It is not hard to understand why the Canadian health care system looks attractive to Americans concerned about both large numbers of uninsured citizens and high medical costs. The most easily measured attributes of the Canadian system look very appealing:

universal coverage, with no financial barriers to care (compared to 31-37 million uninsured in the U.S.)

• per capita spending at two-thirds the U.S. level (about $1,200 in adjusted U.S. dollars in 1985, compared to about $1,800 in the U.S.)

• slower rates of increase in per capita health care costs, measured in constant dollars (3.1 percent per year in Canada, 4.8 percent per year in the U.S., 1971-1985).

To draw lessons from the Canadian experience, however, it is necessary to look at what is less easily measurable in the system-in particular, the factors that explain lower spending, the consequences of lower spending, and the ways in which spending is held in check.

Why Does Canada Spend Less?

Canada's lower health spending per person is not a function of fewer doctors (physicians per person are about equal in Canada and the U.S.), fewer hospital beds (Canada has more than the U.S.), or lower use of institutional care (Canadians use more hospital days per person than Americans).

Rather, lower spending reflects lower costs per hospital day, lower fees to physicians, and lower administrative costs. Lower costs per hospital day appear to mean lower "intensity" or resources per day of hospital care-partly a reflection of lower use of sophisticated technologies, fewer staff, and greater use of hospitals by chronic care, rather than acutely ill, patients. Lower physician fees reflect the fact that in Canada, in contrast to the U.S., government determines fees and can, in fact, keep fee increases below rates of inflation. Administrative cost savings come

• Briefing paper prepared by Judith Feder for July 27, 1989, working meeting.

from universal eligibility, common benefits, and reliance on a single (government) insurer-eliminating marketing expenses, eligibility and benefit determinations, and simplifying revenue collection and payment of bills.

What are the Consequences of Canada's Lower Spending?

In terms of services provided, the most visible consequence of lower spending in Canada appears to be lower availability and use of sophisticated technologies. Hospitals are paid global budgets and must decide how to allocate those budgets among alternative activities. In addition, they must receive government approval to adopt new technologies. The result is that specialty services like cardiac surgery or radiation therapy are available in fewer Canadian than American hospitals. Furthermore, high occupancy rates, partly related to long stays by chronic care patients, may tie up hospital beds and create service delays (e.g., for cardiac or hip replacement surgery).

What we'd most like to know about lower spending is what it means for people's health. Unfortunately, our capacity to provide that answer is decidedly limited. We measure health status at very gross levelsprimarily in terms of death rates, at various ages, and death rates are affected by numerous other factors besides health care. Canada's lower spending is not associated with lower performance on these measures; in fact, Canada has substantially lower infant mortality rates than the U.S.

Such gross measures, however, do not tell us whether lower availability and use of technologies or delays in surgical procedures, which may occur in the Canadian system, have negative consequences for health.

How is Spending Held in Check?

Because there is only one payer for health care in Canada-the government in each province-and be

Introduction

Despite similarities between Canada and the United States in their geography, demographics and cultural heritage, Canada has chosen a different approach to conceptualizing the role of government in financing and delivering long-term care. However, it is important to state upfront that there is no one Canadian long-term care system. Each of the 10 provinces is responsible for administering its own long-term care programs. There is, therefore, wide variation in the availability of and access to services, particularly home and community-based care. Given this important caveat, the Canadian long-term care experience may provide some guidance for reform of long-term care policy in the United States.

Federal Support for Long-Term Care

The financing of long-term care is best understood within the context of Canada's universal health insurance system which has been in place for hospitals since 1958 and for medical care since 1968. As a response to provincial complaints that the health insurance program created incentives for high-cost hospital-based care, the 1977 Established Programs Financing Act provided to each province a per capita extended care block grant. The amount (set at 20 Can $ per capita in 1977, and at 49.15 Can $ in 1988-99) has an automatic escalator for inflation. The purpose of the grant was to permit provinces the flexibility to introduce less expensive and perhaps more desirable forms of care than hospital care, such as nursing home care, community-based care, and home care. In contrast to the health insurance program, no stipulations for comprehensiveness and universality were attached to the extended care grants.

