MARCH 11, 2009 12:15PM

Health Care Comparison: Universal versus U.S.-Style Systems

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There has been a significant amount of discussion about the U.S. health care system over the last week or so since Obama’s decision to put together a health care summit. Some of these intense discussions can be found at both Salon.com and Open Salon:

Cindy Ross' Blog

Mishima666's Blog

Salon's Joe Conason

There are a great number of passionate and diverse views on this topic, but what struck me most was how many people have partially or entirely erroneous information about either or both the U.S. and Universal (Canadian) health care systems. As someone who is directly familiar with both (as a user), I would like to share my experiences by comparing such key aspects as cost issues, access, quality of service, and private versus public management among others.


Before I start the comparison however, I want to point out that there are distinct advantages and disadvantages--even significant problems--to both systems. Neither system is perfect. Those issues will be discussed below and a subsequent post.


First, it is important to discuss the context of the comparison. I lived in Canada for just over 30 years before moving to the U.S. in 2001 (as an interesting side note, I flew in on Sept. 10th, 2001 to find a place to stay; you can guess how difficult it was to fly back home). I've lived in the provinces of Ontario and Quebec (each having their own Universal health care system) and I now live somewhere in the southern U.S. I am currently “insured” via the well-known company Blue Cross - Blue Shield for my health benefits.

 

 Is There Such a Thing as Free Health Care


Time and time again, I see posts here, at Salon and elsewhere indicating that Universal health care is free (such as in Canada, Europe, and Japan). Michael Moore even perpetuated this myth in his movie, Sicko. Although most of the Universal health care or single-payment systems do not have out of pocket co-pay, they are not free. In Canada, as anywhere else, the Universal health care system is paid via income and other taxes. Each province manages its own system.


Given this, here's a short and crude comparison between the U.S. and Canada. For this comparison, let's put a hypothetical married couple in the Southern U.S. state where I live, and another in Quebec and Ontario. All three couples will have combined income equal to $100,000. Let's also assume that the American and Canadian dollars are at-par (which actually happened last year). These comparisons do not include all potential deductions such as those associated with children, pre-tax retirement funds, mortgages in the U.S., etc. The table below uses approximate values from the 2008 tax rate.

 

Update March, 21: I slightly revised the income tax shown below based on other web sites that provided better information (some still provide contradicting information). The aftertax available income values slightly increased for Quebec, but a little bit more for Ontario.

 

                                                       U.S.                 Quebec            Ontario

Family Income                    $100,000         $100,000         $100,000

Max. Fed. Inc. Tax             $17,681            $21,710            $21,710

Max Prov./

State Inc. Tax*                  $0                         $20,000           $15,000

Health Insur. Costs**    ~$7,000                  ---                    ---

Other Taxes

(Soc. sec, Medicare)   ~$7,000     Included in Prov and Fed Taxes

After Tax Income            $68,319            $58,290           $63,290

 

  *There is no state income tax where I live. **Estimate base on my 2008 paycheck (fixed costs).  Note: the health care costs equal to ~$7,000 is for three people (me, my wife and our son). Thus, the true costs will be little bit lower for two people.

 

As discussed above, the values are very approximate and the effective after-tax income is probably larger for each couple than what is shown in the last row. Another point to keep in mind is that the sales taxes in Quebec and Ontario are about 13% to 15%, respectively, whereas where I live right now, it is about 8.0% (to compensate for the lack of state income tax). I will not discuss other items such as public schools or property taxes, but I know they can also be very high depending where you live. I also realize that very few states in the U.S. don't have an income tax, which would also change the table results.


Overall however, I can readily attest that that the after-tax income is much larger here than when I were living in either Ontario or Quebec.


Looking at the table above, the American couple comes out just about $10,000 richer than the Quebecois. However, one could also say that the cost for health care in Quebec for a couple with an income of $100,000 is about $10,000 per year. Except that this $10,000 isn't just for health care. It also includes unemployment benefits, social security, and medical leave, all of which are much more generous than in the U.S.


When I first moved here, I was beguiled by the apparent gain of what seemed like a free and clear ten grand. After living here nine years and experiencing the true cost of private health insurance, I see things a little differently. I'll explain it more thoroughly later.  It's also true that if you earn less in America (and Canada), you pay less in taxes but just as much for health care (provided that you can afford private health care at all), since the cost is fixed and is not dependent upon the income of the couple. Canadians don’t have that problem.

                                                                                                 

So here's my question: pretending that we're all earning this hypothetical $100,000, would Americans be willing to lose about $10,000 each year to get "free" health care? I would, and I know some of my friends who would. On the other hand, given the general antipathy in the U.S. for paying taxes (which is an ongoing political issue), I strongly doubt that the majority of Americans would be willing to lose that much money to get access to universal health care.


For people interested in seeing how much tax you would pay if you were living in Canada, please go to the following website. I'm sure many of you would be shocked to see how little money is left after taxes on a monthly pay check (up to 45% if you live in Quebec). However, Canadians get their deductions reimbursed after they file their taxes for the year. Less money now, more later on.


