network of providers, institutions, and insurers that care for the health of Canadians. In Canada health care is delivered by private institutions—hospitals and physicians—that are not controlled directly by the government. This private delivery system is combined with a publicly financed health insurance system that is paid for by the provincial and federal governments. (In this article, the use of the term “provincial” refers to both provinces and territories, since territories and provinces play the same role in the health care system.) This health insurance system is known as Medicare. Each province has a separate health insurance system funded by provincial government revenues and contributions from the federal government. The federal government provides funding in a lump sum based on the province’s population. Of the total spending on health care in Canada in 1998, provincial expenditures made up 45 percent and federal transfers to the provinces made up 18 percent. Private spending made up 31 percent and accounted for most of the rest. The largest outlays were in these sectors: hospitals, 32 percent; physicians, 14 percent; and drugs, 16 percent.II PROVINCIAL SYSTEMS AND THE FEDERAL GOVERNMENT
The Constitution Act of 1867 made the provinces responsible for matters of health policy (see Constitution of Canada). As a result, instead of national health insurance, Canada has ten provincial and three territorial health insurance systems. Although the federal government has a strong presence in the health sector, the provinces are primarily responsible for health care. Each province and territory has its own statute that regulates its health care system. The provincial governments administer health insurance programs and make decisions about funding hospitals and reimbursing physicians. Most provinces fund their health insurance out of general revenues and do not impose a specific health tax on individuals or businesses. Only Alberta and British Columbia levy health care insurance premiums for their public insurance. Health insurance is an expensive operation, and provinces spend from 30 to 35 percent of their total budget on health care.
The federal government contributes to the provincial systems as part of the Canada Health and Social Transfer (CHST), a block grant that includes the federal contributions to health care, higher education, social assistance, and other social services. The federal government also links the provincial health care systems together with a set of principles, commonly referred to as national standards. These standards were articulated in the Canada Health Act, which the Canadian Parliament passed in 1984.
Under that law, provinces must ensure that their health care systems respect five criteria: (1) public administration—the health insurance plans must be administered by a public authority accountable to the provincial government; (2) comprehensive benefits—the plan must cover all medically necessary services prescribed by physicians and provided by hospitals; (3) universality—all legal residents of the province must be covered; (4) portability—residents continue to be covered if they move or travel from one province to another; and (5) accessibility—services must be made available to all residents on equal terms, regardless of income, age, or ability to pay. In the 1980s and 1990s the federal government began to contribute a lower percentage of provincial health insurance funding. In response some critics questioned the extent to which the federal government could continue to expect the provinces to uphold the national standards of the Canada Health Act with less funding.
In addition to setting standards and providing funds for the provincial health systems, the federal government is required by the constitution of Canada to provide health care to military personnel and veterans, members of the Royal Canadian Mounted Police, and inmates of federal prisons. The federal government is also directly responsible for the health needs of aboriginal Canadians living on reserves. The federal government promotes public health through activities such as prenatal nutrition programs and youth antismoking campaigns. It also maintains laboratories for disease control and product safety.
III HOW THE PUBLIC SYSTEM WORKS
A Patients
When a legal resident of Canada needs medical care, he or she presents a provincial health card, usually a plastic identification card similar to a credit card, to a physician or hospital. Patients choose their physicians, although a general practitioner may refer them to a specialist. If patients require immediate care without an appointment, they can seek admittance to any hospital emergency room or community health clinic. There, the severity of their medical need determines how long they will wait to see a nurse or doctor. Health care provision in Canada is based on medical need rather than the ability to pay; consequently, there are often waiting lists for some elective procedures, such as cataract surgery; nonemergency surgery, such as hip replacement; and diagnostic services, such as the use of magnetic resonance imaging (MRI). In addition, medical specialists are often less available in rural and remote areas.
