Thanks to General Motors Corp. and the other two major U.S. car manufacturers, the Canadian province of Ontario in 2004 surpassed Michigan for the first time as the largest auto-producing region in North America, and GM executives don’t mind being quite
blunt about the reason the company has moved so much production across the border. While hourly wages are somewhat lower north of the border, the most appealing aspect of Canadian production is the $1,400 per auto that GM saves because of Canada’s substantially less expensive state-run healthcare system.
But as much as GM appreciates the Canadian system in Canada, the company becomes downright coy when asked whether such a system could work in the U.S. “GM thinks there has to be closer cooperation between the government and the private sector, but we don’t advocate a single-payer system for the U.S.,” a spokeswoman responded.
GREENER PASTURES ACROSS THE BORDER
It’s not surprising. Although U.S. companies are being sucked dry by the cost of healthcare, few have been open to the idea of handing the system over to the government, despite the fact that the Canadian system is relatively popular among Canadian executives–including those working there for U.S.-owned subsidiaries.
What is it about the Canadian system that has executives willing to overlook the potential of moving from a system that has produced an average annual per employee cost of $6,679 to a system with a per employee cost–at least among large businesses–of around $800? After 30 years’ experience, Canada’s national health bill, with the government handling 75% of all healthcare expenditures and the entire population covered, accounts for just 9.1% of Canadian gross domestic product, while in the U.S.–where the government handles 50% of health expenditures and 15% of the population remains uncovered–healthcare spending now represents 15% of GDP, rising more than 8% last year alone. Of course, it’s that big, bad word–socialism. “No American business can say they’re in favor of socialized medicine,” says Jon Erb, a senior manager for healthcare consulting at Deloitte Consulting LLP. “The whole idea of the government controlling prices on things, and essentially taking over such a huge sector of American business is not something anyone will publicly endorse.”
That sometimes fervent opposition, however, may be beginning to weaken–at least according to some unlikely proponents. While he doesn’t advocate a wholesale appropriation of the Canadian model, Paul O’Neill, President George W. Bush’s first Treasury secretary and former CEO of Alcoa Corp., claims that “socializing” the cost of catastrophic insurance–the real bank-breaker in the healthcare cost crisis–is a likely prospect and should be supported by companies. “That employers are the primary providers of health benefits is an unfortunate accident of history,” says O’Neill, who until recently served as CEO of the Pittsburgh Regional Healthcare Initiative, a health reform project in western Pennsylvania. “It dates from wage and price controls during World War II, when employers turned to health benefits as a way of getting around limits on what they could pay their workers.” O’Neill argues that the primary responsibility for providing health coverage needs to be taken off the back of business.
Some experts point out that healthcare would hardly be the first “business” that government would be in charge of running. “After all, the government runs defense and law enforcement, so why not healthcare?” asks Dr. Steffie Woolhandler, an associate professor of medicine at Harvard and co-founder of the 30,000-member Physicians for a National Health Program. “Businesspeople don’t like to think of the government taking over any industry and doing a better job of it.”
On the corporate side, however, the contention is that a lack of information may also be an impediment to objective review. “It is totally ingrained in the U.S. that the government is the enemy, not a friend,” says Helen Darling, a veteran corporate benefits expert and president of the National Business Group on Health. Darling’s organization lobbies on behalf of its 220 corporate members, most of them large employers. “What I think they do is assume it’s like the U.K. system, which is really radically different and much less well funded. I also think that many executives wouldn’t want a publicly run plan for themselves.”
More than three decades ago, Canada used to handle healthcare with a private-insurance, fee-for-service system very similar to the one in the U.S., and it is tempting to look at how the relative costs of healthcare have become so wildly divergent between two neighboring countries that otherwise have similar demographics, similar health statistics (Canada’s infant mortality, life expectancy and other health statistics are actually marginally better than those in the U.S.), similar standards of living and similar economic systems.
In 1971, Canada switched to a system in which the provinces and the federal government pay doctors and fund hospitals, with patients getting their care at no direct charge. Under this single-payer system, the government “negotiates” budgets, fees and salaries with its healthcare establishment–some would simply say, it sets them. Unlike the U.K. approach, the Canadian system, from the outset, has largely barred private competition by physicians and acute care hospitals–an important decision that has allowed Canada to avoid the erosion in support and funding for the public system that has so plagued the U.K. system.
One problem that the U.K. and Canadian systems seem to share, to some extent, is the long waits for certain services, particularly elective surgery. “The Canadian system rations care,” says Sally Pipes of the Pacific Research Institute, author of the book, Miracle Cure: How to Solve America’s Health-Care Crisis and Why Canada Isn’t the Answer, and an advocate of the consumer-driven healthcare currently being tried by many U.S. companies. “You have long waiting times, and it’s almost impossible to get something like an MRI scan. That is why you have so many Canadians crossing the border to get treatment in the U.S.” Adds Pipes, herself a Canadian living in the U.S., “And remember, Canadians pay higher taxes than Americans.”
But Canadian executives are not so harsh on their own system. Stew Low, a spokesman for GM Canada, says stateside criticisms of the Canadian system are overblown and tend to come from people “with an axe to grind.” He says, “Both the U.S. and Canadian systems have their challenges, and Canada’s system clearly needs some improvement, especially in the form of higher investment, but in general, people here have ready access to healthcare. I can walk into any ER and get treated quickly. My kids are active in sports and get hurt, and they always get treated right away.”
GM is hardly alone in its public support for the Canadian system. First, there are the other Big Three automakers–Ford Motor Co. and DaimlerChrysler AG–which like GM have called upon the Canadian government over the past two years not only to preserve the system but also to expand it to cover prescription drugs and home healthcare. In addition, a lobbying group called the Employer Committee on Health Care–Ontario (ECHCO), composed of 30 of the province’s largest employers, including Toronto-Dominion Bank and Siemens Canada, has thrown its considerable weight behind improved funding for and expansion of Canada’s single-payer system.
While few executives in the U.S. fully embrace the Canadian approach, immeasurable frustration with the U.S.’ inability to keep healthcare inflation in check is making a few wonder if there isn’t a better way. “Is there a private sector solution to the rapidly increasing cost of healthcare? Probably not,” says Deloitte Consulting’s Erb. “As a health consultant, I confess I’ve always underestimated the ability of U.S. companies to absorb health costs, but we’re reaching a tipping point. There would be huge resistance to a wholesale national solution because the tentacles of the healthcare industry reach into all sectors of the economy, but I suspect you’ll see business’s strategy will be to sneak a single-payer system in a little bit at a time.”
A WAR OF ATTRITION
National Business Group on Health’s Darling agrees. Private sector schemes will not solve the problem of rising costs, she claims, and while most business leaders may as a matter of principle or ideology oppose a federal solution, “I think you’ll see them start to support it in small increments, for example with a federal takeover of catastrophic coverage.” She points to the recently passed Medicare drug plan, under which the government pays up to 28% of a company’s costs for providing drug coverage to retirees, as an early example. “That’s the wedge,” she says. “It’s the first time we’ve had the government do that here.”