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Privatizing health care is not the answer: lessons from the United States

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July 25, 2009 – Comments (6)

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....


 

6 Comments – Post Your Own

#1) On July 25, 2009 at 12:31 PM, whereaminow (20.57) wrote:

When the government changes the rules for government mandated health care programs (Congress forced this "private" system upon us in 1973) that no one in the government uses (Congresspersons have their own market health care plans that far exceed what US citizens get in choice and cost effectiveness), that is a failure of free market health care.  Everybody got that?  Good.

David in Qatar

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#2) On July 25, 2009 at 1:50 PM, hsr0601 (< 20) wrote:

The House leaders reached a deal on Medicare payments: A "Pay for Value" reimbursement system that rewards doctors and hospitals that achieve the best outcomes at the lowest cost.

As a result, The House gained a lot of votes, a lot of people who were withholding support.

The federal Medicare program insures some 44 million elderly and disabled Americans at an annual cost of $450 billion, almost one-fifth of total U.S. health care spending.

Supporters of the agreement say it could save the Medicare System more than $100 billion a year and improve care, that means $1trillian over a decade. (Please visit http://www.kare11.com/news/news_article.aspx?storyid=820455&catid=391 for detailed infos)

The Times in a July 7 editorial argued “As much as 30 percent of all health-care spending in the U.S. -some $700 billion a year- may be wasted on tests and treatments that do not improve the health of the recipients,” Thus the remaining $239 billion over a decade does not matter.

No one can disagree with this best outcome / evidence-based system, and private insurance, too, will be greatly influenced by this change with the focus on value over volume. !

THANK YOU !

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#3) On July 25, 2009 at 2:31 PM, dickseacup (66.91) wrote:

Another Canadian perspective, from "Timely Medical Alternatives," (http://www.timelymedical.ca/), a Canadian organization set up to help the 875,000 Canadians who are on waiting lists get health care in a more timely manner:

From their FAQ (http://www.timelymedical.ca/faq.html):

Doesn't this contribute to a "two-tier" healthcare system?

There is already a multi-tier system in Canada. Workers Compensation Boards, the RCMP, the Indian Affairs Ministry, insurance companies and the Federal Corrections Department regularly pay for their clients/prisoners to receive prompt medical care at private surgical clinics in Canada. Recently, the spouse of a deputy provincial health minister sought our help to leave the queue to get private medical care. In November 2005, the CBC aired a one hour documentary on their program "The Passionate Eye" on which they pointed out the fallacy that Canada still has a one-tier system. Our organization, Timely Medical Alternatives was featured prominently, on that show.

If my doctor has put me onto a waiting list, she must believe that the wait won't affect my health? Mustn't she?

Doctors don't establish waitlists- governments do. The Fraser Institute has reported that "specialists now believe over 90% of waiting times are beyond clinically reasonable times". Ask yourself if it is reasonable for Canadian men in some jurisdictions to wait 9 months for the commencement of treatment for prostate cancer after the initial diagnosis? Is it reasonable for an elderly person with kidney stones to wait 8 weeks to see a urologist? Should a woman diagnosed with breast cancer wait 18 weeks before beginning radiation therapy? Clients of Timely Medical Alternatives can access immediate care for all of the above and, in fact, any medical condition. The sooner treatment begins, the more likely it will be that the patient will have favorable results. That's just common sense and why we say "Can you afford to wait?".

What do Canadian doctors think about Timely Medical Alternatives Inc.?

We get many referrals directly from Canadian Physicians. These doctors place more importance on the timely treatment which their patients will receive on the private system, than they do in "keeping" their patients in the public system. For every referral we receive from a Canadian physician, Timely Medical Alternatives Inc. makes a financial contribution to the Canadian hospital of that doctor's choice.

I have heard that despite the fact that more and more Canadians are opting to use the private option, the wait times in the public system are increasing. Why is that?

Two reasons. As our population ages, the combined efforts of the public and private systems are not able to keep up with the increased demands for medical care. Another reason is simple economics. There is little incentive to draw down wait lists in the public system, if, by causing Canadians to wait ever increasing lengths of time, many citizens will give up waiting and get their needed treatment in the private system. This saves governments money.

