MAY 15, 2009 8:52AM

Let's compare Public and Private health care costs, eh?

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Putting aside discussions about torture, its effectiveness or whether the perpetrators should be prosecuted, health care still dominates the front page news. Recently, the Obama Administration has put forward a proposal to cut health care costs. In response, private health care providers have offered to cut down costs by about $2 trillion over the next decade. According to these providers, the proposed costs could lead to about $2,500 in savings per year for a typical American family by the fifth year of the program. On paper, this proposal looks very attractive (and ambitious), but I sincerely doubt it help uninsured or under-insured families.

A few posts ago, I did a cool comparison of the private and Universal health care systems in the US and Canada. You can find them here, here and here. I decided to put the subject aside for awhile, but given the wild misconceptions about Canadian health care I've been reading in the comment sections at Salon, Slate and the Huffington Post, I figured it was time for me to weigh in again.

This time around, I decided to focus on what it would cost someone to go to the emergency room of a typical hospital after an accident, directly comparing the costs a person would have to pay under a public (also known as 'single-payer' or Universal healthcare) and private medical insurance systems.

Before I get into it, I want to make it clear that systems like Medicare and Medicaid are not the same as the Canadian Universal system I'm talking about. Medicare and Medicate actually operate the same way as the private medical insurance industry, with co-pays, deductible and all that jazz.

As I discussed in Part IA and Part II of my first posts about this stuff, in a public health care system (such as the one in Canada), the provincial government spends on average between three and four thousand dollars US per person per year (similar to France, BTW). Don't forget, though, that the Universal health care system in Canada isn't free. On average, a Canuck (or Kanuk, eh) pays between three and four thousand dollars in taxes every year to get this benefit (some pay more while others pay less). For the table below, I'm saying that it's four thousand. (Please remember that this is a simplification. See Part II about the caveats related to income taxes and public health care coverage).

Okay, here's the comparison:

For the hospitalization costs, I used this nifty website. According to the site, the average inpatient charges for fractures are about $9,500 (in 2005). Soliel (yes, that is her login name), a Salon reader who is very concerned (and a little bit clueless) about the Universal health care system, has a monthly premium payment for her private plan of about $350. This is very close to what a single person would pay under my own health insurance plan, and I've used it for the table as well. For the insurance coverage, I used my plan, which has an automatic $300 deductible (that means I pay the first $300, fellow Canadians), and requires me to pay an additional 20% of all medical costs above and beyond that 300 bucks. Ice cream's on Blue Cross/Blue Shield, everybody.

In case you're wondering, I am aware that not all health care plans are like mine. I have friends who use a different insurance company, and their hospitalization costs are very low (<$500). However, their plan only works for two local hospitals. If they have a tragic blimping accident in Delaware, for example, the hospitalizations would be referred to as out-of-network expenses (remember those?), and would be (much) more expensive than the values shown in the second column.

All right, here's the comparison. This time I really mean it:

Items                                 No Insurance          With Insurance          Universal

Annual Premium                 $0                             $4,200#                     $0

Increase in Taxes               $0                              $0                                 $4,000

Ambulance/Emergency   $500                       $0                                 $500

Hospitalization                     $9,500                   $2,140                        $0

and Follow up*                    $4,300                     $680                            $0

Total                                        $14,300                    $7,020                      $4,500

* Twice a week for 10 weeks plus 4 medical visits with a specialist
* Cost for each physio appointment: $175 (co-insurance is $25 - beyond the first $300)
* Cost for each appointment with a specialist: $200 (co-pay is $45)

(These costs come from statements for my own physio and medical visits, detailing the costs billed to my insurance company.)

#If we include the portion my employer pays for the annual premium, this value becomes about $8,400. Thus, the final cost would be $11, 220 at the bottom of the column.

Looking at the table, it's obvious that under a true Universal health care system (unlike Medicare or Medicaid), you pay less for the hospital visit. (Guess how much the difference would be for multiple hospital visits.) And as I discussed in a previous post, in the case of an emergency a Canadian would receive the same medical care as an American, though the Canadian might have to wait longer for non-vital follow-up care.

In a future post, I'll bust some myths about the Universal health care system in Canada. This will hopefully reassure people like Soliel, though I'm not very hopeful.

