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WebMemo #783 on Health Care

July 1, 2005

Doing Your Own Health Care Thing: American Seniors vs. Canadian Citizens

By

Canadian citizens and American seniors have one thing in common: both groups are enrolled in government health programs called "Medicare." Canadians are enrolled at birth; American seniors at age 65. Until recently, both American seniors and their Canadian counterparts also shared one other feature of health care financing and delivery: neither could elect to spend their own money to purchase medical services for themselves.

 

For American seniors, the legal restrictions that Congress imposed on private contracting in Medicare under Section 4507 of the Balanced Budget Act of 1997 are still on the books. Congress conspicuously ignored the issue when it passed the Medicare Modernization Act of 2003. In contrast, some Canadians are regaining the personal freedom to choose the care they want. What finally cracked the thick bureaucratic concrete of Canada's authoritarian system? It took historic decision by the Canadian Supreme Court to let Canadians choose the health care that they want and avoid Medicare's queues.

 

A Canadian Case of Pain and Suffering

In 1997, George Zeliotis, a citizen of Quebec, needed hip replacement surgery. As is standard in Canada for non-emergency surgery, Medicare put Mr. Zeliotis on a waiting list behind everyone else in Quebec who needed the same procedure. When he learned that his wait would be a year-and that he would have to deal with the pain of an arthritic hip in need of replacement for 12 months-Mr. Zeliotis decided to pay for the surgery himself. Then he made a disturbing discovery: he could not pay for it himself. Private payment for a covered medical service was against Canadian law.

 

Since its inception, Canada's Medicare has been the favorite model for single-payer health care among those who advocate socialized medicine in the United States. They tout that every Canadian is covered from cradle to grave and all have equal access to the same level of care. The facts on the ground, however, are quite different. While coverage is universal in Canada, most Americans would not consider acceptable how the Canadian system limits access to care. As Mr. Zeliotis discovered, access to care in Canada is determined by where one is on the waiting list. And there was no getting around the waiting list. Private health insurance has long been illegal in Canada, as has been contracting with a doctor directly-that is, paying out of pocket-for medical services that are covered by Canada's Medicare program.

 

Mr. Zeliotis teamed up with Jacques Chaoulli, a Montreal physician and Senior Fellow at the Montreal Economic Institute, to legally challenge the province of Quebec over the ban on private payment for medical services. After two defeats in lower courts, they took their appeal to the Canadian Supreme Court. On June 9, 2005, the doctor and his patient won a major victory.

 

What The Canadian Supreme Court Said

The Canadian Supreme Court ruled the ban in Quebec on private health care options was a violation of the Quebec's Charter of Rights and Freedoms.Because the wording and concepts in Quebec's Charter of Rights are repeated throughout the laws and charters of the other provinces, the ruling may apply elsewhere, too. The Court left undecided whether the prohibition on private contracting violated Canada's Charter of Rights and Freedoms.

 

In the 4-3 decision, Chief Justice Beverly McLachlin wrote for the majority, "Access to a waiting list is not access to health care."[1]

 

The three dissenting judges acknowledged "that in some circumstances some Quebeckers may have their life or 'security of the person' put at risk by the prohibition against private health insurance."[2] Though the law forbidding private health insurance may put lives or 'security of the person' at risk, they argue that it still does not violate the Charter of Rights. "However, unlike our colleagues, we agree with the trial judge and the Quebec Court of Appeal that this situation, however deplorable, is not capable of resolution as a matter of constitutional law," they conclude.[3] In other words, the minority of judges acknowledge that the Canadian system was performing badly, but expressed the view that there is nothing that the Canadian courts should do about it as a matter of constitutional law.

 

Waiting in Line for Treatment

The Canadian case illustrates a worldwide trend. Where there is a single payer for health care, such as in Canada, delayed access to care-usually by queuing-is the easiest way to control costs. Wait times for non-emergency surgeries are several times longer in countries with government-dominated health care than in the United States.

