Canadian and American health care systems compared

A comparison of the health care systems of Canada and the United States has been made by various governmental and non-governmental health and public policy analysts. Although Canadians and Americans have each looked to the other for ways to improve their respective health care systems, there exists a substantial amount of conflicting information regarding the relative merits of the two systems. In Canada, the United States is used as a model and as a warning against increasing private sector involvement in health care. In the United States, meanwhile, Canada's mostly monopsonistic health system is seen by different sides of the ideological spectrum as either a model to be followed or avoided.

Government involvement
Canada and the United States had very similar health care systems in the early 1960s. The two neighbours are now a dramatic contrast. Canada has one of the world's most fully socialized health care systems while the United States is one of only two OECD countries (with Mexico) not to have some form of guaranteed health insurance for all citizens.

The governments of both nations are closely involved in the delivery of health care. The central structural difference between the two is in health insurance. In Canada, the federal government is committed to providing funding support to its provincial governments for health care expenditures as long as the province in question abides by accessibility guarantees as set out in the Canada Health Act, which explicitly prohibits billing end users for procedures that are covered by Medicare. In the United States, federal and state government funding of health care needs of its citizens is limited to Medicare and Medicaid insurance programs for the eligible senior, very poor or disabled persons. Health insurance must be paid for privately, otherwise, and, in most cases, is provided by a person’s employer.

The Canadian system is 65 - 70% publicly funded, though a substantial portion of the services is provided by private corporations, namely the privately incorporated medical practices of most physicians (however, despite the fact that many doctors will refer to their "private clinics", these are in fact merely private corporations that derive nearly all their revenue through government billings). Although some doctors work on a purely fee-for-service basis (usually family physicians), some family physicians and most specialists are paid through a combination of fee-for-service and fixed contracts with hospitals or health service management organizations.

Canada's universal health plan does not cover certain services. Non-cosmetic dental care is covered for children up to the age of fourteen. Prescription drugs are not covered, and optometry is only covered in some provinces. Visits to many specialists may require an additional user fee. Also, some procedures are only covered under certain circumstances. For example, circumcision is not covered, and a fee is usually charged when a parent requests the procedure; however, if an infection or medical necessity arises, the procedure would be covered. When compared, the privately managed sectors of the health system have similar rates of participation and treatment in both countries.

Until the 1960s both countries had almost identical health care systems. The creation of Medicare in Canada in 1966 rapidly led to government funding of much of the health system. Since then, the American government has also become deeply involved in the delivery of health care, but has not created a system of universal government coverage. There are a number of explanations for this difference. Traditionally it has been ascribed to the more individualistic and free market nature of American society. However, in several other areas of the economy, such as education, the American government is just as, or even more deeply, involved when compared with Canada. Even in some health areas, such as in placing restrictions on smoking, the United States has been faster to restrict freedoms than Canada. An alternate explanation is that during the period that Canada, and most other developed nations, introduced a publicly funded health system the American government was pouring a huge slice of its GDP into the military due to the Cold War and thus could simply not then afford to invest. By the time the Cold War had eased, the post-war consensus on government involvement in the economy had broken down throughout the west, so it was all but impossible to introduce new spending programs on the scale of a national health plan. The plans have remained different from each other.

According to a CBC report on the Canadian health care system: "Dr. Albert Schumacher, former president of the Canadian Medical Association estimates that 75 per cent of health-care  services are delivered privately, but funded publicly.

"Frontline practitioners whether they're GPs or specialists by and large are not salaried. They're small hardware stores.  Same thing with labs and radiology clinics …The situation we are seeing now are more services around not being funded    publicly but people having to pay for them, or their insurance companies. We have sort of a passive privatization."

According to Schumacher's remarks, GP's are "small hardware stores' is a major reason why there is a shortage of doctors in Canada; simple economics dictates that doctors within the system benefit from a shortage of supply of doctors.

Coverage and access to healthcare
In Canada, every citizen has coverage, but access can still be a problem. Based on 2003 data from the Canadian Community Health Survey, an estimated 1.2 million Canadians do not have a regular doctor because they "cannot find" one and just over twice that number do not have one because they "haven't looked". Those without a regular doctor are 3.5 times more likely to visit an emergency room for treatment. Complaints of long waiting lists for some services are also common. For example, in a survey of hospital administrators conducted in Canada, the United States, and three other countries, 21 percent of Canadian hospital administrators admitted that it would take over three weeks to do a biopsy for possible breast cancer on a 50 year old woman. Less than one percent of American administrators made this claim. according to the same survey, fifty percent of Canadian administrators versus none of their American counterparts stated that it would take over six months for a sixty-five year old to undergo a routine hip replacement surgery.

