-care professionals in the private sector also have the same professional responsibility to their patients. They also have to have professional integrity. For example, we may need certain mechanism to ensure that doctors who operate in the private market do not suggest their patients to purchase unnecessary and expensive treatments so they themselves could make a profit off these patients. However, for the purpose of this essay, I will only discuss quality and professional control in the public sector.