By carefully studying the Canadian and

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1 ON HEALTHCARE REFORM Universal Access and Cos Consrain Work In Canada and in Germany BY THOMAS P. WEIL, PhD Dr. Weil is presiden, Bedford Healh Associaes, Inc., Managemen Consulans for Healh and Hospial Services, Ashcville, NC. By carefully sudying he Canadian and German healhcare sysems, we may learn how o design a delivery sysem wihin our curren gross domesic produc expendiures for healh ha offers universal access, consumer choice, cos consrain, and high-qualiy paien care. The Unied Saes urgenly needs comprehensive healhcare reform o provide universal access and o consrain coss. Neiher he single-payer Canadian sysem nor he mulipayer German sysem is a oally appropriae model for he Unied Saes, bu we can learn wha migh be appropriae if we sudy how hose naions deliver hospial and oher healhcare services. In such a pursui, i is criical o remember ha any healhcare sysem involves compromises. The ways in which various naions organize and finance heir hospial, physician, and oher healhcare sen ices are ofen driven by many facors: preceden, consumer pressures, he naion's economic oulook, payer recepiviy, providers' aiude, and a hos of oher variables. Consumers, providers, hird-pary payers, and eleced officials agree ha our curren healhcare sysrem requires modificaions along he following lines: Providing every American wih a leas basiccomprehensive benefis Conrolling rising healhcare coss Mainaining a pluralisic approach ha allows consumer choice in coverage and in care Reforming delivery and conrolling he curren inflaionary rend in healhcare coss a prerequisie o successful economic recovery Wihin he conex of hese enes, I will discuss some lessons Americans could learn from he Canadian and German healhcare sysems. COST CONSTRAINTS The naional healh insurance plans in Canada MK\ he former Wes German)' provide universal, comprehensive naional healh insurance benefis a a fourh and a hird less respecively, of heir gross domesic produc (GOP) for healh, compared wih he Unied Saes (see Table, p. 76). Whereas he average 1990 hospial expendiure per capia in he Unied Saes was $998, i was $745 in Canada and S729 in Wes Germany. (All German saisics are from he former Wes Germany.) The Canadians.md Germans se naional healh policies and maximum healhcare expendiures in a way similar o ha proposed in he Summary Neiher he single-payer Canadian healhcare sysem nor he mulipayer German healhcare sysem is a oally appropriae model for he Unied Saes. Bu we can learn somehing by sudying boh. Naions such as Canada and Germany use global budgeary arge approaches, which have been shown o be more effecive in conrolling healhcare coss han he Unied Saes' micromanagemen mehodology of allocaing resources. As Congress decides on a basic comprehensive benefi package, i mus keep in mind ha a universal, comprehensive plan resuls in a significan addiional demand for healhcare services, as seen in Canada and in Germany. The Canadian and German healhcare sysems encourage consumers o selec heir physicians and hospials. Germany has a disinc separaion of communiy-based, fee-for-service physicians and hospial-based salaried docors. This arrangemen causes difficuly in providing coninuiy of paien care. 74 JULY-AUGUST 1993 HEALTH PROGRESS

2 Caholic Healh Associaion (CHA) reform plan, which recommends a naional healh board. This hoard would be similar in independence o he U.S. Federal Reserve Bank sysem and would recommend naional healhcare expendiures and allocae monies o sae healh organizaions (SHOs). Considerable empirical evidence shows ha hose naions using global budgeary arge approaches are more effecive in conrolling healhcare coss han hose relying more on decenralized mechanisms of allocaing resources. The success of his global budgeary arge model can be illusraed by he 1990 average hospial discharge coss of $4,130 and $2,972 in Canada and Wes Germany, respecively, in comparison o $6,535 in he Unied Saes (see Table, p. 77). Cos comparisons of Canadian and U.S. medium-size and eaching hospials ( ) sugges ha Canadian acue care faciliies, wih an almos 11-day lengh of say, manage wih significanly fewer nursing, emergency