 

A recent survey of hospital executives in five countries (Australia, Canada, the UK, New Zealand, and the U.S.) found that none of the U.S. executives thought a 65-year-old man would have to wait 6 months or more for routine hip replacement surgery.[4] The numbers for other countries, which have greater government control of health care, were significantly higher: 81 percent of hospital executives in the UK, for example, thought the wait would be more than 6 months. (See Table 1.)[5]

 

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Cancer is a terrifying killer. Early diagnosis and quick treatment are essential. The sooner cancer is diagnosed, the sooner treatment can begin. Quick treatment, in turn, leads to higher survival rates. In the same survey, only 1 percent of U.S. hospital executives believed that a 50-year-old woman "with an ill-defined mass in her breast but no adenopathy"[6] would wait three weeks or more for a biopsy.[7] The wait in countries with greater government involvement in health care, however, is likely to be much longer. (See Table 2.)

 

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The Contract with Americans on Medicare

Because of Chaoulli and Zeliotis's stunning Supreme Court victory, Canadian citizens in Quebec are now free to contract with doctors and purchase private health insurance for the health care they need and want.[8]

 

The legal situation for American seniors enrolled in Medicare remains unchanged, however. Under the terms of Section 4507 of the Balanced Budget Act of 1997, a senior can contract privately with a physician for a "covered" Medicare service if, and only if, the doctor signs an affidavit to the effect that he is contracting privately with the senior citizen, submits that affidavit to the Secretary of the Department of Health and Human Services (HHS) within ten days, and agrees to forgo all Medicare reimbursement from all other Medicare patients for a period of two years.

 

While the Clinton Administration, which insisted upon the inclusion of this provision in the final legislation, and congressional supporters claimed that it "liberalized" private contracting in the Medicare program, the regulation severely restricts seniors' ability to contract privately for medical services covered by Medicare. This was the first time that Congress imposed this restriction on doctors and patients, and it is not found in any other U.S. government health care program.[9] Subsequent federal litigation and regulatory adjustments have clarified the terms and conditions of a permissible contract.

 

Amidst the political controversy and litigation following enactment of Section 4507 of the Balanced Budget Act, the Medicare bureaucracy undertook regulatory adjustments to ease the impact of the law on doctors and patients. With these changes, seniors and their doctors can get around the tight statutory restrictions through the use of an Advanced Beneficiary Notice (ABN). According to HHS, "An ABN is a written notice a physician or supplier gives to a Medicare beneficiary before items or services are furnished when the physician or supplier believes that Medicare probably or certainly will not pay for some or all of the items or services…"[10] In other words, if a senior wants a procedure performed, either by choice or on a doctor's recommendation, and his or her doctor believes that Medicare may not deem it "medically necessary," the doctor can give the patient an ABN explaining that if Medicare will not pay for the procedure, the senior will be responsible for the cost. This allows seniors to contract privately with their doctors without forcing their doctors to drop out of the Medicare program for 2 years. While this was a welcome regulatory relief, it also added an unnecessary bureaucratic step and much unnecessary paperwork and expense. Even with the regulatory clarification, it is insulting to American seniors that this bizarre restriction on their personal freedom is still on the books.

 

The 1997 congressional restrictions on private contracting in Medicare may not appear to be a problem in practice because the vast majority of Medicare recipients do not need or want to pay for services out of pocket when Medicare would cover those services. But this one-size-fits-all regulation does not fit the infinitely varying circumstances of seniors and especially the Baby Boom cohorts set to retire soon.

 

In a free society, shouldn't a person's own reasons for deciding to spend his or her own money on a legal medical service without statutory or bureaucratic restrictions be enough? Privacy, personal convenience, the need for specialized care, or the skills and talents of a preferred physician could all explain a senior wanting to purchase care outside of Medicare. The current regulations make accommodating any of these reasonable desires difficult and oftentimes impossible.

