A Canadian take on American health care.

Most Americans think the Canadian health-care system is worlds apart from their own, but we have much more in common than meets the eye. In both countries, we spend more than we have on health care, partly because our citizens share an attitude about services that is atypical in the global village. In many other countries, people are comfortable with a basic package of services provided at a reasonable price that doesn't burden business. The challenge the Clinton administration faces in gaining congressional and public acceptance for its health-care package is getting American citizens to think the same way. Germany, Japan and Sweden all faced explosions in health-care costs 15 years ago. These countries accepted difficult challenges and created health care programs that work for them.

We can do the same. The significant impetus for health-care reform in America has not come from bureaucrats or Congress. It's come from business, which can't continue to carry this burden alone. The business sector is the economic engine of the United States, and we must create a health-care system that does not destroy it.

Growing health-care expenditures without parallel improvements in the health of the public will bankrupt the United States and Canada. It's driving up the deficit in both countries. If we continue to spend money on health care at the current rate, neither country will have much left over for education, technical training, job creation or research and development. Health-care reform will be tough, and implementing it probably will take years. But the longer we wait, the bigger the deficit, because both Canada and the United States are borrowing money on the world exchange to pay for health care.

Not only are we spending more, but we're getting less. Canadian life expectancy is lower than that of our global competitors, and our infant mortality is higher. Plus, our workers' compensation costs are enormous. That's true in the United States, too. In Washington, D.C., four blocks from the White House, the infant mortality rate is 40 per 1,000, the highest in the industrialized world. Overall, infant mortality in the United States is 10 per 1,000, versus six per 1,000 in Canada. And last year, 600,000 American women got no prenatal care of any kind.

THE ENTREPRENEURIAL SPIRIT

Many Americans think Canada has a national health-care system. That's not quite accurate. We have national health legislation that requires each province to create and deliver health care. Health care is publicly financed, but the government doesn't deliver the service. Ninety-five percent of our hospitals are privately held corporations with powerful CEOs and CFOs. We global-budget our hospitals. This encourages the executives and the chief financial officer to pay attention to cash flow every single day, which is an acceptable way of handling both private and public money. The board of directors is responsible for the hospital budget, and the government provides a significant amount of capital funding, but a great deal of entrepreneurial spirit comes from the communities the hospital serves.

Americans seem to disassociate income taxes and health-insurance premiums, so it's important to understand that Canada isn't a heavily taxed nation. Canadian income taxes are relatively stable and include a significant amount of health insurance, so Canadians actually take home more of their pay than their American counterparts.

Progressive taxation determines how much each family pays for health care. For instance, an Alberta family earning $125,000 pays 1.2 percent of its income as a health-care premium. That money goes into the federal government coffers and is transferred back to the province for its health-care expenditures.

Provincial and federal sales and services taxes contribute to health care, a practice many U.S. states are beginning to emulate to support state-mandated health programs. Tobacco, alcohol and gasoline taxes are another source of revenue. Some of our provinces, such as British Columbia and Alberta, mandate premiums from all working people and provide a buffer for those living below the poverty line. In the United States, the poorest people pay the largest proportion of income for health-care premiums, a form of regressive taxation.

Canada provides very limited economic freedom for physicians. We set their fees through negotiations, so they cannot charge whatever they want for a service. However, we provide total clinical freedom, and the malpractice insurance costs are much lower. General practitioners pay about $2,000 a year in malpractice premiums, while specialists pay about $14,000, about a third as much as their American counterparts. Remember, however, that we don't have a legal system like yours. We don't allow a jury trial for malpractice or contingency fees, but the Canadian Medical Protective Association will compensate a patient if it believes the physician did commit a clinical error. It's a relatively reasonable way to do business.

Canadians and Americans spend about the same proportion of their budgets on hospitals, doctors and drugs. The major difference is administrative costs. The U.S. expenditure is just under $500 per person annually, while Canada spends about $150 per person annually. American health-insurance companies don't make money by reimbursing the providers and that, of course, generates a lot of paperwork. This creates some benefits, however, because the health-insurance industry has set up a number of practice standards to make physicians and hospitals think twice about performing a procedure.

In Canada, we have very few standards of clinical practice and no clinical constraints on physicians. Although physicians' fees are set, they can perform a procedure as many times as they wish, which can encourage them to overuse the system. The same is true with laboratory tests. This is a big problem, and since we don't measure health care as well as Americans do, we're in trouble in terms of efficiency.

SETTING THE STAGE FOR REFORM

What can we do to improve both the U.S. and Canadian health-care systems? First, we can limit technology by restricting the introduction of new services and keeping closer tabs on low-cost, high-volume services. With no constraints on capitalization and whiz-bang technology, the U.S. health-care industry generates many services that Americans don't really need. Anyone can wander into a magnetic-resonance-imaging unit and buy a test.

