Past Session:
37-1
37th Parliament,
1st Session
(January 29, 2001 - September 16, 2002)
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Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 23 - Evidence
OTTAWA, Thursday, June 14, 2001 The Standing Senate Committee on Social Affairs, Science and Technology met this day at 12:04 p.m. to examine the state of the health care system in Canada. Senator Marjory LeBreton (Deputy Chairman) in the Chair. [English] The Deputy Chairman: Honourable senators, I see a quorum. Today's meeting marks the end of our hearings on phase three of our health care study in which we are looking at international comparisons. We have witnesses today from the United States Department of Health and Human Services. I would like to thank them for joining us via videoconference from Washington, D.C. With us today is Ms Christine Schmidt, who is the Deputy to the Deputy Assistant Secretary for Health Policy. The Office of Health Policy deals with health-related issues, including health care financing. It works closely with the Public Health Service, the Health Care Financing Administration, the Centers for Disease Control and Prevention, the National Institutes of Health, the Health Resources and Services Administration, the Substance Abuse and Mental Health Services Administration, and the Food and Drug Administration. Ms Schmidt works with the Office of the Assistant Secretary for Planning and Evaluation, whose acronym is ASPE, who is the principal adviser to the Secretary of the U.S. Department of Health and Human Services on policy development and is responsible for major activities in the areas of policy coordination, legislation development, strategic planning, policy research and evaluation, and economic analysis. Ms Schmidt is accompanied by Ariel Winter and Tanya Alteras. They are analysts on the health policy staff. Ms Schmidt has an opening statement, after which we will proceed to questions. I thank you for joining us today. Ms Christine Schmidt, Deputy to the Deputy Assistant Secretary for Health Policy, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services: We are glad to be here. I will take about 10 minutes to give you a brief overview of several areas of the health care system and our publicly financed programs. I will try to build on that fine briefing paper that you have been given by your staff. We will be happy to take questions at the end of my opening remarks. I assume that if we do not have all the information with us, or if I do not know the answer off the top of my head, there will be a way for us to follow up with you to supply those answers. The Deputy Chairman: That is right. Ms Schmidt: Health care delivery in the context of care in the United States has changed dramatically, as you all probably know, within the last 10 years. I will give you two examples. Prescription drugs and the price of prescription drugs has changed dramatically. In the last 10 years, we have seen a large change in the amount of third-party payment for prescription drugs. The amount has almost quintupled. We have also seen a shift from in-patient hospital care to out-patient services. As an example of that kind of shift, our Medicare program used to spend 70 cents of every dollar on in-patient hospital care. It is now only 50 cents of every dollar. Let us look at some of that money. I have sent you some tables and charts. The first one shows you the entire national health expenditures in the United States. The latest data that I have on that is from 1999. You will note that expenditures were about $1.2 trillion. Of that, about one third of the money was spend by private health insurance in the United States. Another third was spent by our publicly financed programs, namely, Medicare, Medicaid and SCHIP. You will also note that about 15 per cent of all of that money that is spent on health care in the United States came out of pocket from people using health services. The U.S. is unique in the source of health insurance, as employer health insurance is the dominant form of health insurance coverage in the United States. You can see that in chart 2. Health insurance, in a way, is part of a total compensation package for workers. In this chart, you see that 63 per cent of those who are covered get their coverage through employer- sponsored programs. You will also see that 10 per cent are covered through Medicaid and 13 per cent through Medicare. About 16 per cent of all those in the United States are uninsured. You asked some questions about the uninsured. I will take about two or three minutes to run through some characteristics and trends of the uninsured persons in the United States. The number of uninsured persons in the country declined between 1998 and 1999, after a period of steady rise in the number of uninsured. In 1995, there were about 41 million people who were uninsured, rising to 44 million. For 1999, the figure is 42.5 million, or about 15 per cent of the population. Three quarters of the uninsured people in the United States are employed. Although many of the uninsured adults are unem ployed, non-workers and part-time workers are less likely to have insurance than full-time workers, again reflecting the nature of health insurance in our country. Health insurance is also related to firm size. Nearly half of uninsured adults work in firms that have fewer than 100 workers. Health insurance coverage also varies widely by the industry. For example, 40 per cent of those who work in the fields of agriculture, forestry or fishery are uninsured, compared with 12 per cent of those in the manufacturing sector or 7 per cent of those in the government sector. Only about one quarter of the uninsured is poor. There are significant portions of higher-income people who are also uninsured in this country. While over half of the uninsured are poor or low-income, the poor are much more likely to be uninsured than people at higher incomes. About one third of all people below the poverty line in the United States are uninsured. About a quarter of the people between 100 and 200 per cent of our poverty line are uninsured. The rate of insurance also changes dramatically by the age of the person. Most uninsured people in this country are under the age