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


Deteriorating Quality of Care

"There are increasing reports of patient deaths and near-deaths because of rationing."

Americans have been told that the quality of care in Canada has not suffered because of Canada's system of global budgets and health care rationing. Yet there are increasing reports by doctors and the news media of patient deaths and near-deaths, precisely because the government limits technology and causes health care rationing. Here is one doctor's report of what conditions are like in Quebec:

"In my academic practice at a teaching neurologic hospital in Montreal, the wait for the treatment of a 'minor' medical problem (e.g., carpal tunnel syndrome) could be half a year or longer. What I considered essential services were unavailable. I recall losing an argument with the radiologist on call over whether a patient with a new stroke should have a CT scan at 5:05 p.m.; he judged that the situation was not an emergency serious enough to warrant performing the procedure after regular hours."41


Inefficiency. As an example of inefficiency in Canada's hospital sector, consider the following. The proponents of global budgets often point to the lower level of health care spending in other countries as "proof" of efficient management. Nothing could be further from the truth. By and large, countries that have slowed the growth of health care spending have done so by denying services, not by using resources efficiently.

How much does it cost a hospital to perform an appendectomy? Outside the United States, it is doubtful that any public hospital knows. Nor do government-run hospitals typically keep records that would allow anyone else to find out.42 In organizational skills and managerial efficiency, Canadianhospitals are far behind hospitals run by Hospital Corporation of America, Humana or American Medical International. In fact, Canadian hospitals in several provinces have called in management groups from the U.S. to either retrieve them from financial difficulty or to improve generally their financial performance.

While 177,000 wait for surgery in Canada, at any point in time one in five hospital beds is empty.43 Moreover, about 25 percent of all acute-care beds are occupied by chronically ill patients who are using the hospitals as nursing homes "often at six times the cost of alternative facilities."44

One reason for these inefficiencies is that under global budgets hospital managers have perverse incentives. In Canada, hospitalized chronic patients are known as "bed blockers," and they are apparently blocking beds with the approval of hospital administrators. Because these patients use mostly the "hotel" services of the hospital, they are less draining to limited hospital budgets.45

One widely used measure of hospital efficiency is average length of stay. In general, the more efficient the hospital, the more quickly it will admit and discharge patients. By this measure, U.S. hospitals are far in front of their Canadian counterparts. The average hospital stay is 42 percent longer in Canada than in the United States.46

A frequent criticism of the U.S. health care system is that it is wasteful because many procedures are "unnecessary." One source of evidence for unnecessary medical care is a series of studies that show wide variations in the rate of treatment among different U.S. communities, with no apparent justification. One might suppose that in countries where health care is rationed and many medical needs are unmet, doctors would tend to provide only necessary care. That turns out not to be the case. As in the United States, treatment rates in Canada vary considerably. For example:47

  • There is a four-to-one difference among Canadian counties in the rate of cesarean sections.
  • There is a four-to-one difference in rates of tonsillectomy and hysterectomy and a two-to-one difference in the rates of mastectomy, prostatectomy and cholecystectomy.

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