Quote-of-the-day mailing list
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Subject: qotd: Important: We have the wrong Medicare program
Date: Tue, 30 Oct 2012 10:45:54 -0700
From: Don McCanne <email@example.com>
To: Quote-of-the-Day <firstname.lastname@example.org>
Archives of Internal Medicine
October 29, 2012 (Online First)
Cost Control in a Parallel Universe: Medicare Spending in the United
States and Canada
By David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH
As the United States was implementing Medicare in 1966, Canada was
phasing in its own Medicare program, which covered all Canadians under
provincially administered plans. While these provincial plans varied,
all incorporated significant payment reforms—global budgeting of
hospitals and stringent capital expenditure controls—and banned
copayments and deductibles.
Before the mid-1960s, the 2 nations' health care financing systems were
similar, and health care costs were comparable. Since then, overall US
costs have grown more rapidly, but no study has compared spending for
the elderly—the populations covered by Medicare in both nations.
US Medicare spending per elderly enrollee rose from $1215 in 1980 to
$9446 in 2009 (an inflation-adjusted 198.7% increase). The comparable
increase for Canada was 73.0% (from $2141 to $9292). Canada's higher
base-year spending reflects its more comprehensive benefits, covering
about 80% of seniors' total health costs, vs about 50% in US Medicare.
The Table lists actual US Medicare spending from 1980 through 2009 and
projected spending and savings had US costs risen at the lower Canadian
rate. Projected savings totaled $154.2 billion in 2009 and $2.156
trillion for 1980 through 2009.
For the 1971-2009 period, US costs rose 374.1% vs 126.3% for Canada, and
estimated foregone savings were $2.9024 trillion.
Medicare spending has grown nearly 3 times faster in the United States
than in Canada since 1980. Had US Medicare costs risen at Canadian
rates, rather than a deficit of $17.1 billion in 2009, the Medicare
Hospital Trust Fund would have realized a $32.3 billion surplus. Savings
on Medicare Part B would have been even larger. By 2009, the $2.156
trillion in excess spending attributable to US Medicare's faster growth
was equivalent to more than one-sixth of the national debt.
Several features of Canada's program help constrain costs. First, the
single-payer system has simplified administration, holding
administrative costs to 16.7% of overall spending vs 31.0% in the United
States. Although US Medicare's internal overhead costs are low, it
remains one among many payers. Hence providers' administrative costs are
inflated by having to deal with a multitude of payers and track
eligibility, attribute costs, and bill for individual patients and services.
Second, Canadian hospitals receive prospectively determined global
operating budgets, removing incentives to provide unnecessary care while
simplifying billing and administration. However, unlike accountable care
organization payment schemes in the United States, capital costs are not
folded into the global budgets but distributed separately through an
explicit health-planning process. Canadian hospitals cannot use
operating surpluses to fund new buildings or equipment but must request
separate capital appropriations. Hence, they cannot expand by
overproviding lucrative services, gaming the payment system through
upcoding, avoiding unprofitable patients, or cost shifting.
Third, 51% of Canada's physicians are primary care practitioners vs 32%
in the United States. Primary care–centered health systems are generally
thriftier. Canada's outpatient fee schedules are also less technology
skewed than in the United States.
Fourth, Canada's provincial plans have used their concentrated
purchasing power to limit drug and device prices.
Finally, litigation and malpractice costs have remained relatively low
Life expectancy at age 65 years is longer and has grown faster in Canada
than in the United States since 1980 (and 1971), offering reassurance
that cost control has not compromised quality. A meta-analysis suggests
that clinical outcomes are, if anything, better for Canadians than for
To some, US Medicare's grim financial health suggests an even grimmer
conclusion: it can no longer keep its promise of all needed care for the
elderly population. Some would replace it with vouchers that seniors
could use to purchase private coverage. Others suggest upending the
current payment system by inverting volume-based incentives, offering
instead profits to organizations that limit utilization. Yet the
efficacy of these drastic solutions remains unproven. Canada's
road-tested cost-containment methods offer an alternative.
PNHP Press Release:
Comment: This study is particularly important because it compares
spending in our Medicare program for beneficiaries 65 and older with
Canadian Medicare spending for the same age population during the same
decades studied. This apples to apples comparison reveals that there is
no contest. Since 1971, we've spent almost $3 trillion more than we
would have had we used Canada's payment reforms. The Medicare Hospital
Trust Fund would have had a huge surplus by now, and nobody would be
claiming that Medicare is "going broke."
The difference is due to economic policies that really do work. Single
payer advocates already know what these are, but for those who need a
reminder, they are listed in the Comment in the original article above.
Not only did Canadians more effectively control their health care cost
increases, their life expectancy grew more rapidly during the same time
period. They benefited more under their cost efficient Medicare model.
We have enough understanding of health policy science to predict that
the current proposals to control spending in the United States will
either have very little impact, or, much worse, will reduce spending by
making health care access even more unaffordable.
Comparing the two Medicare programs, the Canadian system pays about 80
percent of health care costs, whereas our Medicare program pays only
about half. Also, Canada has banned copayments and deductibles for
physician and hospital services - a mainstay of the perverse, misguided
efforts to control health spending in the United States. We can control
spending without imposing financial penalties on people accessing health
care that we want them to have.
It is time for all of us to express our OUTRAGE! We can no longer accept
inaction by our politicians because they fear the political
consequences. We have to make them understand that they face dire
political consequences if they don't act. As FDR said, "Make me do it."
It's time to get in their faces!