In Part II, I'm going to discuss the rest of the topics listed above, which will be within the next week. I thank anyone in advance for their comments. Given my busy schedule, I may not be able to respond often, but I will try my best.

UPDATES 

  • I added a follow-up article to this post, which describes the how much the provinces of Quebec and Ontario pay for health care (March 14th, 2009): Update to Part I
  • I was finally able to finish Part II (March 29th, 2009)
  • I wrote another short article that describes a comparison analysis between the Universal and Privatized health care systems related to out-of-pocket user costs for a hospital visit. You can find the article here. (May 15th, 2009)
  • Again, here's another article I wrote on health care and spreading the risk. You can find the article here.  (May 21st, 2009)
  • Another related one: US vs Canada: Who will be ready when H1N1 strikes again? (Aug. 9, 2009)
  • Here is a post I wrote about someone who does not want people with pre-existing medical conditions on his insurance plan: Insurance: "Life is not fair & it will drive up my rates" (Aug. 23, 2009)
  • This post is a response to Whole Foods CEO John Mackey about personal responsibility. In a few words, it won't help us saving our health care system: Advocating personal responsibility in health: Bullshit! The article was extremely well received. (Sept. 3rd, 2009)
  • This post describes that 45,000 people die every year due to the lack of medical insurance coverage. This is equivalent to having an airplane crashing every day for an entire year. I compare the results with the effort placed by the federal government to reduce the number of fatal motor vehicle crashes which stands at 40,000 deaths per year: "Death Panel" Results: 45,000 Annual Deaths! (Sept. 19th, 2009)

  • This new post shows how the United States arrives dead last for health care delivery, even though expenditures per capita are twice as much as in Canada: Expensive health care is not always the best health care. (December 9, 2009)

  • Update (March 1st, 2010)

     

    This latest post summarizes the key issues I have been discussing over the last year. I also included a detailed example to support the discussion points.

     

    The case against the U.S. health care system

      


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Thanks for the interesting post. I would be more than willing to pay taxes instead of the wildly expensive, completely unreliable health care. I've spent much more than $14000 in the last year for healthcare for my child and myself. And I do NOT make $100,000.

Does anyone here think healthcare in Canada is free? I'm surprised that there were any posts to that effect. Most people already pay much more for health care here, in and out of their taxes, than Canada does, but for some reason, when the charge is attached to the word 'tax' some Americans forget how to count.
Bottom line - for Canadians: no bankruptcy or fighting with insurance companies if a catastrophic illness or accident happens. No palming off the non-insured onto hospital ERs, who then have to make up the cost from paying customers. My view is $ isn't everything (and lots of people aren't in the $100,000 range) and some, yes, socialism is good for individuals and societies.
Rated. This is a very informative and interested, fact-based article. I'm interested to see where you go with this in Part II.

I'll also recommend my earlier article in which I attempt to explain health care in Canada to Americans, and particularly to dispel simplifications about one "national" system. I didn't touch on the simplification that it is "free", either.

Canada does not have a "nationalized" health care system
I have paid so many thousands of dollars in health care over the years... I would gladly pay a premium to have it not be tied to my job. With it tied to your job you are at such risk. Lose a job and you are out of income and health insurance all at one time. Same thing if you depend on a spouse for insurance and if you get divorced.

Not having universal health care is so draining/frustrating/depressing (take your pick). You get trapped into horrible situations to either keep your insurance, or in trying to get insured. All the while hoping that you and those you love don't get really sick or injured.

Our current situation is just so hopeless. I really hope this gets changed. The democrats will utterly fail if they don't do this well and fast.
Thank you very much for everyone's comments. It is greatly appreciated.

odetteroulette: I agree that many people know it is not free. However, there are many who believe it is, as I noticed in the links above and elsewhere. In some cases, people implicitly refer to the term "free" because there is no co-pay when someone shows up at the hospital or for a medical appointment (note: the Quebec Government thought about using some form of co-pay for people showing up at the emergency many years ago – to be discussed in part II).

If I can add the following (for everybody): with the exception of the birth of my child, the total out-of-pocket costs (deductible, co-pay, etc.) I pay on a yearly average is between $1,000 and $2,000, which is below the difference I would have paid if I were to live in Ontario or Quebec; if I remember correctly, my share of the costs came between $3,000 and $4,000 for my wife giving birth. I hope it will remain this way for a while. In any case, I will discuss other interesting topics within the next few days.
Very interesting and informative. I am in favor of single payer nationalized healthcare, but I have to admit the price tag is pretty high, and the tax is pretty high in Canada overall.
Did you say you had to pay $3-4000 out-of-pocket for your wife's childbirth in Canada? That sounds very high. For our HMO plan here in the US, we just paid a $100 flat fee for all the pre-natal and childbirth services.
Taxes in Canada are not higher because of health care. The total government spending on health care in Canada is lower than in the US. So if somehow the US could magically completely switch overnight to a system (or collection of systems) like the health insurance systems in Canada, and all the current public health insurance programs and subsidies in the US were to end, total government spending there would actually be lower. So either your taxes could actually be lowered or, hopefully, your governments' deficits reduced a little.
Icemilkcoffe: I need to look into my files, but it was quite high. Other providers here provide much better coverage for births, but they are not as good to cover for other parts of their health insurance plan. I know some people who switch when they know the family member will give birth over the next fiscal year.

