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.

The provinces control their health care costs by limiting the diffusion of technological innovation, primarily through restraints on funding for hospital capital acquisitions. Technologies such as Magnetic Resonance Imaging machines or open heart surgery facilities are less available in Canada compared to the United States. This is true whether measured by the number of facilities offering various technologies or the number of individuals that each facility services.

Because the available resources of hospitals and other providers are not enough to meet patient demand, physicians must ration health care services to remain within their budget limits. Health services are rationed through queuing or waiting lists. Patients are put on waiting lists for hospital space, for certain types of medical procedures, or are literally lined up in the hospital hallways to await care. In effect, the Canadian system requires doctors and hospitals to decide who receives care and who does not.

The Canadian health system spent $1,483 per person on health care in 1987 – more than any other country except the United States, which spent $2,051, mostly through private insurance plans. While there is little demand for private medical plans in Canada, waiting lists for emergency cancer and heart treatment at certain centers are prompting Canadians to go to U.S. hospitals that have facilities available. For Canadians seeking medical care in the U.S., the province of Ontario will reimburse 75% of the medical cost while the patient is left to pay the balance. A private voluntary group, “Healthbeat Windsor” in Ontario, says it has referred 400 Canadians to U.S. hospitals for critical heart operations. In Vancouver, the British Columbia Department of Health sent a group of patients on the waiting list to Seattle for cardiac surgery.

The bottom line is that you can reduce costs by putting a cap on the amount of dollars paid, but that, in turn, reduces the amount of health services available. I don’t believe that you could implement the Canadian health care system in the United States because the citizens of our country are not willing to stand in line or wait until the money is available to address their health care needs. The Canadians are very fortunate to have the United States health care system available to them for such medical procedures because rather than be on a waiting list, they can make the necessary arrangements to obtain the medical services needed at the many available facilities within the United States. The reason the Canadian health care system works is because the more costly U.S. health system is operating and available.

Editor’s note: Fred Haack was the chief executive officer of the Mille Lacs Health System in Onamia.

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