Health Care and Retirement: Lessons from the United States and Canada

Cover story, Centerpoint, June 2008

Jun 02, 2008

As the United States heads toward a presidential election, two issues on Americans' minds are health care, particularly for the millions who lack coverage, and the future solvency of Social Security. While the United States and Canada have different health and retirement systems, both potentially can learn from each other as they consider health sector solutions. To that end, the Canada Institute, in conjunction with the Global Health Initiative, and the Congress Project have held seminars in recent weeks to debate these pressing issues.

Health Care
Americans receive health care in various ways, said Theodore Marmor of Yale University's School of Management at an April 16th Canada Institute - Global Health Initiative seminar. Most working Americans receive care through private insurance. Some receive benefits via the U.S. Department of Veterans Affairs, which is structured similarly to the National Health Service in the United Kingdom. Others receive Medicare, which Marmor said resembles Germany's "continental-style social insurance" program. Many of America's poorest receive Medicaid, a need-based program, and still others receive "charity medicine," administered to patients unable to pay for care. Finally, there are public-private partnerships. Marmor outlined these access points to care to illustrate the complexity and diversity of the U.S. health care system.

Marmor and co-author Antonia Maioni of McGill University were on hand for the publication launch of the Canada Institute's ninth One Issue, Two Voices series that covers topics important to the U.S.-Canada relationship. In this issue, launched at a similar program in Toronto on April 9th and the focus of a program on health care at Princeton University on April 28th, the authors compared the medical care systems in Canada and the United States and outlined the disputes over reform.

While some U.S. policymakers are investigating public funding options for health care, Canada, with a shortage of public funding for its own health care system, is considering private care options. Maioni questions whether Canadians are receiving sufficient value for their tax dollars spent on health care and whether cost effectiveness has entered into the discussion. "Every other industrialized country is trying to figure out how to spend less on health care," said Maioni. "In Canada, we're trying to figure out how to spend more."

In addition to spending, Canada faces other challenges to maintain its lauded health care system. Similar to the United States, said Maioni, Canada faces demographic and human resource issues, rising expectations, and diminishing confidence among Canadians in the system to provide necessary care. Maioni said the right questions must be considered before attempting reform. With human resources, for instance, the debate centers on how to train more physicians but fails to ask how best to distribute trained physicians across the country.

Marmor suggested if officials on both sides of the border paused to consider each other's health sector challenges, it might lead to promising reforms that otherwise may have been overlooked. If the United States is serious about implementing universal health coverage, he said, U.S. officials should look toward their northern neighbor to learn how Canada implemented its system. Prior to developing a public health care system in the post-World War II era, Canada's health sector was financed and administered similarly to that of the current U.S. system. This fact, combined with the cultural and ideological similarities between the two countries, he said, could allow Canada's system to be a useful model for the United States to build its own version of universal health care.

Maioni maintained that Canadians also would profit by contrasting the problems of their health care system with the U.S. model. Canadians, she said, often fail to recognize they are not the only industrialized country to suffer long waiting times for specific treatments or rising costs of care. Just the fact that 47 million Americans lack any health insurance should remind Canadians of the relative strength of their health care system, argued Maioni. Marmor echoed her sentiment, stating that, while both countries face health care challenges, he believes Americans would "overwhelmingly opt for the difficulties" facing the Canadian system rather than their own.

U.S. policymakers continue to grapple with how to reform the health care system. Unfortunately, said Marmor, plans proposed by the top presidential candidates follow the same reform models that have failed in the past while new ideas and solutions to address today's health care access and costs have yet to materialize.

Pensions for Seniors
At a May 12 Congress Project seminar, two top Senate Budget Committee members spoke despondently about the future of Social Security and Medicare as the "baby boom" generation begins to retire and future unfunded liabilities for entitlements begin to explode. Senate Budget Committee Chairman Kent Conrad said baby boomers will more than double the number of retirees in the United States by mid-century, from roughly 40 million to 82 million, putting tremendous strains on federal entitlement programs. Social Security, Medicaid, and Medicare already consume about 8 percent of GDP, and by 2050 these programs are expected to comprise 18 percent of GDP. At this rate, Medicare would become insolvent by 2019 and Social Security by 2041 if no changes are made.

Senator Conrad and Senator Judd Gregg, the top Republican on the Budget Committee, spoke of tackling this issue on a bipartisan basis and have introduced legislation calling for a 16-member bipartisan task force to make entitlement and tax reform recommendations.

Policymakers in the United States and Canada have raised concerns over the ability to meet the needs of a rapidly increasing elderly population. In the United States, Social Security faces an anticipated long-term fiscal imbalance, but the Canada Pension Plan does not.

A recent Luxembourg Income Study project found poverty among the elderly in the United States to be triple that of Canada. Meanwhile, the Canadian government is far more generous in providing basic pension benefits, noted Michael Wiseman of George Washington University and Martynas Ycas of the Social Security Administration in their co-authored paper. Wiseman presented the paper at an April 15th Canada Institute seminar. "Look north…and admire the [Canadian] system," he said.
The modern American social insurance system is rooted in President Franklin Delano Roosevelt's New Deal. Social Security, created in 1934-1935, has expanded beyond its more humble beginnings to become the center of the modern American welfare state, said the University of Saskatchewan's Daniel Béland.

Canadians, said Béland, more readily accept the idea of a universal benefits system, financed out of general revenues. The cornerstone of the Canadian system, explained Béland, currently a public policy scholar at the Center, is a universal flat pension benefit originally inspired by a British model. Canada also has earnings-related pension programs similar to the U.S. Social Security program.

Demographic aging challenges the long-term sustainability of public pension programs like Social Security and the Canada Pension Plan. While several fiscal options are considered in the United States—such as privatization and increased tax rates—Canada found a viable solution for itself.

The Canadian government's approach to solving its own revenues crisis, Béland said, centered on direct government investment of social security surpluses in equities. In the 1990s, the Canadian government established an investment board to manage Canadian Pension Plan surpluses with the sole objective of increasing investment returns.

The plan works well in Canada, said Béland, but there is no guarantee this model would work in the United States. The American public might fear political corruption and have queries over how and where Social Security surpluses are invested. Also, the United States has 10 times the population of Canada, so any direct government investment scheme would be far larger.

There was general pessimism about the future of seniors' entitlement policy among two panelists at the Congress Project seminar. George Washington University's Kimberly Morgan, who will be a Wilson Center fellow this fall, said growing partisan polarization and strong party leaders setting the agenda make adoption of a bipartisan strategy unlikely. National Public Radio Health Correspondent Julie Rovner predicted entitlement changes will not have high priority in the next administration except as part of an overall program of expanding health care coverage for uninsured Americans. She believes Congress is too inclined to micro-manage Medicare procedures and prices to address the larger, long-term financial needs of the system.
One point is clear: Serious policy changes will be needed, sooner rather than later, to protect our health care and entitlement systems.

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