The American health care system has the world's highest per capita costs and over 30 million citizens uninsured. The neighbouring Canadian system provides coverage for all basic medical and hospital services, at costs per capita that are about US$700 lower. Single-agency public funding allows tighter control of Canadian expenditures, and reduces administrative overheads. Hospitals are run as non-profit private corporations, funded primarily by a fixed annual allocation for operating costs. Most physicians are in private fee-for-service practice, but cannot charge more than the insured tariff negotiated between their provincial government and medical association. This approach, while attractive in its decentralization, tends to separate the funding and management of clinical services. Thus, hospital information systems lag a decade behind the USA, managed care initiatives are few, health maintenance organisations do not exist, and experimentation with alternative funding or delivery systems has been sporadic. Strengths of the system compared to the USA include: higher patient satisfaction, universal coverage, slightly better cost containment, higher hospital occupancy rates, and reduction in income-related rationing with more equitable distribution of services. Weaknesses in common with the United States are: cost escalation consistently outstripping the consumer price index with costs per capita second highest in the world, ever rising consumption of services per capita, inadequate manpower planning and physician maldistribution, poor regional co-ordination of services, inadequate quality assurance and provider frustration. Additional weaknesses include: an emerging funding crisis caused by the massive federal deficit, less innovation in management and delivery of care as compared to the USA, implicit rationing with long waiting lists for some services, and recurrent provider-government conflicts that have reduced goodwill among stakeholders. Thus, while the Canadian model has important advantages, it does not offer a panacea for American health care woes.