Introduction

The health care system in the United States is often compared with that of other countries, and the one that comes up the most frequently in Canada. The Canadian system has better outcomes in general than the American system, and is completely different in terms of structure. This paper will examine the key areas where the systems differ, and seek to extrapolate what that means.

Basic Systems

At its heart, the US system relies on market forces for much of its activity. Health care is providers are usually paid by insurance companies (or the government, which will be discussed in a moment). The insurance market is generally a free market, where insurers compete for customers the same way that insurers in other fields compete for customers. Employers will often pay the cost of coverage under an employer plan for workers, but there are many types of jobs where this is not the case.

The Canadian system is a single-payer system. Each province runs its own health care system, with some funding from the federal government but the rest of the funding from provincial budgets. The federal government provides the legal framework for operating health care and sets minimum standards. In most provinces, health care costs come from general revenues; there is no separate insurance. Health care is provided to all residents, regardless of cost, and generally covers most things. There are some gaps in drug coverage, for example the government plan might mandate the use of generics, but a private insurance market exists to cover these costs, and most employers pay for this insurance for their employees.

In the US, the closest thing to the Canadian system is Medicare, for those over the age of 65. For those under 65, there is really no equivalent. Medicaid provides health care coverage for those too poor to otherwise afford it, but each state sets its own level for this coverage and many states set this level incredibly low. A third system in the US is for veterans, and this system runs parallel, often with its own health care facilities that are entirely government run and not part of the free market system.

Outcomes

Canadians enjoy better health outcomes than Americans. Krell (2017) notes that this is not entirely about health care, but about lifestyle, as Canada has much lower rates of obesity, smoking and higher... However, Krell also examined a study of patients with cystic fibrosis. He notes "median survival in both countries increased…but survival in Canada increased a lot more," but he noted that Canadians fared only slightly better than Americans with Medicare or Medicaid, but 77% better than Americans with no insurance. The difference in outcomes one can extrapolate, is not from quality of care differences but from access to care differences. Other outcomes where the Canadian system performs better are in cost – at 10% of GDP compared with 16% in the US, infant mortality and life expectancy, but studies generally attribute these to lifestyle factors just like Krell did (Magee, 2017).

Structures

The key structural differences between the systems are that the US has a convoluted structure with a lot of free market influence; Canada has a relatively simple structure with single payer and minimal free market influence.

What does this mean in the US? It means a few things. The profit motive is cited for a high rate of innovation, but it also means that some of health care expenditure goes to profits – shareholders – rather than to care. While some would argue that the profit motive means that firms will be efficient, that has proven incorrect, for a couple of reasons. The first reason is simple – the multiple different payers, insurance companies, providers – it's very complex and that complexity limits the ability to do things at scale. The second is that low costs (efficiency) only matter when the higher has bargaining power. The classic Porter's Five Forces model shows us that a health care customer has no bargaining power: they don't know anything about health care, or what it costs, and because they are motivated by ill health they are in a poor position to shop around, even if doing so was possible, which is often isn't. If a can of beans is cheaper at Walmart, you'll buy it at Walmart. But who shops around for bargains on open heart surgery?

The Canadian system is simple, and fewer players are in it for profit. Provincial systems can scale a bit better, and administration is simpler. Moreover, removing profits helps Canada have a lower cost of health care delivery as a percentage of GDP. For pharmaceuticals, the federal government sets the prices and…