COUNTRY COMPARISONS 

 

Canada and the United States

by Lisa Climan, April 2002

 

 

 

The similarities between Canada and the United States go back for many years. As geographic neighbors, fighting allies, and trading partners, their histories as the two halves of North America have been linked since their respective declarations as independent countries. However, even in spite of their various links, there are many differences between the two, the first being that Canada has a population of 31 million people, while the U.S. boasts over 250 million citizens. Canada is the second largest country in the world. However, due to the fact that Canada’s northern regions experience such cold climates, not all of Canada’s territory is suitable for living. So in spite of its enormous geographic area, Canada’s population is about the equivalent of California’s population. The United States, on the other hand, has a vast temperature range, yet every single state is populated, with the least popular states far more heavily populated than the least popular provinces and territories of Canada. With more than 75% of Canada’s population inhabiting the southern part of the country, its population density is considerably different from that of the U.S., which is much more evenly distributed in terms of population.

Canada has two official languages, French and English, as opposed to the U.S. whose only uses English. However, both countries are similar in the fact that in the past 200 years, waves of immigration from more or less every part of the world has made them both far more culturally diverse than they once were.

Canada has remarkable supplies of natural resources like fresh water, minerals, and timber. Many of Canada’s important industries are based on the exploitation of these natural resources. Hydroelectric power has Canada’s rivers as an excellent source of energy.  In the 19th century, the period of industrialization began for Canada, and the country saw the emergence of an impressive manufacturing sector. World War II marked the period of the vastest and most significant change. The abovementioned industries export about one third of their output.

 

Confederation was the event that formed modern Canada in 1867. Confederation involved the merging of three British colonies to form a partially independent state of four provinces. Since 1867, six more provinces have been added for a total of 10 provinces, and three territories as well. In 1931 Canada was declared independent. However, the country is still part of the Commonwealth of Nations. The United States was formed in a very similar fashion. Until 1783, which was the end of the American Revolution, Great Britain had control over 13 colonies in North America that would eventually expand to become 50 states. The American Revolution was made up of two related events: the American War of Independence, and the formation of the American government, as laid out by the constitution of the United States in 1787. Once independence was achieved for the colonies, the newly created United States adopted a Republican form of government

Canada is a federation, which by definition states the powers of its government are divided in two: the central or federal government, and the provincial and territorial governments. The constitution of 1982 governs Canada. The constitution of 1892 gathered earlier constitutional acts into one piece of legislation. A charter of rights and freedoms was added to the legislation and made it complete. “Patriation” was also granted at this point. This meant that any authority that the British government had over Canada as a part of the British North Act of 1867 was taken and granted entirely to the Canadian government. In Canada, the federal, provincial, and territorial legislatures are all elected, which makes it a parliamentary democracy. Canada’s sovereign though is still a monarch, the queen of the United Kingdom. Her representatives are the governor-general and his 10 lieutenant governors. Canada’s constitution, like the constitution of the United States, guarantees equality and freedom to all of its citizens. The constitution clearly outlines the roles of the federal and provincial governments. Over the past few decades though, they have increased their degree of cooperation in a number of programs that provide social services to the public. This is known as the “welfare state.” The United States too is a federation, with power also being divided up between federal and statutory governments. It is a representative government with leaders being elected by citizens of the country. As opposed to the Prime Minister of Canada, Americans elect a President who is in charge of the executive branch of the government. Together with the legislative and judiciary branches, the government is complete.

 

Traditionally, the government of Canada had been comprised of two parties: the Liberal party and the Progressive Conservative party. Both parties held more or less equal amounts of strength, with one party at all times forming the government, and the other forming the official opposition This continued until 1993 when the Bloc Quebecois replaced the Progressive Conservatives in their role, and in 1997, the Canadian Alliance, a Reform party, in turn replaced the Bloc Quebecois. In the United States, on the other hand, the political situation has remained constant, with either the Republican or the Democratic Party in power at all times. However, one similarity lies in both countries use of a purely democratic system, with citizens of both parties allowed to cast political votes at the age of 18.

