Canada: Let’s splurge on health care

by Steven Garrity

I’ve intentionally avoided posting about politics and policy here on Acts of Volition over the past two years. I’ve done this mostly because I don’t like hearing other people’s half-baked arguments, and figured people didn’t want to hear mine. We’ll, I’m not sure why this situation is any different, if it is at all, but grant me some leeway, it won’t happen often.

Today, Roy Romanow released his government-commissioned royal commission report on the state and future of health care in Canada. The ridiculously short summary of the results go something like this (note: I haven’t actually read the report yet – I’m just relying on journalists):

Public health care is good; let’s pay for it.

I completely agree. The classic demands on government go something like this: more stuff, less tax. Politicians (if you’ll permit my gross generalization) are infamous for promising just that. However, let me be at least one person who’s willing to say I want more stuff, and I’m willing to pay for it. I want a strong public health care system and if you need to, raise my taxes.

The most common response I hear to increasing taxes for funding programs like health is that there is so much waste in government, that they should clear that up and they would need to increase taxes. This is probably true (again with the gross generalizations), but it’s a crutch. It’s not going to happen tomorrow. Health spending and general inefficiency in government are two separate issues. We need to pay for the health care we want.

In his introductory remarks, Romanow stated that medicare is a “moral enterprise, not business venture” – that speech writer should get a raise.

Some links and references for those interested in the report:

 

17 thoughts on “Canada: Let’s splurge on health care”

  2. Why does everyone want to think public healthcare is bulletproof? Can’t we take the good of both? Have 100% gov’t funded hospitals, and let private clinics do their thing, but don’t hand them *any* government money.

  4. If you set up two paths for employment in the system, you create a bidding war for workers which, in the short term, the public sector cannot win. This is true of any economic system. As a result, there is an outmovement of quality and quantity of workers. There are limits to this including homebodiness which Canada has done well with when competing province to province or with the US – many are not that willing to move for many good reasons. If the better wage is across the street, however, that factor goes away. As a result, the egalitarian public health provision becomes poorer in quality.

    Beyond the weakening of public staffing, public health care has many economic efficincies that private competition does not enjoy. Simple bulk buying makes prescription drugs cheaper in Canada than in the US. Central purchasing by a national body would be able to achieve this efficiency. I think the three Maritime provinces do some sharing on purchases already, though this may be a sensible as yet political impossibility. Though you wouldn’t know it in PEI, government run or price regulated monopolies usually provide lower prices…buy the same good wine at the LCBO and the free market of New York State and you will see. The market cannot achieve levels of efficiency in many areas of procurement.

    There are some things that the market can do better which is where it does get tricky due to capitalist idealism thinking the market is better everywhere. Right now we ship many types of advanced services across the US border to places like the Maine Medical Centre in Portland or the MRI in Plattsburg New York. Inter-provincially, if it were not for the IWK in Halifax or the Heart clinic in St. John, NB, there would be far fewer Islanders around. It makes sense to not provide many serves in the local area and many of these are provided with an aspect of profit. You can have profit making delivery without payment for use coming from the individual.

  5. Well, unfortunately we southerners (in this context, I’m referring to US citizens) may never see socialized health care. Here, if you suggest something that might de-privatize an industry, you’re instantly labeled a pinko-communist. Of course, capitalism should realistically have limits (and it does in the US for sure, otherwise we’d be run by Libertarians), and in my opinion there are certain industries that shouldn’t be for profit, for moral reasons. Health being the first, then banking and insurance (all kinds, of course if you nationalize health care, then you don’t need health insurance). I don’t necessarily think these should be government run, just I don’t think people should be limited in their health by beancounters, should be risking people’s life savings in banking and investing (without the people’s say in it) and insurance is simply highway robbery. My 2¢. (roughly 4.5¢ CDN)

  7. Actually, wouldn’t 2 cents American be worth 1.2 or 1.3 cents Canadian? Or do I have is bass-ackwards?

  9. ~bc, lots of insurance is publicly run in Canada – workers comp, some disability through the CPP, unemployment and in come provinces, auto. Public banking or at least not for profit? That is pretty much a credit Union.