deparmen, pharmacy and drugs, adminisraive and fiscal, and ineres and depreciaion expenses per discharge. The direc nursing expense per discharge in Canada is slighly less han here because less paperwork is required a he nursing saions, and nurses are responsible for coordinaing fewer nonnursing funcions. Ye Canadian paiens receive more regisered nurses' (RNs') hours per discharge, which could be influenced in par by he fac ha he supply of RNs per 1,000 persons in Canada is wice ha in he Unied Saes. Alhough Canada has four imes as many primary care physicians as he Unied Saes, Canadians annually make almos wice as many emergency deparmen visis per 1,000 persons. (anada's emergency deparmens provide significanly more primary care services a almos half he cos per visi in comparison wih he Unied Siaes. Canadian hospials also have lower pharmacy and drug expenses per discharge han here. This finding is consisen wih a General Accouning Office sudy reporing ha manufacurers' prices o wholesalers for frequenly prescribed iems were on average one-hird less in Canada han in he Unied Saes. Because heir J= faciliies obain a ^ grans horn he provinces for heir capial expendiures or secure funding for expansion and renovaion from local fund-raising effors, Canada's cos per discharge for ineres and depreciaion expenses is significanly lower han in he Unied Saes. Mos U.S. faciliies use long erm deb o fund major capial projecs. Canadian and German hospials are able o manage on significanly lower average adminisraive and fiscal coss per discharge because hey do no have o screen paiens for benefi eligibiliy; prepare deailed bills for hird-pary payers; or respond o uilizaion, qualiy assurance, and oher similar sauory requiremens. Finding innovaive ways o cos shif more expense o a decreasing percenage of privae-pay paiens or using resources o marke heir services o generae a larger regional marke share (as U.S. hospials do) are alien o Canadian and German hospials. Alhough Canadian hospials annually deliver more ambulaory and inpaien care per person han do U.S. hospials, hese cos comparisons sugges ha if Congress mandaes global budgeary arges and simplifies reimbursemen, he U.S. migh be able o replicae Canada's saffing paerns. As a resul, here could be layoffs of 15 percen of our curren full-ime equivalen (FTF) hospial employees (roughly 480,000 posiions). A similar percenage decrease for he oal healhcare field would resul in a loss of 1.2 million FTEs. Alhough such poenial rerenchmen has serious poliical and economic consequences, he naion's reducion in healhcare expendiures has o be a leas parially ied o payroll savings. Under severe cos consrains, he U.S. healh- HEALTH PROGRESS JULY-AUGUST

3 care sysem could require downsizing similar o ha experienced by heavy manufacuring, banking, reailing, defense, auomobile, compuer hardware, and oher indusries during he pas seven years. BASIC COMPREHENSIVE BENEFITS A congressional mandae for universal access in he Unied Saes would be exremely complicaed. Hisorically, he amoun and he conen of healhcare services an individual has received have been relaed o wheher he or she has healh insurance coverage. Naional surveys repor ha Oil average uninsured persons receive 20 percen o 24 percen less healhcare han hose eligible for hird-pary payer benefis. Mos of he basic comprehensive benefi packages now being discussed include ambulaory care, inpaien hospial care, prescripion drugs, ambulaory menal healh services, and prevenive services known o have posiive cos-benefi relaionships. The CHA healhcare reform plan adds long-erm coverage o his lis. BACKGROUND DATA ON HEALTHCARE (1990) Variable Populaion (millions) Healhcare expendiures divided by GDP Hospial expendiures per capia Privae expendiures for healhcare Acue care beds per 1,000 persons Physicians per 1,000 persons Acue care admissions per 1,000 persons Acue care paien days per 1,000 persons Average lengh of hospial say (days) Physician visis per 1,000 persons Canada % $ % , Wes Germany % $ % , Unied Saes % $ % Values are in 1990 U.S. dollars. Canadian figures are adjused according o he purchasing-power-pariy rae of exchange. U.S. $1.00 equals Canadian $1,315; U.S. $1.00 equals DM To avoid compeiion wih