Let’s not get tangled up in America’s red tape
By ANDRÉ PICARD
PUBLIC HEALTH REPORTER
Thursday, June 10, 2004 – Page A21
It is fashionable these days to badmouth public services, and medicare in particular. From pothole repair through to open-heart surgery, it is virtually accepted as gospel that taxpayer-funded services are second-rate, delivered grudgingly by underworked fat cats comfortably ensconced in a bloated bureaucracy.
Bring in some market discipline, the rallying cry goes, and medicare’s woes will disappear: There will be no more wait lists, costs will plummet and services will be delivered with a smile to a society of satiated Methuselahs. Contrast the dream with the findings of two studies published during the past week. The first, a head-to-head comparison of U.S. and Canadian health indicators, found that, despite markedly different delivery systems, health outcomes and satisfaction rates are virtually the same in the two countries.
The second, conducted by researchers at McMaster University, found that the costs of services delivered by for-profit hospitals were 19-per-cent higher than those in not-for-profit facilities. At the same time, the death rate in private, for-profit institutions was about 8-per-cent higher. Sandwiched between these two research papers was the annual compilation of health spending from the Organization for Economic Co-operation and Development that showed the U.S. spends $5,297 (U.S.) per capita on health care, compared to $2,931 per capita in Canada — $2,366 more per person.
So why does Canada’s supposedly stodgily bureaucratic system get so much more bang for the buck than the lean, mean entrepreneurs who control the U.S. free-market health system?
The answer—at least one answer—can be found in a paper published last year in the New England Journal of Medicine, research that got virtually no attention because it was released during the SARS crisis.
The study, by Harvard University professors Steffie Woolhandler and David Himmelstein, concluded that the much-vaunted U.S. health system is choking in red tape.
The authors found that, in 1999, Americans spent $1,059 per capita on health-care administration, compared to $307 per capita for Canadians. Put another way, bureaucracy gobbles up 31 per cent of U.S. health dollars, compared to 17 per cent in Canada.
The authors of the Harvard study said this was due to a number of factors. For example, with Canada’s single-payer system, doctors bill a single provincial insurance plan using a single simple form, and hospitals receive lump-sum payments. In the United States, a hospital can deal with up to 800 insurance plans.
Private insurers, which dominate the U.S. system, have overhead costs averaging 11.7 per cent. That compares to 3.6 per cent for U.S. Medicare, and 1.3 per cent for provincial health plans in Canada. And for-profit institutions must provide a healthy return to investors, so they charge more. They also pay large bonuses to administrators.
Dr. Himmelstein said the stark differences between the U.S. and Canada were driven home during a visit to Toronto General Hospital. He searched long and hard for the billing office—a prominent feature of all U.S. hospitals—before locating two people whose job it is to bill U.S. patients who need treatment while visiting Toronto.
According to the authors, if the U.S. were to adopt Canada’s single-payer system, it would save approximately $286-billion a year in administrative costs ($982 per capita). The thorny problem of 43 million Americans without health insurance—whom it would cost about $69-billion a year to insure—could be eliminated, with money to spare.