of 34. The highest uninsured rates are for young adults between the ages of 18 and 24 - about 29 per cent of that group are uninsured. Some of us think of that as an economic choice on the part of those young people. I also remember myself feeling rather immortal in those years. The number of uninsured children has been dropping in this country. In some ways, we believe that is related to our new program, the SCHIP program, which I will talk about later. The number of children who are uninsured has dropped by about 1 million from the period 1998 and 1999. That number now stands at about 10 million children who are uninsured. Although half of the uninsured people in our country are white, minorities have significantly higher uninsured rates. For example, about one third of Hispanics are uninsured. If you look deeper into that rate, the country of origin is also a predictor of whether people become insured. Different countries of origin with Hispanic immigrants to this country have higher rates of uninsured. We also know that almost 10 per cent of our uninsured are chronically uninsured. That means that they are uninsured for about 25 months or more. There is a lot of what we call churning in the uninsured rate, where people are uninsured for short periods of time, between three and six months. The uninsured rate also varies significantly by state. The heaviest rates of uninsured are in the southwest of our country. Again, that is partially related to the rates of uninsured among the Hispanics. I will now move to our three publicly funded programs. That is on page 3 of the charts I provided. This year, we will be spending about $370 billion on our publicly financed programs that provide health insurance, namely SCHIP, Medicare and Medicaid. We also have investments in the public health sector. I have not included those here. You will note that almost two thirds of the money that the government spends goes out in Medicare. In total, these programs cover 70 million beneficiaries; almost half of those are Medicare people. Let me go into a little more detail for each of these programs. In a way, Medicare is one of the great success stories of U.S. social policy. Right now, less than 1 per cent of the elderly in this country are uninsured. Medicare has also contributed substan tially to the reduction in poverty among our elderly citizens, in combination with changes that were made in the social security system. Furthermore, the Medicare program has provided increased access to health care services in general. In 1967, about 300 elderly persons out of 1,000 accessed some form of health care services. Today, it is about 940 persons per 1,000 who access health care services. Looking at chart 4, this outlines what a beneficiary or individual pays for Medicare during the year and how much money comes from which particular source. As you can see, Medicare pays for more than half of the total cost of a beneficiary's medical care during the year. Medicaid picks up another 12 per cent. Beneficiaries also have out-of-pocket expenses of almost 20 per cent. I will also draw your attention to the wedge of private insurance on this graph. Many people on Medicare also carry other forms of insurance in order to help them with the kinds of things that Medicare does not cover. Let me go into a bit of what Medicare does and does not cover. Medicare is divided into three parts: Part A is an entitlement program; part B is a voluntary program; and part C is the new program called Medicare+Choice, which I will speak to in a moment. The program covers most of the nation's elderly and it is based on their receipt of social security benefits. Disabled workers are also eligible, as are individuals with kidney failure. We have been working on improvements over time. There will be some announcements coming out of the White House probably next week on ways to reform Medicare. Right now, the Medicare program and its benefits are modelled after 1960s private insurance policies in the United States. What is covered in the different sections of Medicare is as follows: Part A, covers in-patient hospital services, post-acute skilled nursing care facilities, hospice care and home health care or post-institutional home health care. The second part is known as supplementary medical insurance. That covers physician and other practitioner services, out-patient hospital services, home health that is not covered by part A, and preventive services. It is important to note that Medicare does not cover out-patient drugs, long hospital stays, routine physicals and certain primary preventive screening services, dental or vision services, or long-term care services. There is no limit on the out-of-pocket spending that a beneficiary may be asked to bear in this. The spending breakdown within Medicare is probably not all that surprising. About 6 per cent of the beneficiaries spend 50 per cent of the money that is paid out in the Medicare program. That means that their average costs are $25,000 or more per year. Turning to page 5, the Medicare sources of income and expenditures, I will talk about where this program has been and where it looks like it is going in the future. The top line on page 5 is the total expenditure spending line for Medicare. We have both the historical and the estimated lines shown for you; the line is our current date, where we are right now. If you follow that line, you will notice that a few years ago the expenditure line was actually above where we were in revenue. We had accumulated some surpluses. Only about four years ago, we were estimating that the Medicare program, at least the part A part of it, which covers hospital services, would be bankrupt in this year. A number of changes were made in the program. You can see where those occurred, right around 1998. Some significant savings were made at that point, and the line on expenditures was significantly pulled down. At the same time, because of the period of economic health and growth in the United States, revenues were increasing faster than expected. We are now in a period of collecting a surplus in our fund, again, on the hospital trust fund side. However, we are expecting that, by 2029, we will again be faced with a shortfall in the part A side, in