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Canadian Healthcare Cost Crisis

Canada, U.S., Healthcare Costs, Pharmaceutical Drugs

Canada, U.S., Healthcare Costs, Pharmaceutical DrugsHealthcare spending in Canada, which accounted for 35% of provincial budgets in 1999, now accounts for 46%.

Canada, U.S., Healthcare Costs, Pharmaceutical Drugs

During the healthcare debate in the United States, the Canadian healthcare system was continually singled out as an example of both what’s good and bad about government involvement in healthcare. As it turns out, timing is everything. Things are now looking mostly grim for the healthcare system north of the border, thanks to the ever-increasing surfeit of aging baby boomers. (I could swear I’ve been predicting for years this would be a problem.) As the Canadian baby boomers enter their “golden years,” they require more healthcare attention than they did when younger, and that means more expense. It’s the same situation as in the U.S., with the boomer generation eating up more and more of the system’s resources.

An article in the Economist points out that healthcare spending in Canada, which accounted for 35% of provincial budgets in 1999, now accounts for 46%. At this rate of growth, by 2030 it will eat up 80% of the provincial budget in Ontario, the most populous province. (Just in time for current Canadian 30-year-olds to require their first colonoscopies.) In Canada, at least, the biggest reason for this increase is rising prescription drug costs, with boomers being primary consumers. The percentage of the public health budget spent on pharmaceuticals has tripled since 1980.

The Canadian system presents something of a pickle for those who would control drug costs. On the one hand, as large buyers, provinces can negotiate with manufacturers to lower the costs of branded drugs. But when in comes to generics, the provinces cap the amount they pay to a fixed percent of the cost of branded drugs. And the percentage is so high (50%) that it has made Canadian generics among the most expensive in the world. (Those “cheap” Canadian drugs you can order over the Internet are all branded.) Also, Canadian law allows manufacturers to pay an annual kickback to pharmacists in exchange for stocking branded drugs. In fact, pharmacists received about $712 million last year in compensation for stocking the brand-names. The kickback expenses don’t make a dent in the profits gained from brand-name sales, and so the drug companies win big time.

Of course, the logical response would be for the provinces to slash the generic fee cap. And in fact, in March, Ontario announced that it would do just that, reducing the cap from 50 percent to 25 percent. But this set off considerable protest by the drug industry because pharmacists stand to lose a large amount of income as a result. The country’s biggest chain of pharmacies threatened layoffs and store closures. It also asked customers to sign protest cards and curtailed hours in seven stores in the district of the provincial health care minister. Talk about making a fight personal. However, Ontario stuck to its guns — sort of. It did slash the generic fee cap, but it also agreed to increase pharmacists’ dispensing fees and to allow them to charge for patient counseling to make up some of their lost income. Other provinces are now considering making the same “adjustment.”

So again, you have the drug costs added to the financial strains caused by the health-care needs of the aging boomer generation, who will comprise 25 percent of the population by 2036. The Canadian census of 2006 showed that one out of every seven people was a senior citizen, compared to one out of 50 in 1966. The implications of this increase in the proportion of seniors for the healthcare system are obvious. Seniors see their doctors more often, take more prescription drugs, and are more subject to diseases and conditions requiring lengthy hospital stays compared to the hip-hop generation and their parents. Greater numbers of seniors translates to a greater financial burden on the healthcare budget (and greater amount of out-of-pocket health expenses for seniors.)…and a smaller percentage of young working people to pay for those expenses.

But in a sense, all these issues ignore what is perhaps the key driving factor. Yes, it is true that in both Canada and the U.S. healthcare costs are skyrocketing. And indeed, drug costs are absorbing a disproportionate chunk of the healthcare budgets. And it is also true that the proportion of the population that is elderly is increasing and accounts for a greater and greater share of health care expenditures. But underlying all of these issues is the philosophical orientation of Western healthcare systems. If only mainstream medicine stopped focusing on fixing health problems after the fact instead of preventing them from happening in the first place, healthcare costs could be slashed across the board. And with more citizens than ever graduating into the “senior class,” this need to stress wellness over treatment becomes even more critical. And this is not just an issue for the United States and Canada; it is an issue that must be faced sooner or later by every country in both the developed and developing worlds.

To decrease costs, we need to change the way medicine is practiced. It is great to have drugs and procedures that can address diseases after they have developed. But it is far better to deliver information, practices, and dietary and lifestyle changes that can prevent the diseases and conditions from developing in the first place. As Navi Radjou, Executive Director of the Centre for India & Global Business at the Judge Business School at the University of Cambridge, said in a blog in the Harvard Business Review,“By improving the holistic health and wellness of all American workers and citizens, both governments and corporations could save hundreds billions of dollars currently wasted in untargeted, inefficient therapies.” Or as I keep saying over and over, the only way to save health care (in any and all countries) is for people to stop using it “patch up” self-inflicted illness.

:hc

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