Author Insights: Canadian Example Offers a Possible Path to Curbing US Medicare Costs

Steffie Woolhandler, MD, MPH, School of Urban Public Health at Hunter College, City University of New York, and a colleague found US Medicare spending has increased 3 times faster than Canadian Medicare. (Image: Provided by the author)

While Medicare costs continue to rise and Democrats and Republicans promote various plans to curb such spending, 2 researchers suggest politicians look north to Canada for solutions.

In a Research Letter published today in the Archives of Internal Medicine, the authors compare Medicare spending from 1980 through 2009 in the United States and in Canada, which has a similar Medicare program. They found US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009, an inflation-adjusted increase of 198.7%. In Canada, spending per elderly enrollee increased from $2141 to $9292, a 73.0% increase. Canada’s higher initial spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs compared with about 50% in US Medicare. Had US Medicare spending grown at the same rate as in Canada, more than $2 trillion (one-sixth of the national debt) would have been saved.

Coauthor Steffie Woolhandler, MD, MPH, School of Urban Public Health at Hunter College, City University of New York, discusses her publication:

“Regardless who wins the election, we will be facing big cuts in the Medicare program, but many seniors don’t have the money to pay for their own health care plans. So we wanted to see what happened in Canada with its senior citizens. In many ways Canada’s plan looks like US Medicare; however, they have been much more successful at cost control than us, and we quantified this.

“In the United States, costs in Medicare have risen 3 times faster than in Canada’s Medicare. There are several reasons for this. Administrative costs are about 31% of overall spending in the United States [including both public and private insurance] and only 16.7% in Canada. If we look at the US Medicare program, the overhead cost is only 2% versus 14% for private insurance, but then the hospitals and doctors have extremely high paperwork costs because they have to work with various insurers, and this spills over into administrative costs in Medicare.

“Canada has health planning with teeth. They make sure facilities are built where they’re needed. There is strict control of building new buildings and buying new equipment: hospitals don’t expand willy-nilly. Canadians pay about 40% less for their medications because the government steps in and makes bulk purchases.

“And when we start talking outcomes, it looks like Canada’s health care system is delivering. Canadians do live 2 years longer than people in the United States. And if measured starting at age 65, Canadians have seen more improvement in their life expectancy than seen in the United States.

“We in the physician community need to take some leadership here and tell the politicians that we need to use these road-tested cost controls, and we cannot accept that people may be denied or will not be able to afford care.”