the hospital side of this program. We will be faced with some serious issues about what to do. Part of that happens because of our expectation on rising health care costs, which we are expecting to be GNP plus one. Another factor is the retirement of the baby boom, having so many people enter the program. The third factor is that there will be fewer workers to support the retired population. I will turn to Medicaid and SCHIP. Medicaid was enacted in 1965 as a federal-state partnership program to provide health care to low-income Americans. It is the single largest federal grant and aid program that states receive. It accounts for $176 billion of the total $271 billion that the federal government gives to the states. All 50 states have Medicaid. That has been since 1982. The program has grown significantly in the late 1980s and the early 1990s because we changed the numbers of people and the kinds of people who were eligible for the program. Currently, we have about 41 million people enrolled in the program. The federal spending for Medicaid falls into four categories. One is acute care services. Another is where long-term care is paid for low-income people. Another category gives special payments to hospitals that serve a disproportionate share of people who are either low income or uninsured. The last is for administrative funds that go out as well. The percentage that the federal government pays each state varies based on the state per capita income. We pay up to 83 per cent of the state costs. Currently, Mississippi is the poorest state in the union. It has the lowest per capita income. We pay almost 80 per cent of their costs for the Medicaid program. There are three categories of people eligible for Medicaid, parents and children, the elderly, and the disabled. Children make up about half of the population in Medicaid but represent only about 16 per cent of the money. The disabled population makes up the flip of that, about 16 per cent of the Medicaid population, and they account for 42 per cent of the spending. There is a baseline set of mandatory Medicaid services that states must offer. These include hospital, physician, nursing home, prescription drug and other health and long-term care services. States may also choose to provide non-mandatory services, for example, out-of-hospital prescription drug coverage, hospice care and preventive services. Most states have selected to offer those services and most are feeling some strain right now because of the rise in prescription drug costs. The states have some flexibility vis-à-vis their program design, within certain federal parameters. They can set income eligibility according to age. States must cover infants under 100 per cent of the poverty line, but some states cover infants up to the age of one and up to 400 per cent of the poverty line. States can vary how high up the income distribution they are going to go. The newest, and by far the smallest, program is the State Children's Health Insurance Program, SCHIP, which has only recently been established. This program is done in partnership between the federal government and the states. In this instance, the federal government pays a higher match rate than it does in Medicaid. That match rate starts at about 60 per cent and ranges up above 80 per cent. States, again, have flexibility in how they design their benefit packages and their service delivery settings. I will stop here because I know hat you will have many questions. We will answer them as best we can. The Deputy Chairman: You were talking about the chart on Medicare, page 5. You show the revenue and expenditure lines, and you show yourselves operating in a surplus currently. You mentioned a surplus, and you mentioned it going into the hospital trust fund side. Could you clarify that? Are there different areas to which you designate these funds? Are there different trust funds? Ms Schmidt: There are two parts. There is the hospital insurance trust fund, which we call part A. This chart will show you the combined amount for both parts A and B. The payroll taxes go into the trust fund. That is shown at the bottom of this chart. That provides about 86 per cent of all of the revenues that flow into the trust fund. The other sources of revenue for the trust fund are the interest earned on the trust fund assets, which is about 7 per cent, and the taxation of a portion of social security benefits. In this country, social security benefits are income-tested. If an individual's income is over a certain amount and the person is also collecting social security benefits, we tax those benefits. A portion of that benefit goes into the social security trust fund; another portion goes into the hospital insurance trust fund. There is other income that flows into the trust fund. It forms only about 2 per cent. Those are the sources that make up part A. That is the place where we are carrying a surplus. The second section of Medicare, which pays for physician services and all the out-patient services, is called part B. That is made up of federal general revenues, which is about 73 per cent of all the money that goes into part B. The other part is beneficiary premiums, which is about 23 per cent. There are also some assets, only about 4 per cent, and there is some income flowing from that. In ever year, part B is in balance. It must be in balance by law. General revenues, which is from general taxes of the country, go to support that program. The general rule of thumb that we try to hit is that 25 per cent of the money comes from premiums from the beneficiaries and 75 per cent comes from general revenue. Senator Morin: As neighbours, we share our health systems in many ways. You probably know that Canadians cross the border, either on their own or as part of the government treatment system, for treatments in the U.S. We have many U.S. citizens coming to Canada to purchase their drugs and pharmaceuticals. I would like to point out the success story in many aspects of the U.S. system. I think your support of scientific research is remarkable. Canadian citizens profit from this. The rest of the world also profits much from your outstanding support of health research. You are far ahead of what we are doing in quality control