In Canada, one issue that tends to prevail — arguably more than any other in Canadian public policy debate — is the issue of health care and health care delivery. At the heart of this issue is the debate over public versus private health care. The purpose of this article is to provide an overview of
public and private sector participation in health care.
Generally speaking, Canada has a mixed public-private system — a system where the private sector delivers health care services and the public sector is responsible for financing those services. The Canadian system, however, is not completely consistent with this model. Canadian governments exercise considerable authority over the delivery of services by the private sector. Moreover, while governments fund the large majority of services, the private sector does play an important, albeit secondary, role in health care financing.
[size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt]
Elements of the Canadian Health Care System[/size][/size][/size][/size][/size][/size][/size][/size][/size]
Federalism and the Healthcare System
A basic defining characteristic of Canada’s healthcare system is federalism. Canada is a federation, meaning that political power and authority is divided among and between levels of government. There is the federal government (the Government of Canada), empowered to enact laws for whole the country. Canada is further comprised of numerous sub-national or regional governments, referred to as provinces and territories. There are 10 provinces: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Newfoundland and Labrador, Nova Scotia, New Brunswick and Prince Edward Island. Canada also has three territories: Yukon, Northwest Territories, and Nunavut.
Under Canadian federalism, the federal and provincial levels of government enjoy their own jurisdictions or areas of public policy. In many cases, one level of government has exclusive authority in a particular area of public policy. What does this have to do with Canada’s health care system? Under the Canadian constitution, health care falls largely under the authority of the provinces. Only provincial governments have the power to pass laws governing the financing and delivery of health services to the majority of Canadians. This, in turn, has had important implications for the Canadian health care system. Instead of developing a national system that is centrally administered and uniform across the country, Canada has essentially developed several provincial health care systems which differ significantly in structure and operation. In sum, one cannot speak of Canadian health care as a “single system,” but as a “patchwork” of provincial regimes.
This is not to suggest that the federal government plays no role in health care. Besides enjoying authority in some niche areas of health (such as providing Aboriginal healthcare and policing food and drug safety), the Government of Canada has exerted considerable influence through constitutional spending powers. The federal government is permitted to spend money in the area of health care, either through fiscal transfers to the provinces or directly to individuals and groups.
The federal government spends tens of billions of dollars annual in support of provincial health care systems. The federal government uses this money to influence provincial policy-making in the area of health care. It provides money to the provinces if they implement programs and policies that are consistent with federal objectives. Conversely, if a province institutes policies that directly contravene federal goals, the federal government can choose to withdraw its financial support. The Canada Health Act, federal legislation that sets out a list of criteria that must be met by the provinces if they are to receive annual federal monies, clearly illustrates the extent of the federal government’s leverage in the health care realm. The Canada Health Act includes the requirements that all provincial systems be publicly administered, comprehensive, universal, portable, and accessible
[size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt]
Public Sector Financing of Health Care[/size][/size][/size][/size][/size][/size]
At discussed above, the public sector accounts for the large majority of spending on health care in Canada. While all levels of government contribute to health care financing, the largest source of public spending are provincial and territorial governments. This is because the delivery and financing of health care falls under provincial jurisdiction. The next largest public contributor is the federal government, which provides annual fiscal transfers to the provinces and territories in support of their health care spending in addition to direct contributions for health programs and initiatives falling under its jurisdiction (i.e. Aboriginal and veterans’ health, health protection, disease prevention, health information and health-related research). Lastly, local and municipal governments provide small levels of financing for local health initiatives.
While the provinces and territories carry the largest portion of health care financing, customarily there is disagreement on the precise federal-provincial split. Much of this is due to the complex fiscal relationship between the two levels of government and the lack of clear transparency in the flow of health care funding. Each year, the federal government transfers billions of dollars to the provinces. In some cases, these fiscal transfers are dedicated to health care spending, such as the Canada Health Transfer. In other cases, fiscal transfers simply go into general provincial revenues, which may or may not be spent on health care programs (such as the Equalization Program). Some estimates have placed the provincial and territorial share of health care financing as high as 85 percent of all public sector expenditures, with the federal share being less than 15 percent (Provincial and Territorial Ministers of Health, 2000). Other estimates suggest that provincial and territorial spending has typically accounted for only 60 percent of total expenditures, with the federal government accounting for approximately 40 percent (Department of Finance Canada, 2004).
