comparing the US and Canadian healthcare systems

The health care system in the United States is often compared with that of other countries, and the one that comes up the most frequently in Canada. The Canadian system has better outcomes in general than the American system, and is completely different in terms of structure. This paper will examine the key areas where the systems differ, and seek to extrapolate what that means.

At its heart, the US system relies on market forces for much of its activity. Health care is providers are usually paid by insurance companies (or the government, which will be discussed in a moment). The insurance market is generally a free market, where insurers compete for customers the same way that insurers in other fields compete for customers. Employers will often pay the cost of coverage under an employer plan for workers, but there are many types of jobs where this is not the case.

The Canadian system is a single-payer system. Each province runs its own health care system, with some funding from the federal government but the rest of the funding from provincial budgets. The federal government provides the legal framework for operating health care and sets minimum standards. In most provinces, health care costs come from general revenues; there is no separate insurance. Health care is provided to all residents, regardless of cost, and generally covers most things. There are some gaps in drug coverage, for example the government plan might mandate the use of generics, but a private insurance market exists to cover these costs, and most employers pay for this insurance for their employees.

In the US, the closest thing to the Canadian system is Medicare, for those over the age of 65. For those under 65, there is really no equivalent. Medicaid provides health care coverage for those too poor to otherwise afford it, but each state sets its own level for this coverage and many states set this level incredibly low. A third system in the US is for veterans, and this system runs parallel, often with its own health care facilities that are entirely government run and not part of the free market system.

Canadians enjoy better health outcomes than Americans. Krell (2017) notes that this is not entirely about health care, but about lifestyle, as Canada has much lower rates of obesity, smoking and higher rates of exercise than Americans. However, Krell also examined a study of patients with cystic fibrosis. He notes "median survival in both countries increased…but survival in Canada increased a lot more," but he noted that Canadians fared only slightly better than Americans with Medicare or Medicaid, but 77% better than Americans with no insurance. The difference in outcomes one can extrapolate, is not from quality of care differences but from access to care differences. Other outcomes where the Canadian system performs better are in cost – at 10% of GDP compared with 16% in the US, infant mortality and life expectancy, but studies generally attribute these to lifestyle factors just like Krell did (Magee, 2017).

The key structural differences between the systems are that the US has a convoluted structure with a lot of free market influence; Canada has a relatively simple structure with single payer and minimal free market influence.

What does this mean in the US? It means a few things. The profit motive is cited for a high rate of innovation, but it also means that some of health care expenditure goes to profits – shareholders – rather than to care. While some would argue that the profit motive means that firms will be efficient, that has proven incorrect, for a couple of reasons. The first reason is simple – the multiple different payers, insurance companies, providers – it's very complex and that complexity limits the ability to do things at scale. The second is that low costs (efficiency) only matter when the higher has bargaining power. The classic Porter's Five Forces model shows us that a health care customer has no bargaining power: they don't know anything about health care, or what it costs, and because they are motivated by ill health they are in a poor position to shop around, even if doing so was possible, which is often isn't. If a can of beans is cheaper at Walmart, you'll buy it at Walmart. But who shops around for bargains on open heart surgery?

The Canadian system is simple, and fewer players are in it for profit. Provincial systems can scale a bit better, and administration is simpler. Moreover, removing profits helps Canada have a lower cost of health care delivery as a percentage of GDP. For pharmaceuticals, the federal government sets the prices and bargains with the drug companies – there is no provider in the US with that kind of bargaining power (Khazan, 2014). While the Affordable Care Act, which sought to bring in some cost controls, comes nowhere near what Canada has for actively bringing down costs (Maioni, 2013), meaning that the cost of health care is escalating faster in the US than in Canada.

