Hospital Spending in the United States and Canada: a Comparison

Abstract

Prologue:The rate at which Canada's citizens are hospitalized is high (1, 242 days per 1,000 residents) and the lengths-of-stay for all levels of care in private voluntary hospitals long (11.5 days). Canada's hospitals negotiate their budgets every year with, for all practical purposes, the lone payer of care—the provincial health insurance plan where they operate. In this paper; Joseph Newhouse, Geoffrey Anderson, and Leslie Roos explore the question: What accounts for the substantial differences in hospital spending between such institutions in Canada and the United States? Comparisons both between and within countries are complicated by the difficulty of defining similar hospitals and similar patient populations. Nevertheless, the question they address is compelling and warrants examination. Newhouse, an economist, is the John D. and Catherine T. Mac Arthur Professor of health policy and management at Harvard University. He holds a joint appointment at the Harvard Schools of Government, Medicine, and Public Health. Newhouse is also codirector of the Harvard-RAND-UCLA consortium, which provides policy analysis on selected health issues to the Health Care Financing Administration. Before joining the Harvard faculty this summer to build a strong doctoral program in health policy, Newhouse directed The RAND Corporation's Economics Department. He was the principal investigator of RAND's fifteen-year, $82 million, federally funded health insurance study, the largest randomized trial of health care financing ever undertaken. Anderson, a physician who also holds a doctorate in health policy from the RAND graduate program, is on the faculty of the University of British Columbia. Roos, who received his doctorate in political science from the Massachusetts Institute of Technology, is a member of the faculty of management at the University of Manitoba. Roos has built a distinguished career in health services research, in part by mining a rich claims database maintained by Manitoba's provincial health insurance plan.