Public health insurance plans also represent a significant avenue of public sector financing. Each province and territory in Canada has mandatory and universal health insurance plans, to cover basic medical services. These are public insurance schemes insofar as they are administered by provincial/territorial governments and funded almost exclusively through taxation. This includes general provincial/territorial taxes and the annual federal fiscal transfers (referenced earlier). Some provinces have experimented with the idea of levying health care premiums, charging provincial residents regular fees for health care services. In addition, some provinces have also experimented with user fees (a flat fee patients pay per medical visit) and extra-billing (allowing physicians to charge extra fees above what they bill public insurance plans). Nevertheless, these alternative forms of funding represent only a small fraction of public sector spending on health care. As indicated in the above table, public health care premiums in Canada totalled just over $2 billion in 2007. General government funding, by contrast, totalled $107 billion.
Provincial/territorial health insurance plans are mandatory and highly monopolistic. Canadians are required to participate in the public financing of these plans through general government taxation and health premiums. Moreover, private insurance is not available (or is very limited) for those services covered by public plans. It is important to note, however, that public health insurance is not completely comprehensive in its coverage. Also, while coverage differs from one province or territory to another, it tends to cover only basic or medically necessary services. This includes most primary and secondary care services, such as visits to the family physician and specialized hospital care. Medical services that fall outside the scope of public insurance plans must be financed privately, either through direct, out-of-pocket payments or private health insurance (see below for more information).
Another way the public sector finances health is through direct program funding. The largest of these initiatives tend to relate to hospitals and other health facilities. As discussed above, hospitals in Canada are typically operated by private community or voluntary boards. Their operating and capital costs are largely funded through annual government budgetary allotments. Governments also spend directly on other programs such as health protection (i.e. anti-smoking campaigns) and health research.
Private Sector Financing of Health Care
While health care in Canada is financed primarily by the public sector, the private sector also plays an important role. As discussed above, public health insurance plans are not completely comprehensive, tending to cover only basic or medically necessary services. As such, the private sector fills the gap, financing those additional care services not covered by provincial/territorial health insurance plans.
The level of private participation in health care financing differs significantly from one province and territory to the next; this is because different jurisdictions cover different sets of services under their public insurance plans. Two key areas of additional care, however, tend to be financed largely through the private sector: dental and vision care. Other areas that often have large private participation include medical equipment and appliances and independent living for seniors and those with disabilities.
Another important area of private sector participation is prescription drugs. It is necessary to distinguish between drugs prescribed and consumed in hospitals and those consumed outside a hospital setting. Drugs consumed in hospitals are covered by provincial and territorial governments, either through their public insurance plans or through direct financing of hospitals. Drugs consumed outside a hospital setting, however, are only partially subsidized by the public sector. Provincial/territorial drug plans are not universal, but tend to target vulnerable groups, such as those in the lower economic classes, the elderly, and the seriously ill. Moreover, drug plans often do not necessarily cover the full cost of prescription drugs. In some cases, individuals are charged a copayment or deductible. The private sector assists, financing drug costs for those not covered by these provincial/territorial plans.
Within these areas of health care, there are two key sources of private sector financing. The first is out-of-pocket payment, which includes direct payment of costs by individuals and their families. In many cases, individuals pay for dental, vision and drug costs directly themselves. In 2007, out-of-pocket payments represented the second largest source of health care financing in Canada, totalling $23 billion or 15 percent of total health care expenditures. The second key source of private financing is private health insurance plans. This includes plans which individuals and families have purchased independently, as well as employer-based plans which individuals participate in through their workplaces. In 2007, private health insurance represented the third largest source of health care financing, totalling $20 billion or 13 percent of total health care expenditure
public and private sector participation in health care.