  10. I find this interesting because in Australia we have had a public health system for some time. I think this stems from a greater value placed on social responsibility in the past – including not only public health, but also public education and unemployment benefits.

    However, at the moment the current government is actively pushing people into a private health system with direct subsidies etc. We seem to be moving towards a more capitalist system like the US – which worries me. My 1¢.

  11. the only thing i’d like to add to the debate… and maybe get other people’s opinions upon… is the accountablility issue. I think I’d rather have a national heath care system, instead of the provincial led one. I think all the arguments that the provinces offered for maintaining the status quo are lame. I don’t believe the health care needs of people living in Toronto are that much different than in Charlottetown… that’s not to say that there aren’t very real social and community differences. Or at least (and this looks where it may be heading) insist on a core of services, with a percentage determined by the province. But, frankly, I don’t trust the provinces, particularly my province (PEI) to spend the money properly. PEI women still can’t get access to abortions in this province, men and women are routinely denied funding for drugs that are paid for in other provinces… I’d very much like the federal government seperate the transfer payment… at least on paper… so we can see what is going where… I was appalled, but not surprised to hear Jamie Ballem on the radio a month or so ago saying he really has no idea how much money the feds were giving us for health care and that the formula was just “too complicated” to work out. Next.

  12. Good points Dave. I share your concern about the provicial argument for “non-accountability” (appologies to George Orwell). It comes across like children arguing selfishly (try examining all news with this in mind – I find it helpful).

    I’m not convinced that the federal government can provide better service than the provinces. I generally tend to think that the closer to the people (more local), the better.

    However, if we believe that equality of care across the country is imporant (and I think that we do), wild disparity in population between the provinces my be reason enough for centralization. Toronto alone has roughly the population of all four atlantic provinces combined.

    The Walkerton water disaster might be another argument for centralization in public services. However, I’m not sure that Johnny Ottawa is any less dumb that Johnny Charlottetown (or Steven Garrity, for that matter).

    Is it a case of Garrity’s Law of Inverse Congregational Intelligence.

  13. Johnny Ottawa may not be smarter but…nah, he probably is…why would you assume any population pool of 140,000 would create the number intellegent folks to be Ministers and senior officials of government found in a population pool of 30,000,000. If you believe that, imagine giving health care jurisdiction to municipalities.

    I totally agree, Dave. The local Ministerial mental numbness is is a problem [- like another doctor is going to have a look at Souris after the uninformed tizzy fit Ballem had end of last week]. Financial mismanagement like NS has suffered since Buchanan has led them to cut services even we have. We left Ontario when the first of the Harris hospital closures kicking in – apparently Canada Post were brought in as “service improvement” consultants. Polticial agendas and skills affect what should otherwise be equal service throughout the country.

    Also, restriction of different services based on the personal belief about health held by people in the health system also includes not only reprodutive rights but environmental disorders – these conditions “don’t exist” medically in PEI to the degree that they do in NS because of the relationship between chemical users and political party funding. The government of PEI this week was saying there was no “conclusive proof” of health concerns over the Albertson well poisonings at the same time Health Canada was confirming both the “fumangant” and the chemicals it breaks down into are clearly carcinogens. They just don’t have the resources or, sadly, the unfettered will to do a proper job.

  14. Liars.

    Public Health Care is a waste of government attempts to make everything worth getting for yourself. You can’t give everyone what they want. It’s fine how it is. Leave well enough alone.

  15. Just some stuff I studied in nursing school, The Canada Health Act, I’m sure some of you are already familiar with it.

    I should have included the link, sorry, I just googled Canada health act and a whack of sites popped up, this one seemed to give the best overview, I copied and pasted the parts I thought were helpful, I quickly browsed, you can do so as well. I find this conversation interesting, I’ll check in again.

    Staff of the Parliamentary Research Branch (PRB) of the Library of Parliament work exclusively for Parliament conducting research and providing analysis and policy advice to Members of the Senate and House of Commons and to parliamentary committees on a non-partisan and confidential basis. The documents on this site were originally prepared for general distribution to Canadian Parliamentarians to provide background and analysis of issues that may arise in the course of their Parliamentary duties. They are made available here as a service to the public. These studies are not official Parliamentary or Canadian government documents. No legal or other professional advice is offered by the authors or the Parliamentary Research Branch in presenting its publications or in maintaining links to other Internet sites.

