Much to learn from our health care
If Obama looked at our successes and failures, he could avoid making the same mistakes
Jul 19, 2009 04:30 AM
Tom Campbell
As President Barack Obama drafts his health-care plan, he could profit from reviewing the successes and shortcomings of the Canadian system that has operated successfully for more than 40 years. Canada spends more than a third less per capita on health than the United States and still covers everyone, whereas the U.S. system leaves 46 million people without insurance.
Since our health statistics are markedly better, average Americans would be healthier and live longer if they lived in Canada. Here, doctors do not have to waste time seeking insurance approvals. Medical need is the only requirement and pre-existing conditions don't matter. The reduction in the bloated overheads and bureaucracy among insurance companies and government is one of the secrets to our lower costs. If the U.S. were to copy this, it could save $1 trillion a year and cover everyone. The lower costs would also help make employers more competitive.
In our system, wait times have been the largest complaint but some progress is being made. We do have a good referral system, which means that urgent cases mostly get treated in a timely fashion, hence our excellent health statistics.
The Canadian health plan remains our most popular government program. However, if we could start over, we could transform a very good system into a great one. Our main obstacle to reform is the very success of the system to date. Politicians admit privately that reforms are needed but they hesitate to speak out. This does not make for thoughtful debate.
Most problems stem from one cause. From the beginning, we ignored advice and made taxes the single source of funding. But there never are sufficient revenues for an open-ended system. This is why we struggle with scarcity of staff and equipment. While the U.S. probably spends too much on health care, Canada needs to spend more. We have to pay the price if we want a first-class system.
Our system, while very good, is due for an upgrade. But it is not realistic to expect Canadian governments to increase their share. Health-care costs have been climbing to the point where they are crowding out other essentials such as education and welfare, which are also important determinants of health and happiness. Increasing taxes is not recommended as Canadians are already overtaxed. If we want our economy to thrive so we can afford these services, we have to be sensitive to these issues.
When the government is the only payer, it rules out market signals that improve service and efficiency. We provide free coverage for minor services so we don't always have enough resources for timely major services. A more sensible system, while excluding no one, would include co-payments for front-end costs up to a reasonable maximum, depending on the patient's ability to pay.
Only an adequately funded universal health plan can protect all of us from major and catastrophic occurrences. But there will never be adequate funding if we continue to rely solely on government to provide for every minor expense.
Co-payments based on income would introduce a new source of funding to remedy this imbalance. It would encourage improved service rather than rationing. It would offer incentives for patients and providers to do the right thing. The more affluent would pay modest co-payments so the system could provide first-class service for all, rich and poor alike. This proposal would set the top co-payment at $2,500 a year for those earning more than $100,000, tapering to zero for those with incomes less than $25,000. In comparison, U.S. private premiums can be $15,000 a year plus co-payments.
Existing levels of tax funding should remain as a floor upon which the system can be upgraded. Funds should be distributed the same way as university funding through an impartial commission. Government's role would then be to set standards, which it can do well, rather than to micromanage, where it is not so good. New revenue based on service provided would create an incentive for hospitals, which now receive global budgets, to provide more timely service rather than rationing it through wait times.
New sources of funding would empower Adam Smith's concept of the invisible hand that matches services with resources. Waiting lists would be reduced as hospitals could use their facilities more efficiently. Surgeons, who now complain of lack of operating room time, could treat more people. Additional funding could make possible a major drug plan and keep pace with best equipment and practices. Surveys have shown that the public, while supporting our system, is aware that it needs upgrading.
These changes would make our public system more efficient and faster to respond. However, private health-care providers, unlike now, should be permitted to compete. Restrictions now placed on the ability of citizens voluntarily to access private care are a violation of our civil rights.
The United States has an opportunity to make a fresh start. While the Canadian system, if applied to the U.S. and pro-rated for the larger economy, would save it a $1 trillion a year and cover its whole population, the U.S. reforms now being considered could cost an additional $1 trillion over the next 10 years. These higher costs will represent an enormous additional burden on employers and taxpayers.
Obama's expressed hope that his health-care plan can be budget neutral will, in all probability, prove illusory. In the current unprecedented climate of spending and deficits, Americans would be wise to consider the economies that are available in a public system similar to Canada's. While America's ultimate system may end up quite different from ours, it would nevertheless profit from thinking carefully about what works in our system and what needs improving.
Tom Campbell is a former deputy minister of health and deputy minister of treasury and economics for Ontario.