programs and in the harnessing of information technol ogies. We are way behind you in those three respects. We are quite worried here in Canada about waiting lists for various elective procedures and for diagnostic tests and so forth. What is the situation in the U.S.? I realize that for those who have private insurance the waiting lists might be shorter, but what about those Americans who are on either medicare or Medicaid. Is there a waiting list? I do not expect figures, but if you could give us an idea; in Canada it is a problem. We hear about this regularly in the press, and people are quite upset about it. This is also the case in Great Britain and many European countries. Is that a problem in the U.S.? Ms Schmidt: We are concerned about access in particular, somewhat in the Medicaid program. As you noted, the distribu tion of physicians and services is not even throughout either one of our countries. There are certain elective procedures within Medicaid that may have some waiting lists. In general, we do not see that as a large problem. We may not see it as much because of the way managed care functions within the Medicaid program and how that gatekeeper system works in referring people to specialists. As you noted, in the employer-sponsored insurance, there is less of that; but again it is a function of what kind of insurance system they are in and whether it is an HMO. In the U.S., the insurers are moving away from more heavily managed care, in large part because there is such a tight labour market and employees do not want their care heavily managed. Even the Medicaid system is becoming much more loosely managed. Senator Morin: Are the uninsured, in fact, being denied care? For example, in an emergency or in a life-threatening situation such as diabetes or AIDS we have heard that approximately 45 million Americans are being denied access to drugs. I know that is not the full truth, but for the purposes of this committee it would be interesting to know what happens in such a case. If someone presents either to a hospital or to a physician without insurance, what happens? Ms Schmidt: Hospitals that are certified as a condition of participation in the medicare program have to accept people at the emergency room. If you present for an emergency, they are supposed to take care of you. If there are reports that an individual has not been taken care of has been shifted to another hospital, the situation is usually investigated. Many uninsured people present at emergency rooms not only for emergency treatment but also for other kinds of health care services. The way in which the uninsured are taken care of in the U.S. varies dramatically by location. In some areas, there are community health centres and what we call the "safety net." A lot of federal funding does go out to these community health centres. In fact, President Bush announced in the last budget that he would like to double the number of community health centres in the next five years, to take care of the uninsured. In some areas, there are community health centres; in other areas, there are clinics. For example, in the State of Rhode Island, physicians donate services. They rely less on clinics, but they have a pool of physicians who donate their time on a rotation basis to take care of the uninsured. Much of that falls at the local level to determine how that will happen. We do know that while regular and emergency services are certainly accessed there is less use of health care services among the uninsured. That can be measured. Senator Morin: What is the situation concerning drugs relevant to the treatment of AIDS or diabetes? Ms Schmidt: I can supply more information on the AIDS drug program for you. There are programs run by CDC and HRSA, the Health Resources and Services Administration, to get drugs delivered to the uninsured persons with AIDS in the communities. I can supply those numbers but I do not have them with me. Ms Tanya Alteras, Analyst, U.S. Department of Health and Human Services: Some states have applied and have received waivers to use their Medicaid programs to provide low-cost drugs to HIV and AIDS patients. Senator Morin: I would like to know about drugs for other conditions such as heart disease and diabetes that require life-saving, often expensive, medications for long periods of time. Ms Schmidt: Almost all states now cover prescription drugs within the Medicaid program. If you present at a hospital with one of those conditions and appear to be eligible for Medicaid, the hospital will ensure that you are signed up for that program. Therefore, you would be eligible for your protocol of drugs. Senator Morin: Do you think that the variability from state to state in Medicaid programs is a positive experience? Do states actually learn from each other? For example, the Oregon program is well known outside the U.S. Is there some experimentation that happens? Is this a positive experience? Ms Schmidt: I believe they do learn from each other. The states and the state Medicaid directors get together quarterly to share their experiences. When there is something new and radical, such as the Oregon experiment, people do examine it to determine the effects. States have pushed their rights to flexibility to try new things - to pool resources and to figure out how to serve the populations better. In the U.S, the saying is "All health care is local." Thus, that variation is very important. Senator Morin: There is much interest in Canada in the Medical Savings Account, the MSA. I know there has been some experimenting in the U.S. Do you have any comments on that? Ms Schmidt: That is only about a year or a year and a half old. We do not have any reports as of yet. I will provide that information when the first report is ready. Congress designed this to be relatively stringent; a small income band would be allowed into these medical savings accounts. Very few people have elected to use them. Within the medicare program, which also has that option, very few people have elected to use MSAs. You are allowed by law to offer that option of an MSA, but no one has stepped forward in the private sector to offer that to the beneficiaries in medicare. Senator Graham: I want to deal with the SCHIP program, which