Health Systems: Why can’t we be less like the US and more like Denmark?

Compared to the United States, Canada’s health care system appears to be the model of efficiency. The United States continues to be an outlier when it comes to health care. Americans spend a greater percentage of their overall economy on health care than in any other United Nations member state – except for East Timor. And yet many of their key outcome indicators are well below countries that spend far less.

According to international OECD data (Organization for Economic Cooperation and Development), in 2008 Canada spent $4,079 (US) per capita on both private and public health care. The US spent $7,538 (US).

What we often forget in these comparisons is about a third of our health care system is very much like the United States. Most of us do not pull out our OHIP card when we visit the dentist or the pharmacy. When Dalton McGuinty was first elected in 2004, he established a dedicated health care tax that brings in about $3 billion per year. He also delisted physiotherapy, eye exams and chiropractic care. Most now have to pay for these services through private insurance or out-of-pocket. Now we are seeing more Ontarians, tired of waiting for home care services, paying out-of-pocket to get service from the same agencies that are responsible for providing public care. According to the Ontario Home Care Association, 20 million hours – or about 40 per cent of home care – is purchased privately.

When it comes to public spending on health care, Canada is in the middle of the pack compared to peer OECD nations.  Remarkably, we even spend less than the United States on public health care.

That doesn’t mean our health coverage is comparable to our peers.

Dr. Michael Rachlis pointed out in a recent presentation that Denmark spends less than Canada on health care compared to the overall size of its economy. Denmark also has a higher percentage of its population over the age of 65 and provides better coverage for home care, drugs and appliances and devices.

Canada is usually second to the United States in the percentage of private health care. And Ontario is usually at the top when it compares to other Canadian provinces.

The story doesn’t end there. Within the public side of our health care system we are seeing increasing private delivery of public services.

In 2008 we got a sneak peek at what this means when the McGuinty government hired RPO consultants to look at a 10-year pilot project in which 12 public hospitals in small rural and northern communities continued to do community-based lab testing.  Thanks to the Harris government, community-based work – tests ordered by doctors outside of a hospital setting – was given to the private sector labs. The theory was these large central labs would be more efficient than the individual hospital labs. Harris also hedged his bets by making sure the private labs were staked a 15 per cent advantage in the public funding they received to do this work.

There is no question the government did not want this pilot to succeed. While private labs continued to get increases per test, the hospitals in the project were given a lump sum payment that remained frozen for eight years despite volumes increasing by as much as 144 per cent.  Two of the hospitals eventually found the funding freeze unworkable, and surrendered the work.

The remaining 10 hospitals all submitted briefs to RPO asking to retain the community volumes. They said the volumes helped keep longer lab hours, it assisted in the purchase of lab equipment, and it improved the overall scope of testing. Doctors preferred having testing done locally given they could call up the lab and talk to a technologist they knew. They also found turnaround to be much faster and the risk of a lost or damaged specimen much less.

How much more would we have to pay to maintain this ideal situation?

The answer is the hospitals were performing this testing well below the cost of the private sector. RPO reported that average testing cost $33 in the private labs and only $22 in the public hospital labs.

You would think the McGuinty government, continually complaining about rising health care costs, would jump all over this. If small hospitals could produce this kind of result, imagine how large automated city hospital labs could outperform their private sector rivals in both quality and cost.

Despite the overwhelming evidence, RPO recommended the government actually end the pilots and give the work to the private sector. They claimed hospitals had an advantage over their private sector cousins because they indirectly subsidized their lab operations – such as providing power and lights – through global budgets. This the Ministry directly denied in an e-mail to us. Given the hospitals have to maintain basic lab service, the justification was absurd. The hospitals would not be turning off the power and lights in their labs once they lost these volumes.

RPO also argued that the model didn’t fit the structure of the Local Health Integration Networks (LHINs). Private labs were outside their jurisdiction, they argued, and it would leave LHINs responsible for this handful of labs that continued such community work.

Remarkably, the government began wrapping up these hospital pilots based on this flimsy justification.

Such direct comparisons between public and private are often difficult to find. Private sector providers religiously guard what they view as proprietary information. In other words, they don’t want the public to know how much more they are charging to provide public health care.

This was also the view of the private consortium that built Brampton’s William Osler Health Centre. As part of the deal, the consortium has a long-term contract to provide non-clinical services such as IT, food services and cleaning.

OPSEU joined a consortium of its own to fight in court to get details of that P3 contract. While we never got all the documents, we got enough to discover that the value for money comparisons had been skewed to hide significantly higher costs to develop that hospital as a public-private partnership. The Auditor General of Ontario later confirmed our findings only to be largely ignored by the mainstream corporate media. While e-Health consultants were being flailed over the cost of Choco-bites,  the same media shrugged over a $500 million difference to build Osler as a privately run public hospital.

While the rising cost of health care is as sustainable as we want it to be, there is no question that bringing more services under the public umbrella would produce significant savings. The Canadian Centre for Policy Alternatives estimates we could save $10.7 billion per year by creating a national drug plan to cover all Canadians.

We also need to look more closely at private delivery of public health care.  The RPO case study was revealing not only for the significant cost differences, but also for the government’s indifference to the public sector advantage.

It’s hard to take government serious when they complain about rising health care costs while ignoring obvious public initiatives that have the ability to reap significant savings and improve the quality of care.

We do take it seriously when front line caregivers lose their jobs amid a new wave of austerity that will likely be as counterproductive as the one we experienced in the 1990s.

We do have choices.


As a footnote to this story, the Kaiser Family Foundation recently reported on the cost of private health insurance in the United States. The average cost of family health insurance is now $15,073 per year – an increase of 113 per cent since 2001.  19 per cent of premiums charge $18,087 per year. Premium rates rose between 8-9 per cent last year.  Deductibles – the amount Americans have to pay before their insurance kicks in – range from $675 to $1,908 per year. Fewer Americans are receiving health insurance as an employer benefit – down 9 per cent from 2010. Only 60 per cent of American employers now provide health coverage.  Those who are advocating for two-tier private insurance in Canada should seriously think about these numbers.

One response to “Health Systems: Why can’t we be less like the US and more like Denmark?

  1. The inefficiency of private healthcare is so obvious that only a moron or private healthcare provider would even consider private provision as
    a better choice.
    Bob Scott Petrolia Ontario.

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