Is Canada the Right Model for a Better U.S. Health Care System?

May 19, 2017
Knowledge@Wharton

For many critics of U.S. health care, the Canadian system of universal health care has long been viewed as an alternative, superior model for the U.S. to follow. Canada’s single-payer system is mostly publicly funded, while the U.S. has a multi-payer, heavily private system. While dissatisfaction with the U.S. health care system is widespread among Americans, Canada’s health care system enjoys high levels of satisfaction among its own population.

Much of the appeal of the Canadian system comes from the fact that it seems to do more for less. Canada provides universal access to health care for its citizens, while nearly one in five non-elderly Americans is uninsured. In Canada, coverage is not tied to your job or dependent on your income; rich and poor are in the same system, and enjoy equal access. Yet last year, Canada spent far less of its GDP on health care than did the U.S. — 10.4% compared with 17.8% in the U.S. — which was the highest percentage of any nation in the world, according to the World Health Organization. For all that, Canada scored better than the U.S. on two commonly cited health outcome measures — infant mortality and life expectancy.

What, if anything, can American policy makers and the public learn from Canada’s success? Can some aspects of the Canadian system be applied to the U.S. at a time when the American public remains deeply divided about whether to replace and/or reform the Affordable Care Act?

‘A Discombobulated, Fragmented System’

Why is the U.S. system so much more expensive? As Dan Polsky, executive director of the University of Pennsylvania’s Leonard Davis Institute of Health Economics, notes, “We have this discombobulated, fragmented system that leads us to have very high administrative costs, and everything is disconnected. You have to go from one system to another when you go from one provider to another. Some health [information] gets lost with the transfer from one provider to the next. And there’s a private health care system that funds you when you are under 65, and when you’re over 65, you get funded by Medicare. And maybe most of your problems occur when you’re on Medicare, so our private health care system doesn’t have a lot of incentive to keep you healthy when you’re over 65, because they’re not on the hook for it.”

“In one sense, what Americans can learn from Canadians is nothing, because we don’t share the same views of society as they do.” –Mark Pauly

Does that mean Americans have much to learn from Canada? Not necessarily. “In one sense, what Americans can learn from Canadians is nothing, because we don’t share the same views of society as they do,” says Mark Pauly, Wharton professor of health care management. “The design of a country’s health care system and the performance of it are very dependent on a specific country’s culture, ethnicity and a whole lot of factors that have nothing to do directly with health care but have everything to do with health outcomes. It’s the old apples and oranges problem. Canada is most similar to us of any other country, so in that sense we have more of a chance of learning some things. But the literal answer to the question, ‘Why don’t we just copy the Canadians?’ is because we can’t. We’re not Canadian and we don’t share the same history or the same social ethos.’”

Polsky agrees that differing social values are the core issue. “At the end of the day, the debate is about what are our values. What is the best way we should structure a system of insuring our public? When you talk with the Canadians, there are a number of problems with their health care system that, for a lot of people in Canada, reflects their values about being in a country that has a system that provides … for all of its citizens. For the most part, they are very much in favor of their health care system. In our country, we have a mix of public and private insurance. Half of our health care is paid through Medicare and Medicaid, which are publicly sponsored health care programs, and the other half is paid through private insurance. What you end up with here is a very mixed view of the values.”

Supporters of universal health care in the U.S. don’t always understand the difference between a ‘single payer’ system and universal health coverage. Explains Polsky: “Universal coverage is [when] everyone has some health insurance. That would be my value; everyone is insured in some way. We could achieve that in this country just by filling in the holes, with a little bit of Medicare, a little bit of Medicaid, a little of employer coverage, and the individual market. [It would be] a crazy, mixed-up system, and at least we’d have everybody covered. A single payer system is what they have in Canada, which is that in each of the provinces, all health care for hospitals and mostly for doctors is paid for through the public insurance system. This is one system that pays each doctor in each hospital.”

Still, “there are some things we can learn” by studying the Canadian system, Pauly argues. “Number one, although in many ways the system looks like ours, the system has a much greater emphasis on primary care and less emphasis on specialist care and hospitalization, and on complex and costly procedures. And that probably contributes a lot to the lower spending [in Canada], because while primary care can be good for you, expensive procedures such as for cancer may add only a few months of life but cost hundreds of thousands of dollars.”

Pauly adds, “Ordinary people in Canada are healthier than in the U.S., but outcomes for cancer and very serious illnesses are less good there. It’s a great place to live as long as you don’t get too sick, as one critic put it.”

Another fact that might dissuade Americans from duplicating the Canadian model, Pauly adds, is that “Canadians have a longer waiting list for things like joint replacement, so if your hips are killing you in Canada, you may wait months for that [surgery] to happen. In the U.S., the orthopedic surgeons are calling you every day, wondering when you are going to come in for your joint replacement procedure. We probably do too many; they probably do too few. But the safety valve for Canada is that they can always come across the border, and have a procedure done here.”’

