THIS IS MY ANNUAL RANT- WHICH I WRITE AT THE END OF EVERY YEAR. IT DOES NOT COVER INVESTMENT ANALYSIS. AS WITH ALL OF MY PAST RANTS, MY AIM IS TO CHALLENGE CONVENTIONAL OPINIONS AND EXPLORE SOMETIMES-CONTROVERSIAL TOPICS WITH A CONTRARIAN THINKERS MINDSET. WHILE MANY OF MY PAST BLOGS HAVE BEEN POLITICAL, THIS BLOG ONLY TOUCHES POLITICS A BIT. TODAY WE FOCUS ON THE CANADIAN HEALTHCARE SYSTEM, WHICH I BELIEVE HAS BEEN FALSLY LIONIZED.  READ ON IF THIS IS A TOPIC YOU HAVE AN INTEREST IN.

In my yearly rant posted December 2020, I proposed a new type of tax system that would offer greater disclosure, a more ethical approach to government expenditures, and a way to lower taxes yet accomplish more of what matters. One of those government services I touched on was the Canadian healthcare system. As a person who spends a fair bit of time in Florida, USA, I have become aware of a mythology surrounding USA healthcare services when compared to the (supposedly) “free” and (supposedly) “great” healthcare system in Canada. Today is the day for my 2021 rant -and I’ve decided to address the truths and myths behind the Medicare models in both Canada and the USA.

I will contrast and compare the benefits and myths behind the two models including costs and quality. My apologies for the length of this blog – exploring a Healthcare system is like trying to learn how rocket ships are made. As such, I spent more hours researching this topic than originally planned, and was still forced to condense what I learned to only the more important facts. Still, this is a lengthy blog! My wife feels its too long. So many of you wont make it through this writeup. I’m ok with that – it had to be as detailed as I could make it, as I knew there are deep seated beliefs by many Canadians in these myths.  So–Anyone who still wants to claim any of the myths noted below as “not myths” had better be prepared to counter them with some diligence on their own.

Read this Myth by Myth if you wish to expand your knowledge about the respected healthcare systems in North America. There may be lessons we could learn here to improve our poor world ranking in healthcare quality. If you don’t make it through the blog , here is the executive summary for the 4 Myths;

1.  Healthcare is free and available to all people in the USA at any income level.
2.  Healthcare is less costly in the USA than in Canada. Yes, you read that right.
3.  Healthcare in the USA, or for that matter, most of the world, is superior to Canada in every significant way (wait times, available technology/ equipment, number of doctors, facilities per capita). The USA has a two tiered system. The “upper end” package is largely offered through employers and/ or purchased by higher income persons – it is typically not necessary – but it is an option should an employer wish to provide it, or someone privately wants to buy it (dentists, chiropractic, other benefits are included). The “regular” system covers most of the services we get in Canada – but at a superior level. 
4. If Canada were to adopt a two tier system, it will likely not affect 97.7% of us and – will likely enhance the “regular” system if operated in a manner similar to the USA’s.  

In researching this subject, I spent considerable time contacting and interviewing independent healthcare insurance companies and agents who are involved with group plans in the USA, along with independent healthcare companies or agents who are involved with individual (non-group plan) insurance. I am grateful to Tom Cotton of Hugh Cotton Insurance who specializes in group/ employer plans. He helped me understand how the majority of working Americans are looked after. I’m also grateful to Pam Elmke of Florida Blue & Rogers Benefits Group who specializes in individual plan products. She was instrumental in my understanding of US plan types and how Obamacare works. My apologies to them if I misinterpreted any of the myriad of notes taken after our conversations. This blog is the result of my interpretations – and as such may contain inaccuracies – despite all of my efforts. 

As part of my research, I also spoke to numerous residents of Florida, who fall under the same healthcare system that the rest of America does. I wanted to know what they do for their healthcare needs, and I wanted to hear of their experiences within their system. Some were friends, others were individuals who I got into conversations with randomly, and some were residents in the neighborhood where I reside when visiting. I managed to speak with sole proprietors, retired people, and lower income individuals. I spoke with employees of companies with –  and without – group health plans. While there’s always more to learn when trying to understand an unfamiliar and complex system such as a healthcare program, I think I got a fair picture of the situation after speaking to the professionals (mentioned above) and users of the American system.

Through these conversations, I uncovered 4 Myths that have been propagated in Canada regarding the respective Canadian and USA healthcare systems. By discussing these issues, it is my hope that more Canadians might become aware of the true differences, and seek improvement in the Canadian healthcare system. Lets get started.