Update (May 21st, 2009)

Again, here's another article I wrote on health care and spreading the risk. You can find the article here

Update (June 6th, 2009)

For the more academically inclined, I found a few peer-reviewed papers related to what I discussed above. I know that many more publications exist, but I will leave to others to look for them.


Decker, S.L., Remler, D.K. (2004) How much might universal health insurance reduce socioeconomic disparities in health? A comparison of the US and Canada. Applied Health Economics and Health Policy, 3 (4), pp. 205-216.


O'Hara, B. (2004) Do medical out-of-pocket expenses thrust families into poverty? Journal of Health Care for the Poor and Underserved, 15 (1), pp. 63-75.


Himmelstein, D.U., Thorne, D., Warren, E., Woolhandler (2009) Medical Bankrupcy in the United States, 2007: Results of a National Study. The American Journal of Medicine, Vol. 122, No. 8, pp. 741-746. 


Himmelstein D.U., Warren E., Thorne D., Woolhandler S. (2005) Illness and injury as contributors to bankruptcy. Health affairs (Project Hope) Suppl Web Exclusives: W5-63-W5-73.


Woolhandler S., Campbell T., Himmelstein D.U. (2003) Costs of health care administration in the United States and Canada. The New England journal of medicine, 349 (8), pp. 768-75. 


This one also discusses the impact of loss of income when someone falls severely ill:


Smith, J. (1999) Healthy bodies and thick wallets: The dual relation between health and economic status. Journal of Economic Perspectives, 13 (2), pp. 145-166.


Update (Aug. 8, 2009)


I wrote a somewhat related article to this one. In it, I discussed that implementing a public health care system will not lead the U.S. into a communist regime (nor a fascist one) any time soon:


Fear of a Red Planet (Socialism isn't Communism--Really!)


Update (Aug. 9, 2009)


Another related post:


US vs Canada: Who will be ready when H1N1 strikes again?


Update (Aug. 23, 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".


Update (Sept. 3rd, 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.


Update (Sept. 19th, 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!


Update (Dec. 9th, 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


I'm glad to see that my own estimates for Ontario and Quebec are the same as the Canadian average shown in this latest post.


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


Update (Nov. 6, 2010)

I recently found the following newspaper article titled "GMs Healthcare Double Standard: Bad ideology trumps good business" published five years ago that is highly relevant to what I discussed above. Highlights are:

"Yet just across the Detroit River in Ontario, the company's subsidiary-like the subsidiaries of Ford, DaimlerChrysler and other U.S. firms----strongly endorses Canada's national health system.

"The Canadian plan has been a significant advantage for investing in Canada," says GM Canada spokesman David Patterson, noting that in the United States, GM spends $1,400 per car on health benefits. Indeed, with the provinces sharing 75 percent of the cost of Canadian healthcare, it's no surprise that GM, Ford and Chrysler have all been shifting car production across the border at such a rate that the name "Motor City" should belong to Windsor, not Detroit.

Just two years ago, GM Canada's CEO Michael Grimaldi sent a letter co-signed by Canadian Autoworkers Union president Buzz Hargrave to a Crown Commission considering reforms of Canada's 35-year-old national health program that said, "The public healthcare system significantly reduces total labour costs for automobile manufacturing firms, compared to their cost of equivalent private insurance services purchased by U.S.-based automakers." "

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Jane: Thanks, I am glad you found it useful. Hopefully, others will too. In my book, health care cost is only a small part of the problem. In truth, the main issue is the one related to coverage.
Excellent chart. Another thing to consider is that your chart covers only one medical incident. If the person in question had additional ongoing medical problems requiring clinic visits, lab tests, xrays, scans, prescriptions, etc., the costs would continue to rise, indefinitely in the case of the uninsured, and up to the maximum out of pocket for the insured.

For example, if the insurance in question had a $5,000 maximum out of pocket (in addition to the $300 deductible) the person could end up paying $9,500 for health care for the calendar year -- more than twice as much as the Universal program. And that's IF the person has good insurance.
Mishima666: Thanks! This is true that this example is for one incident (for a given year). Since the costs for the Universal health care system are fixed, any additional medical consultations (co-pays, etc.) or hospital visits will add to this difference. This explains the sentence I added (in parentheses) in the second to last paragraph.

I hope other people will find this post useful.