I understand was introduced in 1997 to expand public health care coverage to otherwise uninsured people. The program enables states to provide coverage to children from working families with income too high to qualify for Medicaid but with incomes that are too low to afford the purchase of private health care insurance. In other words, it is supposed to catch those people in the middle. In spite of this, we are told that millions of children remain uninsured; I believe you used the figure of 1 to 2 per cent. Senator Morin: Ms Schmidt said 10 million children. Senator Graham: What percentage is that? Ms Schmidt: That would be 14 per cent of children. Senator Graham: SCHIP was, as I understand, an innovative program, and the Clinton administration received a great deal of credit for introducing it. Are states required by the federal government to participate in SCHIP, or is this a voluntary program? Ms Schmidt: It is a voluntary program, but all states are now participating in that program. Senator Graham: How is it financed? Ms Schmidt: It is mostly financed by federal revenues, but there is a state share as well. The federal share is about 60 per cent to 85 per cent of total costs. The states put up the rest. The states' share can come from some premiums that are paid by the participants in the program above certain levels. Senator Graham: It has also been suggested that perhaps some low-income working families who have never been eligible for traditional public assistance programs may not realize that they are entitled to receive benefits under SCHIP. Is that a possibility? Ms Schmidt: That is absolutely a possibility, and it is something on which we have been working quite a bit. We recognize the difficulty, because this is a new program. We need to get the word out on that. Some people also do not want to sign up for government programs or do not understand them. I noted earlier, also, that there was a great variability in the insurance rate across different groups. Notably, one third of Hispanics are uninsured. Also, certain people who come into the country as recent immigrants do not understand the concept of insurance. There are different reasons in different areas of for this problem of people not signing up. Many states have been very active in trying to get advertising campaigns out. They send workers out to the schools. This year, I think, is the first year that we have had a national school lunch program. When children sign up for that program, they can simultaneously sign up for the SCHIP program for their health insurance coverage. We are trying. We realize this is a problem. Senator Graham: One of the topics we are interested in is preventive health care. I am wondering how much emphasis is placed on preventive health care programs in the United States and whether that is a shared responsibility between the federal government and the state governments. Ms Schmidt: It will be a shared responsibility between the states and the federal government. A number of agencies work on preventive services, notably CDC, HRSA and NIH. You have hit on one of the things that the secretary is interested in, and he will be announcing a major preventive initiative this summer. He has already talked about this prevention initiative. New preventive benefits have been added to medicare, covering certain cancer screening and different types of tests. Medicaid has some preventive services in it as well. Senator Graham: We are also interested in the administrative costs of the health care delivery system. We know that it varies from country to country and according to the services that may be provided. For instance, in Canada, it is estimated that it is from 2 to 3 per cent. In other countries, it ranges up to 5 or 6 per cent, and even higher. Can you give us an indication of what those percentages might be in the United States? Are the administrative costs of public programs lower or higher than the administrative costs of private insurance plans in the United States? Ms Schmidt: The administrative costs for public plans are significantly lower than for private insurance programs. In the medicare program, we think that the administrative costs are about 2 to 3 per cent of total costs for that program. The Medicaid program, which is that shared state-federal program, is about 10 per cent. The private sector ranges from 10 to 15 and up to 20 per cent. One of the major differences is that private insurers also do a lot of marketing, in order to have people sign up for their plans. That marketing increases their administrative costs. Economies of scale also enter in, obviously. Senator Graham: Is there a feeling in your group that more emphasis should be placed on preventive programs? Is there a willingness, both at the government level and in the private sector, to spend more money? It seems to us that if we invest more money in preventive programs, we will save money in the long run. Ms Schmidt: As I noted earlier, the secretary is very interested in preventive services and will be launching a major campaign about that, so, yes, it is also obvious from the federal level that we will be very interested in it. In the private sector and at the state level, there is also tremendous interest in it because of the distribution of health care costs in the country. For example, I said that about 6 per cent of the medicare beneficiaries spend 50 per cent of the dollars. These are people with chronic diseases - in particular, a lot of heart conditions. The more you can spend on preventive services, the lower the health care costs in the future. However, private insurers may be less willing to invest in preventive services because people change their insurance companies over time. There is a lot of churning in the United States - in other words, a period where an individual is with one company, followed by a period of uninsurance, following which the individual may go with another company and then may be on Medicaid. The company that invests in prevention may not be the company that actually receives the savings down the road. That is part of the economics of how the insurance industry works. Senator Graham: Do you have any studies that would indicate a correlation between preventive programs and