Medical Technology in the United States and Canada: Where Are We Going?
Dewar, Diane M., Review of Social Economy
Medical technology is both a blessing and a burden. It is held responsible for improving the quality of life and life expectancy for many, as well as increasing medical expenditures for all. The increased demand for healthcare technology in the neighboring economies of the United States and Canada raises issues regarding cost, acquisition and efficacy.
This paper compares U.S. and Canadian policies concerning healthcare technology acquisition and diffusion to determine policy commonality and diversity in the neighboring economies. As well, it highlights the major implications in the healthcare economies due to increased technology utilization. The discussion is divided into four sections. The first compares the countries' current resource allocation mechanisms in the healthcare sectors as they relate to medical technology acquisition and diffusion. The second briefly presents the main catalysts in acquiring medical technology. The third describes the implications of the current medical technology trends. The fourth summarizes policy issues common to both countries' societies.
HEALTHCARE RESOURCE ALLOCATION
In terms of training and medical advances, the U.S. has the best healthcare in the world (Botehlo 1991). It is renowned as the premier nation in the provision of high-quality, comprehensive medical education (Todd et al. 1990).
It is also a leader in healthcare expenditures, spending 38 percent more per capita than Canada, 88 percent more per capita than West Germany (prior to reunification) and 124 percent more per capita than Japan (Kronenfeld 1993). Per capita healthcare spending is projected to increase to $5,534 in the year 2000: a 30 percent increase from 1995 estimates (Cherner 1991) and projected to consume 37 percent of GNP by 2030 (Gibson 1994). The elderly play a major part in expenditure levels. For example, in 1987, those aged 65 and over constituted only 12 percent of the population but accounted for 30 percent of all healthcare expenditures (Waldo et al. 1989; Pegels 1990). Therefore, the majority of expenditures is concentrated in relatively small, specific demographic segments.
At first glance, Canada appears to be more cost-effective than the U.S. in healthcare delivery. In 1991, it spent $2,045 per capita (U.S. dollars) or 9.9 percent of its Gross Domestic Product (GDP) on healthcare, while the U.S. spent $2,868 per capita, or 13.2 percent of its GDP (U.S. Bureau of the Census 1993). With lower expenditures, Canadians' life expectancy is similar to Americans' while their infant mortality rates are 25 percent lower than those in the U.S. (Rosenthal 1993).
Canada's lower expenditures are due to less administrative overhead, lower hospital costs, and lower physician fees - mostly due to the single payer reimbursement methodology (Barer and Evans 1992) and regionalization of high cost or capital-intensive procedures. In 1983, the proportion of healthcare expenditures devoted to administration was 60 percent higher in the U.S. than Canada (Himmelstein and Woodhandler 1986). From 1983 to 1987, the administrative contribution to expenditures in the U.S. grew from 21.9 percent to 23.9 percent, while the proportion in Canada declined from 13.7 percent to 11 percent of expenditures (Woodhandler and Himmelstein 1991). Further, expenditures per hospital admission in the U.S. are higher than in Canada since the U.S. hospitals have a more complicated case mix of patients (as measured by DRGs) and specialized procedures are done in only a few large hospitals in Canada (Fuchs 1994). However, although differences in administrative costs and case mix exist, some analysts suggest that overall healthcare spending in the two countries is similar. Much of the expenditure gap can be explained by the failure to account for capital costs in Canadian hospitals, the larger proportion of elderly in the U.S., and the higher level of investment in R&D in the U.S. (Krasny and Ferrier 1991). …