 

To fix the current law, Rep. Sam Johnson (R-TX) introduced "The Medicare Beneficiary Freedom to Contract Act of 2005" (H. R 709). The bill would eliminate prohibitions on seniors' entering into private contracts with medical professionals for legal medical services, regardless of whether those services are covered by Medicare. As Rep. Johnson explains, "This wacky law just makes no sense. If a senior wants to pay out of his pocket to visit his doctor, he should have that right. This common-sense bill empowers seniors to get the care they want, when they want, from whom they want."[11]

 

Conclusion

A ruling by Canadian Supreme Court means that Canadians in Quebec will be free to choose health care services outside of the government controlled Canadian Medicare system. Despite that the decision will take time to go into effect and no doubt result in some practical problems and controversies, it will have a profound and positive effect on the Canadian health care system. This decision has set in motion a new dynamic and opened up new opportunities for quicker and higher quality care in Canada.

 

Things are very different, however, for the seniors in America's Medicare and the doctors who serve them. Statutory restrictions on seniors' ability to secure the services of any doctor they choose and to pay directly with their own money remain firmly in place. Despite its single-payer structure, Canada's Medicare now allows Canadians more freedom (at least in Quebec) than America's Medicare does American seniors.

 

American seniors should be as free as their Quebecois neighbors. Congress has the opportunity to improve seniors' health care choices and increase their freedom by repealing Section 4507 of the Balanced Budget Act of 1997. A repeal would restore the freedom of seniors to choose medical care any way they want and spend their own money in any way they choose without government interference-surely a right no less valuable to Americans than to their Canadian neighbors.

Derek Hunter is a Research Assistant in the Center for Health Policy Studies at The Heritage Foundation.




[1] Canadian Supreme Court, Chaoulli v. Quebec (Attorney General), 2005 SCC 35 (CanLII), June 9, 2005, at http://www.canlii.org/ca/cas/scc/2005/2005scc35.html.

[2]Ibid.

[3]Ibid.

[4] "A Cross-National Look at Hospitals and Their Health Care Systems: Views of U.S. Hospital Executives in Comparison to Four Other Countries," Catherine M. DesRoches, Elizabeth Raleigh, Robin Osborn, et al., The Commonwealth Fund, May 2004 at /static/reportimages/BF1AB4AA3529E0E540DE1BDE134AEF12.pdf.

[5]Ibid.

[6] Adenopathy is defined as "Swelling or abnormal enlargement of the lymph nodes" by dictionary.com at http://dictionary.reference.com/search?q=adenopathy.

[7] "A Cross-National Look at Hospitals and Their Health Care Systems: Views of U.S. Hospital Executives in Comparison to Four Other Countries," Catherine M. DesRoches, Elizabeth Raleigh, Robin Osborn, et al., The Commonwealth Fund, May 2004 at /static/reportimages/BF1AB4AA3529E0E540DE1BDE134AEF12.pdf.

[8] In a briefing and forthcoming Heritage Lecture delivered on June 21, 2005, Dr. Chaoulli states that he believes the Canadian Supreme Court Decision applies to all of Canada and not just the Province of Quebec.

[9] For background information on the current status of private contracting in Medicare, including the rationale of recent litigation on the topic, see Robert E. Moffit, Ph.D., "Congress Should End the Confusion Over Medicare Private Contracting," Heritage Foundation Backgrounder #1347, February 18, 2000 at http://www.heritage.org/Research/HealthCare/BG1347.cfm; see also John S. Hoff, "Medicare Private Contracting: Paternalism of Autonomy," AEI Press, 1998.

[10] Department of Health and Human Services, "Program Memorandum Intermediaries/Carriers," Transmittal AB-02-168, November 22, 2002, at /static/reportimages/354C0033FDF5E744A9070570F9DA7F9A.pdf.

[11] Office of Congressman Sam Johnson, "Sam Johnson introduces legislation to repeal red tape and regulation for seniors," Press Release, February 10, 2005, at http://www.samjohnson.house.gov/News/DocumentSingle.aspx?DocumentID=22006.

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