Which country has the better healthcare system, Canada or the U.S.? While both systems offer many benefits and challenges, I believe the U.S. model is better in one fundamental area: U.S. plan sponsors tend to take a more holistic approach to the health of their plan members.

I’m not suggesting U.S. plan sponsors are smarter than their Canadian counterparts; their model just has different incentives.

In the U.S., the bulk of healthcare costs for the majority of working Americans are borne by employer-sponsored health plans. These plans fund the lion’s share of healthcare costs for employees and their families. Since employers pay a portion of virtually every aspect of healthcare for their plan members, there is a significant financial incentive to provide coverage that will result in the best possible health outcome for the employee. A U.S. employer is less likely to cut back on one area of the program (e.g., prescription drugs), if that action could lead to more costly treatment (i.e., hospitalization and surgery) down the road.

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Managing this mammoth cost burden is also why employer-sponsored wellness programs are much more prevalent and well developed in the U.S. compared to Canada. There is a greater potential return on investment (ROI) for each dollar spent in an effort to improve employees’ overall health. Whether or not current wellness programs actually deliver the desired ROI is another debate, but the potential cost savings in the U.S. are greater simply due to the size of the healthcare expenditure, which are about five times higher on average than typical employer-sponsored healthcare plan costs in Canada.

Canadian employers, by contrast, pay a smaller portion of their plan members’ overall healthcare costs. Employer healthcare plans in Canada only supplement provincial plans by covering prescription drugs, paramedical practitioners, semi-private hospital room fees, and some miscellaneous services and supplies. The most costly healthcare expenses—including physician, hospital, surgical, lab test and diagnostic costs—are all covered by government-funded provincial healthcare plans.

Read: The challenges of U.S. healthcare reform for Canadian employers

Since Canadian plan sponsors aren’t responsible for plan members’ whole healthcare picture, plan design decisions are sometimes made in silos, which could have negative repercussions elsewhere in the healthcare system. With the increased prevalence of high-cost specialty drugs, it’s becoming more common for Canadian plan sponsors to implement annual drug maximums on their plans – about 19% of plans based on our 2014 Benefits and Pension Survey of Alberta based employers. But what happens if plan members can’t afford these drugs once they’ve hit the plan maximum? Much like squeezing a balloon, it may lead to higher direct costs to the healthcare system such as hospitalization, not to mention the indirect socioeconomic costs to plan members and their families if they’re unable to work. However, unlike U.S. plan sponsors, this more costly treatment is not going to have as much impact to employer benefits plan costs, since most of it will be covered by the provincial health plan.

Canadian plan sponsors have generally been slower and more moderate in implementing wellness initiatives. Sure these initiatives may help reduce benefits program costs, but the potential ROI just isn’t as great as it is in the U.S. Corporate investment in wellness initiatives is more likely to have a greater positive impact on provincial healthcare expenditures such as lower physician and hospital costs, which have little direct impact on employer costs.

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While there are financial incentives for Canadian plan sponsors to take a more holistic healthcare approach in making benefits program decisions—such as considering the impact these decisions may have on disability costs, engagement and productivity—connecting the dots is not as obvious or significant as it is in the American model. I’m not judging Canadian plan sponsors that make decisions to reduce or limit plan coverage. Many are under enormous pressure and are simply making the best decisions they can to manage their organization’s rising benefits program costs.

Instead of government and plan sponsors working at odds to shift the cost burden of healthcare on each other, wouldn’t it be great if there were better incentives for Canadian plan sponsors to take a more holistic approach to healthcare that would not only deliver the best possible health outcome for their plan members, but also result in lower costs for the entire healthcare system as a whole? It’s time for plan sponsors and government to start the conversation and create a model with built-in incentives that encourage a more holistic and unified approach to employees’ healthcare.

Kenneth MacDonald is a senior consultant with Morneau Shepell in Calgary. These are the views of the author and not necessarily those of Benefits Canada.
Copyright © 2021 Transcontinental Media G.P. Originally published on benefitscanada.com

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You are correct in that for a US sponsor, keeping an individual out of the hospital providing services to promote better health has a large benefit compared to the Canadian model. It is nly one aspect of the problem however.

As to discussions between employers and the governments, these are not new, a group called ECHCO attempted such in Ontario back in the 90’s both the government and the providers were not interested.
Instead the government and the providers have continued to download the costs to the employers and individuals

A closer look at the benefits provided and the cost would show the US system as good or better in most aspects and the overall cost is not much different

Saturday, January 03 at 10:36 pm | Reply

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