exising healh insurance conracs and o conain axes or he cos of premiums, Congress may iniially curail he scope of hese basic comprehensive benefis. Apparenly, eriary services will be excluded from hese iniial benefis, which hins ha Congress a he ouse migh be mandaing a wo-ier healhcare sysem. A major lesson from he Canadian and he Wes German healhcare sysems is ha a universal, comprehensive plan resuls in a significan increase in he demand for healhcare services. If we were o replicae he 1990 inpaien day-use raes in Canada or Wes Germany (afer he passage of a healhcare reform plan), our saffed acue care beds would be percen or percen occupied, respecively. There would be significan pressures o add beds. Physicians could likewise be affeced by a mandae for universal access. Docors may find hemselves following he Wes German use paern, where a hird more physicians han in he Unied Saes provide virually double (117.0 percen) he number of visis per person annually. The Canadian experience (wih roughly he same number of docors per 1,000 persons as in he Unied Saes) would come o 24.5 percen more physician conacs per person annually. Canadian and Wes German hospials are able o provide universal, comprehensive benefis a a significanly lower percenage of heir GDP han U.S. hospials. They accomplish his by providing far greaer volumes of care a a significanly lower cos per uni of service. CONSUMER CHOICE IN COVERAGE AND IN CARE The Canadian and German healhcare sysems encourage consumers o selec heir physicians and hospials. Germany has a disinc separaion of communiy-based, fee-for-service physicians and hospial-based, salaried docors. This arrangemen causes difficuly in providing coninuiy of paien care. I should no be replicaed in he Unied Saes. Canada has a single-payer sysem. Alhough he various provinces have some differences in coverage, flexibiliy in choice of coverage is limied. In conras, Germany has a mulipayer sysem ha allows consumers a choice of hird-pary payer and benefis. This is a model ha could be easily followed in he Unied Saes. Wha is paricularly aracive abou he German sysem is ha is sickness funds (acing as hird-pary payers) can negoiae reimbursemen raes wihin global budgeary arges, wihou direc governmenal inervenion. Canadians and Germans raion healhcare by limiing heir GDP expendiure for healh on he 76 JULY-AUGUST 1993 HEALTH PROGRESS

4 SELECTED HOSPITAL OPERATING DATA ( )* Variable Canada Wes Germany Unied Saes Operaing expense per discharge $4,130 $2,972 $6,535 Operaing expense per day $382 $215 $901 Full-ime equivalen personnel per occupied bed Surgical visis per 1,000 persons Emergency deparmen visis per 1,000 persons Oupaien visis per 1,000 persons Average percenage of occupancy 78.9% 86.2% 66.8% Paid hours per discharge All hospials Medium-size hospials Teaching hospials Direc nursing expense per discharge Medium-size hospials Teaching hospials $ $ $ $1, Number of paid RN hours per discharge Medium-size hospials Teaching hospials Emergency deparmen direc expenses per visi Medium-size hospials Teaching hospials $19.04 $28.54 $38.90 $42.94 Pharmacy and drugs Medium-size hospials Teaching hospials $ $ $ $ Toal adminisraive and fiscal direc expense per discharge Medium-size hospials Teaching hospials $ $ $ $ Ineres and depreciaion per discharge Medium-size hospials Teaching hospials $ $ $ $ Curren raio, all hospials Days in ne paien accouns receivable, all hospials Long-erm deb-o-equiy raio, all hospials Invenory urnover, all hospials Average age of plan (years), all hospials * Values are in 1990 U.S. dollars. Canadian figures are adjused according o he purchasing-power-pariy rae of exchange. U.S. $1.00 equals Canadian $1,315; U.S. $1.00 equals DM. Similar deparmenal^ oriened informaion is unavailable for German hospials. NOTE: Canadian and U.S. medium-size and eaching hospials in had an average daily census of 200 and 500 paiens, respecively. HEALTH PROGRESS JULY-AUGUST