If Obama looked at our successes and failures, he could avoid making the same mistakes
Jul 19, 2009 04:30 AM
Tom Campbell
As President Barack Obama drafts his health-care plan, he could profit from reviewing the successes and shortcomings of the Canadian system that has operated successfully for more than 40 years. Canada spends more than a third less per capita on health than the United States and still covers everyone, whereas the U.S. system leaves 46 million people without insurance.
Since our health statistics are markedly better, average Americans would be healthier and live longer if they lived in Canada. Here, doctors do not have to waste time seeking insurance approvals. Medical need is the only requirement and pre-existing conditions don't matter. The reduction in the bloated overheads and bureaucracy among insurance companies and government is one of the secrets to our lower costs. If the U.S. were to copy this, it could save $1 trillion a year and cover everyone. The lower costs would also help make employers more competitive.
In our system, wait times have been the largest complaint but some progress is being made. We do have a good referral system, which means that urgent cases mostly get treated in a timely fashion, hence our excellent health statistics.
The Canadian health plan remains our most popular government program. However, if we could start over, we could transform a very good system into a great one. Our main obstacle to reform is the very success of the system to date. Politicians admit privately that reforms are needed but they hesitate to speak out. This does not make for thoughtful debate.
Most problems stem from one cause. From the beginning, we ignored advice and made taxes the single source of funding. But there never are sufficient revenues for an open-ended system. This is why we struggle with scarcity of staff and equipment. While the U.S. probably spends too much on health care, Canada needs to spend more. We have to pay the price if we want a first-class system.
Our system, while very good, is due for an upgrade. But it is not realistic to expect Canadian governments to increase their share. Health-care costs have been climbing to the point where they are crowding out other essentials such as education and welfare, which are also important determinants of health and happiness. Increasing taxes is not recommended as Canadians are already overtaxed. If we want our economy to thrive so we can afford these services, we have to be sensitive to these issues.
When the government is the only payer, it rules out market signals that improve service and efficiency. We provide free coverage for minor services so we don't always have enough resources for timely major services. A more sensible system, while excluding no one, would include co-payments for front-end costs up to a reasonable maximum, depending on the patient's ability to pay.
Only an adequately funded universal health plan can protect all of us from major and catastrophic occurrences. But there will never be adequate funding if we continue to rely solely on government to provide for every minor expense.
Co-payments based on income would introduce a new source of funding to remedy this imbalance. It would encourage improved service rather than rationing. It would offer incentives for patients and providers to do the right thing. The more affluent would pay modest co-payments so the system could provide first-class service for all, rich and poor alike. This proposal would set the top co-payment at $2,500 a year for those earning more than $100,000, tapering to zero for those with incomes less than $25,000. In comparison, U.S. private premiums can be $15,000 a year plus co-payments.
Existing levels of tax funding should remain as a floor upon which the system can be upgraded. Funds should be distributed the same way as university funding through an impartial commission. Government's role would then be to set standards, which it can do well, rather than to micromanage, where it is not so good. New revenue based on service provided would create an incentive for hospitals, which now receive global budgets, to provide more timely service rather than rationing it through wait times.
New sources of funding would empower Adam Smith's concept of the invisible hand that matches services with resources. Waiting lists would be reduced as hospitals could use their facilities more efficiently. Surgeons, who now complain of lack of operating room time, could treat more people. Additional funding could make possible a major drug plan and keep pace with best equipment and practices. Surveys have shown that the public, while supporting our system, is aware that it needs upgrading.
These changes would make our public system more efficient and faster to respond. However, private health-care providers, unlike now, should be permitted to compete. Restrictions now placed on the ability of citizens voluntarily to access private care are a violation of our civil rights.
The United States has an opportunity to make a fresh start. While the Canadian system, if applied to the U.S. and pro-rated for the larger economy, would save it a $1 trillion a year and cover its whole population, the U.S. reforms now being considered could cost an additional $1 trillion over the next 10 years. These higher costs will represent an enormous additional burden on employers and taxpayers.
Obama's expressed hope that his health-care plan can be budget neutral will, in all probability, prove illusory. In the current unprecedented climate of spending and deficits, Americans would be wise to consider the economies that are available in a public system similar to Canada's. While America's ultimate system may end up quite different from ours, it would nevertheless profit from thinking carefully about what works in our system and what needs improving.
Tom Campbell is a former deputy minister of health and deputy minister of treasury and economics for Ontario.