DonOntario: I agree with your assessment about the investment in health care is probably lower in Canada (which also explains why the service in general is of lower quality there as well; to be discussed later). However, this is very complex issue, which includes the national depth and funding related to other social services among others. While living in Quebec, the number one issue the government was facing was always related to the funding of health care. Up to now, the funding of health care is still considered a significant problem and this despite the high taxes they have over there. I attached an interesting comparison about income taxes between various countries: http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg. It is interesting to see how the U.S. is among the lowest among most industrialized countries.
This one includes all types of taxes:
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
This may be of interest too:

http://en.wikipedia.org/wiki/Health_care_systems

In general, I do not like to use Wikipedia as reliable source of information, but it is useful information.
Hi DonOntario: After my last post, I put more thoughts about your comment while driving home. Unfortunately, I do not believe in a second that if the U.S. were to change to a single-point system, the income or any other taxes would go down. First, I have never heard any politicians making such statement, which would be a very good pitch to get elected (if we make abstraction of ideology issue in certain parts of the country).

Second, although the U.S. appears to spend more on health care (according to the link above – note: as an academic who has worked with international data, I take values from WHO or other international organizations with a large grain of salt), this only applies to the portion of the population who actually uses the system (they are other reasons which I will explain in Part II). I know many people who do not have medical insurance where I live and will not go see a medical doctor or go to the emergency, unless it is absolutely necessary. Even for me, I always think twice before I go see a general practitioner and even more so with a specialist (because of the co-pay: $25 and $45, respectively). I try to avoid the emergency at all, unless I have no other option (obviously this does not apply when you are critically injured or ill). With most health insurance plans, an emergency visit costs at least $500, which is the minimum yearly deductible for my plan. Now, if we allow everybody in the U.S. to get “free” access (that is, without co-pay) to any medical facility, I do not see the overall cost going down (even if we eliminate the overhead costs associated with privatization). In any case, I will discuss it further very soon. Thanks again for sharing your thoughts.

p.s. I also noted that the three states (Vermont, Minnesota, and Massachesetts) that offer a system closer to the universal system also have among the highest state income tax rates: http://www.taxadmin.org/fta/rate/ind_inc.html
Hi Cindy,

yes, I agree. I thought about it. I may re-post the update as a different post when I get back from running errands. Thanks!
Very interesting post. This should have been a cover piece.

The thing is, here in the U.S. you never know what your health care expenses will be. Most people have health insurance from employment, and every year the employer can change the health plan. Or you can get laid off and have to pay for COBRA insurance.

If your hypothetical couple is paying for insurance through COBRA, you can add another $10,000 to their total. And then there's the deductible and copays. With the COBRA insurance my wife and I have, we could end up paying as much as $21,000 out of pocket -- $10K for COBRA, $1K deductible, and $10K additional max out of pocket.

But then -- the maximum per person insurance payment is $100K per year. After that you basically have no insurance. So if either one of us had a very serious and expensive illness, we literally could be financially wiped out, even with insurance.

And the thing is, these expenses would be the same for a couple making $20K per year. Here in the U.S. with the "best health care system in the world," almost all of us are one serious illness away from bankruptcy.

I have already determined that I will not be financially ruined by medical expenses. This means that I am prepared to die much earlier than I otherwise would have. If the day comes when the doc says that I need a $200K heart valve replacement, or something like that, forget about it, I'm done.

What I find fascinating is the Republican party's approach to health care. If you want a good laugh check out their 2008 platform on health care. The word "pathetic" doesn't begin to describe it.

There are things like "Clear information about health care empowers patients. It lets consumers make better decisions about where to spend their health care dollars, thereby fostering competition and lowering costs." What utter bullshit. I spent 8 years as a data analyst in the financial office of a large hospital, and the expenses related to a serious illness are IMPOSSIBLE to predict with any accuracy, especially when you add in physician professional fees, and more especially when you add in continuing care throughout the year. But not to worry, because the Republicans will also give you a "health savings account," that will enable you to go bankrupt one day later than if you didn't have the account.

When it comes to health care the Republicans are the most clueless and worthless sons of bitches on the face of the earth.
Mishima666: Thank you very much for your comments. I agree with everything you wrote. Indeed, I did not touch people who are under COBRA. I knew someone who had to be on COBRA for about a m0nth and she had to pay her and her employer's contribution to her health care plan (~$1,000+). She was not very happy.

As you indicated, one of the main problems is related to the fact that if you have a major illness or severe disability, you do not know how much it will cost you in the end. I will try to find some time to discuss this and other issues within the next few days.