In the United States, the majority of citizens have health insurance that is related to employment or purchased directly. The federal government does not guarantee universal health care to all its citizens, but certain publicly funded health care programs help to provide for the elderly, disabled, and the poor and federal law ensures public access to emergency services regardless of ability to pay. Those without health coverage are expected to pay privately for medical services.

According to the United States Census Bureau, 45.8 million Americans (15.7%) were without health insurance coverage in 2004. A 2003 report by the Congressional Budget office found that many of these uninsured are uninsured only temporarily, such as between job changes. The number of chronically uninsured (uninsured all year) is somewhere between 21 and 31 million. Also included in the uninsured are about 3 million children who are eligible for Medicaid but who have not been enrolled by their parents. 

A number of free clinics also exist that provide free or low-cost non-emergency care to poor, uninsured patients. The National Association of Free Clinics claims that its member clinics provide $3 billion in services to some 3.5 million patients annually. 

Price of health care
Health care is one of the most expensive items of both nations’ budgets. The United States spends more per capita on health care than the government does in Canada. In 2003, the government of Canada spent $1886 (in US dollars) per person on health care, while the United States government spent $2548.

Despite the American government paying more per capita, private sources also pay far more for health care in the United States. In Canada an average of $630 dollars is spent annually by individuals or private insurance companies for health care, including dental, eye care, and drugs. In the United States this number is $2719. In 2001 the United States spent in total 13.6% of its annual GDP on health care. In Canada only 9.5% of the GDP was spent on health care. This difference is a relatively recent development. In 1971 the nations were much closer with Canada spending 7.1% of GDP on health while the U.S. spent 7.6%. The health share of gross domestic product (GDP) in America is expected to hold steady in 2006 before resuming its historical upward trend, reaching 19.6 percent of GDP by 2016.

Some advocating against socialized health care have asserted that the difference in health care costs between the two nations is partially explained by the differences in their demographics. Police-reported Drug abuse and violence are all more common in the United States than in Canada, and all place a burden on the health care system. Most illegal immigrants (more prevalent in the United States than in Canada) do not carry health insurance and rely on emergency rooms (which are legally required to treat them) as a principal source of health care. (In Colorado, for example, 80% of illegal immigrants do not have health insurance.) Illegal immigrants' relative lack of preventative care incurs higher overall costs. Recent history has meant that the United States has far more veterans and war wounded, also somewhat increasing cost. Accounting practices also differ and in Canada fewer capital investments are included in health care costs. Another important caveat is that research and development spending in Canada is lower, but Canada still benefits from the research done in the United States. This leads some scholars, such as David Gratzer, to argue the actual cost difference, while still real, is much smaller than the straight GDP numbers would indicate.

The private system in the United States has itself adapted in some ways, to become more similar to the Canadian system. In recent decades managed care has become common in the United States, with some 70% of privately insured Americans belonging to managed care plans. Managed care is when the insurance company controls patients' health care to reduce costs, for instance by demanding a second opinion prior to any expensive treatment. Proponents assert that managed care reduces health care costs by up to 30% with no appreciable decrease in the quality of this care.

Administrative costs for health care are higher in the United States than in Canada.

Medical professionals
Some of the extra money spent in the United States goes to doctors, nurses, and other medical professionals, all of whom receive much higher compensation than their counterparts north of the border.

It has been reported that average income for physicians in the United States is nearly twice that for physicians in Canada. Nurses earn at least 50% more in the US than in Canada. Canadian billing rates for each procedure are set through negotiations between the provincial governments and the physicians' organizations. In the United States, nominally, the free market determines the rates that physicians charge. However, actual compensation to medical professionals in the United States is highly influenced by the discounted rates that publicly funded insurance programs, Medicaid and Medicare, and major health insurance companies are able to negotiate through the exercise of their market power. This mix of public and private pay for healthcare services results in much higher compensation for medical professionals in the United States than in Canada. Some economists have argued that in highly technical matters like health care the free market fails due to the problem of asymmetric information. According to this argument, one group, the doctors, have much greater knowledge about the true value of their services, and, therefore, are at an advantage vis-a-vis healthcare consumers when it comes to setting rates. In Canada, professionals working for the government are also experts in the field and thus, the argument goes, fairer rates are set. This argument does not fully account for the disparity in pay for medical professionals in the two countries. Factors such as higher cost of living in the United States, lower private cost of medical training in Canada and high costs of medical malpractice insurance in the United States come into play.

