What Canadian Health Care Can Really Learn from Europe and Beyond
Some participants in Canada’s ongoing debate about the organization and financing of health care have argued that additional private funding will improve health care outcomes in Canada. The most common claim is that we should model our financing system on the ones currently used in Europe. However, the idea that changing to the European financing model would solve our health care problems is a vast oversimplification.
There is no such thing as the “European financing model.” Each country in Europe has its own unique health care system, which evolved on a particular historical path due to the institutions, interests and needs specific to that country. In addition, every country, both in Europe and elsewhere, faces its own health care policy challenges. No country has developed a perfect way to finance, organize and deliver health care.
While Canadian health care policies should be informed by successful policy ideas and programs from around the world, none of the policies worth emulating require a shift toward private financing. In fact, many of the most high-performing European health care systems have substantially more public funding than Canada.i Below, we briefly review several health care systems from around the world and consider which features Canada should study more closely and which features we would be wise to ignore.
Overview - Most of Australia’s health care is funded through taxation, much like Canada. However, unlike Canada, Australia currently uses a two-tier model of health care, with a large portion of the population purchasing additional and duplicative coverage through private insurance, despite public coverage available for all. Individuals purchase private insurance to get care more quickly and with more add-ons than are available through the public system.ii The government encourages the purchase of private insurance by subsidizing premiums.iii Another important distinction between Australia and Canada is that in Australia the federal government uses public funds to subsidize pharmaceuticals.
What We Can Learn - The government has had to spend billions of dollars supporting the private health insurance industry.iv Waiting lists remain long for publicly funded patients, especially in areas where more private care is available.v Private hospitals generally treat the healthier, more profitable patients—a typical feature of two-tier systems often referred to as “cream skimming.”
In a recent report on public hospitals, the Australian Medical Association raised serious concerns about equity. They determined that after years of two-tiered medicine, the public hospitals “are in bad shape and are desperately in need of urgent recurrent and capital funding increases.”vi And after a fact finding trip to Australia, two prominent Canadian hospital administrators came to the following conclusion:
“We believe both Australia and New Zealand expanded their original small private hospital system as a quick fix, political solution but failed to appreciate the potential for this new system to negatively impact the future sustainability of their public hospital system.”vii
In contrast, Australia’s current pharmaceuticals plan offers a positive lesson for Canada. Australia grants citizens equitable access to drugs through subsidized government purchases and a national plan. Most individuals pay a co-payment of approximately AU$30 per prescription, but the cost is much lower for concessional card holders (the elderly and the poor). There are also patient/family limits on out-of-pocket pharmaceutical expenditure. After reaching a specific amount, most individuals pay for further prescriptions at the concessional co-payment rate, while concessional cardholders receive all further prescriptions free.viii Australia also uses reference-based pricing more widely than Canada. Modeling Australia’s approach to pharmaceuticals could help Canada have more buying power and contain drug costs, one of the main reasons for the increasing cost of health care.
Overview – Most health care in Germany is funded through social insurance—employees and employers pay into non-profit ‘sickness funds’. Because contribution rates do not depend on an individual’s risk of needing health care, the system functions more like Canada’s public insurance system than a private insurance model. Only the wealthiest Germans are permitted to purchase private insurance, and if they do they cannot subsequently revert to the sickness funds. Currently, a small number of citizens can choose to have no health coverage at all, but this option is being phased out by 2009, at which point Germany will have total universal coverage.
What we can learn - There is evidence from Germany, as well as from other European countries with similar systems, that preferential treatment for those with private insurance creates inequity.ix This makes sense, because in order to be more attractive than the public options, commercial insurers must provide care options that appear superior. According to the OECD, private health insurance members are both healthier and wealthier on average than social insurance members, and this leads to less efficient risk pooling.x These inefficiencies eventually increase overall societal costs.
Like Australia, Germany has more equitable coverage for drugs, and it also offers much better eye care through its public financing than is currently offered by Canadian provinces.
Overview – France has universal coverage, funded mostly through social insurance. Social insurance contributions come from employers, general tax revenues and employees. Patients are charged copayments on most visits, although these are reimbursed either through complementary private insurance or via a government-subsidized scheme for those with lower incomes.
What we can learn – France is often considered to have one the best health care systems in the world. However, largely because of co-payments that must be paid up front, many studies have shown access to health care in France is inequitable – not all citizens are getting the benefits of its successes.xi Also, for many years France’s social insurance funds accrued large deficits, although more recently the financial situations of the funds have improved.
Since 1990, France has shifted its source of health care financing from employee contributions to taxes. In 1990, employee contributions accounted for 32.2% of financing; by 2000, the number had dropped to 3.4%. In addition, the government has begun to play a larger role in influencing health care delivery.xii Though the financing methods are still quite different, the fact that France has been moving closer to the Canadian funding model over the last 18 years while reducing its deficit suggests that our model of financing is worth keeping and helps keep costs more manageable.
