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Reaction to Note on Flaws in the Canadian Healthcare Delivery System

Posted Oct 13 2009 10:03pm

In a recent note, I discussed some flaws in the Canadian healthcare delivery system and how it possibly could be reformed (see: The Fundamental Flaws in the Canadian Healthcare Delivery System ), quoting the work of Nadeem Esmail, an economist from the Fraser Institute. The piece has stimulated two Canadian physician readers to submit comments, which I now elevate to the level of this note:

  • (Dr. EM) [Nadeem Esmail] removed data from some OECD slides to enhance his point: the country with the largest %GDP health spending is the USA -- by far. In 2003, USA= 16%GDP, Canada= 10%. Other than that, the overall message is correct. In particular, Canadian doctors are truly more pessimistic than other doctors, as shown here. His solution is good, rational and should be well accepted by hospital admins, doctors and patients alike. But it will not happen, because Canadian politicians handle health care (35% of all public expenditure) like a sleeping dragon: action only if absolutely necessary. Unlike Obama, we in Canada hope there's no change
  • (Dr. Murray Treloar) As a Canadian doc, I can say that these comments resonate. However, it must be recognized that the Fraser Institute is a conservative (read Republican) 'think tank' and can be relied on for right-leaning analyses. What the US and Canada need is evidence based debate, not ideological ramblings. Neither system is sustainable.

I did state in my first bullet point that Nadeem had stated unequivocally during his presentation that he was only comparing those OECD countries that offer universal health coverage in his comparison slides. No one disputes the fact that the U.S. spends more per capita on healthcare as a percentage of the GDP than the U.S. I also suspect that, on average, U.S. physicians work many more hours per week than the physicians in other countries so that the hourly compensation for some may not actually be that different than their peers. For those U.S. physicians who perform procedures, I am sure that their income dwarfs that of comparable physicians in other countries.

I must admit that I did not know anything about the political orientation of the the Fraser Institute when I posted the note. I did have the distinct impression that Nadeem was not a staunch liberal because of his willingness to criticize Canada's universal health system. However, I think that it will be more productive to discuss healthcare reform from the perspective of incentives rather than political labels. Here are some examples what I consider to be major flaws in the current U.S. healthcare delivery system in terms of incentives:

  • Physicians have an incentive to provide too many procedures because they are rewarded financially on this basis rather than on treatment effectiveness.
  • Healthcare consumers with insurance have an incentive to consume far too many services because they do not pay out-of-pocket for them. They also have few incentives to take better care of themselves.
  • Health insurance executives have an incentive to demand ever-increasing compensation, including lucrative stock options, while minimizing costs by cherry-picking customers and denying claims to existing clients on the basis of preexisting conditions.
  • Health insurance executives have few incentives to simplify their billing procedures in order to lower administrative costs and, in fact, have an incentive to make them more complicated as a basis for denying claims on technicalities.
  • Health system executives have an incentive to take advantage of their non-profit status by allocating only a small portion of their budgets to uncompensated care while simultaneously expanding their facilities to compete with regional competitors.

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