Both countries have also had their shares of internal conflicts. From 1860 until 1864, America fought a civil war, plotting the north against the south. Although the internal conflict in Canada was nowhere near as serious in terms of loss of life and destruction, it has plagued many Canadians for years, and still does, in some cases uprooting people from their homes. As the government struggles between federal and provincial power, some individual provinces feel as if they are being swept into one giant, uniform province. The province most distraught by this idea is Quebec, who under certain provincial leaders has been fighting for separation and sovereignty form the rest of the country for many years. With referendums every four years and “language police” on the prowl citing local businesses for violating language laws, a number of individuals and companies have simply decided to leave the province, or even the country, rather than bear witness to what becomes of the province of Quebec.

 

Canadians and Americans share a most similar national identity. Both countries exude confidence, promise, and independence. They both recognize their strengths and weaknesses, and embrace them to make both countries better off. For example, the North American Free Trade Agreement was testament to the fact that both countries could thrive doing what they do best. With both countries exporting above 30% of their GDP’s, America relies on Canada’s natural resources for products like timber and minerals, while the Canada relies on the U.S. for a variety of manufactured goods.

 Both countries have always been ready to fight for what they believe in, and although the U.S. has had a far more active role in fighting wars due to its enormous and powerful army, Canada has always been an ally ready to help in any way it could.

The area in which the two countries are perhaps most different is in their economic systems. Although on a broad spectrum Canada and the United States may not lie terribly far apart from one another, their differences abound in many aspects of their economies.

Both countries are considered to have mixed economies, with a combination of public and private ownership; however, Canada lies further to the left than the U.S., implying that they have more government control than their neighbors to the south. This can be seen in a variety of areas. One, for example, is labor. While unions have been declining in the United States – about 16% of U.S. workers are union members – they remain strong in Canada, including about 37% of Canadian workers. More than 2 million Canadian workers are employed in government service industries. Approximately 2,900,000 workers are employed in government service industries in the U.S. When these proportions are considered in relation to respective populations, the difference is staggering: approximately 6.4% in Canada versus 1.1% in America. Clearly, the U.S. is far more privatized than Canada, especially in matters involving the economy.

 

The most glaring example that illustrates America’s privatization versus the public nature of businesses in Canada is the two countries health care systems. They are both very complex, yet very different.

In the U.S., health care is more or less private. Medicare and Medicaid do exist, but are only for the extremely indigent or the elderly. This leaves the remainder of the population in the hands of HMO’s, employer health care, or worst of all, completely private health care.

For a family to be insured through Medicaid, they must have incomes between 100 and 200% of the poverty line, which is $13,290 for a family of three. Being even $10 away from this cutoff immediately removes a family from being eligible for public health care, but it does not make them any more able to pay for private health care. HMO’s were designed in the 1980’s to make the health care system more efficient, but they have done anything but that. Many serious diseases go untreated or even undiagnosed by doctors working for HMO’s, because in an attempt to save money, HMO’s offer doctors who delay treatment of certain symptoms in hopes that they will go away bonuses. This leaves simply seeking private treatment, which can often be a crushing source of debt. The Kaiser Family Foundation issued a report that described a mother taking her son to the hospital with a broken leg. She missed the Medicaid cutoff by $4. The trip left her with a hospital bill of $6,000. She pays off $25 per month, and after seven years, she still owes the hospital $1,790.

 

In Canada, the system is very different. All you need to do to qualify for Medicare is be a Canadian citizen. Since Canada became a nation in 1867, health care had more or less been the responsibility of the individual provinces. This posed a serious problem, however. It was detrimental to businesses in provinces that charged taxes on employers to pay for health care, as it put those provinces in less of a competitive position from a business standpoint than businesses in provinces that did not engage in this practice. After the Second World War, the government attempted to keep some elements of local control, while creating some uniformity throughout the country. The solution was tax collection by the federal government.

At first, a federal-provincial consensus was difficult to arrive at, but through its spending power, the government made an offer no province could refuse. In order to bring all of Canada’s provinces into a national health plan, the government offered to pay half the costs of hospitals. Later, its payment of half the costs of doctor’s services was added to the list. The 1984 Canada Health Act brought together these two plans. The Act comprised five mutually reinforcing principles whose purpose was to guarantee access and reasonable equity.

The first principle of the Act was portability, which ensured that Canadian citizens would be eligible for coverage in all provinces. This principle allowed for ample flexibility in the labor force, allowing employees to move from province to province for job opportunities. This also meant that if a specific treatment required by a patient was not available in one part of the country, the patient could seek the treatment in another province, thus ensuring good coverage for all citizens while at the same time using resources efficiently.