I realize that 875,000 is only approximately 2.65% of the total Canadian population. For perspective, if the same percentage of US citizens were waitlisted under Obamacare, that would be roughly 8,138,298 people with an urgent need for health care who would not be receiving it in, as the Canadian doctors seem to think, a timely manner. If the US adopts the Democratic wet-dream of universal health care, a la the Canadian system, where will the Canadians who come to the US now, and the US patients who need care more quickly than Obamacare can provide go to be treated?

If 15% of the US population, or 45,900,000 citizens, are currently not receiving health care, how will the US health care system realistically expand to accomodate this massive increase in patients?

 

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#4) On July 25, 2009 at 4:18 PM, starbucks4ever (97.42) wrote:

"There are strong moves within Canada to make the Canadian health care system more like the US system by partially privatizing it. "

As if anybody would doubt it. I take it for granted that the allure of getting something for nothing, like, say, $30K for a one-night hospital bed plus a thermometer and a sugar pill, is proving as irresistible for Canadian businessmen as for our own domestically-grown types.

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#5) On July 25, 2009 at 4:57 PM, UltraContrarian (31.33) wrote:

"If 15% of the US population, or 45,900,000 citizens, are currently not receiving health care, how will the US health care system realistically expand to accomodate this massive increase in patients?"

You are referring to people who only receive ER care.  If those people were covered for primary and diagnostic care, health problems could be addressed sooner and they would not require as much expensive emergency treatment.

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#6) On July 25, 2009 at 5:09 PM, devoish (98.38) wrote:

Whether privatization would shorten waiting lists by creating more facilities is arguable. What it would certainly do is change who would be waiting. In the US, for example, well-insured patients have a very short wait for a hip replacement, but the 46 million Americans without health insurance might wait for the rest of their lives.

The 2% of Canadians on a wait list is a signifigant improvement over the 15% of Americans (actually 20%) who forgo recommended medical treatment due to cost considerations.

All the TMA does for Canadians is call TMA's recommended hospital in the USA. They choose a "not for profit" probably because "for profit" as we know, costs too much. The Canadians could call us themselves.

The Canadians healthcare reimburses Canadians with a tax refund for any "outside" medical costs exceeding 3% of their income. Effectively covering the Canadians and preventing bankruptcy. Exactly where our system fails those who believe they are insured.

If you go from America to Canada for a treatment, it probably won't be "in" network at great expense to you. In fact here, your insurer does not even allow you to choose which hospital you can go to. So there is good financial reasons that most Americans don't shop around. Our private insurers do not allow it.

You asked the question;

If 15% of the US population, or 45,900,000 citizens, are currently not receiving health care, how will the US health care system realistically expand to accomodate this massive increase in patients?

After the last ten years of a healthcare system dominated by private insurers, funding self serving advertising campaigns, that question is the greatest curse of the private insurers. We have spent twice as much money as any other Nation and there is question whether we have the facilities to serviced our healthcare needs. Pathetic. Although I suppose it is possible that our facilities are under utilized by insurers denying treatments.

875,000 Canadians go on waiting lists. Sounds scarey and horrible right? Good marketing, crummy information. Some on those waiting lists are for less than a week. How many clients did TMA have last year? I found this article;

Overtime, Baker was able to identify sources of high quality, deeply discounted sources of surgery in the U.S. In the last 4 ½ years, thousands of Canadians have gone to the U.S., with the help of Baker’s company, Timely Medical Alternatives, Inc., for cardiac, orthopedic, neuro and general surgeries of all types.
Not tens of thousands, or hundreds of thousands, just thousands. Over 4 and 1/2 years. Lets say ten, no twenty thousand, used TMA services, so desperate were they. That equals .0006% of Canadians, in FOUR years. .00015 annually.

I imagine TMA's overhead costs are held down by the SINGLE PAYER  (I'm sorry? what kind of system pays the bills? HR 676?) healthcare system that pays Canadians to use TMA's services.

So at 50% of our costs they have .00015% of people waiting long enough to seek outside help. We have 20%, you say 15%, dead in the water with no help or hope at all and forgoing treatment entirely.

I suppose at 51% of our costs they could handle it themselves if they couldn't come here.

You have convinced me. Let's skip the Obamacare model entirely with its private insurer's, keep your plan if you like it, and go right to Single Payer HR 676.

Thanks for making such a strong case for the Canadian model. I had no idea they were doing that much better than the USA.

The problem with Canadian medicare is not the system, it is the amount of money put into it. The US problem is exactly the opposite. It is not the money, it is the system.

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