National Agenda : Canada’s Health System May Be Catching Virus : The model of free, universal medical care so lately admired by America is developing symptoms of sickness. Costs are rising, and resources are strained.

TORONTO —  Quietly, tentatively, like an off-color joke that no one wants to be caught repeating, an unpleasant thought is creeping into public discourse in Canada: user fees for health care.

For years, Canadians have been going to the doctor without so much as feeling for their wallets. Medical care here has been universal and free since 1971 and has become by now the most popular social welfare measure in the land. A recent poll indicated that an overwhelming 86% of Canadians are happy with the treatment they get from their doctors and hospitals.

Canadians look on universal coverage as one of the things that makes them distinct from--and superior to--their dominant southern neighbor. People here are proud of a system that costs less than the American one, as a percentage of national wealth, and that still covers a far bigger share of the population. Ordinarily, no Canadian politician but one with an advanced death wish would hint at tampering with the health insurance regime.

But now, the national plan that Canadians love so dearly--and that Americans increasingly eye with envy--is showing considerable signs of strain. Per capita spending on health rose by about 10% a year from 1980 to 1987; Canada’s inflation rate, by contrast, has been about 6.3%. Cost pressures may be lower than in the United States, but they are still higher than in Europe.

The Canadian government now spends close to $55 billion annually on health care, and the money is getting harder to find. As a result, policy analysts and even a few bold politicians are taking hard looks at Canadian health insurance and recommending major surgery.

No one in Canada is talking about throwing out the universal health insurance system altogether; far from it. The problems have not yet reached the crisis point. But ever more voices are calling for cost-cutting measures and new sources of funds--and even user fees.

Earlier this year, for instance, Canada’s ruling Progressive Conservative Party surprised the public by voting narrowly in favor of user fees at a policy-making convention. User fees were also an issue in a recent election in British Columbia, and have been recommended for upper-income patients by a group of Quebec politicians.

Canada’s federal health minister, Benoit Bouchard, has said he will not let doctors charge user fees. Still, a recent survey found that a majority of Canadians would in fact accede to the logic of paying for health care, if the choices were higher taxes or reduced services.

A few recent events:

* In the province of Quebec, doctors have staged three walkouts and threatened a general strike after budget-nervous government officials proposed charging patients about $4.35 for emergency room visits, posting new doctors to remote, lonely areas of the huge province, and making other reforms.

* Also in Quebec, pharmacists angry about reimbursement rates have threatened to pull out of a program that provides free prescription medicines to the poor and elderly.

* In Ontario, hospital administrators have been complaining that by March they will have been forced to cut 5,000 hospital beds and 3,500 jobs in a two-year drive to reduce costs. They say they will have to do away with even more beds and jobs if the provincial government can’t come up with more money.

* Ontario Health Minister Frances Lankin, meanwhile, says that with nearly a third of the provincial budget committed to health care, she is thinking of ways to curtail cholesterol testing, Cesarean sections, in-vitro fertilization and other sometimes questionable, relatively esoteric and expensive procedures.

* In British Columbia, a major government health care inquiry has just recommended an array of seemingly puritanical measures aimed at keeping people out of the health care system: legal euthanasia, mandatory AIDS tests for pregnant women, needle exchanges for drug addicts, condoms and sex education for “escort service” personnel, an all-out ban on liquor and tobacco advertising, a curfew for teen-age drivers and even mandatory bike-helmet laws for children and adults. The panel also suggested caps on amounts paid to doctors.

* In the prairie province of Manitoba, officials have touched off a firestorm by proposing the sale of health care to sick, cash-paying Americans as a way of financing continued free coverage for Canadians. Critics argue that Canada has no great surplus of hospital beds; they fear that columns of sclerotic North Dakotans will get faster and better treatment than Canadians if the proposal is put into practice.

Canada’s attempts to grapple with health care costs come at a time when more and more Americans are looking north for cost-cutting guidance and ideas for extending coverage to the 34 million U.S. residents who now have no health insurance. The landslide election earlier this month of Pennsylvania Sen. Harris Wofford--a virtual unknown who attracted votes by calling for expanded health coverage--has convinced many U.S. politicians that voters want action on the issue.

A number of Democrats in the House of Representatives now support a bill that would create a government health insurance system, in the Canadian image.

But Republicans favor rival legislation that would keep the existing insurance industry intact and merely make it somewhat more affordable by introducing new tax credits and deductions. They scoff at the idea of bringing Canada-style coverage south.

And Dick Thornburgh, the former Republican governor and U.S. attorney general who lost to Wofford in the Pennsylvania Senate race, referred in his campaign to “the failed Canadian plan.”