One of the other manifestations of this centralized approach to health care is a far greater emphasis on prevention. The government knows that it is on the hook for health care costs, and thus takes a much more assertive approach to prevention. The ACA was the first attempt at bringing preventative outlooks to US health care. Remember that accidents, homicides, smoking and obesity are all key factors in the US having worse health care outcomes. Prevention programs in Canada help make for a healthier overall population (Magee, 2017). The US, because universal care does not start until age 65, most people do not equate prevention with their taxes – yet they should.

It is worth noting that health care in a sense reflects differences in the cultures of these two countries, and that to change the US system would require some significant socio-cultural shifts in how people view the role of government (Wharton, 2017). So in that sense, changing the culture around health care is a lot more difficult than anything else. People genuinely do not see the link between poor health behaviors and their cost of health care like they do in Canada, so there is more of a societal approach of individualism. If someone smokes, you don't pay their health care, so the thinking goes. But even people with poor habits can be quite against single payer, because of the way that the debate is framed in the US.

Setting aside the political, cultural dimensions, structurally what would be required is an extension of Medicare. Basically, Medicare is single payer, centrally-run, and it's quite popular. The US could not pay for Medicare for all without raising taxes, and it would likely want to streamline delivery, but in essence setting up single payer is not that hard, because it would be an extension of an existing system.

Delivery is a different matter, however. The current system has different providers that cater to different payers. While many providers would certainly handle the change quickly, some are financially dependent on private payers, or insurance payers, and don't really make money on Medicare. These companies would struggle with a Medicare-only system at current rates. Any for-profit provider would essentially have to convert to being a non-profit provider, and that is where it gets tricky – a lot of equity would be lost if that were to be the case. In Canada, hospitals are run by the government as the system is vertically-integrated. To do this in the US would require nationalizing a lot of companies in the industry, at tremendous expense.

There would also be a need to replace funding for innovation that currently is in the private sector, as profits often pay for this. Government would need to step in and make sure that innovation was still profitable, that there were ways to make sure that the innovation pipeline doesn't slow down. Germany might be a better model than Canada for this, actually.

The federal government would have to become involved with things like setting minimum standards, the way the Canadian government does, to ensure that each state meets its needs. To run the entire system at the federal level is an option, but requires an entire infrastructure oversight that might not yet exist. Different states can be involved, but where in Canada there is a general consistency to health care delivery because of generally similar cultures in the provinces on the matter of health care, the US has some states that are very small government, free enterprise, and some that are quite a bit more in line with socialized medicine.

In essence, it would be quite difficult to move towards a Canadian model. While such a model would be popular, there would be a lot of stakeholders of the current system that would struggle with the changes, and that would create a certain amount of chaos, and friction, in health care delivery in particular. It might be worth considering, but the change would probably need to take place over a fairly long period of time to allow for the different stakeholders to make adjustments, and to ensure that the system was not thrown into chaos. As long as there was certainty with respect to the timelines of implementation – uncertainty like we see now where healthcare has become a political football, is bad for everybody.

References

Khazan, O. (2014) What if America had Canada's healthcare system? The Atlantic Retrieved November 5, 2017 from https://www.theatlantic.com/health/archive/2014/10/what-if-america-had-canadas-healthcare-system/381662/

Krell, K. (2017). Canadian vs US health care. PNHP. Retrieved November 5, 2017 from http://www.pnhp.org/news/2017/may/canadian-vs-us-health-care

Magee, M. (2017) Canada vs US health – report card. Health Commentary.org. Retrieved November 5, 2017 from http://www.healthcommentary.org/2017/02/28/canada-vs-u-s-health-report-card/

Maioni, A. (2013) Obamacare vs Canada: Five key differences. Globe and Mail. Retrieved November 5, 2017 from https://beta.theglobeandmail.com/globe-debate/obamacare-vs-canada-five-key-differences/article14657740/

Wharton (2017). Is Canada the right model for a better US health care system? Knowledge @ Wharton. Retrieved November 5, 2017 from http://knowledge.wharton.upenn.edu/article/lessons-can-u-s-learn-canadian-health-care-system/