    PRB 94-4E
    Print Copy

    THE CANADA HEALTH ACT: OVERVIEW AND OPTIONS

    Prepared by:
    Odette Madore
    Economics Division
    Revised 16 June 2003

    TABLE OF CONTENTS

    ISSUE DEFINITION

    BACKGROUND AND ANALYSIS

    A. Justification for Government Intervention in Health Care

    B. The Role of Governments in Health Care in Canada

    C. Historical Background

    D. The Requirements Stipulated in the Act
    1. Criteria
    2. Provisions
    3. Conditions

    E. Penalties for Defaults Under the Act

    F. Imposition of Penalties

    G. The Issue of Privatization

    H. The Options: Should We Keep the Act As It Is, Amend It or Repeal It?

    PARLIAMENTARY ACTION

    CHRONOLOGY

    SELECTED REFERENCES

    THE CANADA HEALTH ACT: OVERVIEW AND OPTIONS*

    ISSUE DEFINITION

    The Canada Health Act (hereafter called the Act) received Royal Assent on 1 April 1984. Through this Act, the federal government ensures that the provinces and territories meet certain requirements, such as free and universal access to insured health care. These requirements, or “national principles,” have helped shape provincial health-care insurance plans throughout the country.

    Today, however, the Act is the focus of a lively debate. Factors that call into question or can be said to threaten the national principles in the Act include:

    *
    the gradual reduction of federal transfers to the provinces in the 1990s;

    *
    the de-insuring of services previously covered by provincial health-care insurance plans;

    *
    the existence of private facilities in some provinces delivering uninsured and insured health services; and

    *
    the shift towards non-institutional care.

    The discussion on national principles is part of a much broader picture, involving factors that are political (distribution of powers), fiscal (balancing the budget and responding to priorities other than health care), and economic (greater cost-effectiveness). It raises fundamental concerns about the public sector’s role, including that of the federal government, in health-care funding.

    This document gives an overview of the Canada Health Act. It does not set out to offer a legal interpretation of the Act; rather, it seeks to take stock of the evolution of the way it is implemented and examine its future prospects. The first section reviews the justifications for government intervention in the health-care sector, while the second describes the respective roles of the federal government and the provinces. The third section traces the historical background of the Act, and the fourth presents an overview of the requirements attached to it. In the fifth section, penalties for defaults under the Act are described, and the sixth section discusses the imposition of penalties. The seventh section examines the issue of privatization. In the eighth section, some options are set out for maintaining the Act or improving it.

    BACKGROUND AND ANALYSIS

    A. Justification for Government Intervention in Health Care

    In Canada, governments are the main source of funding for health care because they play a key role in the insurance market. The proponents of government intervention in this field generally cite economic and social equity factors. First, they explain that government intervention is necessary to correct potential problems for social equity in the operation of the private insurance market. They claim that private insurance companies could refuse to insure high-risk clients or force them to pay a much higher premium to offset the risk. They believe that government insurance can correct the shortcomings in the private market by protecting the broadest possible cross-section of the population and avoiding unreasonable premium hikes which ultimately effect no improvement in the state of health. Second, they maintain that the private insurance market does not have a regard for economic equity. They argue that in a private insurance market, individuals with health problems and a low income would be subject to the same fee structure as high-income individuals; thus, economically disadvantaged individuals would have to assume a relatively higher proportion of health-care costs. Government intervention would, then, guarantee increased access to insurance, regardless of the individual’s ability to pay.

    For these reasons, governments in Canada have favoured public health-care insurance over private insurance. This approach, which protects all people against risks related to illness, is essentially based on income tax: all citizens contribute in accordance with their income, rather than in accordance with the benefits they expect to derive. Thus, since its introduction, public health-care insurance in Canada has stressed the principle of transferring resources from the richer to the poorer and pooling the risks between the healthy and the less healthy.

    This does not mean, however, that the private sector is totally absent from this field in Canada. Private health-care insurance exists, but its scope is limited. To be more precise, the private market provides additional coverage for health services that are not insured by the public plan or that are only partially insured by it. Moreover, the delivery of health care is largely in the hands of the private sector: most medical practitioners are in private practice and hospitals are to a great extent private, non-profit organizations. However, physician and hospital services and remuneration for these are subject to government regulation.