Higher pay in the United States lures skilled doctors and nurses, trained in Canada partially at the taxpayer's expense, to emigrate to the United States to pursue higher salaries. This partly contributes to Canada having fewer doctors per capita than the United States. In the United States there were 2.8 doctors per 1000 people in 1998 while in Canada only 2.1. New statistics, however, compiled by the Canadian Institute for Health Information (CIHI) show that for the first time since 1969 (the period for which data are available) more physicians have returned to Canada than moved abroad.

Drugs
Another much higher cost in the United States is that of prescription drugs and medicines. The US has explicit laws that prohibit Medicare or Medicaid from negotiating drug prices. Canada has laws that impose medical patents less rigorously. Generic drugs are thus available on Canadian shelves sooner. The Canadian system also takes advantage of centralized buying by the provincial governments that have more market heft and buy in bulk, lowering prices. This typically delays the introduction of new medications into the Canadian market. In addition, price negotiations by Canadian health insurers are based on evaluations of the clinical effectiveness of prescription drugs, allowing the relative prices of therapeutically-similar drugs to be considered in context.

Technology
A major difference between the Canadian and American health spending is on investment in technology. For example, in terms of medical equipment such as MRI scanners per million people, America ranks first in the world with 19.5 per million people; Canada ranked 13th, with 4.6 MRI scanners per million people. In terms of CT scanners per million, America ranked third in the world with 29.5 per million while Canada was ranked 16th, with 10.3 per million.

Litigation
Contrary to popular belief, malpractice lawsuits do not account for a large portion of American healthcare spending. A study in Health Affairs found that the cost of defending and settling malpractice lawsuits in 2001 was approximately $6.5bn, or 0.46% of total health expenditures (reference: http://content.healthaffairs.org/cgi/content/abstract/24/4/903). Malpractice costs in Canada are unknown. Indeed, payouts to Canadian plaintiffs were higher than those to Americans. Average payouts to American plaintiffs were $265,103. Payouts to Canadian plaintiffs averaged $309,417.

Ancillary expenses
There are a number of ancillary costs that are much higher in the United States. One of the most important of these is marketing both by insurance companies and health care providers. These costs, that are very low in Canada, are eventually borne by the consumer. Administrative costs are also higher in the United States - the diversity of insurers and plans means more administrative effort. There are also more players involved in health care, with the patient, insurer, physician, HMO, and hospital all involved in most transactions. Administrative costs in the United States are roughly double what they are in Canada (reference: http://content.nejm.org/cgi/content/abstract/349/8/768).

Quality of health care
A Canadian systematic review concluded that differences in the health care systems of Canada and the United States could not alone explain differences in health care outcomes.

While Canada's health system is cheaper, some have claimed that it compares well with the American one based on the fact that Canadians are, overall, statistically healthier than Americans. Life expectancy in 2005 was about two and a half years lower in the United States than in Canada, with Canadians living to an average of 80.1 years and Americans 77.7 (US Census Bureau). Infant and child mortality rates are also higher in the United States. This may be due in part to the different way agencies compile their statistics, although Canada's healthcare performance is regularly as good as or better than that of the US system in major comprehensive comparisons (WHO study, Johns Hopkins study, independent study).

A great difference is seen between uninsured Americans and Canadians. Overall the uninsured group was much less satisfied, less likely to have seen a doctor, and more likely to have been unable to receive desired care than both Canadians and insured Americans.

Cancer
1997 death rates for various types of cancer can be used as a comparative example of differences between the systems. Below are the numbers of deaths per 100,000 people each year from various forms of cancer. Although the United States spends fifty percent more on each cancer patient, Canada fares slightly better statistically in the overall figures:

Females

Males

Source: WHO Cancer database[cannot verify]

The comparison above involve the overall population rather than cure rates for the types of cancer in each country. Because Americans have higher incidence of most forms of cancer than do Canadians, they have higher rates of mortality regardless of the quality of their cancer treatment. For example, the incidence of breast cancer is higher among Americans than among Canadians (90.7 per 100,000 population among American whites and 79.3 among blacks, in comparison to an incidence of 76.8 among Canadians . This means that American women are more likely to have cancer than are Canadian women.  Yet, as the chart above indicates, the mortality rate of this type of cancer is slightly higher among Canadians than among Americans despite Americans' greater rates of cancer.  A similar phenomenon exists with prostate cancer.  American men are about 40% more likely to develop prostate cancer than are Canadian men, yet the mortality rate is about the same.  Such statistics would seem to indicate that although Americans are more likely to develop various types of cancers, treatment for these cancers is more effective in America than it is in Canada.

