The American States and Canada: A Comparative Analysis of Health Care Spending

Abstract

Most comparisons of the relative effectiveness of cost containment in the Canadian and U.S. health systems trace Canada's greater success to its single-payer approach. However, these studies ignore the substantial variation that exists in hospital and personal health care spending among both the American states and the provinces and territories of Canada. Four American states have adopted all-payer hospital rate setting; one other uses competitive bidding. All five show rates of growth in per capita hospital spending comparable to (and in some cases, lower than) the Canadian jurisdictions. Hospital spending, as a percentage of state gross domestic product (GDP), declined or remained constant in four of the five states. In four out of the five, growth in per capita spending on personal care, as a percentage of GDP, remained or fell below the national average. By contrast, in Canada, per capita spending on both hospitals and personal health care increased as a percentage of GDP in ten out of eleven jurisdictions. In each of the U.S. states, government played a central role in structuring the terms of payment and thus strengthened the hand of purchasers over providers. This strategy, rather than specifically a single-payer or universal health insurance approach, seems to be the key to limiting the growth in health costs to the growth in state or national income.