    B. The Role of Governments in Health Care in Canada

    The federal and provincial governments have very different responsibilities in health care. Strictly speaking, the federal government cannot establish and maintain a national health-care insurance plan because it cannot regulate the delivery of health care to individuals; under the Canadian Constitution and its interpretation by the courts, health care is a field primarily under provincial jurisdiction. The only explicit references in the Constitution to health-care issues give the federal government jurisdiction in matters relating to navy hospitals and quarantine. In addition, the federal government is responsible for delivering health services to groups that fall under its jurisdiction, such as Aboriginal peoples, the Canadian forces, veterans, and inmates in federal penitentiaries. Provincial governments are responsible for:

    *
    determining how many beds will be available in a province;

    *
    determining what categories of staff will be hired;

    *
    determining how the system will serve the population;

    *
    approving hospital budgets;

    *
    negotiating fee scales with medical associations; and

    *
    administering the public health-care insurance plan in their own province.

    The federal government has intervened in the health-care field by using the constitutional “spending power,” which enables it to make a financial contribution to certain programs under provincial jurisdiction, generally subject to provincial compliance with certain requirements. Pierre Blache, in an article published in 1993 in the Revue générale de droit, indicates that in his opinion, it is the constitutional imbalance between powers and responsibilities, together with inter-provincial equity factors, that brought about federal transfers such as those to the health-care sector:

    The scale of transfer payments from the federal government to the provincial governments has increased in Canada as a result of the characteristics of the constitution and reality. It is because Canadian provinces have been given the potentially most expensive responsibilities in the modern state, while being limited to direct taxation, and because many of them have found themselves faced with a tax base below the national average, that recourse to the spending power has become so important in the practical workings of Canadian federalism. [?] Against such a background, it appeared unfair to leave it to the provinces to fund the social programs demanded by the people, out of their own resources. (p. 38) [translation]

    Consequently, the federal government has intervened in areas under provincial jurisdiction, but without changing the division of powers stipulated in the Constitution. Although the federal government is not responsible for health-care administration, organization or delivery, it can exert considerable influence on provincial health-care policies by using the political and financial leverage afforded by the spending power. In fact, by setting the requirements for providing federal funding, the Canada Health Act has to a large extent shaped provincial health-care insurance plans throughout the country.

    C. Historical Background

    Public health-care insurance as it is known today, in which the federal government’s financial contribution is linked to provincial compliance with specific requirements, dates back to the late 1950s. Under the Hospital Insurance and Diagnostic Services Act of 1957 and the Medical Care Act of 1966, the federal government made an offer to the provinces to fund approximately half the cost of all insured health services. In return for federal contributions, the provinces – as part of their public health-care insurance plans – undertook to insure hospital and physician services and to comply with certain requirements, such as universality. These two Acts did not prevent provinces from demanding a financial contribution from patients; however, because federal contributions were proportional to provincial government expenditures, the provincial governments had nothing to gain from imposing direct patient charges. In fact, the revenue from such charges would have resulted in a reduction in the federal contribution. This implicit reduction mechanism thus strongly deterred provinces from adopting any form of direct patient charges, such as extra-billing and user charges.

    In 1977, this formula of shared costs was replaced by a method of block funding based on cash transfers and tax point transfers as part of Established Programs Financing (EPF). Both federal Acts on hospital services and medical care and the requirements attached to them were retained. However, the implicit mechanism for deducting federal contributions was eliminated with the EPF, because federal funding was no longer linked to provincial government expenditures; this resulted in a proliferation of direct patient charges. For example, Newfoundland, New Brunswick, Quebec, Ontario, Saskatchewan, Alberta and British Columbia levied user charges; and extra-billing was authorized in most provinces. The federal government saw this situation as posing a threat to the principle of free and universal access to health services throughout the country. It was therefore anxious to reassert its commitment to the principle of universal health-care insurance; and it relied heavily on the criterion of economic equity to justify its intervention. A document issued by Health and Welfare Canada in 1983 stated:

    The Government of Canada believes that a civilized and wealthy nation, such as ours, should not make the sick bear the financial burden of health care. Everyone benefits from the security and peace of mind that come with having pre-paid insurance. The misfortune of illness which at some time touches each one of us is burden enough: the costs of care should be borne by society as a whole. That is why the Government of Canada wishes to re-affirm in a new Canada Health Act our commitment to the essential principle of universal health insurance.

