Privatizing health care is not the answer: lessons from the United States
July 25, 2009
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A Canadian perspective on how they have done, as compared to the USA since 1972.
There are strong moves within Canada to make the Canadian health care system more like the US system by partially privatizing it. Those who favour this approach claim that the US system offers more choice and better quality of care and spares the public purse. Some proponents even go so far as to claim that it is more efficient. My purpose here is to disabuse Canadians of these myths by taking a close look at how the US system works and comparing it with the Canadian system.
In 1972 the Yukon Territory became the last jurisdiction in Canada to adopt the Medical Care Act, which set up a system to provide hospital and physician care to all Canadians.1 Before then, the Canadian and US health care systems were similar. Both were partly public, partly private, partly for profit and partly nonprofit. Both also left a great many citizens uninsured. The costs were also about the same — a little over $300 per person in 1970 — as were outcomes. At that time, life expectancy was about a year longer in the United States.2
But with the implementation of Canadian medicare, the 2 systems rapidly began to diverge in all respects. The US system became more and more costly, leaving increasing numbers of Americans — now about 46 million people — uninsured. In 2005, expenditures were twice as high in the US as in Canada — US$6697 per person v. US$3326 in Canada.3 And although Canada insures all its population for necessary doctor and hospital care, the US leaves 15% without any insurance whatsoever.4 Those who are insured often need to pay a substantial fraction of the bill out-of-pocket, and some necessary services may not be covered. In a recent survey, 37% of Americans reported that they went without needed care because of cost, compared with 12% of Canadians.3
Outcomes also now favour Canada. Instead of living a year longer, the life expectancy of Americans is now 2.5 years shorter than that of Canadians.2 Infant mortality rates are higher in the US, as is preventable mortality (death before the age of 75 years from diseases that are amenable to treatment).5,6 Furthermore, contrary to popular belief, people in the US do not receive more health care services. They visit their doctors much less often and spend less time in hospital than Canadians do (Table 1). Per population, there are also fewer nurses and hospital beds in the US, although there are slightly more doctors and many more magnetic resonance imaging (MRI) units.....
.......It is instructive to follow the health care dollar as it makes its way from employers to the doctors and nurses and hospitals that provide medical services. First, private insurers regularly skim off the top a substantial fraction of the premiums (about 15%–25%) for their administrative costs, marketing and profits.9 The remainder is passed along a veritable gauntlet of satellite businesses that have sprung up around the health care industry. These include brokers to cut deals, disease-management and utilization review companies, drug-management companies, legal services, marketing consultants, billing agencies and information management firms. They, too, siphon off some of the premiums, including enough for their administrative costs, marketing and profits. It was conservatively estimated that, in 1999, 31.0% of all health care spending in the US was for overhead, nearly twice the estimated 16.7% in Canada. The overhead for Canada's private insurers that year was 13.2%, compared with only 1.3% for its public system.10
The most popular part of the US health care system is the government-administered system for Americans over the age of 65 — Medicare. This is a single-payer program embedded within the private, market-based system. It is by far the most efficient part of the US system, with overhead costs to government of about 2%.11 It covers virtually everyone over the age of 65, not just some of them. It also covers everyone for the full package of benefits, so it cannot be tailored to avoid high-risk or chronically ill patients. But US Medicare is not perfect, and it has been weakened by the Bush administration. Out-of-pocket costs for Medicare beneficiaries are substantial and growing. Moreover, because Medicare pays for care in a market-based private system, it experiences many of the same inflationary forces that affect the private insurance system, including profit-maximizing hospitals and physicians' groups. In addition, doctors' fees are skewed to reward highly paid specialists for doing as many expensive procedures as possible. As a result, inflation in the Medicare system is almost as high as inflation in the private sector and is similarly unsustainable....
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