In debates over health care reform in the US, it is frequent for Canada’s name to pop up in order to signal that Canada is spending much less of its GDP to health care and seems to generate relatively comparable outcomes. I disagree.

Its not that the system presently in place in the US is so great, its that the measure of resources expended on each system is really bad. In fact, its a matter of simple economics.  Imagine two areas (1 and 2), the first has single-payer health care, the other has fully-private health care.

In area 2, prices ration access to health care so that people eschew visits to the emergency room as a result of a scraped elbow. In area 1, free access means no rationing through price and more services are consumed. However, to avoid overspending, the government of area 1 has waiting lists or other rationing schemes. In area 2, which I have presented as an ideal free market for the sake of conversation,  whatever people expend can be divided over GDP and we get an accurate portrait of “costs”. However, in area 1, costs are borne differently – through taxes and through waiting times. As such, comparing what is spent in area 1 to what is spent in area 2 is a flawed comparison.

So when we say that Canada spends 10.7% of GDP on health care (2013 numbers) versus 17.1% of GDP in the US, is it a viable comparison? Not really.  In 2008, the Canadian Medical Association produced a study evaluating the cost of waiting times for four key procedures : total joint replacement surgery, cataract surgery, coronary artery bypass
graft (CABG) and MRI scans. These procedures are by no means exhaustive and they concern only “excessive” waiting times (rather than the whole waiting times or at least the difference with the United States). However, the CMA found that, for the 2007 (the year they studied), the cost of waiting was equal to 14.8$ billion (CAD).  Given the size of the economy back in 2007, this represented 1.3% of GDP. Again, I must emphasize that this is not an exhaustive measure of the cost of waiting times. However, it does bring Canada closer to the United States in terms of the “true cost” of health care.  Any estimate that would include other wait times would increase that proportion.

I know that policy experts are aware of that, but it is so frequent to see comparisons based on spending to GDP in order to argue for X and Y policy as being relatively cheap.  I just thought it was necessary to remind some people (those who decide to read me) that prudence is mandatory here.