UO > Policy Points > Health Care Canadian Style

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One advantage Canada has over the United States is much lower health-care administrative costs. According to a study by Steffie Woolhandler, Terry Campbell, and David Himmelstein (New England Journal of Medicine, Aug. 21, 2003), Canada spends 29 percent of what the U.S. spends on administrative costs per person—$1,059 per capita in the U.S. versus $307 per capita in Canada (using 1999 figures).

The savings in Canada come from having a single-payer system rather than scores of private insurers with different requirements for determining eligibility and processing claims. In addition, Canada’s hospitals operate under global budgets, which means simpler accounting and billing procedures than those in U.S. hospitals. Some economists have criticized the methodology and estimates of Woolhandler and her colleagues, but still agree that Canada’s administrative costs are lower than those in the U.S.

By providing universal coverage, Canada has better life expectancy and child mortality rates than the United States. According to data gathered by the World Health Organization, life expectancy and healthy life expectancy is 2 1/2 to 3 years longer in Canada than the U.S., and child mortality rates in Canada are about one-third lower. (See sidebar “Comparison of health indicators in Canada and U.S.”)

The Canadian health-care system reflects a higher level of social conscience and social cohesion than the United States health-care system. In Canada, it is not acceptable to have millions of residents without health insurance, whereas in the U.S., political and popular will have yet to bring about universal health coverage. In Canada, there is substantial resistance (but not complete resistance) to having a two-tiered health system—one for people who can afford pay for prompt, high quality service, and another system for people who cannot afford to pay. In the U.S., there are two or more tiers to the health-care system. (See sidebar “Lessons from Canada,”)

The Canadian system has problems, some of which may be attributed to a lack of funding and to a government-run system being slower to respond to inefficiencies and to the desires of consumers than the private sector. As the U.S. and Canada each try to improve their health-care systems, hopefully they will learn from each other. n

As the United States considers reforms to its own health-care system, both benefits and problems can be seen in the Canadian health-care system. Here is a list of some of the positive and negative aspects of the Canadian system from which U.S. health-care reformers can take lessons.

J Saving administrative costs. A single payer system can substantially reduce the costs of administration of health care since health-care providers and patients do not have to deal with scores of different health plans. Some researchers estimate the administrative costs could be reduced by as much as two-thirds (from $1,059 per person per year in the United States to $307 per person per year in Canada, using 1999 costs). Other researchers also project savings from a single payer system, but in lesser amounts.

K Wait lists and availability of health care, depending on government budgets. If the government is paying all the bills and the government is experiencing shortfalls in revenue, a common response from the government is to reduce budgets, including for health care. This can result in less availability of services, wait lists for services, and providers who feel that they are not being paid enough. If the payments for health care are divided between the national government and more local units of government, there also may be ongoing disputes about which unit of government should pay how much. In addition, when the federal government includes payments for health care in block grants to local units of government, and the block grants combine payments for health care with other types of expenses (such as social services), there is likely to be less accountability about how the money is spent.

K Technology allocation. If payment of health care is centralized, there also may be more centralized allocation of expensive technology equipment, such as magnetic resonance imaging (MRIs) and CAT scans. Centralized control, particularly when coupled with budgetary restraints, may limit access to such equipment and slow the response time to demands of the health-care marketplace and to new technology developments.

Canada U.S.

Median Salaries:

Family physician $ 75,550 $150,000

Medical specialist 107,528 275,000

Surgical specialist 134,087 265,000

All physicians 95,300 162,000

Overhead:

Averaged 27- 35% 51%

among specialties

(Percent of gross income used for overhead)

Sources: For Canadian data: Article in Canadian Medical Association Journal (March 2, 2004) by Lynda Buske, Associate Director of Research of the Canadian Medical Association. For U.S. Data: Medical Economics (Medical specialists’ salaries were derived by averaging gastroenterologists and non-invasive cardiologists; surgical specialists’ salaries derived by averaging general surgeons and orthopaedic surgeons). To convert Canadian dollars to U.S. dollars, the average conversion rate for 2001-02 was used ($1 U.S. = $1.56 Canadian).

(data from 2002)

Canada U.S.