    This document paved the way for the Canada Health Act, which, as stated earlier, was passed on 1 April 1984. The Act combined and updated the two federal Acts of 1957 and 1966. The national principles were reaffirmed in the Act, but extra restrictions were specifically added to deter any form of direct patient charges and to provide citizens of all provinces with access to health care regardless of ability to pay.

    Since 1 April 1996, the Canada Health Act has been linked to the Canada Health and Social Transfer (CHST), which merged EPF transfers with Canada Assistance Plan (CAP) transfers. The method of calculation adopted for the CHST is similar to that used for the EPF, and includes both cash transfers and tax point transfers. The provinces must meet all the requirements of the Act in order to be eligible for the full cash transfer. Beginning with the 2004-2005 fiscal year, the Canada Health Act will be linked to the Canada Health Transfer (CHT).

    D. The Requirements Stipulated in the Act

    The Canada Health Act sets out nine requirements that provincial governments must meet through their public health-care insurance plan in order to qualify for the full federal contribution under the CHST. These nine requirements include five criteria, two specific provisions and two conditions. The five criteria are public administration, comprehensiveness, universality, portability, and accessibility; they apply to insured health services. The two specific provisions relate to user charges and extra-billing for insured health services. The two conditions pertain to the provision of provincial information and provincial recognition of federal contributions; they apply to both insured health services and extended health-care services.

    1. Criteria

    Section 8 of the Act deals with public administration. Under this section, each provincial health-care insurance plan must be administered on a non-profit basis by a public authority, which is accountable to the provincial government for its financial transactions. This arrangement is largely explained by the considerable amount of money devoted to the health-care sector and the need for governments to keep some control over the growth of these expenditures. It is also designed to allow information to be consolidated. In Canadian literature, reference is frequently made to the concept of “single payer” to describe the concept of administration by a public authority.

    Under the criterion of comprehensiveness stipulated in section 9, the health-care insurance plan of a province must insure all services that are “medically necessary.” The criterion of comprehensiveness refers in a way to a minimum basket of services, because the Act neither mentions the quantity of services to be provided nor gives a detailed list of what services will be insured; provincial governments can define these. Thus, the range of insured services may vary among provinces and from one year to the next.

    Under section 10, the criterion of universality demands that all residents in the province have access to public health-care insurance and insured services on uniform terms and conditions. Initially, the concept of universality focused on two specific objectives. First, it sought to make insured services available to everyone, everywhere. Second, it sought to pool the risks among those insured; the more people the plan covered, it was said, the more the risk-sharing would be cost-effective.

    As stipulated in section 11, the criterion of portability requires provinces to cover insured health services provided to their citizens while they are temporarily absent from their province of residence or from Canada. For insured health services provided in another province, payment is made at the rate negotiated by the governments of the two provinces. For out-of-Canada services, the Act states that the amount paid will be at least equivalent to the amount the province of residence would have paid for similar services rendered in that province.

    The fifth criterion, accessibility, is set out in section 12: insured persons must have reasonable and uniform access to insured health services, free of financial or other barriers. No one may be discriminated against on the basis of such factors as income, age, and health status.

    2. Provisions

    Free access to insured health services is the key factor of the Canada Health Act. The two provisions of the Act specifically discourage financial contributions by patients, either through user charges or extra-billing, for services covered under provincial health-care insurance plans.

    3. Conditions

    With respect to the two conditions, provincial governments are required by regulation to provide annual estimates and statements on extra-billing and user charges. They are also required to provide voluntarily an annual statement describing the operation of their plans as they relate to the criteria and conditions of the Act. This information serves as a basis for the Canada Health Act annual report. In addition, provinces are required to give public recognition of federal transfers.