MYTH #1: There is no free healthcare in the USA

This belief, held  by some Canadians, is completely false. True, there can be a cost to companies or individuals who desire an independent healthcare package. But most employed and self employed individuals have a package provided or supplemented by a company. Individuals not covered at work can buy their own package. Can these individuals afford it? Yes! Low income citizens have a package provided with subsidies or at no cost through government subsidies. I’ll get to those costs and programs in Myth #2. But its important to understand that citizens who cannot afford a healthcare package still get one – and its free. Key word here being “citizens”.

What about residents in the USA who are not citizens?  Interestingly, even illegal immigrants (much to the chagrin of many American taxpayers) get free access to the healthcare system.  Anyone will get served if they show up in the hospital for any reason. It is accessible to all people in the USA, legal or not – healthcare card not required.  In fact, it is standard for non-citizen (residents) and even illegal immigrant families to attend physicians through hospital services. US law states that hospitals must treat any condition for all who enter the hospital. This includes everything from the common cold to child birth.

In many cases this taxpayer funded Medicare for illegal immigrants or “off the grid” individuals is a bone of contention for Americans. For example: As in Canada, a number of people in the USA are drug abusers (hello, Vancouver!). In the USA, addicts treated at no cost regularly for reoccurring conditions (except to taxpayers).  If they are pregnant, the additional complications associated with birthing are absorbed by the US  system. Apparently a “crack-addict” birth can cost up to $5million due to complications – vastly exceeding the cost of a traditional birth.

As with Canada’s “free” system, the “free” US healthcare service for non-citizens requires sitting around for hours waiting for service in the hospital. Myth # 3 goes into the differences in the two countries level of service. Its important to understand that these frustrating wait times are only imposed on non-citizens. US citizens of all ages and income brackets have complete access to an efficient and outstanding healthcare system that is vastly superior in quality – than is the Canadian system.  We’ll get to that in Myth #3.

The bottom line: One way or another, healthcare is free and/or financially attainable by every individual in the USA – citizen or not- without exception, at any income level. We’ll cover the logistics of these individual packages next, in Myth #2.

MYTH # 2: Independent healthcare packages are costly and unattainable by many US residents

To address this myth we’ll look at different scenarios. That is, a healthcare plan fully or partially covered through an employer, vs. a plan bought by an individual with no employee plan. We will also address deductibles and the Tax-deferred Health Savings Account.

To start, everyone in the USA can open a Health Savings Account (HSA) – although it is typically chosen by self employed or mid-high income people who do not qualify for Obamacare (more on that later) and who buy a lower cost plan with a high deductibility. Investopedia has an excellent writeup on how these accounts work, here. This is a little like a Tax Free Savings Account in Canada, in that it offers tax deferred returns with the assets held in the plan.  People choosing a high deductible plan can potentially use HSAs to save up to $8,100 per year in a tax-sheltered account. For both high income earners and those approaching retirement, the HSA can be a worthwhile vehicle for building a medical emergency fund. The benefit of this plan is that if an individual opens their own Individual Healthcare plan, they can opt for deductibles on their plan. In the case of a high income self-employed friend of mine in the USA, he has a fairly high deductible level against major surgeries and procedures. The deduction is much like the deductibility on your car – the higher the deductibility, the lower your monthly premium.

An example: My friend took a very high deductibility in his plan, the amount of which he has saved in his Health Savings Account. The Health Savings account can only be used against medical procedures. He is a very healthy 60 year old  – he rides a bicycle at a high performance level and has the body composition of a 20 year old.  So he figures that he has a lower than average probability of cardiac or other problems.  Given the lower probability of a health problem, he elected for a high deductibility against a major health problem or procedure. His premium, which could have been around $20,000 per year for a top-notch package (more on this later), is instead only a few hundred dollars a month due to this high deductible. Further, he is assessed as a non-smoker. A sensible part of the US healthcare program is to reward non-smoking individuals with lower premiums –  all non-smokers get the HMO package free or very cheap – vs. higher costs for smokers. Age and where you live can also alter your premiums (discussed below), although not immensely.

Most people choose a HMO plan. This plan is a package in that it dictates which healthcare services/ doctors/ specialists are available to the plan holder. Some people opt to have a higher cost  PPO package.  PPO packages allow the plan holder freedom in choosing their own specialists, along with more services and benefits.

