are giving up and the benefit they derive from never having to see uninsured patients.

1. Blendon, R.J., K. Donelan, R. Leitman, et al. 1993. Physicians' perspectives on caring for patients in the United States, Canada, and West Germany. New England Journal of Medicine 328(14):1011–1016.

W. Vickery Stoughton

First, I would like to put health care in Canada in historical perspective. In the late 1960s the Canadian health care system, for all practical purposes, paralleled the U.S. health care system of today. In 1970, global budgeting was introduced in Canada. The basis of that introduction was taking the 1969 budget and capping it for every institutional care provider in the country, with some increase for inflation in 1970. Then, from year to year, the government would deal with each institutional provider on the basis of that global budget, with some adjustment based on inflationary considerations and approved program changes.

Before 1969, Canada and the United States were spending roughly equivalent shares of their gross domestic products and gross national products on health care, and probably roughly the same amount on a percapita basis as well. Since then, however, the Canadian system has actually held its cost increases down more tightly. That effort is reflected in the current numbers, which demonstrate that on a per-capita basis, U.S. expenditures exceed Canadian expenditures by about 40 percent.

How has that occurred? Here Uwe Reinhardt is right—it has not occurred specifically in areas that are reimbursed on the basis of volume. When examining cost increases from one year to the next in those areas that are reimbursed on the basis of volume, one can see swings in costs that are equivalent to, if not even higher than, some in the United States.

Pharmaceutical products, for all practical purposes, are reimbursed on the basis of volume, and the cost increases in the late 1980s were in excess of 20 percent a year. Physician fees are also reimbursed on the basis of volume. Although there was an effort to control the magnitude of the fee by specialty, the fact that it was volume-related allowed the number of patients treated by specialists to increase. Those overall cost increases exceeded 16 percent a year.

In the institutional global budgeting area, however, cost increases were more in the neighborhood of 10 to 12 percent a year. Those institutional cost increases—be they for acute care hospitals, nursing homes,