The Canadian federal government provides additional subsidies (matched 50-50 with the provinces) for care to the poor.

* Briefing paper prepared by Robyn I. Stone for July 27, 1989, working meeting.

Institutional Care

With the assistance of the annual federal block grant, all but three of the Eastern-seaboard maritime provinces provide universal entitlement to nursing home care. Eligibility is based on functional disability. No income or assets tests are applied, although the consumers do pay part of the bill. All nursing home residents are charged a monthly co-payment for room and board which equals the maximum federal monthly income security benefit less a comfort allowance (about $90 per month in 1984). This copayment is indexed to rise with the cost of living and publicly financed pensions.

The three provinces without universal nursing home coverage contribute to the financing of nursing home care through a residual program for people who have "spent down" to poverty (similar to Medicaid reimbursement for institutional care in the United States).

Home and Community-Based Care

There is much variation among the provinces in the provision of home and community-based care. Manitoba, which has a province-wide, universal, nocost-to-consumer home and community-based care program, has the oldest and most fully-developed system in Canada. This program, administered by the Office of Continuing Care, has a single point of entry for both institutional and community-based and home care. A standardized assessment tool is used to determine eligibility. Both level of functional disability (regardless of age) and availability of informal supports are considered in determining the services government will provide. Although the need for institutional care is recognized, the goal of the Manitoba longterm care program is to keep disabled persons in the community as long as possible by providing a range of personal care and other nonmedical services.

British Columbia's long-term care program is patterned after the Manitoba model. The program serves

all adult residents, although children do receive home nursing care. Homemaker services and handyman services (the primary home care services offered by British Columbia's Long-Term Care Program) are not free; a sliding scale based on income is used. Nevertheless, no one is impoverished in order to be eligible for services. Case managers are responsible for assessing and authorizing levels of care in facilities as well as in the community.

In contrast, much of the publicly financed home care in Ontario, the most populous province, is medically oriented (analogous to the home health benefit under Medicare in the United States). Chronic home care services (e.g., personal care, homemaker chore) are available through the Ministry of Community and Social Services, but they are means-tested and targeted to the poor. There is no consistent case management.

At the opposite end of the spectrum are the relatively poor maritime provinces. They are piecing together home care programs based on existing resources, with Nova Scotia in the lead by developing a coordinated single-entry system through its homemaker agencies. Nova Scotia and New Brunswick are, in fact, attempting to develop their home care programs before instituting universal nursing home coverage. Therefore, it will be interesting to see whether subsidized home care will make nursing home care (which requires "spend-down") less attractive to disabled persons and their families.

Strengths and Weaknesses of Canada's Program

• Strengths-All Canadians, with the exception of residents of three maritime provinces, are entitled

to nursing home care. Although there is a standard co-payment for room and board, no one is pauperized in order to have access to institutional long-term care.

• In some provinces, publicly financed, nonmedically-oriented home and community-based care is available free of charge (e.g., Manitoba) or on a sliding scale basis (e.g., British Columbia). These programs tend to have a single point of entry and a case management system which determines eligibility and service packages based on functional need and the availability of informal care supports.

• There appears to be no runaway utilization of home and community-based care programs in provinces that fund these services because of case management and the commitment to operate within available funds.

• Weaknesses-Home and community-based longterm care services are not available in all provinces. Even among provinces that finance care, there are differences in the types and amount of services provided. Access to community-based and home care, therefore, is inequitable across provinces.

• Many provinces attempt to control nursing home costs by limiting bed supply. Expenditure control that relies on constraining bed supply does not, however, guarantee efficient use of services. Use of hospitals for long-term care patients is suggestive of this inefficiency.

• Just as in the United States, Canada does not effectively coordinate health care services with nonmedical long-term care services. Furthermore, even though several provinces have developed home and community-based care programs, because Canada's health insurance program covers medically-oriented care in institutions or at home, these services receive greater emphasis.