Medicare gives competitive edge in world trade

By Guy Caron
The StarPhoenix (Saskatoon)
October 19, 2007

Following is the opinion of the writer, a health-care campaigner with Council of Canadians.

With the loonie at par or besting the greenback, grumbling is heard from many corporate boardrooms that Canadian businesses have lost a major edge over American competitors.

This analysis neglects an important point: As the recent UAW-GM collective agreement reminds us, Canadian companies don't have to deal with the health-care headaches of our neighbours -- or with the costs. Indeed, the fact that Canadian companies don't have to offer health benefits to compete for the most talented and productive workers explains in large part why we are still competitive in the NAFTA era -- despite the high-flying loonie.

In a 2003 interview with Alberta Venture magazine, TransAlta Executive V-P Ken Stickland noted Canadian businesses don't know how lucky they are to operate in a country with universal health care.

"If I don't have a firm or a division in the States, and if my sales are 100 per cent to the domestic market, it is certainly easy for me to think it doesn't have an effect," he said. "But once you get the rumble of external competition coming into your previously cozy little business, you might become more aware of it. It is clearly an advantage."

The KPMG Competitive Alternatives series of studies confirm the health care advantage for Canadian business. Even more convincing proof comes from a 1999 briefing published by the Conference Board of Canada entitled, Corporate Health Care Costs in Canada and the U.S.: Does Canada's Medicare System Make a Difference? It compared similar U.S. and Canadian companies in four sectors: business services, pharmaceuticals and chemicals, automobiles and information technology.

It confirmed the competitive advantage of publicly funded health care and noted employers' total health care expenditures for private and public health benefits are substantially lower in Canada than in the U.S. Furthermore, even though taxes and contributions to legislated health-care benefits are higher in Canada, these costs do not offset the significantly higher cost of employer-sponsored benefits in the U.S.

Chrysler's outspoken former CEO Lee Iacocca is said to be the first to credit public health care as providing Canadian businesses a serious competitive advantage over their U.S. counterparts.

A car built in Detroit in 1984 cost about $500 US more to produce than to do it in Windsor. This amount equalled the value of health care benefits Chrysler was providing to its U.S. employees, while Canadian workers received comparable benefits through the Ontario government.

Today, General Motors estimates that private health care expenditures for workers in U.S. plants add about $1,500 to the cost of each vehicle produced there. Chrysler puts U.S. health care costs at $1,400 per vehicle while Ford says its burden is $1,100. In Canada, GM estimates its costs were less than $500 per vehicle.

GM recently negotiated the transfer of its health benefits liabilities for U.S. workers to a type of trust fund called Voluntary Employees Beneficiary Association, to be managed by the autoworkers' union.

Instead of having a liability of $51 billion on its books, GM will transfer 70 cents to the dollar to the fund and will write the liability off its books.

But this won't cancel out Canada's health-care competitive advantage. According to financial experts consulted by the Wall Street Journal, such arrangements likely will be limited to a few industries and won't extend to most U.S. businesses.

This means that the health-care competitive advantage enjoyed by Canadian companies, especially small and medium-sized, is alive and well.

It is a common assumption that the Canadian public health care is in a state of crisis and that partial or full privatization is the only cure. However, it is in the interest of Canadian businesses to ensure that health-care delivery and insurance remain, to as large an extent as possible, in public or non-profit hands.

Two major studies conducted in the last 15 years (one published in the New England Journal of Medicine and the other in the Canadian Medical Association Journal) have demonstrated that under similar conditions, health services provided at for-profit medical institutions cost between 19 per cent to 23 per cent more.

These studies are major blows to the argument that, "It does not matter who provides health care as long as the government pays for it."

Dealing with private, for-profit clinics and hospitals will significantly drive up the cost of public health insurance programs to the point where governments might not be able to afford them. The costs will then shift to employers.

For Canadian businesses, and especially smaller companies, the only logical choice is to demand that Canada maintains a strong, public and universal insurance program, and non-profit delivery of health services.

Guy Caron, Health Care Campaigner, Council of Canadians

Visit the Profit is not the Cure website for more information about public health care.