Housekeeping

RequiredText:
"Public Health and Preventive Medicine in Canada" 5th
edition by Chandrakant Shah. (You may find them in
the Medical Books Department on the second floor
of the Bookstore.)

Recommendation: Danielle Martin’s new book “Better

Now: Six Big Ideas to Improve Healthcare”
The Canadian Health Care System

MIE 561S
Health Care Systems

Mike Carter & John Blake

Outline
The economic importance of health care
Trends in health care expenditures
Long Term
Short Term
An International Comparison
GDP, expenditures & outcomes
Public vs. private payers
Public vs. private delivery
International Trends
Managed Competition
HMOs, PPOs & EPOs
Obamacare
 The Importance of Health Care

Health care is North America’s largest single

industry.
Estimated total spending in Canada in 2016
$228 billion (CN)
$6299 (CN) per person
11.1% of GDP
Estimate total spending in the US in 2016
3.2 trillion (US)
$9,990 (US) per person)
17.8%
Long Term Trends
Expenditures
outstripped inflation
Distribution by Source ‘12
every year from 1971 to Soc.
1992. Sec. Fed
Priv 1% 3%
The public portion of 30%
health care was
decreasing (76.2% to
69.7% 1975-2001)
2001-2013: Public share Mncpl Prov
has remained ~70% 1% 65%
Total Health Expenditure per Capita
Annual growth rates

Notes
* Calculated using constant 1997 dollars.
Source
National Health Expenditure Database, Canadian Institute for Health Information.
Trends 1975 - 2015
1975 to early 1990s: Health expenditure grew during
this period higher than inflation
Mid-1990s: As governments focused on fiscal restraint
between 1993 and 1997. GDP ratio fell each year
Late 1990s to 2010: Major investments were made in
health care. Health expenditure grew faster than GDP
from 1998 to 2010,
2011 to 2015: Following the 2009 recession,
governments have focused on restraining program
spending to manage budgetary deficits.
2016: Latest Federal/Provincial negotiations indicate
continued restraining of spending
Health Spending Mirrors the Economy
Cost Drivers of Healthcare
Trends in Healthcare Spending:
Aging Population
46% of public Healthcare dollars in Canada are spent on
Seniors
Per person cost vary significantly with age of seniors
Age 65 to 69: $6,424
Age 70 to 74: $8,379
Age 75 to 79: $11,488
Age 80 and older: $21,15
Aging Population expected to increase cost by most but
steady 1% per year.
 0
1000
1500
2000
2500
3000
3500
4000
4500

500
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Public Per Capita Cost

2007
2008
in constant 1997 dollars

2009
2010
2011
2012 f / p
2013 f / p
Trends in Healthcare Spending
% of Total Spending for Selected Use

Source
National Health Expenditure Database,
Canadian Institute for Health Information
Prescribed Drug Expenditure, Private-
Sector Share, Canada, 1975 to 2013
International Trends
Health Spending as a % GDP
20.0

15.0 US
Canada
France
Germany
10.0
UK
Netherlands
Japan
5.0 Mexico
Belgium

0.0
80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 08 10 12 14

OECD web site: www.oecd.org Dec. 2015

Total Expenditures as %GDP (2011)

OECD web site: www.oecd.org Jan 2015

Unfair Comparison:
More $ doesn’t = better health?
Unfair Comparison:
More $ doesn’t = better health?
Health Risks

US
New Zealand
UK
Canada
Germany
Netherlands % tobacco (daily)
Sweden alcohol (L/capita)
% overweight (BMI >25)
France
% obese (BMI >30)
Japan
0 20 40 60 80
Health Care Delivery
(% Public Payor in 2009)
Public Private Mix
Payor Payor
Public UK (84.1), Sweden
Japan (81) (81.5)
Provider
Private Canada (70.6), United States
Germany (76.9) (47.7)
Provider France (77.9)
** Most OECD states
Mix allow wealthy to opt out.
of public system **
Canadian Medicare (very brief)
Providers are private.
Covered if:
“Medically necessary”
Done in a hospital
Done by a doctor
1990 – Internationally recognized leader
2000 – We had slipped significantly
2009 – Major funding increases – failed to deliver
2012 – Funding tightening – could inspire renewed focus
on efficiency and innovation? Or slip further?

