The wrong health-care model. Is Canada's health-care system really cheaper?

National Review, Feb 17, 1992 by Jacques Krasny

Above all, we have made no allowance for the significant (currently unmeasured) use of the U.S. system by Canadian citizens. Each dollar spent by a Canadian in the United States increases the apparent cost of the U.S. health-care system, and decreases the apparent cost of the Canadian system. Thus, a more sophisticated analysis would almost certainly yield a percentage of GNP equal to, or perhaps greater than, that of the U.S. health-care system.

A Question of Limits

CANADA's health expenditure may be higher than the crude figures suggest; but it is still a finite sum of money. And it is a fundamental tenet of the Canada Health Act that all residents are covered by one of the provincial health-care plans. Hence unlimited demand meets limited resources, and - something's gotta give.

The result is that while health insurance may be universally provided, access to actual health care is limited. There is, in effect, rationing by delay. Canadian residents may wait two months for a CAT scan or cataract surgery, four weeks or more for elective surgery (sometimes even in urgent cases), six to ten months for hip replacements. Two of Canada's most affluent provinces - Ontario and British Columbia - have contracted with U.S. hospitals near the border to provide coronary bypass surgery for Canadian citizens, with the relevant provincial ministry of health paying for the procedure.

Furthermore, the restriction in access have grown more serious as Canadian administrators have sought to contain rising health-care costs. The 1970s were a period of rigorous management control that succeeded in squeezing much of the fat out of the health-care system. By the 1980s, however, management devices to improve productivity and cut waste were at the point of diminishing returns. Hence, the bulk of cost constraint in Canada is now achieved at the expense of ease, timeliness, and choice of access to health-care resources. A comparison of U.S. and Canadian access to higher (i.e., newer) medical technologies shows the per-capita ratio of accessibility ranged from 200 to 800 per cent higher in the United States. Ironically, while Americans examine the Canadian system, Canadians have been studying U.S. models, particularly health-maintenance organizations (HMOs), to learn from their skills at cost containment.

Although it derives its economic support from the federal government, the Canadian system is in fact a collection of ten different provincial plans, each administered by the individual province. Those provinces with a population base of one million or less can be usefully compared with the seven HMOs in the U.S. that provide health care to an enrollment of over one million subscribers. In fact, in 1987 three of the larger American HMOs - Kaiser Permanente, Cigna, and Harvard Community Health - provided a full range of health-care services with per-capita costs $400 to $500 lower than comparable services in Canada.

Increasingly, the U.S. health-care system serves as a safety valve for the Canadian system - the latter can succeed within its limitations because there is a medical version of "overdraft protection" to help it cope with the vagaries to adopt the Canadian system, not only would the resulting limitation of resources affect American healthcare consumers, it would also eliminate the Canadians' safety valve. And what country would then serve as a safety valve for the United States?