males/females males/females

Life expectancy
at birth 77.2 / 82.3 74.6 / 79.8

Healthy life
expectancy at birth 70.1 / 74.0 67.2 / 71.3

Child mortality
(per 1,000) 6.0 / 5.0 9.0 / 7.0

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						Policy Points: Health Care Canadian Style (cont’d) [ previous ] Administrative costs and health benefits One advantage Canada has over the United States is much lower health-care administrative costs. According to a study by Steffie Woolhandler, Terry Campbell, and David Himmelstein (New England Journal of Medicine, Aug. 21, 2003), Canada spends 29 percent of what the U.S. spends on administrative costs per person—$1,059 per capita in the U.S. versus $307 per capita in Canada (using 1999 figures). The savings in Canada come from having a single-payer system rather than scores of private insurers with different requirements for determining eligibility and processing claims. In addition, Canada’s hospitals operate under global budgets, which means simpler accounting and billing procedures than those in U.S. hospitals. Some economists have criticized the methodology and estimates of Woolhandler and her colleagues, but still agree that Canada’s administrative costs are lower than those in the U.S. By providing universal coverage, Canada has better life expectancy and child mortality rates than the United States. According to data gathered by the World Health Organization, life expectancy and healthy life expectancy is 2 1/2 to 3 years longer in Canada than the U.S., and child mortality rates in Canada are about one-third lower. (See sidebar “Comparison of health indicators in Canada and U.S.”) Social cohesion The Canadian health-care system reflects a higher level of social conscience and social cohesion than the United States health-care system. In Canada, it is not acceptable to have millions of residents without health insurance, whereas in the U.S., political and popular will have yet to bring about universal health coverage. In Canada, there is substantial resistance (but not complete resistance) to having a two-tiered health system—one for people who can afford pay for prompt, high quality service, and another system for people who cannot afford to pay. In the U.S., there are two or more tiers to the health-care system. (See sidebar “Lessons from Canada,”) The Canadian system has problems, some of which may be attributed to a lack of funding and to a government-run system being slower to respond to inefficiencies and to the desires of consumers than the private sector. As the U.S. and Canada each try to improve their health-care systems, hopefully they will learn from each other. n SIDEBAR Lessons from Canada As the United States considers reforms to its own health-care system, both benefits and problems can be seen in the Canadian health-care system. Here is a list of some of the positive and negative aspects of the Canadian system from which U.S. health-care reformers can take lessons. J Universal coverage. A single-payer system facilitates universal health-care coverage. When the government pays the health-care bills, all residents of the country can be covered, and there will not be a problem, as there currently is in the U.S., of more than 43 million people without health insurance. J Better overall health. When coverage is universal (and of good quality), the overall health of the population improves. Child mortality rates drop, life expectancy increases, and the number of years that people live without significant disability increases. J Saving administrative costs. A single payer system can substantially reduce the costs of administration of health care since health-care providers and patients do not have to deal with scores of different health plans. Some researchers estimate the administrative costs could be reduced by as much as two-thirds (from $1,059 per person per year in the United States to $307 per person per year in Canada, using 1999 costs). Other researchers also project savings from a single payer system, but in lesser amounts. K Wait lists and availability of health care, depending on government budgets. If the government is paying all the bills and the government is experiencing shortfalls in revenue, a common response from the government is to reduce budgets, including for health care. This can result in less availability of services, wait lists for services, and providers who feel that they are not being paid enough. If the payments for health care are divided between the national government and more local units of government, there also may be ongoing disputes about which unit of government should pay how much. In addition, when the federal government includes payments for health care in block grants to local units of government, and the block grants combine payments for health care with other types of expenses (such as social services), there is likely to be less accountability about how the money is spent. K Technology allocation. If payment of health care is centralized, there also may be more centralized allocation of expensive technology equipment, such as magnetic resonance imaging (MRIs) and CAT scans. Centralized control, particularly when coupled with budgetary restraints, may limit access to such equipment and slow the response time to demands of the health-care marketplace and to new technology developments. K Private sector innovations. To the extent that the private sector is able to develop new methods of delivering health care that are beneficial or cost-effective, those innovations are less likely to occur in a government-run system. n SIDEBAR Comparison of salaries and overhead of physicians in Canada and U.S. (Salary data from 2001-02; all figures in U.S. dollar) Canada U.S. Median Salaries: Family physician $ 75,550 $150,000 Medical specialist 107,528 275,000 Surgical specialist 134,087 265,000 All physicians 95,300 162,000 Overhead: Averaged 27- 35% 51% among specialties (Percent of gross income used for overhead) Explanatory note: Salaries are gross income after deduction for tax-deductible business expenses (overhead), but before deduction of the physicians’ personal income taxes. Sources: For Canadian data: Article in Canadian Medical Association Journal (March 2, 2004) by Lynda Buske, Associate Director of Research of the Canadian Medical Association. For U.S. Data: Medical Economics (Medical specialists’ salaries were derived by averaging gastroenterologists and non-invasive cardiologists; surgical specialists’ salaries derived by averaging general surgeons and orthopaedic surgeons). To convert Canadian dollars to U.S. dollars, the average conversion rate for 2001-02 was used ($1 U.S. = $1.56 Canadian). SIDEBAR Comparison of health indicators in Canada and U.S. (data from 2002) Canada U.S. males/females males/females Life expectancy at birth 77.2 / 82.3 74.6 / 79.8 Healthy life expectancy at birth 70.1 / 74.0 67.2 / 71.3 Child mortality (per 1,000) 6.0 / 5.0 9.0 / 7.0 Jeff Atkinson teaches courses in health-care law and policy at DePaul University College of Law in Chicago, where he graduated summa cum laude. He writes on legal, medical, and ethical issues. 1 \| 2 @ 2004 UO Inc. www.uoworks.com 800-888-2047