But wait..what about the poor? Not everyone is like my friend insofar as personal incomes go. How do they afford a healthcare package?  Enter Obamacare (Affordable Care Act). All citizens in the USA have access to an excellent healthcare package. Again, the key word is citizens. The Affordable Care Act (ACA) was signed by President Obama in 2010. It aims to expand access to affordable quality health care to all American citizens. It does this via cost assistance for those with lower income.

The ACA is a tax credit/supplement. Americans estimate their income for the coming year. For example, if you estimate $50,000, you will get $200/month towards your healthcare premiums. If you earn closer to $13,000, you will be entirely covered by the ACA.  If you earn over $80,000, there are no credits. If you underestimate your income (you estimate $50k, but earn $80k) your supplement is clawed back.  Commission sales like real estate agents who have an outstanding year sometimes have this happen. If your income is very low / nil you can get a $1000/month supplement to pay for an HMO healthcare package. If you are 65 years of age, a citizen, and have 10 years of employment total during your life, your healthcare package is also free.  HMO healthcare package providers cannot charge more than 8.5% of your income if you don’t qualify for ACA credits.

Obviously lower income individuals will focus on the HMO package rather than the PPO option. In fact, most people use HMO packages unless an employer provides a healthcare package with an upgrade – much like with corporate healthcare packages to employees in Canada. The only real difference with the higher cost HMO package is that you don’t need a referral to see a specialist – you can book one yourself anywhere you like and the plan will cover the costs. HMO packages require you use a primary doctor who provides referrals to a specialist, similar to Canada’s system.  A PPO package may also include a few perks like massage or sports therapy. It may offer coverage for extras that fall outside of  reasonable necessities, like private rooms in a hospital, etc. But these extra benefits are not generally considered deal-breakers for most people to go with the more expensive PPO packages.

Before I am asked – it is true that individuals who can afford the few hundred dollars / month more for the PPO package might benefit over those who have the standard HMO packages. Canadians have a very strange mindset that being able to pay-up for something like this, is “unfair”.  Healthcare, to Canadians, is an essential “right” – one of the basics like food, water and shelter. Interestingly, if you have a good income in Canada, you can “unfairly” buy better shelter and eat better food than lower income people.  Food and shelter are essentials to life. But strangely, Canadians cannot buy the other essential in life –  a better healthcare package. To be “fair” (if that’s what you want to call it) – why not make everyone in Canada live in equally valued row houses and limit us to an identical daily food allowance?  This would ensure true equality in these three essential living needs – food, shelter, healthcare.

But I digress. The HMO packages are similar in services (but better in quality – see Myth #3) to the Canadian system.  Most Americans  tend to have the HMO package – unless a PPO is provided at their work. The point is, you have the right to buy a PPO package and be pampered if you can afford it and wish it in the USA. But its not necessary.

Insofar as company (group) plans – the typical full benefits PPO type plan is a little less than $700/ month for an individual, or $2050 for a family. This is typically covered by the employer, but in some cases the employee may pay 25% or 50% of the cost.

Canadian vs. US Healthcare costs

American residents get free healthcare just like in Canada, as noted in myth #1. However, unless they are citizens, their free healthcare is pretty much as bad as Canadian “free” healthcare – aka long waiting periods and lousy service.  I discuss the unfortunate reality of Canadian healthcare quality in Myth #3. Obamacare / ACA brings that quality up significantly for US citizens of all income levels.

So, lets find out just how “free” our healthcare is, and how the costs of an optional US Healthcare package (beyond Obamacare) compares to our situation. This section contains some math, and I relied on the conversations I had with the professionals noted above along with internet tax calculators. I believe they are correct but I can’t fully represent they are accurate or complete.  We’ll look at Canadian fully taxpayer funded healthcare vs. private healthcare in the USA.

USA

Canada

MYTH #4: The Best Doctors delusion

Some Canadians fear that, were we to adapt an independent US-style option for healthcare, all of the “best doctors” would migrate into the paid healthcare system, leaving the dregs in the public system. This myth has two flaws. First, it assumes that you or I are currently dealing with one of the “best” doctors. You would need something beyond a casual opinion to determine if you actually have one of the “best doctors” right now. It’s hard to quantify if we  have a “best doctor” unless we have a quantitative model tested against a large enough sample size ( ie we study a large population of doctors and examine their cure rate percentages, medical education pass marks, etc). Since you and I would have a hard time assembling this study, we are better to use a statistical probability model to estimate the likelihood that we actually have a “best doctor”.