24 CORS 2008 May 12, 2008

 Commonwealth Report 2014
COUNTRY RANKINGS
Top 2*
Middle
Bottom 2*
AUS CAN FRA GER NETH NZ NOR SWE SWIZ UK US

OVERALL RANKING (2013) 4 10 9 5 5 7 7 3 2 1 11

Quality Care 2 9 8 7 5 4 11 10 3 1 5

Effective Care Safe 4 7 9 6 5 2 11 10 8 1 3

Care Coordinated 3 10 2 6 7 9 11 5 4 1 7

Care 4 8 9 10 5 2 7 11 3 1 6

Patient-Centered Care 5 8 10 7 3 6 11 9 2 1 4
Access 8 9 11 2 4 7 6 4 2 1 9
Cost-Related Problem 9 5 10 4 8 6 3 1 7 1 11
Timeliness of Care 6 11 10 4 2 7 8 9 1 3 5

Efficiency 4 10 8 9 7 3 4 2 6 1 11

Equity 5 9 7 4 8 10 6 1 2 2 11

Healthy Lives 4 8 1 7 5 9 6 2 3 10 11

Health Expenditures/Capita, 2011** $3,800 $4,522 $4,118 $4,495 $5,099 $3,182 $5,669 $3,925 $5,643 $3,405 $8,508

Notes: * Includes ties. ** Expenditures shown in $US PPP (purchasing power parity); Australian $ data are from 2010.
Source: Calculated by The Commonwealth Fund based on 2011 International Health Policy Survey of Sicker Adults; 2012 International Health Policy Survey of Primary Care Physicians; 2013 International Health
Policy Survey; Commonwealth Fund National Scorecard 2011; World Health Organization; and Organization for Economic Cooperation and Development, OECD Health Data, 2013 (Paris: OECD, Nov. 2013).
Public and Private share by use of funds: 2015
“30% of healthcare is waste”
Berwick & Hackbarth June 2012

1. Overtreatment
2. Failures of care coordination
3. Failures in execution of care processes
4. Administrative complexity
5. Pricing failures
6. Fraud and abuse
Estimates of Annual US Health Care Waste $ in Billions
Annual Cost to US Health Care System in 2011

Low Midpoint High

Failures of care delivery 102 128 154

Failures of care
coordination 25 36 45

Overtreatment 158 192 226

Administrative complexity 107 248 389

Pricing failures 84 131 178

Fraud and abuse 82 177 272

Total $558B $910B $1263B
% of Total Spending 21% 34% 47%
International Trends - Health Care Reform
Regionalization
Individual hospitals merge/close.
Increased specialization.
Regional management
Decreased intensity.
Day surgery. (1980s: all surgery required
overnight stay)
Hospital beds converted to long term care.
Increased influence from private sector.
International Trends - Health Care Reform
Central insurer limits cash transfers.
Effective, but very little rationale.
Managed competition
Allows more control of fees and services by payer
Less choice for patients and providers
Managed Care
Any system that manages healthcare delivery with the aim of
controlling costs.
Usually more control over services provided and quality control.
Private Managed Care Examples: HMO, PPO, EPO
International Trends - Health Care Reform
HMO (Health Maintenance Organization)
Closed Network – patients must use provider in network (except
emergencies)
Provider paid by capitation (fixed monthly fee per patient
enrolled) – may incentivize reduced service
Primary Care provider is gatekeeper to other services
PPO’s (Preferred Provider Organizations)
Open Network – patients incentivized to use network
Insurers fully cover in-network providers, only partially
cover out of network providers
No primary care gatekeeper
Network providers assured a minimum volume in return
for a price break. (lower fee for service)
International Trends - Health Care Reform
HMO (Health Maintenance Organization)
Closed Network: patients must use provider in network (except
emergencies)
Providers paid by capitation
Primary Care provider is gatekeeper to other services
PPO’s (Preferred Provider Organizations)
Open Network – patients incentivized to use network
out of network providers accessible (partial coverage)
No primary care gatekeeper
Network providers change insurers lower fee for service
EPO
Similar to PPO but no ability to go outside network - even in an
emergency
Obamacare: “Affordable Care Act”
Prohibits denying coverage due to pre-existing conditions
Minimum standards for health insurance policies
All individuals not covered by a health plan must secure private-
insurance policy or pay a penalty,
Health insurance exchanges serve as an online marketplace to
compare policies and buy insurance.
Low-income individuals and families between 100% and 400% of the
federal poverty level receive subsidies [2012: $23,050 for family of 4]
Medicaid eligibility expanded to 133% of the federal poverty level,
(several states have opted out)
Restructuring Medicare from fee-for-service to bundled payments.
E.g., defined episode (such as a hip replacement)
Businesses which employ 50 or more people but do not offer health
insurance to their full-time employees will pay a tax penalty
Systemic Hospital Issues:
The Four Faces of Health Care*

Health care is a
business, but... Containment
Coalition
It is a business unlike
all others. Trustees Managers

Multiple decision makers. Community Control

Conflicting goals,
Status Insider
incentives. Coalition Doctors Nursing Coalition
Social “good”.
Cure Care
No market, no manager.

Clinical
Coalition

*Glouberman & Mintzberg, 2001

The Four Faces of Health Care*

The same divisions

Health
apply to the overall Elected
Officials Authorities
social health system! Community
Insurance

Involvement Public
Control

Acute LTC, Primary

Hospital
Community
Acute Cure Care

*Glouberman & Mintzberg, 2001

Summary
Health care is big business.
Until recently hard decisions never had to be made.
Extraordinary changes are taking place in Canada and the
world.
Funding models are converging.