The past month I have had a number of conversations about the cost of health care and usually there is some comment made about the Canadian health system and how it is less costly and better than what we have in the state.

The Canadian health care system was established in 1971. It provides its citizens with universal access to an extensive package of medical services through a health plan network of the 10 Canadian provinces, which are similar to our states. Each Canadian province is required to create and administer a public health care plan that meets the federal government’s basic guidelines. Canadians are free to choose their own physicians and hospital and generally do not pay for health care at the time of delivery. Rather, the health care system is financed through income and sales tax imposed by both the federal and provincial governments. The provincial government pays providers directly for all covered physician and hospital services. Payments to physicians are made on a fee for service basis, but the fee schedule is set on a per visit rate, regardless of the physician’s time and effort involved. Hospitals are also paid directly by the provincial health plan for the services they provide. Based on the number and type of patients the hospital provided services to the previous year, adjusting for changes in population, the government establishes the amount of money each hospital will receive in its capped annual budget. Hospitals that spend less than their allocated amount in a year do not keep the excess; it is subtracted from the next year’s budget allocation. Hospitals that spend more than their budget allocation in a year in general must absorb the loss.

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