Resolved: That Canada's health-care system is a business advantage (debate)

FOR

By John Butler

Canada’s publicly funded health-care system is a big factor in this country’s international competitiveness, and constitutes the best employee benefit corporations can offer workers.

When Canada introduced universal health insurance in the 1960s, the percentage of GDP spent on health care here was the same as in the U.S. Today, the vaunted free-enterprise health system in the U.S. comprises 13.5 per cent of gross domestic product, and by 2007 is expected to hit 16 per cent. Canada’s, on the other hand, remains about four percentage points lower than the U.S. system.

Health-care expenses in the U.S. continue to rise faster than in any other industrialized nation – a rate of 4.3 per cent a year between 1990 and 1997, compared with an average of 3.8 per cent for all 29 industrialized nations (and a Canadian rate of 2.7 per cent). The additional percentage of GDP spent on health care in the U.S. — largely due to higher administration costs and private-sector profit margins, acts as a drain on the American economy.

U.S. health-care expenditures have become an issue for employers concerned about the escalating costs of care — paid for by corporate plans. Attempts to rein in private-sector profits through the modest reforms tabled by the Clinton administration in its first term — and soundly defeated by well-organized lobby groups — were thwarted.

The motive for recent health-reform initiatives in the U.S. was simple: even 10 years ago, when the aging baby boomer population was just a demographic storm cloud on the horizon, the U.S. private sector spent 61 per cent of pre-tax profits on health care benefits for employees. At that time, Chrysler Corporation chair Lee Iacocca and his counterparts at Ford called for a national health insurance plan for the U.S., warning that rising health-care costs were making the Big Three auto companies less competitive internationally, and adding hundreds of dollars to the cost of every car produced.

The U.S. General Accounting Office found that having multiple public and private insurers accounts for about five per cent of health-care costs. (Compared to less than two per cent in Canada).

What do American firms pay for in terms of health services?

In addition to the tax dollars spent on government-funded health care, such as medicare for the poor, American companies pay benefits premiums for employees, often to cover expensive and unnecessary medical procedures. Health insurance represents from five to nine per cent of wages and benefits for U.S. companies that provide benefits (up from two per cent in 1965).

While the cost escalation of employer-paid health premiums has been muted in the U.S. over the last decade, that escalation is likely to increase substantially, since managed-care organizations are pushing premiums up in response to shrunken profit margins. The premium rate growth for firms of fewer than 100 employees is expected to increase by 10 per cent a year over the next 10 years. As the U.S. Chamber of Commerce puts it: “We recognize that a growing number of Americans do not have a connection to the large employers who are best able to sponsor comprehensive health coverage; in their case, a health delivery system that is employer-based does not make sense.”

Americans firms must pass these extra health-care costs on to consumers through increases in the cost of products — thereby making their goods and services less competitive. The typical U.S. family in 1998 paid $1,200 in higher prices for goods and services because of the health-benefit mark up on U.S. products.

The American system also promotes social and economic discord — not a good prognosis for business in a country where 16 per cent of the population is uninsured (try marketing your products to those people). For that reason, the U.S. Chamber of Commerce is increasingly championing the need to provide health coverage to this component of the U.S. population.

And when it comes to Canada opting to let those who can afford it buy private-sector services, let’s be clear on who will be footing the bill. HR professionals can expect to start drawing up expensive health benefit plans for their management teams. So which country offers the best health system climate for business? Give me Canada any time.

John Butler is president of The Agora Group, a Markham, Ont.-based health system and HR consulting firm. He is the former executive director of the Association of District Health Councils of Ontario, and may be reached at (905) 294-9762.

AGAINST

By Michael Walker

he Canadian health-care system is failing. Waiting lists are rising across the country, the medical technology gap between Canada and most other advanced countries is widening and key personnel are leaving the country in unprecedented numbers. How can the perpetuation of this situation possibly be a business advantage to any corporation?

First of all let’s note that many corporations are already, for their top executives, paying the extra costs of having either private health-care assessments done in Canada or paying for the cost of executives travelling to the Mayo clinic or to other U.S. health-care outlets.

Production workers covered by workers’ compensation already, to a significant degree, receive their care from private surgery centres or on a fee-for-surgical-service basis through public hospitals. In fact workers’ compensation board cases constitute the glaring evidence that Canada already has a multi-tiered health-care system. If we did not, the obvious impact on workers’ lost time would already have lead the business community and unions to demand changes. The existence of this way of jumping the queues has mitigated that pressure.

Corporations also bear the cost of senior executives spending their time lobbying the local cardiologist or in other ways using their influence to jump waiting list queues that have reached unacceptable lengths in most parts of the country. A recent University of Toronto study showed that high-income and highly educated Canadians are 30 per cent more likely to see a specialist than ordinary Canadians. But their access is not “free.” It comes as a result of the expenditure of effort that is not included in the bill.

For the workers not fortunate enough to have the pull or influence needed to jump the queue, there is the increasing burden of worry and concern about family members who are not getting access to timely care. The number of people for whom this is true is growing daily.

The HR executives who have been complaining about their inability to keep or attract employees to Canada must realize that “free health care” is reflected in the tax rates which are deterring bright people from choosing Canada as their home.

Since Canada’s tax system is highly progressive — and in Ontario directly related to the cost of health care — the free care for auto workers translates into unbearable taxes for knowledge sector workers and owners of capital. Even if it makes auto-sector labour seem cheap, do we really want to continue in this direction given the dramatic reduction in our productivity and standard of living which has already occurred as a direct consequence?

The high levels of expenditure on health care in the U.S. are reflecting a vibrant, high-growth sector of the U.S. economy which is providing high-paying, interesting and rewarding employment for the best minds that Canada is producing. It is also providing a surplus of health care capacity which people around the world are flocking to — including Canadians. Those who point to the “high cost” of U.S. health care fail to notice the fact that in our hospital sector health care workers, such as cooks, painters and groundskeepers, are often paid wages that are 25 to 50 per cent more than unionized employment in, for example, the hotel sector.

The notion that health care is, overall, more expensive in the U.S. because it is private and therefore has many competing providers is not credible. Of course competition means that there are higher costs of administration. Imagine how much administrative cost could be saved in the auto sector if we eliminated all the competing auto companies with their sales, parts and service administration programs and had instead only one auto company. We don’t think that would be a good idea because we know it would produce the Trabant — the pride of the Soviet auto sector.

Canada is gradually producing the Trabant of health care in the public sector. We need to challenge this direction by allowing private and public providers to gradually provide alternatives that respond to economic incentives. Recent legislation in Alberta will ensure that there is a beginning of this movement in an orderly, Canadian way.

Michael Walker is the executive director of The Fraser Institute, a public policy think-tank located in Vancouver. He may be contacted at [email protected]. Web site for all institute publications on health care www.fraserinstitute.ca.

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