Comparison of The Health Care Systems in Canada and The United States - Price of Health Care and Administration Overheads

Price of Health Care and Administration Overheads

Health care is one of the most expensive items of both nations’ budgets. In the United States, the various levels of government spend more per capita on health care than levels of government do in Canada. In 2004, Canada government-spending was $2,120 (in US dollars) per person on health care, while the United States government-spending $2,724.

A 1999 report found that after exclusions, administration accounted for 31.0% of health care expenditures in the United States, as compared with 16.7% of health care expenditures in Canada. In looking at the insurance element, in Canada, the provincial single-payer insurance system operated with overheads of 1.3%, comparing favourably with private insurance overheads (13.2%), U.S. private insurance overheads (11.7%) and U.S. Medicare and Medicaid program overheads (3.6% and 6.8% respectively). The report concluded by observing that gap between U.S. and Canadian spending on health care administration had grown to $752 per capita and that a large sum might be saved in the United States if the U.S. implemented a Canadian-style health care system.

However, U.S. government spending covers less than half of all health care costs. Private spending for health care is also far greater in the U.S. than in Canada. In Canada, an average of $917 was spent annually by individuals or private insurance companies for health care, including dental, eye care, and drugs. In the U.S., this sum is $3,372. In 2006, health care consumed 15.3% of U.S. annual GDP. In Canada, only 10% of GDP was spent on health care. This difference is a relatively recent development. In 1971 the nations were much closer, with Canada spending 7.1% of GDP on health while the U.S. spent 7.6%.

Some who advocate against greater government involvement in health care have asserted that the difference in health care costs between the two nations is partially explained by the differences in their demographics. Police-reported drug abuse and violence are more common in the United States than in Canada; both place a burden on the health care system. Illegal immigrants, more prevalent in the U.S. than in Canada, also add a burden to the health care system, as many of them do not carry health insurance and rely on emergency rooms — which are legally required to treat them — as a principal source of care. In Colorado, for example, an estimated 80% of illegal immigrants do not have health insurance.

The mixed system in the United States has become more similar to the Canadian system. In recent decades, managed care has become prevalent in the United States, with some 90% of privately insured Americans belonging to plans with some form of managed care. In managed care, insurance companies control patients' health care to reduce costs, for instance by demanding a second opinion prior to some expensive treatments or by denying coverage for treatments not considered worth their cost.

Administrative costs for health care are also higher in the United States than in Canada.

Through all entities in its public–private system, the US spends more per capita than any other nation in the world, but is the only wealthy industrialized country in the world that lacks some form of universal health care. In March 2010, the US Congress passed regulatory reform of the American health insurance system. However since this legislation is not fundamental health care reform, it is unclear what its effect will be and as the new legislation is implemented in stages, with the last provision in effect in 2018, it will be some years before any empirical evaluation of the full effects on the comparison could be determined.

Health care costs in both countries are rising faster than inflation. As both countries consider changes to their systems, there is debate over whether resources should be added to the public or private sector. Although Canadians and Americans have each looked to the other for ways to improve their respective health care systems, there exists a substantial amount of conflicting information regarding the relative merits of the two systems. In the U.S., Canada's mostly monopsonistic health system is seen by different sides of the ideological spectrum as either a model to be followed or avoided.