Why Canada’s System Developed Differently

Given cultural similarities between U.S. and Canadian societies, why did health care in Canada emerge so differently? “It may have something to do with the respective ages of the countries, time of settlement and who settled there,” asserts Michael Decter, a former deputy minister of health for Ontario who was responsible for managing that province’s $18 billion health system, serving its 11 million residents. “When Saskatchewan — one poor province — started the ball rolling in the 1950s by providing its people with hospital insurance, its government said they were going to pay the hospital bills for all of their citizens. And then a decade later, they said they’d pay the physician bills, which was much more contentious. A lot of your northern [U.S.] states were not far off that. Wisconsin, Minnesota were heading that way.”

“At the end of the day, the debate is about what are our values. What is the best way we should structure a system of insuring our public?” –Dan Polsky

The major difference from the United States, adds Decter, is that “the U.S. already had a fairly well developed health insurance industry, and Canada didn’t. So, when Canadian [provincial] governments got into the act in terms of paying for services, they weren’t displacing big, for-profit insurance corporations. They were, at most, displacing some voluntary Blue Cross health organizations. In some provinces, the physicians themselves operated some schemes of pre-paid insurance.”

That doesn’t mean that everyone in Canada is equally delighted with the Canadian system, Decter notes. “In Canada there is a small minority that would like us to go in the U.S. direction. There is litigation around that, because the government, in paying for health services, sort of gave itself a monopoly. A doctor can’t say, ‘I’ll take the government fee for poor people but I’d like to bill a wealthy guy a lot more to do his hip,’ [for example]. If you’re in the government scheme, it’s one price.”

In comparing the health care systems in the U.S., Canada and the U.K., many people “see the National Health Service (NHS) in the U.K. as similar to Canada’s, but we [in Canada] have a lot more similarities to the U.S., actually,” Decter says. “Medicare [in the U.S.], which clicks in at 65, is more comprehensive than Canadian Medicare; it pays for a lot of services that we don’t pay for. Medicare uses more of the model we [use]: It pays providers, but they don’t work for it. The [British] NHS is different, in that it employs a million people, who are actually employees of the NHS. In Canada, we left the hospitals as free-standing…. They get most of their money from the governments, but the governments don’t run them. The governments set policy, but the hospitals have a degree of independence. They decide whom to hire. They negotiate with their own unions, and hire their own medical staffs.”

The Canadian system has its origins in cost-sharing, Decter adds. “Some provinces started to pay their hospitals, and the federal governments said, ‘We want this to be a national plan, and a fair plan, so we’ll pay half of the hospital cost for every province if they provide the insurance.’ And then they did the same with doctors. But it was costing too much, so they capped their payments. And there’s been a whole history of arguing over that. But the dynamic that is now going on with the Affordable Care Act — where you’ve got [state] governors in the act, and there’s a back-and-forth about who should be covered, [and about] where the poverty line should be set — we don’t have that. But we do have the tension between the national government and the provinces over funding.”

Thus, notes Decter, “The provinces would like the national governments to give them more money for health care, and they fight about it. They’re just coming off a 10-year agreement where the federal government said it will increase its contribution by 6% a year. That made some sense in 2004, when it was agreed to. But now, with much slower growth and less inflation, it seemed overly generous, so the federal government has cut that growth to 3% a year, and added some additional money for home care.”

Unnecessary expenses

Despite its relative low costs, the Canadian health care system is not free of wasteful practices. An April 2017 report by the Canadian Institute for Health Information (CIHI) and Choosing Wisely Canada (CWC), a nationwide clinician-led campaign that develops recommendations about tests and procedures, found that up to 30% of tests and procedures in Canada are potentially unnecessary, waste health-system resources and increase wait times for patients in need. Highlights from the report include:

“In Canada there is a small minority that would like us to go in the U.S. direction. There is litigation around that, because the government, in paying for health services, sort of gave itself a monopoly.” –Michael Decter

Building a Single-payer System

Despite such imperfections, there is growing support in the U.S. for instituting a single-payer health care system based on the Canadian model. But it is far from certain that there is enough of a social and political consensus to bring it about. Notes Pauly, “There has been more of a consciousness [lately], and probably consensus on what ought to be some social objectives here [in the U.S.] What I don’t see, though, is a consensus on how to achieve them. [U.S. Senator] Bernie Sanders believes, I guess, that you should have a right to as much health care as you and your doctor agree on, and it should be paid for by millionaires and billionaires. But I don’t think we really have a national consensus on that… The real question is ‘How much health care does an individual person have a right to; and who has the obligation to pay for it? And who should pay for that?’ Those questions are not addressed by Sanders in a way that there would be a consensus on.”

What’s the most practical way of bringing to life Sanders’ dream of a single-payer, national health care system in the U.S.?  Perhaps, argues Pauly, by “letting it happen piecemeal, state by state, just as it happened piecemeal, province by province in Canada. Although there was an overarching federal plan there to get the individual provinces to coordinate and subsidize them, originally it was a provincial initiative. Maybe that’s the way that Senator Sanders ought to go. First, start back home — and see if he can get Vermont to do what he advocates for the rest of the country. And then New Hampshire should be easy and then work across the northern tier. Washington [State] should be a snap, rather than try to persuade the heart of Republican power in the South to go along with this; that’s never going to happen.”

For his part, Polsky argues, “It’s one thing to talk about the values that are consistent with the health system you want; it’s another thing to get there.” Sanders’ plan has resonated with many in terms of the values it embodies, he notes, “but the details of that plan have never been worked out…. And a lot of the challenges are in the details.”