 

The second principle is the prohibition of any and all for-profit medical coverage. Public administration, as opposed to private, offers many benefits. It allows governments to distribute services efficiently and effectively, without the need for excessive record keeping and surveillance of private contracts. It allows for public debate and planning, and provides citizens with a feeling of integration and continuity, more so than private programs. Most importantly, it ensures the development of systematic coverage in equitable ways, by requiring every citizen to pay some amount of taxes for the system, without an “opt-out” option.

The third principle is universality. Compared to the private administration of health care, not only is the fact that every single citizen is covered more efficient, it is also cheaper. Subsidies were offered to about three quarters of the population as a part of a two-tiered program, depending on the exact income cutoff, was rejected as it was decided by the 1964 Hall Royal Commission that the costs of such a program would certainly outweigh the benefits.

The fourth principle is accessibility. This means that access to medical care is based on need, and not on one’s ability to pay. The cornerstone of this principle is that health services should be provided under equal terms and conditions, which means that two-tier systems, user fees, or anything else that would lead to any differentials in the system, from preferred access to different facilities for different payment needs, are prohibited. Another point is that physicians with reputations for being of higher quality may not charge higher fees, and physicians who wish to lower their fees below the negotiated standard are forbidden from doing so.

 

In the language of the Health Care Act, “reasonable compensation for all ensured services” is required. This principle guarantees that individual providers of health care (only doctors and dentists are mentioned in the list) must receive decent pay in order to ensure quality, stability, and fairness. A reference to reasonable compensation for hospitals is also made in the Act, thus including the services of anyone who works in a hospital.

The last principle is comprehensiveness. Health care provision is not required by law to extend beyond care that is deemed medically necessary and provided by doctors and hospitals. It does however include every imaginable service that may be defined as such

The basic idea is a health care system providing public payment for private practice and private provision. The government pays, but the bulk of the actual provision is left to those who provided health care before the public system was implemented. The only major change then, was the shifting of the burden of paying for the services from individuals to the provinces. Any province that contravenes the principles of the Health Care Act faces having its funding withheld by the federal government. Provinces control hospitals through negotiated budget allocations, and set standards for care to be followed in the hospitals. Doctors, who along with locally appointed boards run the hospitals, are guaranteed payment under a negotiated fee for service program.

 

The provinces vary greatly in wealth and population. For example, Prince Edward Island’s population consists of about 140,000 people, while Ontario boasts over 11 million. However, federal equalization payments have allowed the poorer provinces’ per capita health care spending to remain more or less in sync with the wealthier provinces. At the same time, each province is given enough independence and flexibility to implement their own means of delivering health care. This, in turn, creates the problem of estimating and limiting expenditures. The federal government felt that the method that was in place, which essentially involved writing the provinces blank checks, was no longer the best method. So in 1977 the government shifted its support from cash to the creation of tax space for provincial governments, while capping its transfer payments to the provinces as well. By 1995, health transfer payments were eliminated altogether. Now, federal funding for health, post-secondary education, and social assistance have all been placed into the new Canada Health and Social Transfer program, which makes it impossible to calculate exactly what the federal contribution to healthcare funding is.

This process has its consequences, though, the most important being that provinces strapped for cash are not very willing to make an effort to implement the five principles discussed above. That is, without contributions from the federal government, the provinces are less likely to listen to them and do things in the exact manner they were set out in the Canada Health Act. The provinces’ responses to the cutbacks have included reductions in hospital spending, and closing of hospitals altogether. Many remaining hospitals have been severely restricted by provincial directives, and have been placed under regional boards that have budgets determined by the province. Other ways that provinces have dealt with these cutbacks have been by decreasing or removing public spending from certain services, and by failing to cover new treatments and services. It is for this reason that many Canadians are forced to seek treatment involving new and expensive technologies in richer provinces, like Ontario, or in the United States.

 

The Canada Health Act covers all services that are provided by a hospital or are defined as medically necessary and provided by a doctor. Coverage for inpatient prescription drugs and outpatient tests and procedures is also provided. However, coverage for a variety of services is limited, thus restricting access. The further care is removed from hospitals and doctors, the further it is removed from the Canada Health Act. Therefore, the Medicare system does not cover services provided by nursing homes, residential care services, or institutions for the mentally ill. User fees are usually charged for these services, and the care is more likely to be provided by for-profit firms. This is illustrated by the fact that the amount of health care paid for privately rose from 23.3% in 1983, to 30.3% in 1998.