    The Act makes a distinction between “insured health services” (i.e., those that have been deemed “medically necessary”) and “extended health-care services.” So-called medically necessary services are defined only in the broad sense of the term in the Act. Section 2 states that insured health services – which must be fully insured by provincial health-care insurance plans – comprise:

    *
    hospital services that are medically necessary for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, including accommodation and meals, physician and nursing services, drugs and all medical and surgical equipment and supplies;

    *
    any medically required services rendered by medical practitioners; and

    *
    any medically or dentally required surgical-dental procedures which can only be properly carried out in a hospital.

    Section 2 of the Act also stipulates that extended health-care services include intermediate care in nursing homes, adult residential care service, home care service and ambulatory health-care services. Because these services are not subject to the two provisions relating to user charges and extra-billing, they can be charged for at either partial or full private rates. In addition, provincial health-care insurance plans may cover other health services, such as optometric services, dental care, assistive devices and prescription drugs, which are not subject to the Act, and for which provinces may demand payment from patients. The range of such additional health benefits that are provided under provincial government plans, the rate of coverage, and the categories of beneficiaries vary greatly from one province to another.

    E. Penalties for Defaults Under the Act

    Penalties under the Canada Health Act are linked to federal transfers to the provinces. More precisely, each provincial health-care insurance plan must comply with the requirements of the Act before the province receives its total entitlement of cash transfers. If a province fails to comply, the federal government may impose a penalty and withhold part or all of the transfers. Between 1984-1985 and 1990-1991, this financial penalty was applied to that portion of EPF cash transfers earmarked for health care. Between 1991-1992 and 1995-1996, financial penalties were not limited solely to federal cash transfers for health care. In fact, the government expanded the penalties to cover other cash transfers. It had become necessary to extend the financial penalty to transfer payments in other fields because of the federal government’s continued restriction on the growth rate of EPF transfers and its specific impact on cash transfers. Studies such as those conducted by the National Council of Welfare in 1991 and Jenness and McCracken in 1993 had predicted that EPF cash transfers to some provinces would be non-existent by the year 2000. These additional withholdings or deductions were not stipulated in the Canada Health Act, but were specifically set out in paragraphs 23.2(1), 23.2(2) and 23.2(3) of the Federal-Provincial Fiscal Arrangements Act, the legislation that established the EPF and that now governs the CHST. These provisions apply as well to the CHST, but have become less relevant with the merger of EPF and CAP transfers into a single envelope. By introducing the CHST, the federal government moved to prevent the erosion of its power to enforce compliance with the Canada Health Act across the country. Obviously, if a province were to decide to forego its cash entitlement under the CHST, it would no longer be required to comply with the requirements of the Canada Health Act. Although the Act will be linked to the new Canada Health Transfer effective 1 April 2004, the penalties will apply to total cash transfers to the provinces for health and social programs.

    The financial penalties stipulated in the Act vary depending on whether a default is directly related to extra-billing and user charges or involves failure to satisfy any of the five criteria or the two conditions. Sections 18 to 21 of the Act, which describe the provisions relating to penalties for extra-billing and user charges, stipulate that the federal government may withhold one dollar of cash transfer for every dollar collected through direct patient charges. In the case of failure to satisfy the criteria or conditions, section 15(1)(a) of the Act stipulates that the cash value of the penalty is left to the discretion of the Governor in Council, who sets the amount depending on the “gravity” of the default. As Sheilah L. Martin suggested in a paper published in 1989, the discretionary nature of this penalty does not require the federal government to impose a fine, but leaves it the option of doing so. At one extreme, Cabinet could decide to withhold all CHST cash transfers, and even reduce federal contributions paid as part of other programs. At the other extreme, the federal government could decide not to impose any financial penalty and to confine its action to persuasion and negotiation.

    The Act also includes a conflict resolution mechanism for cases where a province violates the requirements of the Act. It is a long process, however, with the result that federal contributions are not reduced immediately. In the event that Health Canada deems that a provincial plan is failing to satisfy any one of the five criteria or the two conditions, under section 14(2) it must inform the province of the problem, obtain its explanations, draft a report on its concerns and, if the provincial Health Minister so requests, hold a meeting to discuss the issue. Section 15 states that where the Governor in Council is convinced that a province no longer meets the criteria and conditions of the Canada Health Act, the Minister of Health may direct by order that federal contributions be reduced or withheld.

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