France also has many more physicians than does Canada—3.4 per 1000 compared to 2.1 per 1000.xiii One reason why France can afford more physicians is that doctors are paid less in France than in Canada. For a number of important reasons, including the proximity of the United States, reducing wages in Canada would likely not lead to improved physician supply. While increasing medical school enrolment in Canada is helping to alleviate the physician shortage, it is clear that we must achieve and maintain a higher physician-to-population ratio. This is likely to prove more expensive in Canada than in Europe.
Overview – Japan offers its citizens a public health insurance system with two methods of payment. Corporate employees pay through employer-based insurance, while the National Health Insurance plan offers coverage for self-employed individuals and students. The gatekeeper model of using primary care physicians does not exist in Japan. Patients do not need to make appointments and can see any specialist at any time. In Japan, physician fees are strictly regulated by the national Medical Fee Schedule.
What We Can Learn – Because Japan has no gatekeepers, it probably spends too much on unnecessary treatments and unnecessary tests. This suggests that Canada’s current model, where family doctors perform a gate keeping function, is wise. It limits the overuse of specialists and prevents the system from wasting money on unnecessarily expensive care.
Despite the lack of gatekeepers, Japan has very low cost health insurance due to strict price controls. But fewer limitations on fee-for-service care than in Canada have probably led to excessive testing and prescribing by physicians to make additional income.xiv Historically, Japanese physicians have also been able to increase their incomes by dispensing medications, and this may be one reason why the Japanese are among the highest users of prescription drugs in the world.
Overview – Singapore has a health care model that emphasizes individual responsibility. Citizens pay into Medisave, a compulsory savings account administered by the government. Every person is required to put 6-8% of their income into these medical savings accounts, which they then use to pay for some but not all medical expenses. Individuals are also encouraged to purchase insurance from the government’s MediShield program, which offers citizens coverage for catastrophic illness.
What We Can Learn – Singapore’s health care financing arrangements have been closely studied because of the extensive use of medical savings accounts (MSAs) and because of its relatively low health care costs. Medical savings accounts have also become increasingly popular in the United States, particularly among individuals who believe the best way to contain health care costs is by enhancing “consumer choice.”
Although MSAs do meet the needs of young, affluent and healthy people who need little care in the present, they are ineffective for everyone else, especially the poor, the elderly and the sick.xv Comprehensive data which would enable one to adequately assess the effects of MSAs in Singapore on equity, efficiency and quality are unavailable. However, most experts believe that the financing arrangements function only because the government contains costs by limiting the provision of health care. For example, Singapore has strongly restricted access to new technologies and has strictly limited the percentage of specialists allowed in the overall physician workforce.xvi
Overview - Sweden offers universal coverage to its citizens, funded through local and federal taxation. Local governments have considerable freedom to determine the best way to deliver health services to their populations. Sweden allows supplementary private health insurance for faster access to care, but only about 2.5% of the population takes advantage of this.xvii Although residents pay fees for all visits to doctors in the public system, these co-payments are very small (usually a few dollars per visit) and annual caps are low (about $15 dollars for doctor visits and $30 for medications).
What We Can Learn – Despite the opportunity to use private health care insurance and providers, most Swedes prefer to use the public system. Attempts at privatization in some of the local counties have led to resistance.
Sweden has been stressing integrated care in its health care system. This involves a variety of care providers, such as local hospitals, health centers, and social services, which coordinate their services in order to meet patients’ needs.xviii Canada has been working toward this model recently as well, but we can and should do more. From a practical standpoint, public health care makes instituting successful integrated care much easier than disjointed and competitive commercialized care.
In areas where Sweden has implemented activity-based funding, payments fall once a specified volume of activity has been reached. This limits a hospital’s ability to unnecessarily increase activity just to increase its revenues.xix If Canada should increase its activity-based funding, a similar policy could be considered.
Overview – The National Health System is funded almost entirely through taxation. Almost all services are free at the point of use. Prescription drugs are also covered, without co-payments for most residents. Residents may also purchase private insurance, which can be used to expedite care at private hospitals.
What We Can Learn – Primary care doctors in the United Kingdom are much more likely than in Canada to work in teams. Moreover, 89% of medical records used by primary care doctors in the UK are electronic. In Canada, the comparable figure is 23%. Electronic medical records can help limit duplication, over prescribing, and make overall patient management easier.xx A publicly funded but independent agency, the National Institute for Health and Clinical Excellence, was established almost 10 years ago to provide national guidance on promoting good health and preventing and treating ill health.
This guidance has been used to establish standards, monitor progress and reduce inequities in care. Increased public funding and the establishment of national wait time targets, combined with clear lines of accountability and incentives, have also led to sharp reductions in wait times for all diagnostic tests, outpatient specialist visits and elective surgery. Though provinces like Ontario have been very successful in reducing wait times in select priority areasxxi, we may find more success if provincial governments were to review the British example for more opportunities to excel.