The problem of adverse selection, a fairly common one for health insurance companies, is not an issue in Canada. A lack of competition arises as a result of the fact no private sector exists, thus eliminating competition among insurers to avoid high-risk individuals, or to set higher premiums for those with higher cost illnesses. Canada is one of the only countries that does not have a private sector for the wealthy to exploit. On the other hand, this system does not really provide a structure that encourages containing costs. In countries with private insurance companies, the companies may negotiate hospital fees and doctor fees, and individuals may choose plans based on quality and price. Canada does not offer such options, although the concept of everyone having access to basic health care at no charge seems more appealing than a select group of people who are either living below the poverty line, are quite ill, or are relatively wealthy being able to choose from a variety of health plans that the average citizen cannot afford.

 

Although Canada is not able to benefit form the obvious cost-reducing mechanisms that go with health insurance, other cost-cutting measures can be exploited, like the time-honored practices of restricting entry and limiting prices. For example, the government places constraints on hospital bed supply, and on the pool of specialized physicians. By restricting supply, the government may affect prices. That is, controls on hospital rates and physician’s fees are effective. Also noteworthy is the fact that Canada’s administrative costs constitute less than 2% of all health care expenditures. This number is considerably lower than that of a U.S. Blue Cross Blue Shield, or any other commercial health insurance plans of the sort.

Typically, competition is believed to increase any industry’s efficiency. However, this does not seem to be the case for the health care industry, as can be seen by simply looking at the different requirements for Medicare in Canada and the United States. In the U.S., you need to be of a certain age, your income has to fall below a certain cutoff, your assets need to equal a certain amount, or you need to have a certain illness or disability. In Canada, you need to be Canadian, and that’s it. The presence of competition in this industry does not necessarily lead to equitable distribution of services, or to a reduction in costs.

 

However, even in spite of  the establishment of a health care system that is beneficial to so many, some are fighting to privatize the system and make it more like that of the U.S. They have several arguments, including one that states that the costs of health-care are skyrocketing. This may be true on some levels, but the fact that health care costs are only 10% of the GDP in Canada, while they are 14% in the U.S., must be accounted for. Also, the only component of the system whose costs are rising, drugs, is already in the private sector. Another argument is that the private sector is more efficient. This myth is also easily debunked when you consider that fact administration accounts for 34% of costs in private hospitals, but only 26% in public hospitals. In addition to these facts, the following numbers from the World Health Report 2000 should be considered: in terms of overall health care performance, Canada ranked #30, spending about 10% of its GDP on health care, which comes out to $1,783 per person. The United States ranked #37 in overall performance, spending about 14% of its GDP on health care, which comes to about $4,187 per person. Canada spends 72% of its total health care spending on public health care, while the U.S. spends 44.1% on public health care. And the fact that Canadians spend less has not put them at a disadvantage in terms of their health either. The expected healthy life span of a Canadian is 72.0 years, while that of an American is 70.0 years. The infant mortality rate in Canada is 5.5 per 1000 live births, while it is 7.2 per 1000 live births in the U.S.

Canada and the United States plainly have plenty of similar traits, but many differences exist as well. These differences tend to be each country’s defining characteristic, and in a way symbolize their respective mentalities. While each country’s system would only be complemented by a degree of integration of the other country’s system, the correct formula seems to evade both countries. The U.S. system has provided the country with a stronger and sounder economy, while Canada’s system looks out for the welfare of its citizens above all, even at the expense of a relatively weak dollar on the world market. As Canada looks to American behavior for answers to its financial problems, and the U.S. looks to Canadian behavior to solve its efficiency problems, the future is unclear for both countries.

 

   References

Climan, Lisa and Adria Scharf. “Putting Names on the Numbers: Testimonies of the Uninsured.” Dollars & Sense, No. 235 May/June 2001. p. 32.

Frank, Ellen. “Making Patients Pay.” Dollars & Sense, No. 235 May/June 2001. p. 34.

Gorkun, Alkin. “Health Care Systems at a Glance.” Dollars & Sense, No. 235 May/June  2001. p. 38.

Rebick, Judy. “The Scaremongers.” Elm Street, April 2002. p. 90.

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