Note that I will post another interesting article on health care probably tomorrow morning before I leave for vacation.
Kanuk, I too am Canadian. You say we pay more taxes and we do. But at least, in Brisitsh Columbia, the BCMSP is paid premiums. If your work is paying for your health care, it shows on your pay stub. If you are paying yourself, you get a bill from BCMSP that you can pay monthly, bi-monthly etc. Your insurance premuim is based on your income, Each province runs its own health care program guided by Federal Standards, the only thing wrong with Canadian Health Care is a lack of infrastructure, resulting in wait lists. And doctors that see they can make a huge amount of money, leaving Canada to work in the United States where they can bill out enourmous fees, fees that are regulated in Canada.
Deborah: Thanks for providing additional information about the system in British Columbia. I am aware that in Ontario there is a special income tax for health care. I also discussed many issues you raised, such as each province having its own system and higher wait times, in previous posts:

Health Care Comparison Part II

Health Care Comparison Part IA

Health Care Comparison Part I

Some of the issues are discussed in the comments.
Deborah: I forgot to add that you are right about physicians and scientists (myself included) moving south. However, I also personally know many physicians/researchers who refused jobs in the US for philosophical or political reasons, even though they would make twice as much money here.
Nice job.

You put some work into this and I appreciate that.

I think you estimate the insurance premiums too low by about 6,000 dollars or so.

The way it stands here in the US is that the profit margin of 20-30% eats up actual care. Regardless of how we pay for health care, we need to pay for "health care" and not a Cigna CEO's 1.8 billion in stock options or his multi-million dollar salary for engineering off shore bank accounts. That's not health care it's financial shenanigans and I don't want to pay for it.

With my Medicare coverage and being in fair health with more than one chronic condition, I can expect to pay between 3-5 thousand dollars a year, but if my health declines my out of pocket should not increase by much at all.

Public plans offer security and stability to the delivery of health care here.
onelucybaxter: Thank you very much for sharing your experience. I agree that out-of-pocket insurance premiums can be larger than the value I used in the table. For instance, I recently read about one reader who indicated that he was paying about $15,600 in insurance premiums every year for two people. As I have probably indicated in the text (it has been a while since I wrote it!) about half of my premium is paid by my employer. Thus, the actual or effective premium should be about $8,000. I will add a note to this effect in the text very soon. Thanks again for dropping by!

Thank you so much for commenting so I could find this piece. There are so many articles being published on OS that I often miss these.

Your comparisons are outstanding and if you don't mind, I'd like to link this to our US vs Canada health care piece.

Thank you.

"A transplanted academic who is trying to save people's lives using mathematical equations and theoretical derivations."

I went to your profile picture to click on the Friendy-button and almost stopped because of that Math thing. I'm hopelessly challenged in that direction, but clicked on you any way! ;)
Blue Roses: Thank you! Don't worry about the mathematical equations. I will keep them under wraps in my posts.

Yes, feel free to link this post to yours.

All the best
I have heard that in most Provinces of Canada you are disqualified for a heart by-pass or kidney transplant at something like 62 or 65 is this true? Regards
DDutton: Thanks for dropping by. As I discussed somewhere in the comments section of one or two of my posts on health care, the final decision as to whether or not you can have a heart-by-pass surgery, as an example, is between you and your physician (and heart surgeon in this case). If your doctor believes that you can sustain the surgery, the government will pay no matter how old you are. That will be the end of it. The government does not question the medical decision of physicians, unless there is fraud involved (very few cases).

My friend’s father who lives in Quebec recently had a brain tumor removed. He is in his late 60s. There was no question about the provincial government paying for the surgery. This is actually a very expensive surgery. He stayed at the hospital for two months, which included a long rehabilitation to learn how to walk again. The total cost for his surgery, hospital stay, and physiotherapy/rehabilitation: $0. He did pay extra to get a private room, but when you share a room, it is free (similar to anywhere else).
Thanks so much for the in-depth posts. I have not had time to read your other ones yet, but I plan to do so tonight. This is providing very detailed information that is very helpful in explaining options.

My fear of blimping accidents in Deleware has increased though. I'm in Deleware alot...
m k: thanks for dropping by. I forgot to respond to your comment. Glad that the post has been useful.

Be careful in Delaware! ;-)