actual cost savings? Ms Schmidt: Not that come to mind immediately. Let me check back at the office on that. Senator Graham: If so, will you make them available to us? Ms Schmidt: Yes, of course. Senator Fairbairn: Thank you for joining us. I understand that the individual states have the responsibility and the right to raise their own revenue through taxation and that there is no federal law that limits that power of taxation. Parts of our country are more well off than others, and that would be the same of course in the United States. With that responsibility on the state, is there a great variation in levels of care among those who are less fortunate? You mentioned that Mississippi was a state that had more difficulty than the rest. I am wondering if there is a perceptible difference in the way that Americans in less prosperous states are receiving benefits. Ms Schmidt: That is a good and very complex question. A number of things are going on. On the one hand, the answer is yes. The eligibility limits vary greatly for the Medicaid program. Medicare, let me point out, is uniform nation-wide. Some of the coverage decisions that are made in medicare may be locally made, but for the most part medicare is a relatively uniform program. In Medicaid, what will change most dramati cally is who is eligible. I said that in some states children through the age of 18 will be eligible up to the poverty line. In other states, children will be eligible up to 300 or 400 per cent of the poverty line, and those would be wealthier states that would go up higher into their income distribution. Another difference in health care services in the United States has been documented, and that relates to service delivery and the kind of care. If you look at some medicare data, how medicine is practised in Florida is different in many ways from how it is practised in Boston or how it is practised in Minnesota. The cost in Minnesota per person may run around $3,000. An individual in the exact same circumstance - and I will use medicare data as an example - who presents himself or herself in Miami, Florida, will cost the medicare program between $10,000 and $12,000. We all know that the quality of care is not that different in their outcomes and yet the cost is varied. It is a complex picture when you look at how care is delivered and how medicine is practised in different areas of the country, and then you overlay that with the differences in income. Senator Fairbairn: The Florida example is startling. I had an experience with a family member who was placed in a severe emergency situation a year ago, in Jupiter, Florida. With our health care coverage from Canada and some supportive insurance, we had absolutely outstanding treatment. Had we not had the support from our Canadian system, it might well have been quite an incredible expense. That is interesting that there is that divergence. I also want to go back to Senator Morin's question. There is a mythology on both sides of the border about each other's system. Often what we hear on this side of the border is the mythology of people in your country being turned away at hospitals if they do not have either the insurance or the money. I want to clarify this in my own mind. In the United States, if children or poorer people or those who, for whatever reason, have chosen not to get involved in the system show up in an emergency situation anywhere in the United States, would they be accommodated? Ms Schmidt: They are supposed to be accommodated, yes. The hospital would be investigated if it did not, and a report would be made. Senator Fairbairn: If it was an emergency, life or death, would they be treated? Ms Schmidt: Yes. Senator Fairbairn: Most of the traffic moves in your direction, with Canadians seeking expert treatments from some of your well-known institutions, like the Mayo Clinic, or Boston, or Mount Sinai. There is an element of support from our system, particularly if these procedures are not done at all in Canada. If the shoe were on the other foot, if we had a particular expertise in this country and an American wished to come here and be treated, would that citizen be supported by your health system to do that? Ms Schmidt: It would depend on the individual's type of insurance. If the individual had employer-sponsored insurance that allowed that, it would happen. If the individual was in a managed care situation with a network, where the insurer wanted the individual to see certain doctors, it would not be allowed. I am not certain, but I gather it would not be covered by medicare. The Deputy Chairman: I have a supplementary question about going back and forth across the border. Senator Fairbairn and I have had the experience of having husbands admitted to hospitals in Florida, where they received very good care. My question, however, relates to the specific issue of the drug prices. Some companies in the United States bring busloads of people to Canada on a package tour to purchase their drugs. Do not get me wrong, we are happy to have the tourists. What is the reason for that? Is it related to cheaper prices, or is it related to the exchange rate on the Canadian dollar, or is it because there is a gap between the different programs? Some insurance programs cover drugs and some do not. What is the reason for it, in your view? Ms Schmidt: It is the pricing difference. The Deputy Chairman: How do you explain the price differences? Ms Schmidt: The same drugs in the United States are priced in a different manner than they are in Europe and in Canada. It is a function of how the marketing system works from the drug manufacturers. Do you have price controls on drugs in Canada? Senator Morin: The answer is yes. In Canada, we do have price controls on drugs. The Deputy Chairman: On some drugs. Ms Schmidt: That makes a difference. Senator Morin: I would like to come to the HMO system. There have been negative reports recently. If I understand correctly, 85 per cent of those Americans who are insured are taking part in an HMO. I would like to know the difference between for-profit and not-for-profit HMOs concerning patient satisfaction and outcom es. Do you think it is still a formula for the future? Are you looking at other possibilities? Do you