What President Clinton Can Learn from Canada About Price Controls and Global Budgets

Policy Backgrounders | Health

No. 129
Tuesday, October 05, 1993
by Michael Walker & John C. Goodman


Introduction

"Both the Congressional Budget Office and the New York Times warned that Clinton's plan may lower the quality of medical care."

As part of his health care plan, President Clinton has proposed price controls on health insurance premiums and "global budgets" that try to limit how much people can spend on health care each year.1 Although the details of his plan are still sketchy, the concept is not new. It represents a major departure from Clinton's election campaign promise to rely on competition, not price controls, to hold down health care spending. As a result, the "Jackson Hole" health economists who originally developed Clinton's plan have now dissociated themselves from it.2

The New York Times, an early supporter of Clinton's proposal for "managed competition," clearly feels betrayed by the latest plan:3

A system that was supposed to control cost with competition would amount to price controls. And the severe price caps would likely drive providers to skimp on treatment and erode the unrivaled excellence of American medicine. The Administration argues that there is plenty of waste in health care and that caps can squeeze it out. But caps don't target waste; they are likely to squeeze out important services. 

And the Congressional Budget Office (CBO), which normally would be expected to support a Democratic president's health care proposal, offered a similar analysis. The CBO, according to the New York Times, says federal limits on private health insurance premiums could harm consumers by forcing a reduction in valuable medical care and restricting access to new medical technology.4

"An estimated 1,379,000 Canadians are waiting for some kind of medical service."

To see how the Clinton plan might affect patients, the president might look at Canada. In general, Canadians have little trouble seeing a general practice or family practice physician. But specialist services and sophisticated equipment are increasingly rationed. Canada attempts to control health care spending by limiting expensive medical technology. Within hospitals, physicians work under severely limited budgets.

The resulting system of health care rationing is inefficient and unfair. It also threatens the quality of care Canadians receive. In general:

  • Canadians do not have full access to existing modern medical technology, and there is very little research or development of new technology.
  • Some patients, including a friend of one of the coauthors of this backgrounder, die while waiting for diagnosis and treatment.
  • An estimated 1,379,000 Canadians are waiting for some kind of medical service.
  • There are 177,000 Canadians waiting for surgical procedures, and 45 percent of them say they are "in pain" while they wait.
  • Access to health care is unequal, with some Canadians having a much better chance of seeing a doctor than others.

Despite these developments, Canada's per capita health care costs have been rising at roughly the same rate as those in the United States.


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