Before getting started on that probability, I’d like to note that ALL doctors, best, worst, and average–have passed their exams and have achieved pretty high standards to be awarded that title. This ain’t night school cooking lessons, folks. All doctors have a pretty high level of training and education from the start.

But, true to all things in life, there is something called the “Bell curve”. Basically, the Bell Curve shows us that the vast majority of any group falls into a range that is pretty close to the median level of competence. The “average” doctor will be competent to that level within a tight range.  Less competent, or more competent, doctors only vary by a little bit in their competence. We call this variation a “standard deviation”. The vast majority of doctors will vary in competence within 2 standard deviations of this middle level of competence. It is only a very select minority of doctors who will fall within 3 standard deviations of median competence – i.e. very incompetent, or very competent. Hence the look of the bell curve, below. In this “normal distribution” model, 68.2% of all doctors are within 1 standard deviation of competence from average, and 95%.4% of doctors are within 2 standard deviations of average. This means that only 2.3% of doctors would be 3 or 4 standard deviations of the average on either side of competency. If we say the right side of the curve is the ‘best doctors” side, you have a 2.3% chance of having one of them. You also have a 2.3% chance of having an inferior doctor. But again, the standards are pretty high just to become a doctor. So even the 2% of the population who deal with the low end of the doctor-curve – its still a high bar.

So – to kibosh this ridiculous myth once and for all. Its true, the “best doctors” probably will migrate to private healthcare. But statistically, the likely reality is that your current doctor is NOT in that super-doctor group. You have a low single-digit percentage chance of actually having a “best doctor” right now!  You may be convinced your GP is superior to others – but that is an opinion, not a fact. The greater odds are that they are average. Its like driving – most people think they are above-average drivers. But of course, that is not possible. Same with doctors. Most doctors, by statistical probability, are not in the “best” group. Statistically, that means you probably deal with an average doctor right now, and a migration of super-doctors to private healthcare has a 98% probability of not not affecting you.

Conclusion

By examining the mythology surrounding our respective healthcare programs – and learning lessons from the US system – including the ACA – might enable Canada to move up from being one of the worlds worst healthcare systems into a system that might actually justify its greater costs. There is nothing wrong with a system offering greater choices. Just like with other essentials like housing and food, it can be both a matter of budget AND personal preferences as to where we spend our money. That too, can take some of the pressure off of the standard healthcare services.  Canadians have long been brainwashed into believing a simple concept:

Canadian system = good. US system = bad.

This, without ever examining how the other system actually works. This is like growing up in a country that only has low quality vanilla ice cream made out of frozen vegetable oil. Everyone is brought up to believe that this is the only brand & flavor that is good.  They believe other flavors or brands are bad. This, despite never having tasted another brand or flavor.

If they ever got the chance to try Hagen Daz praline’s and cream made with real cream! But, they’ve been told that Hagen Daz is poison, so they stay ignorant and eat their frozen “ice desert”, thinking its the best out there.

The point of this blog was to challenge some of the nonsense I hear regarding the US vs Canadian healthcare systems, and to encourage active discussion surrounding improving Canadian wait times and health choices. It is clear that the current Canadian government is hiding the facts regarding our inferior healthcare system. Its less about doing what’s right, and more about an effective political tool that plays into the fears and ignorance of Canadians. In fact, Trudeau has used the “threat” of private Medicare while spreading falsehoods – as seen here and here. This, without bothering to explain (assuming he even knows) how a successful private system with income supplementation is a superior model to Canada’s. Wait times, doctor availability, and access to technology are factors conveniently overlooked by socialist politicians in Canada.  Trudeau recently claimed that a private addition to our healthcare would only “benefit the rich”. Ironically – if you know anything about our entitled rich-boy PM, this is one guy who has almost certainly never had to to sit in a walk-in clinic for hours, or been put on a list to see a specialist for months in the future. You know – like the rest of us.

As a final comment – I am not exaggerating when I say that my greatest fear in life is facing a major health or physical ailment and deal with the Canadian medical system. Too many clients, friends, family and neighbors have relayed the length of time they have had to suffer while waiting for service after a debilitating injury or health concern. My immediate family has had very disturbing experiences surrounding the failures of our healthcare system that I haven’t described on these pages. They would read like fiction if I relayed them.

Frankly, for the money we pay, the Canadian healthcare program is absolutely unacceptable on every level. Something needs to be done. Now.

I’m back next week with my usual Technical Analysis of the markets.

Happy New Year to all of my blog readers!