Generally speaking, Canada has a mixed public-private system — a system where the private sector delivers health care services and the public sector is responsible for financing those services. The Canadian system, however, is not completely consistent with this model. Canadian governments exercise considerable authority over the delivery of services by the private sector. Moreover, while governments fund the large majority of services, the private sector does play an important, albeit secondary, role in health care financing.
[size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt]
Elements of the Canadian Health Care System[/size][/size][/size][/size][/size][/size][/size][/size][/size]
Federalism and the Healthcare System
A basic defining characteristic of Canada’s healthcare system is federalism. Canada is a federation, meaning that political power and authority is divided among and between levels of government. There is the federal government (the Government of Canada), empowered to enact laws for whole the country. Canada is further comprised of numerous sub-national or regional governments, referred to as provinces and territories. There are 10 provinces: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Newfoundland and Labrador, Nova Scotia, New Brunswick and Prince Edward Island. Canada also has three territories: Yukon, Northwest Territories, and Nunavut.
Under Canadian federalism, the federal and provincial levels of government enjoy their own jurisdictions or areas of public policy. In many cases, one level of government has exclusive authority in a particular area of public policy. What does this have to do with Canada’s health care system? Under the Canadian constitution, health care falls largely under the authority of the provinces. Only provincial governments have the power to pass laws governing the financing and delivery of health services to the majority of Canadians. This, in turn, has had important implications for the Canadian health care system. Instead of developing a national system that is centrally administered and uniform across the country, Canada has essentially developed several provincial health care systems which differ significantly in structure and operation. In sum, one cannot speak of Canadian health care as a “single system,” but as a “patchwork” of provincial regimes.
This is not to suggest that the federal government plays no role in health care. Besides enjoying authority in some niche areas of health (such as providing Aboriginal healthcare and policing food and drug safety), the Government of Canada has exerted considerable influence through constitutional spending powers. The federal government is permitted to spend money in the area of health care, either through fiscal transfers to the provinces or directly to individuals and groups.
The federal government spends tens of billions of dollars annual in support of provincial health care systems. The federal government uses this money to influence provincial policy-making in the area of health care. It provides money to the provinces if they implement programs and policies that are consistent with federal objectives. Conversely, if a province institutes policies that directly contravene federal goals, the federal government can choose to withdraw its financial support. The Canada Health Act, federal legislation that sets out a list of criteria that must be met by the provinces if they are to receive annual federal monies, clearly illustrates the extent of the federal government’s leverage in the health care realm. The Canada Health Act includes the requirements that all provincial systems be publicly administered, comprehensive, universal, portable, and accessible
[size=10pt][size=10pt][size=10pt][size=10pt][size=10pt][size=10pt]
Public Sector Financing of Health Care[/size][/size][/size][/size][/size][/size]
At discussed above, the public sector accounts for the large majority of spending on health care in Canada. While all levels of government contribute to health care financing, the largest source of public spending are provincial and territorial governments. This is because the delivery and financing of health care falls under provincial jurisdiction. The next largest public contributor is the federal government, which provides annual fiscal transfers to the provinces and territories in support of their health care spending in addition to direct contributions for health programs and initiatives falling under its jurisdiction (i.e. Aboriginal and veterans’ health, health protection, disease prevention, health information and health-related research). Lastly, local and municipal governments provide small levels of financing for local health initiatives.
While the provinces and territories carry the largest portion of health care financing, customarily there is disagreement on the precise federal-provincial split. Much of this is due to the complex fiscal relationship between the two levels of government and the lack of clear transparency in the flow of health care funding. Each year, the federal government transfers billions of dollars to the provinces. In some cases, these fiscal transfers are dedicated to health care spending, such as the Canada Health Transfer. In other cases, fiscal transfers simply go into general provincial revenues, which may or may not be spent on health care programs (such as the Equalization Program). Some estimates have placed the provincial and territorial share of health care financing as high as 85 percent of all public sector expenditures, with the federal share being less than 15 percent (Provincial and Territorial Ministers of Health, 2000). Other estimates suggest that provincial and territorial spending has typically accounted for only 60 percent of total expenditures, with the federal government accounting for approximately 40 percent (Department of Finance Canada, 2004).