Canada should also consider following the British example when it comes to paying for drugs and influencing physician prescribing. Pharmaceutical spending in the NHS grew at 1.7 per cent last year, compared with 7.2 per cent in Canada.
Overview – Health care in the United States is funded mainly through tax revenue, private insurance and out-of-pocket payments. Further complicating this mix is the extensive use of tax incentives. Private insurance is prohibitively expensive if purchased individually, so it is available primarily through employment. Publicly funded health care is available for people who are 65 and over and for those who are very poor, along with some children, people with disabilities and pregnant women. The U.S. currently spends more on health care per capita and as a portion of GDP than any other country in the world, and is the only industrialized nation where a substantial portion of the population lacks health insurance.
What We Can Learn – Though it may be surprising, we can learn several positive things from the U.S. health care system. Medicare, the publicly funded program for the elderly, illustrates clearly how administrative costs can be reduced with publicly-financed health care. A study revealed administration costs for traditional fee-for-service U.S. Medicare were 3.5% of total costs, while for commercial carriers, administration was 19.9% of costs.xxii
The Veterans Health Administration in the U.S. offers compelling evidence of the success of publicly funded health care within the most corporate health care system in the world. Once thought of as an example of bloated bureaucracy, the VA has turned itself around in the last fifteen years by looking for solutions outside the competitive market approach. Its outcomes have improved such that it is outperforming the private sector in several areas, including patient satisfaction.xxiii These results have come from a central health administration that emphasizes preventative primary care, has a successful national electronic patient record system and offers veterans an affordable, evidence-based prescription plan.xxiv
Our around-the-world tour illustrates the unique features of several health care systems, and explains that private funding does not lead to improved quality, equity or efficiency internationally. It is important to point out that no nation has achieved equity in health care, let alone equity in health. All countries should be working to improve equity as well as quality and efficiency in the health care sector. Canadian health care could be improved if we spent more time and energy studying some of the successful innovations in promoting access and efficiency from other countries and from within our provinces. These innovations can and should be incorporated within Canadian Medicare. We currently waste too much energy debating commercial solutions. Doctors should know better than to continue to debate solutions unsupported by evidence. We can continue to improve on a good health care system; we just need to prescribe the right solutions to the challenges that face us.
i OECD Data 2008
ii Dhalla, Irfan. “Private Health Insurance: An International Overview and Considerations for Canada.” Healthcare Quarterly, Vol. 10, No.4, 2007
iii Healy, Judith et al. “Australia Health System Review.” Health Systems in Transition, Vol. 8, No. 5, 2006
iv Duckett, Stephen J. "Living in the Parallell Universe in Australia: Public Medicare and Private Hospitals." CMAJ, pp. 173-180, 2005
v Duckett 2005
vi Australian Medical Association. AMA Public Hospital Report Card 2007. .
vii Murray Martin and Cliff Nordal. "A Visit Down Under: Our Journey to Improve Canada's Healthcare System." Healthcare Quarterly, Vol. 11, No.3, pp.28-36, 2008
viii Healy 2005
ix Gress, Stefan. "Private Health Insurance in Germany: Consequences of a Dual System." Healthcare Policy, Vol.3 No. 2, pp.29-37; 2007
x Organization for Economic Co-operation and Development. “Economic Survey of Germany 2008.”
xi Dhalla 2007
xii Sandier, Simone et al. “France Health System Review.” Health Systems in Transition. 2004
xiii OECD Data 2008
xiv Oliver, Adam J. “Health Economic Evaluation in Japan: A Case Study of One Aspect of Health Technology Assessment. Health Policy, 63 (2), pp. 197-204, 2003
xv Joseph Bryne and Thomas Rathwell. “Medical Savings Accounts and the Canada Health Act: Complimentary or Contradictory.” Health Policy, 72, pp.367 -379, 2005
xvi Barr, Michael. “Medical Savings Accounts in Singapore: A Critical Inquiry.” Journal of Health Politics, Policy and Law, Vol. 26, No. 4, 2004 –
xvii Anell, Anders. “The Health System in Sweden.” Eurohealth, Vol. 14, No.1, pp 10-11, 2008
xviii Swedish Institute. “Swedish Healthcare.” 2007
xix Anders 2008
xx Anders 2008
xxi Canadian Institute for Health Information. “Surgical Volume Trends, 2008 - Within and Beyond Wait Time Priority Areas.” 2008
xxii Woolhandler, Steffie et al. “Costs of Health Care Administration in the United States and Canada.” New England Journal of Medicine, pp.768-75, 2003
xxiii Ibrahim, Said. “The Veterans Health Administration: A Domestic Model for a National Health Care System?” American Journal of Public Health, Vol. 97, No.12, 2007
xxiv Ibrahim 2007
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