In 2010, nearly five decades after the passage of both U.S. Medicare (1965) and Canadian medicare (1966), a spirited American health-care discussion culminated in the passage of the Affordable Care Act, commonly known as Obamacare. It’s still too early to evaluate the full impact of this act; even without political roadblocks, many of its elements won’t be implemented before 2014. Nevertheless, the deliberations that informed Obamacare’s structure offer three lessons for Canadians on the sustainability and effectiveness of medicare.
First, much of the act’s design focuses on covering the uninsured. For policymakers, this meant addressing the contentious issue of what exactly would be covered. The solution they chose recognizes that as practices and technologies change, so does the best way of meeting a population’s health needs.
For example, many chronic diseases treated by prescription medication today would have been treated in hospitals when Medicare began. With this in mind, the U.S. legislators designed the act’s benefit package around the health needs themselves. The 10 categories of “essential health benefits” include familiar types of services (ambulatory, emergency, laboratory and hospital services) and supplies (prescription drugs), but also mental health, substance use and behavioural health services; rehabilitative and habilitative services and devices; preventive and wellness services and chronic disease management; and pediatric oral and vision care.
The scope of services is very broad and, unlike in the Canada Health Act (which refers only to services provided by doctors and hospitals), the statutory definitions generally do not refer to specific types of providers and leave to evolving regulation decisions about what services will be covered. Over time, states, insurers and patients can decide whether a particular rehabilitative need is best met through a licensed therapist, a specialist physician, a drug or a therapeutic device. Coverage under the statute can accommodate this choice.
Second, the act addresses the reality that purchase of expensive private coverage has reverberating consequences, driving up costs in private insurance and in parallel public systems and making the overall health-care system less equitable. This ripple effect is compounded when coverage is subsidized by the government (as it is in both the U.S. and Canada, excluding Quebec) because health benefits obtained through employment are not taxed as income. At just the federal level, Canada’s Department of Finance calculates the value of this subsidy to be more than $3-billion.
While Obamacare contemplates a world in which coverage continues to vary in generosity (so some people can buy more comprehensive policies while others pick more restrictive and less costly options, the act reverses that tax incentive. Beginning in 2018, purchasers of exceptionally generous health coverage will pay a tax on the excess cost of their plans – and that tax will return to the funding pool for health insurance. And unlike other taxes, this one will rise with health-care costs, generating a funding stream that helps maintain the publicly funded system instead of draining it.
The third feature worth examining is delivery system reform – such as the accountable care organization. An ACO is a group of health-care providers, including doctors and hospitals, assigned a population of patients and responsible for offering a full spectrum of care. If the ACO succeeds, it retains part of the savings while another portion is directed toward reducing overall costs. Patients retain the freedom to choose their provider. The logic behind ACOs and other delivery system models in the new law is that, by devolving some of the fiscal and quality responsibility to front-line providers, you can improve quality while controlling costs, since providers in direct contact with patients can make better choices than centralized bureaucracies.
Despite their differences, the Canadian and U.S. health-care systems both face the common challenges of deciding what’s “medically necessary,” funding the system in a sustainable and equitable way, and providing quality care as efficiently as possible. As Canadians look to improve their health-care system, learning from the Obamacare experience while keeping the best of what medicare has to offer might just ensure another 50 successful years.
Sherry Glied is a professor of health policy and management at Columbia University’s Mailman School of Public Health and a former assistant secretary for planning and evaluation at the U.S. Department of Health and Human Services. Mark Stabile is director of the School of Public Policy and Governance and a professor of economics and public policy at the University of Toronto’s Rotman School of Management. The authors are part of the Finance & Governance for Health symposium, hosted by the School of Public Policy and Governance, to examine how international evidence and experience can help build a better health-care system for Canadians.