5 basis of seing global budgeary arges naionally. The Unied Saes raions healhcare on he basis of an individual's healh insurance coverage and oher available resources. As our healhcare reform debae unfolds, we may come o he conclusion ha he Unied Saes can no longer afford all he healhcare ha a marke-driven sysem is capable of offering and ha igher macromanaged consrains are needed. The implemenaion of a global budgeary arge (as CHA recommends) would make SHOs responsible for allocaing oal dollars o regions wihin he borders of heir saes. Even hough we now spend a leas 25 percen more per person for healhcare han Canada or Germany, communiies, rusees, hospials, physicians, and oher ineresed paries may feel compelled o underake some implici raioning of resources. This is paricularly relevan if we are faced wih he higher uilizaion raes of hospial days and physician visis experienced in Canada and Germany. Collaboraive effors would be required a he regional and local levels o shape he delivery of healhcare services o he available dollars provided by a SHO. This could be a rying process for many providers, since hey would need o redefine heir mission and goals in an environmen ha focuses on universal access and cos consrain. ECONOMIC IMPACT OF HEALTHCARE REFORM U.S. healhcare expendiures are projeced o increase by he year 2000 o 16 percen or more of our naion's GDP. Hospials could consume on average SI ou of $15 of each person's disposable income. Wha is currenly driving he Unied Saes o healhcare reform is simply ha oo many persons are wihou healh insurance and he cos of American healhcare is considered excessive. There is also recogniion ha we may have he world's fines medical care, bu ha he highes-qualiy care is only available o hose wih adequae insurance coverage. Afer reviewing Canada's average hospial discharge cos ($4,130), one migh wonder wheher heir naional healh insurance plan wrecked he fiscal viabiliy and bankruped heir acue care faciliies. Possibly he mos effecive and efficien way o deermine his is o compare he financial raios of all Canadian and U.S. hospials in (he laes daa available in Canada). These 673 Canadian hospials had a 9.0 percen operaing loss ha was offse by an 11.9 percen nonoperaing gain, so hey ended ha year wih a 2.9 percen surplus of revenues over expenses. Some revealing Canadian-U.S. financial daa (see Table, p. 77) sugges Canada has a weaker curren raio, bu far fewer days in ne paien accouns receivable. The average Canadian acue care faciliy has half he deb-o-equiy raio of a U.S. hospial and an average plan ha is only six monhs older han U.S. faciliies. These fiscal daa convey ha Canadian hospials (wih a universal, comprehensive healh insurance plan) have been able o mainain heir fiscal viabiliy. HAVING IT ALL The oucome of our naion's healhcare reform iniiaives will be unique. Bu we should emulae he Canadians' and Germans' abiliy o havelower healhcare expendiures wih no adverse effec on paien oucomes, as shown by heir lower infan moraliy raes and longer life expecancies. The major lesson ha we can learn by sudying he Canadian and German healhcare sysems is ha we should be able o design a delivery sysem wihin our curren GDP expendiures for healh ha offers universal access, consumer choice, cos consrain, and high-qualiy paien care. a I acknowledge he assisance of my colleague, William H. Miller of Asheville, NC, in he preparaion of his aricle. He has been an enlighened observer of comparaive healhcare sysems for several decades. BIBLIOGRAPHY AND DATA SOURCES American Hospial Associaion, Hospial Saisics, Chicago, G. Forin, Healh Informaion Division, Policy, Planning & Informaion Branch, Healh and Welfare, Oawa, K. J. Hammer, German Federal Saisical Office, Weisbaden, C. Nair, N. Naul, and G. MacDonald, Canadian Cenre for Healh Informaion, Saisics Canada, Oawa, G. J. Schieber, J. P. Poullier, and L. M. Greenwald. "U.S. Healh Expendiure Performance: An Inernaional Comparison," Healh Care Financing Review, vol. 13, no. 4,1992, pp J. L. Shikles, Prescripion Drugs: Companies Tha Typically Charge More in he Unied Saes Than in Canada, General Accouning Office, Washingon, DC, HRD , Sepember J. Vollink, German Hospial Federaion, Dusseldorf, T. P. Weil, "The German Healh Care Sysem: A Model for Hospial Reform in he Unied Saes?" Hospial and Healh Services Adminisraion, Winer 1992, pp T. P. Weil, and W. H. Miller, "Canadian-U.S.Healh Care and Hospial Comparisons," Healhcare Financial Briefs, vol. 15, no. 6,1992, pp JULY-AUGUST 1993 HEALTH PROGRESS