THE BLOG
09/19/2009 05:12 am ET | Updated May 25, 2011

LBJ Created Canada's Superior Health Care System

As the health care establishment appears to be once again able to block any reasonable changes to America's sick health care system, it's important to note that, ironically, the "father" of Canada's universal, single-payer health care system was late President Lyndon B. Johnson. In 1964, his plan caused Canadian Prime Minister Lester Pearson to rush the same health care scheme into existence so that Ottawa was not beaten by the Americans, as was the case in 1934 with Social Security. As things turned out, LBJ compromised with the Republicans and scaled back his plan to a co-payer insurance for senior citizens, or Medicare. So it's hardly surprising that, again, a popular President cannot win out against the nasty tactics and enormous wealth of the medical vested interests.

And yet, today Canada's system is not only as good as America's, but better medically speaking, according to the World Health Organization. Even more dramatic, it is between 30 and 60% cheaper for procedures, medications and hospital stays. Despite compelling evidence, the status quo remains south of the border and American voters/media appear to be unaware of the need for change. There are billions in profits being made at the expense of Americans and the country's economy.

The Canadian Advantage: Five Reasons

1. Doctors' fees. According to health data collected by the Organization for Economic Cooperation and Development, the average income for physicians in the United States in 1996 was nearly twice that for physicians in Canada. (Doctors in Canada are self-employed, bill provinces for fees and are not employees of the governments.)

2. Hospitals are not-for-profit entities in Canada run on behalf of patients and governed by regional health boards that include physicians and other health professionals.

3. Drugs are cheaper in Canada. In the U.S., US$728 per capita is spent each year on drugs, while in Canada it is $509. Patented drug prices in Canada are between 35% and 45% lower than in the United States, according to the OECD. (The price differential for brand-name drugs between the two countries has led Americans to purchase upward of US$1 billion in drugs per year from Canadian pharmacies.)

This is because Canadian provinces buy drugs through a centralized system and get volume discounts. U.S. laws prohibit Medicare and Medicaid from doing so. The Canadian Patented Medicine Prices Review Board also can set a fair and reasonable price on patented products, based on comparisons with similar drugs and prices in similar countries. (Both countries are net importers of medications and industries in both spend 0.1% on research each year.)

4. Administrative costs are dramatically lower in Canada than in the U.S. Administrative costs in the U.S. are double Canada's (according to a study in the New England Journal of Medicine 2003) plus healthcare providers and insurance companies have huge marketing costs.

Here's the study done by the Department of Medicine, Cambridge Hospital and Harvard Medical School, Cambridge, Mass, USA:

In 1999, health administration costs totaled at least US$294.3 billion in the United States, or US$1,059 per capita, as compared with US$307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada.

Canada's national health insurance program had overhead of 1.3 percent; the overhead among Canada's private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent).

Providers' administrative costs were far lower in Canada. Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996.
(Both nations' figures exclude insurance-industry personnel.)

CONCLUSIONS: The gap between U.S. and Canadian spending on health care administration has grown to 752 dollars per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system.

5. Other costs also add to American health care expenditures dramatically: government administrative red tape, requirements for record-keeping, a diversity of accounts receivable insurers and a patchwork quilt of plans and layers of authority to deal with.

Higher payment for doctors has created a brain drain of physicians from Canada to the U.S. but in 2005 this reversed, according to the Canadian Institute for Health Information (CIHI).

Today, unsurprisingly, a medical tourism business in Canada is growing rapidly as Americans go north to take advantage of lower costs. Now that the Americans appear to have blown another chance to fix their health care system, it's time for Canadian physicians and others to ratchet up the industry offering selective services to Americans.

Diane Francis blogs at National Post.