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Government and Policy

U.S. healthcare system in a shambles

While Canada’s healthcare system is continually under fire by critics across the board, medical care in the United States appears to be in even worse financial condition.

According to a series running this week in the San Francisco Chronicle (, the U.S. system of funding healthcare is on the verge of breakdown. “Employers, consumers and governments at every level are straining under the burden of a healthcare bill that is growing at a pace five or six times the rate of inflation,” says the first of five articles, written by reporter Victoria Colliver.

The public healthcare system is under enormous pressure from the nation’s 45 million uninsured Americans, who rush to hospital emergency rooms for basic care, states the feature, titled “In Critical Condition: Health Care in America.”

The U.S. is currently contending with the following problems:

• Medicare, the system designed to look after the elderly, will likely run out of funds by 2019 at the present rate of spending.

• The mainstream consumer of healthcare is usually covered by an insurance plan. But employer healthcare insurance premiums jumped an average of 11.2 percent in 2004, lower than the 13.9 percent reported last year, but still more than five times the rate of inflation, according to a survey by the Kaiser Foundation.

• According to the newspaper report, the United States spends nearly US$5,000 annually per person on healthcare – more than twice the amount of some other industrialized countries. By comparison, Canada spends 60 percent less per person than the U.S., but life expectancy is longer.

• Battles over healthcare costs are moving to the top of labour-union negotiations with corporations. A 139-day strike by Southern California grocery workers was resolved this year when union negotiators agreed to a contract that requires new workers to wait 12 months before qualifying for individual health coverage, and 30 months before family coverage kicks in.

The U.S. is wrestling with many of the same factors that are driving up costs in Canada. New medical technologies – everything from multi-slice CT scanners and more powerful MRIs to drug-coated stents – may be responsible for up to 50 percent of cost increases, as Americans push for new and expensive diagnostic tests and treatments.

Drugs represent the fastest component of the healthcare price tag, with Americans paying among the highest prices in the world for pharmaceuticals.

However, some elements are different in the U.S. In particular, it’s a more litigious society, and lawsuits against healthcare institutions and practitioners are draining cash from the system. In many states, high malpractice insurance costs have caused shortages in certain specialties. According to the Chronicle’s sources, the practice of “defensive” medicine – the ordering of additional tests or procedures to avoid litigation – has added considerably to healthcare costs.

And in a finding that favours the Canadian system, Harvard Medical School researchers reported earlier this year that a sizable part of U.S. healthcare spending has little to do with medicine. Instead, the U.S. spends nearly $400 billion per year on healthcare bureaucracy, essentially the administrative costs of insurers, hospitals, doctors, nursing homes and other institutions. In California, $45 billion of the $163 billion spent on healthcare, or 28 percent, went to administration.

(Researchers in other studies have found that Canada’s single payer system of healthcare actually reduces the bureaucracy and paperwork, in comparison with the United States.)

According to the San Francisco Chronicle, as the cost of care in the United States started rising rapidly in the late 1990s, insurers rushed to catch up by raising premiums. With the economy booming, employers were able to absorb those increases.

With the current downturn in the U.S. economy, things have changed. Premiums and out-of-pocket costs have increased. In California, workers paid 30 percent of their premium costs in 2003, up from 26 percent just a year earlier, according to the Kaiser Foundation.

As the Chronicle article states, “The United States has a healthcare system unique in the developed world. Costs are high, employers pay most of the bills and tens of millions have no coverage. Polls show that most Americans believe the system doesn’t work and want universal coverage.”