think it is a formula of the past? What is your impression? Parts of it are being considered here in Canada. As we are moving into that system, I have the impression that Americans are moving out. Ms Schmidt: Your mentioned that, in the employer-sponsored insurance sector, 85 per cent of people will be in HMOs. It may actually be that amount, I am not sure of the exact number, but it is in managed care. Most things in the United States now are managed care. The HMO part of managed care has become a smaller and smaller part of the picture over time. One of the ways to think about that is the degree of management that occurs within this system. There is a whole spectrum of managed care. In a closed, tight, gatekeeper system HMO, which was one of the original philosophies of the HMO movement, that has become rather small right now. There are fewer of them. Kaiser Permanenti is one example of that, and that only exists in certain markets, notably in California. California probably has the greatest concentration of HMO types and managed care types. In about 1994, everyone expected that what happened in California would march eastward and take over the rest of the United States. It has not yet really crossed the border of California. It will not move in that direction. There are other models now. There are preferred provider organizations and point-of-service organizations. Fewer and fewer managed care organizations have closed networks. There is now a network that people can choose from, but you can also go outside that network for a slightly larger co-pay in order to get another doctor of your choice. Some of these models no longer have a gatekeeper to which you must go before you can go to a specialist. This brings me to your second point on patient satisfaction. Again, this is something of a mixed bag. This may be a U.S. thing, but satisfaction is very much linked to choice. People are more satisfied if they get to choose their doctor or their specialist. In the closed HMOs, there is less satisfaction. On the other hand, the people in the closed HMOs liked the fact that the price was cheaper and that they got a lot of care for absolutely no co-pay. In this range, there was more satisfaction with more loosely managed types of organizations but less satisfaction with the cost of getting that kind of insurance. Satisfaction is also prominent in all of the ongoing debates on Capitol Hill right now about patient and consumer bills of rights. Almost all care in the United States now is some form of managed care, but it is across a range. It has become looser because people do not like tight managed care and employers decided to start offering looser products. They told the insurers that their employees did not want this product any more, that they wanted a preferred provider list or a significant loosening up on gatekeeping. Since it is all part of accommodation, it started to loosen up. Many economists now say that when we are faced with the inevitable economic downturn and the labour market is no longer so tight, employers may revert to becoming more interested in controlling their insurance costs and, therefore, managed care will become a little tighter again. Other economists argue that we will never go back to that tightly managed care. In terms of outcomes, there are some different outcomes. I would like to send you a recent Hal Luft paper about a literature search, because I am afraid that I will get some of the outcomes wrong. It is particularly noted in terms of length of hospital stay - the more managed the care, the shorter the hospital stay. I addressed the formula for the future. It is unclear in the United States. We are moving away from tightly managed products. Many people do not believe that we will go back and there will be a loosening up of the labour market before people see which way it goes. However, people are starting to talk about the next generation of models. The economists who talk about that do not know exactly what the next model will be, in terms of how to control costs, but they are not sure that managed care is the way that it will happen. Senator Morin: This is very interesting. Here in Canada, where care is dominated by the provinces, primary care reform is very fashionable. There are various models, but universal among all the models is having a team of physicians, nurses and so on who would serve as gatekeepers. In Canada, as compared to the U.S., pediatricians and gynecologists, for example, are considered specialists or referred care. I realize that in the U.S. many of them are considered to be primary care professionals. The function of these primary care teams would be very strict. You would not be able to consult a specialist unless you were referred by the primary care team. This was a concept derived from HMOs, to which we keep referring. If I understand correctly, you are definitely moving away from this gatekeeping function that we see in the HMOs. Ms Schmidt: That is the trend in employer-sponsored insurance right now, yes. Reflecting where the costs occur in the system, one of the models for the next generation that people are looking at and that we are about to start demonstrating in the Medicare program is a system of coordinated care for people with chronic conditions who require care over time. With regard to drug utilization, in the elderly population in particular people rarely have only one condition. They usually have two, three or four conditions. Coordinating that care is very important. Therefore, people are currently talking about coordinating care for that group of people with chronic conditions with teams of doctors, as you mentioned, more tightly than for the general population. Senator Cordy: Thank you for taking the time to be with us today. I would like to talk to you about health care professionals in the United States. In Canada, we currently have a shortage of doctors and nurses. They are leaving Canada for a variety of reasons, including better salaries, better research dollars and job satisfaction. Will you tell us about the job situation in the United States? Are you experiencing shortages there? With regard to job satisfaction, nurses in particular in Canada are experiencing great dissatisfaction and frustration