Just because I feel that the court's decision seems to be a natural one does not mean that I think two-tier health care is a good change for our country. I'm not convinced of that yet, not even after reading arguments in favour such as the one on Bound by Gravity.
Markets for private health insurance are subject to extremely severe information
asymmetries. This leads to serious adverse selection problems (insurers attract bad risks, forcing
firms to refuse insurance to certain groups, and institute costly underwriting practices for others),
and moral hazard (cost control is difficult, because it is very expensive for insurers to determine
whether claims that they receive are justified). Both of these problems generate enormous
transaction costs at best, complete market failure at worst. The Canadian “single-payer” system
eliminates the adverse selection problem in one fell swoop, by creating a single mandatory
universal plan. It also minimizes moral hazard, by centralizing negotiations over fee structures,
and eliminating the collective action problem in enforcement. However, it is extremely important
to the structure of the Canadian system that the government delivers health insurance as a public
good, not health care. And the reason that government provides insurance of this type is not that
there is something intrinsically wrong with buying and selling heath insurance, it is that markets
fail to do so efficiently.
He goes on to talk about good and bad types of two-tier.