Much the same attitude prevails in Canada. Our hospital stays are twice as long as they are in the United States, and they produce the same outcomes. A recent study at the Ottawa Civic Hospital showed that simply reducing the number of ankle X-rays on people without broken ankles could save the emergency department millions. As CFOs, you know that these small-ticket items add up fast.

We can stop open-ended programs. This is where American health maintenance organizations are valuable for constraining open-ended programs and rationing care. Most Canadians can drop in and visit their physicians at any time, because they have no deterrents, such as a fee or a limit on the number of visits.

Fraud inflates health-care expenses, too. In the province of New Brunswick, 30,000 people who aren't Canadian citizens have health cards. In the United States, fraud assumes different forms, but any reforms in the health-care system must address this problem.

In addition, Canada and the United States could apportion physician populations better by telling our doctors, "You can't practice in Chicago -- there's no room, but we sure want you in Dubuque." We can set criteria for, say, half the people in our graduating classes to be primary-care physicians. And we can develop practice standards and stick to them, an area in which the United States leads the world.

In terms of doctors, Canada has made a big mistake by paying physicians primarily on a fee-for-service basis. Americans have done much more to place physicians in salaried positions, and that changes the way they practice medicine. The American HMO system and preferred-provider mechanisms help prevent the problem of unnecessary services and allow businesses to get a handle on health care.

A NEW VISION OF HEALTH CARE

Both Canada and the United States have to rethink old assumptions about health care. We should look at countries like Sweden, which spends less money on health care than Canada and about half as much as the United States. Swedes still live longer and have more active days of life. That's because Swedish health care focuses a great deal on prevention and keeping seniors active, so their quality of life is better. This shows we should zero in on the practices that produce a positive outcome and stop providing services that don't make any difference except to the incomes of physicians.

For example, we ought to begin the debate about death with dignity. In your business, would you invest in a program with absolutely zero productivity, which caused anxiety for the person who had to deliver the program? In Canada, we incur about 50 percent of our lifetime health-care expenses during the period in which we die. If we could put 10 percent of those people in medical wards rather than intensive-care units and make them comfortable, while at the same time refraining from using machines to keep them alive, we wouldn't have a national deficit. It sounds harsh, but other countries have tackled the issue successfully. For example, Holland has created a window of opportunity for physicians, families and patients to choose death with dignity, and this isn't considered a criminal act.

The United States and Canada also need extensive public health education -- to tell people what condoms are for; how immunization works; and why clean water is important. A second-grade teacher who instills a love of learning in her students and makes a dent in the illiteracy problem is a health worker. A cop who understands domestic violence is health worker. Many aspects of our social structure contribute to health, not just hospitals and doctors.

The Clinton administration has several opportunities before it. It can and should continue to grant waivers to the states. The Employee Retirement Income and Security Act waiver in Oregon set a precedent in which states make and deliver health-care decisions, with the federal government empowering them. Also, the administration shouldn't try to reinvent the wheel. If the administration hopes to make any progress in implementing reform, it's got to be fast, because in two years, Clinton will have to begin, once again, the process of getting elected.

If I could single out one area for reform that would most improve the American system, I'd choose the insurance component. America already has superb health care. It just doesn't get to people quickly enough and to the right people early enough. To remedy that, you're going to have to go to war with the insurance industry. Health-insurance premiums in America are about money and profit, not about health care. Health care has become a great deterrent to small business, and it is small business that is driving the economic recovery. If Clinton does nothing but protect the new entrepreneur, he will go a long way toward solving the problem.

Clinton's plan calls for a shift from insurance to taxation, and Americans hate the "T" word. But if you eliminate the profit from health-insurance premiums, your taxes for health care won't be much of a burden. They will allow the government to redistribute health care more equitably and alleviate the burden on business. A healthy nation is more likely to be able to deal with the problems of growth, retraining and technical skills.

I challenge financial executives to accept some leadership in health-care reform in both countries. We desperately need some bright people who know how to make tough decisions and still sleep at night. You can bite the bullet now or you can suck on it forever. If health-care reform is to work in the United States, it needs a boost from the organizations who will benefit most from it. Your retirees will consume enormous resources that you need for research and development, marketing and entering the global village. Corporate America and Canada should help the public understand that they aren't at war with the government, but with their own expectations of the health-care system.

Dr. Fulton is associate professor of strategic management and ethics at the University of Ottawa in Ottawa, Ontario. She is also a member of Hillary Rodham Clinton's task force on health-care reform, where she contributes information and answers questions about the nature of a single-payer system.