with their jobs. Is that happening in the U.S., as well? Do you have much movement between professionals working for the HMOs and outside the HMOs? Ms Schmidt: In some ways, the situation is very similar. On shortages, we have a clear and distinct nursing shortage in the United States. An issue of some concern in the federal government and the federal policy is how we will attract people into the nursing field. There is less of a concern on the physician side. In terms of job satisfaction, the situation with nurses regarding jobs satisfaction sounds about the same on both sides of the border. Movement in and outside of HMOs is, in a way, a shifting story. There was a period during the 1990s when physicians were leaving HMOs. In terms of economics, there was a large struggle between the providers and the insurers. It seems that within the last year providers grouped together. Certainly, hospitals have done so, but there are also areas where physicians have grouped together. In Boston, all the OBGYNs grouped together and faced down the insurers and said, "You are not reimbursing us enough." They said, "If you want any kind of obstetrical services in this city, you must deal with us." Therefore, the dynamics in the negotiations between the insurers and the providers have changed. Right now, it looks as if the providers are getting a little more of their way, and that is changing some of the dynamics on the physicians' side, at least, both in satisfaction and in how they are working inside and outside of managed care. Mr. Ariel Winter, Analyst, U.S. Department of Health and Human Services: Physicians can also contract with many different kinds of health plans, with tightly managed HMOs, with more loosely managed provider organizations or fee-for-service types of plans. The same doctor could see first an HMO patient and then a PPO patient. There is a relatively small percentage of doctors who work inclusively for one HMO and are paid on a salary basis. Senator Cook: Thank you for sharing your wisdom with us today. I would like to move from how we look after people who are ill to how we look after people who are well. I would like to talk about population health. You deliver your services in a variety of ways, from the state system, to the federal system, to the private system. How are programs such as immunization, nutrition and literacy delivered? Are they delivered from a federal perspective, through a cooperative effort, or by the state? Ms Schmidt: The answer to that question is every which way. It is all over the place. There are federal nutrition programs and there are some federal public health programs. The large nutrition programs include nutrition education programs and large feeding programs. There are also programs that are delivered in partnership with the states at the federal and the state level. There are also many that are delivered directly at the state level, with federal grants provided. Both the Centers for Disease Control and the Health Resources and Services Administration direct many grants to states, and some of them are even passed through to local communities in order to design population health programs. Senator Cook: Given the size and population of your country, at any given time is there any effort to coordinate all these programs, such as the gathering of evidence-based information, or is it done, as you say, all over the place? Ms Schmidt: It is done in layers. There are researchers who do try to do it. However, there are other layers. Research is also done at the community and state levels. Much of this data then feed into the CDC or are collected in other databases for researchers at NIH and other organizations to use, to track what the population looks like. We had a goal for the year 2000. We have now established what we call "healthy people goals" for 2010, which were designed by the U.S. Public Health Service in consultation with the states. There are about 200 indicators of public health that we will try to track over time, with goals attached to each. The country has also selected about 10 of these goals, almost treating them like economic indicators, that we can look at annually, such things as obesity rates, smoking rates and the like. We will be tracking those over time to see how the public health is working and whether we can meet our goals in 2010. Senator Graham: You are obviously familiar with the Canadian health care system. Is there anything about our system that would attract you sufficiently that you would like to see it incorporated or adopted in the U.S. system? Mr. Winter: I would suggest coverage rates. Ms Schmidt: That is really hard to say. I do not know your system as well as you may think. Certainly, the coverage rates and having people insured would be wonderful for our country. We also worry about access. Nothing springs to mind at this moment, I am sorry. Senator Morin: My question concerns President Bush's platform with regard to the coverage of prescription drugs for seniors and the patients' bill of rights, which has been stalled in Congress for a time. If I understand correctly, President Bush wants to implement a drug benefit for medicare beneficiaries. That is an important issue here in Canada, one that we are discussing. Do you think there is any possibility of these two issues being implemented? Ms Schmidt: Our sense is that there is a very good chance that there will be legislation. Certainly, we are all hoping that there will be legislation. We will see whether it happens this year or next year. The debate right now on the patients' bill of rights is getting closer all the time. There has been much negotiation. We may well see a bill this summer on that particular area. With regard to prescription drugs, the congressional budget office just put out new estimates indicating that the addition of prescription drug benefits to the medicare program is within the reach of the budget agreement that has been put forward late this spring. It is now at the congressional level. We are all expecting a debate on that issue and on medicare reform this summer. The Deputy Chairman: Thank you very much for giving your time today. We anticipate receiving the material you have agreed to send us. The committee adjourned.