Canadians find such talk of their “failures” inaccurate and offensive. And indeed, policy analysts here say Canada’s brewing health coverage problems don’t come close to proving the Republicans right. What they do show is that even a national monument to progressive government can develop some disfiguring cracks if it isn’t looked after properly.

“Canada’s system is not under-funded, but it is seriously under-managed,” says Michael Rachlis, a physician and health policy consultant in Toronto. “The problems of the Canadian system are not inherent to the public health insurance model.”

As things now stand, Canada does not have “government-run health care,” or “socialized medicine,” as free-marketeering detractors south of the border claim. On the contrary, a greater proportion of doctors here work in private, fee-for-services practices than do their counterparts in the United States, since Canada has no such innovations as health maintenance organizations, where doctors work on a salary. For the most part, Canadian doctors go about their professional lives largely free of government or other interference.

What is government-run in Canada is health insurance. There are 10 public insurers here, one for each of the 10 provinces. The provinces are free to run their insurance programs as they please, as long as the coverage meets certain federal standards.

There are slight differences in how each province does things, but a Canadian generally gets a health insurance number from his home province, enters it on a form each time he sees the doctor, gets treatment on demand and lets his doctor charge the province. The patient never sees a bill.

The economy of the system owes everything to its simplicity. Since there is just one “insurer” per province--the government--billing is straightforward and paperwork is kept to a minimum. And since there is no competition among private insurers, there are no advertising costs to pass on to customers.

The problem for Canada, though, is that this streamlined system was put in place in the high-growth 1960s, a time when governments could afford to lavish public funds on health care without paying much attention to what they were buying. That era is long over, but the mind-set lives on.

“For 10 years now there has been increasing scrutiny of what doctors do” in America, says Rachlis, noting that the fine-tooth-combing is usually done by insurance company auditors. “In our country, that hasn’t been possible. We have an implicit social compact: The provincial governments will not intervene in any way in the clinical practice of medicine.”

That has effectively tied the provinces’ hands when it comes to cost control.

Compounding things, many Canadian health policy analysts now argue that their country has more doctors than it needs.

In British Columbia, David Sinclair--a member of the commission that recently investigated health care costs and recommended an overhaul--points out that Canada conducted a major demographic survey in the 1960s and determined that there would be 35 million Canadians by the year 1990. Policy-makers decided that five new medical schools were in order.

Before the report had a chance to circulate, though, he says, the birth-control pill arrived in Canada, and birthrates plummeted. Today, there are only 26 million Canadians--but nevertheless, the five medical schools all were built and have been turning out doctors since.

Twenty years ago in British Columbia, Sinclair says, there was a doctor for every 850 citizens; today, there is one doctor for every 500.

“We really don’t know what the right number of doctors is, but society has to concern itself with the cost,” says Sinclair, noting that as the number of doctors has increased, so have Canadian health costs.

“If they don’t have enough to do, they will find things to do,” he adds.

With federal and provincial policy-makers thinking out loud about shortcomings in health care management, ordinary Canadians worry that tighter fiscal controls will mean chintzier care for themselves. And when Canadians picture chintzy health care, they picture the American system at its worst, with under-insured people struggling to pay outlandish costs.

In an attempt at curtailing questionable procedures, Ontario recently dropped about 100 prescription drugs from its program of free medicines for the elderly and the poor. In doing so it incurred still more wrath, however, and some of the medicines were put back on the list.

“It’s perceived by provincial governments that patients, who also happen to be voters, will go wild if the government says they can’t have something that their doctor says they should have,” Rachlis says. He fears that politicians, in desperation, will either cut health services at random or impose user fees. He argues that user fees will do nothing to hold down health care costs--rather, they would just shuffle them around within the system.

Rachlis cites the experience of Saskatchewan province: For a few years in the 1960s, physicians there were permitted to charge user fees. Their billings fell about 5%--mainly because the poor and elderly stayed away from their doctors to save money. The rich actually went more often. It appears that doctors ordered more discretionary tests and treatments for the wealthy to make up for the income they were losing on the fee-shy poor.

Comparing Medical Costs

CANADA SPENDS LESS THAN THE U.S. . . .

When Canada began offering universal and free medical care in 1971, health costs per person were about the same as in the United States. Since then, the gap has steadily widened. . . .BUT ALSO OFFERS LESS. . .

Canadians have less access to open-heart surgery, magnetic resonance imaging, radiation therapy and other high-tech procedures than do Americans.SOURCE: U.S. General Accounting Office

. . . AND DISPUTES ARE GROWING