Canada's health plan not for importing

Nation's Business, Sept, 1990

Canada's Health Plan Is Not For Importing

Several recent polls have shown that most Americans like the idea of Canadian-style national health insurance. Canadians choose their own doctors; the government pays most of the bills and sets all fees charged by doctors and hospitals.

Critics of the American health system frequently note that no one in Canada goes without health insurance - while there are 31 million uninsured Americans - yet Canada spends less of its gross national product on health than the U.S.

If this sounds too good to be true, you're right. Headlines in the Canadian press frequently report problems with waiting lists for hospital beds and some types of surgery. And a new study by the Health Insurance Association of America, a Washington-based trade group, casts doubt on whether the U.S. could afford to copy the Canadian system.

Congress has not shown great interest in transplanting the Canadian model to the U.S., but several states have considered such a plan.

If the U.S. were to adopt a system mirroring Canada's, the changeover would cause a massive shifting of health costs from employers and private insurers to government. In Canada, 74 percent of health costs are paid by government - both federal and provincial. In the U.S., the comparable figure is only 42 percent, including Medicare and Medicaid.

Increasing the state and federal share of U.S. health expenditures to 74 percent, plus covering 31 million uninsured Americans, would cost an additional $250 billion in 1991, the study concludes.

A Canadian-model distribution of costs would saddle the states with responsibility for the entire $250 billion in new spending, since the U.S. and Canadian federal governments pay roughly the same proportionate amount for national health expenditures - 29 percent. Meeting this obligation would require a 71 percent increase in overall state tax revenues, says the study.

If the federal government picked up the entire tab, the added costs would require a 59 percent increase in current federal payroll taxes, a 46 percent increase in income-tax receipts, or a 62 percent decrease in defense spending, according to the study.

Another reason to question the adoption of a Canadian model is that it is no better at controlling spiraling health costs than the U.S. system.

Although Canada funnels less of its gross national product into health care than the U.S. does - in 1988 the figures were 8.98 percent in Canada and 11.06 percent in the U.S. - the report attributes the difference to faster economic growth in Canada, not to more effective health-care cost controls.

When costs are analyzed on a per-capita basis rather than as a percent of GNP, the study shows, both countries have similar rates of inflation in health-care costs. "Analyzing health-care costs over the past 10 years [1977 to 1987], we found that real per-capita health-care spending grew slightly faster in Canada than here," says Edward Neuschler, director of health-policy studies at HIAA and author of the 100-page study. "The average annual increase was 4.28 percent in Canada, compared to 3.93 percent in the United States."

Says Neuschler: "Public insurance fashioned on the Canadian model does not seem to be an approach that would work well here."