Some of the differences shown above may also be related to lifestyle choices, and this is true of all health comparisons between the two countries. For instance, Canada has a slightly higher smoking rate than the United States, while the Americans have a significantly higher rate of obesity (23.1% vs. 29.7%). 

Effect of poverty
Poor health has been linked to poverty. Poverty may be a result of poor health.

Over a quarter of the American poor report chronic health difficulties, a level much higher than in Canada. This can make it far harder to find and hold a job and improve one's financial well being. Better overall health of the poor is thought to encourage social mobility.

Impact on economy
Canada's higher taxes to pay for health care certainly have some negative impact on its economy. There are, however, some benefits as well.

In 2002, automotive companies claimed universal health care system in Canada saved labour costs. In 2004, health care cost General Motors $5.8 billion, and would increase to $7 billion. UAW also claimed the resulted escalating health care premiums reduced workers' bargaining powers. In fact, Canada's universal healthcare has been an incentive for US companies to set up businesses and create jobs in Canada.

Flexibility
In Canada, increasing demands for health care, due to the aging population, must be met by either increasing taxes or reducing other government programs. In the United States, if the government does not act, more of the burden for health care will be taken up by the private sector and individuals.

Canada's recent budget surpluses, however, have allowed a significant injection of new funding to the healthcare system, with the stated goal of reducing waiting times for treatment.

One problem with the U.S. system is known as job lock, in which people become tied to their jobs for fear of losing their health insurance. This reduces the flexibility of the labour market. Legislation such as HIPAA and COBRA has reduced the prevalence of job lock in the US system from the levels found in the 1980s.

Politics of health
In Canada, the right-wing and now defunct Reform Party and its successor, the Conservative Party of Canada toyed with increasing the role of the private sector in the Canadian health care system. Sharp public backlash caused these plans to be quickly shelved.

The Democratic President Bill Clinton attempted a large reform of health care, but the effort collapsed in his first term. The 2000 U.S. election saw prescription drugs become a central issue, but although the program created by George W. Bush increased the relative cost of American health care, it did not fundamentally change the system. In the 2004 U.S. election health care proved to be an important issue to some voters, though not a primary one.

More radical solutions in both countries have come from the sub-national level. In 2000 Massachusetts held a referendum on whether to adopt universal health insurance, the measure losing, but having considerable support. In 2006, Massachusetts adopted a plan that intends to vastly reduce the number of uninsured. It will require everyone to buy insurance, and subsidize the insurance costs for lower income people on a sliding scale. In Canada, it is oil rich Alberta under the conservative government of Ralph Klein that is seen to experiment most with increasing the role of the private sector in health care. These include the introduction of private clinics that are allowed to bill patients for some of the cost of a procedure. Quebec has also recently experimented with private health care under the Liberal government. Not only does Quebec now have the highest number of private clinics which deliver publicly funded care, but Quebec also has whole hospitals and emergency wards that have opted out of the public system.

A recent Canadian court decision has ruled that the Canadian health care system, which outlaws private health insurance, contravened the Quebec Charter of Rights guaranteeing the right to security of the person. In June 2005, the Supreme Court of Canada overturned a Quebec law preventing people from buying private health insurance to pay for medical services available through the publicly funded system.

Consumer driven health care
Republicans in the United States have recently enacted laws to promote consumer driven health care. By that they mean Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. In order for an individual to qualify for tax-deferred accounts they must carry a High Deductible Healthcare Plan (HDHP). The higher deductible shifts to some degree the healthcare administrative responsibility from insurance administrators to the individual consumer. This shift towards a market based system with even greater responsibilities on the individual makes the differences between the U.S. system and Canada's even greater. An American Medical Association Meeting discussed blacklisting patients and their families who have been involved in lawsuits against physicians. Blacklists of patients are known to exist. Health care ratings comparing the U.S. versus Canada put Canada far ahead of the U.S. in all major categories including mortality.