Canada Faces Same Cost Pressures as U.S., Despite Its Single-Payer System
Many on the left have assailed the Affordable Care Act as a giveaway to insurance companies and would have preferred legislation that included a government-offered "public option." Of course, what most of these people really wanted was a single payer, government-run system, similar to that of Canada. But as some recent news from our northerly neighbor shows, a single payer system -- despite its many advantages -- would not solve the fundamental problems affecting American healthcare.
Canada, like the U.S. and many other countries, faces two intractable challenges: healthcare technology is racing ahead of the nation's ability to pay for it, and the deep recession has reduced the amount of tax money available for healthcare. As a result, Canada's federal government is mulling whether to cut the statutorily specified growth in its 20 percent contribution to the provincial health budgets; meanwhile, the provinces are seeing healthcare costs approach half of their total spending. If they receive less federal money, they'll either have to cut services or raise taxes.
Now, I'm generally in favor of a budgeted approach to healthcare spending, which helps reduce waste. I also like the Canadian system because it guarantees healthcare to all of its citizens. But clearly, Canadians are not exempt from the technology trend that affects all advanced nations: As more new drugs and treatments are developed and approved for use, doctors feel compelled to use them to provide what they regard as the best patient care. Canadian politicians are afraid to suggest that some of this technology may be unnecessary because they must be accountable to patients (aka voters) at the polls. Sound familiar?
Alexandra Bibbee, a senior economist at the OECD, recently suggested that Canada reform its system to put a brake on health spending. Among her proposals:
- Patient user fees or premiums for Canadian Medicare.
- Capping doctors' incomes but letting them charge the privately insured for extra services
- Letting private hospitals operate alongside public ones with the same funding formulas that public hospitals have
- Having Medicare cover only "essential" drugs.
Now, that rate is pretty mild by our standards: twice the pace of inflation. In contrast, our healthcare costs are rising at 5.7 percent, five times the rate of U.S. inflation. Similarly, healthcare accounted for 10.3 percent of the Canadian GDP in 2008; in our country, it consumed 16.2 percent of GDP that year. So Canada has a long way to go to spend as much as we do on a per capita basis. Nevertheless, Canada is on an unsustainable course that will eventually devour all other kinds of government spending. So it's not so different from us.
One way in which Canada is different is its conservative approach to the adoption of new technology. For example, PET scanners came into widespread use only recently, several years after they were embraced in the U.S. And there are long waiting times for certain kinds of imaging tests because less equipment is available. But even at the slower pace of technology introduction, the sheer multiplicity and expense of what's available is inexorably driving up Canada's healthcare bill.
So what does this mean for us? It means that regardless of whether or not we continue to have a mixed private/public insurance system, there's no substitute for re-engineering our care delivery system and educating the public about what it can and can't have.
Images supplied courtesy of Wikimedia Commons.
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