Public health insurance plans also represent a significant avenue of public sector financing. Each province and territory in Canada has mandatory and universal health insurance plans, to cover basic medical services. These are public insurance schemes insofar as they are administered by provincial/territorial governments and funded almost exclusively through taxation. This includes general provincial/territorial taxes and the annual federal fiscal transfers (referenced earlier). Some provinces have experimented with the idea of levying health care premiums, charging provincial residents regular fees for health care services. In addition, some provinces have also experimented with user fees (a flat fee patients pay per medical visit) and extra-billing (allowing physicians to charge extra fees above what they bill public insurance plans). Nevertheless, these alternative forms of funding represent only a small fraction of public sector spending on health care. As indicated in the above table, public health care premiums in Canada totalled just over $2 billion in 2007. General government funding, by contrast, totalled $107 billion.
Provincial/territorial health insurance plans are mandatory and highly monopolistic. Canadians are required to participate in the public financing of these plans through general government taxation and health premiums. Moreover, private insurance is not available (or is very limited) for those services covered by public plans. It is important to note, however, that public health insurance is not completely comprehensive in its coverage. Also, while coverage differs from one province or territory to another, it tends to cover only basic or medically necessary services. This includes most primary and secondary care services, such as visits to the family physician and specialized hospital care. Medical services that fall outside the scope of public insurance plans must be financed privately, either through direct, out-of-pocket payments or private health insurance (see below for more information).
Another way the public sector finances health is through direct program funding. The largest of these initiatives tend to relate to hospitals and other health facilities. As discussed above, hospitals in Canada are typically operated by private community or voluntary boards. Their operating and capital costs are largely funded through annual government budgetary allotments. Governments also spend directly on other programs such as health protection (i.e. anti-smoking campaigns) and health research.
Private Sector Financing of Health Care
While health care in Canada is financed primarily by the public sector, the private sector also plays an important role. As discussed above, public health insurance plans are not completely comprehensive, tending to cover only basic or medically necessary services. As such, the private sector fills the gap, financing those additional care services not covered by provincial/territorial health insurance plans.
The level of private participation in health care financing differs significantly from one province and territory to the next; this is because different jurisdictions cover different sets of services under their public insurance plans. Two key areas of additional care, however, tend to be financed largely through the private sector: dental and vision care. Other areas that often have large private participation include medical equipment and appliances and independent living for seniors and those with disabilities.
Another important area of private sector participation is prescription drugs. It is necessary to distinguish between drugs prescribed and consumed in hospitals and those consumed outside a hospital setting. Drugs consumed in hospitals are covered by provincial and territorial governments, either through their public insurance plans or through direct financing of hospitals. Drugs consumed outside a hospital setting, however, are only partially subsidized by the public sector. Provincial/territorial drug plans are not universal, but tend to target vulnerable groups, such as those in the lower economic classes, the elderly, and the seriously ill. Moreover, drug plans often do not necessarily cover the full cost of prescription drugs. In some cases, individuals are charged a copayment or deductible. The private sector assists, financing drug costs for those not covered by these provincial/territorial plans.
Within these areas of health care, there are two key sources of private sector financing. The first is out-of-pocket payment, which includes direct payment of costs by individuals and their families. In many cases, individuals pay for dental, vision and drug costs directly themselves. In 2007, out-of-pocket payments represented the second largest source of health care financing in Canada, totalling $23 billion or 15 percent of total health care expenditures. The second key source of private financing is private health insurance plans. This includes plans which individuals and families have purchased independently, as well as employer-based plans which individuals participate in through their workplaces. In 2007, private health insurance represented the third largest source of health care financing, totalling $20 billion or 13 percent of total health care expenditure