B Physicians
The majority of Canadian doctors provide care in private practice and apply for admitting privileges at one or more nearby hospitals. Most doctors provide care on a fee-for-service basis. In that arrangement the doctor is paid for each service provided to the patient, rather than earning a set salary or a set amount for each person under his or her care. The fee-for-service format is especially common among specialists and doctors who see patients outside of the hospital. The fee-for-service arrangement allows the physician to decide what care to provide independent of the influence of administrators or insurers. The licensed physician is reimbursed for his or her services through a provincial agency that negotiates a fee schedule with the provincial medical association.
Not all doctors are paid by the fee-for-service format; some are paid a fixed wage, either an hourly wage or a salary. Emergency room doctors, for example, are often paid on an hourly basis. Doctors in their residency (early years of specialty training) in teaching hospitals are generally paid on a salaried basis. In Québec, a small number of general practitioners choose salaried positions in community health and social clinics. In most provinces, specialist salaries are capped at a certain level of income.
C Hospitals
Hospitals in Canada are nonprofit institutions with independent administrative boards; they are not directly operated by the government. However, all hospitals depend on public funds for their operating costs. These funds are provided through the provincial government and are allocated by means of a yearly global budget. The yearly global budget is a set amount of money that the hospital uses to meet the needs of its patients. Each hospital and each province as a whole has a yearly global budget, which is determined by a provincial agency or a regional board. Provinces and individual hospitals must use the global budget to cover all their costs for personnel, equipment, and supplies. Limited global budgets have at times forced provinces to recommend the reduction of available beds, laboratories, or operating rooms and, in some cases, the closure of certain hospitals.
IV SUPPLEMENTARY HEALTH CARE
With a few exceptions, provincial health plans cover all medically necessary services, so that patients need not pay directly for anything except so-called incidental costs. These incidental costs include items such as a patient’s private hospital room, unless it is specified by a physician, and transportation to the hospital. Provincial health plans also do not cover some nonessential procedures, such as laser surgery for the eye, cosmetic surgery, procedures to reverse sterilization, and, in most provinces, in vitro fertilization. In addition, provinces do not pay for dental services and long-term or special care facilities, such as nursing homes and addiction-recovery centers, with exceptions. Also provinces generally do not cover prescription drugs for patients outside the hospital. Some benefits vary by province: For example, limited chiropractic and optometrist services are covered in Ontario and British Columbia but not in Québec. Although health benefits are portable across provincial boundaries, there is only limited coverage (mainly for emergency care at provincial rates) for Canadians when they travel outside the country.
Canadians have two choices when it comes to paying for these additional services: They can either pay directly for whatever services they use, or they can join a private supplementary insurance plan, usually offered by their employer. Private insurers are not permitted to offer insurance coverage for any service that provincial insurance covers. That restriction is designed to prevent a two-tier system in which people who could afford more expensive private insurance would have greater access to necessary medical services and procedures.
Many provinces subsidize these additional services for the elderly and those who receive social assistance. Several provinces also have government plans that provide insurance coverage for drug costs and that are available to the entire population, but those plans require substantial contributions from the insured. Private spending on health care in Canada (mainly on dental care and prescription drugs) has been increasing steadily, and in 1998 it accounted for 31 percent of total health care spending.
The practice of extra-billing, in which physicians charge patients a higher fee than that covered by provincial insurance, was common in some provinces. The patients then had to pay the difference between the cost of the service and the amount covered by provincial insurance. The federal government effectively abolished this practice in the Canada Health Act, a law that specifically prohibits extra-billing and penalizes any province that allows it. If a province allows extra-billing, the federal government reduces funding to the province by the amount charged in extra-billing.
V CANADIAN SYSTEM IN COMPARISON
Although health care in Canada is expensive, the country’s expenditures on health care resemble those in other industrialized countries and are considerably less than in the United States. In 1998 Canada spent C$81.8 billion dollars or C$2,700 per person on health care, representing 9.1 percent of Canada’s gross domestic product (GDP). In contrast, health care expenditures in the United States in the same year totaled 13.5 percent of the U.S. GDP, representing approximately C$5,700 per person. In Canada, about 69 percent of total health expenditures are publicly funded, whereas in the United States 45 percent of health expenditures are funded by the government.
Despite these differences in spending, the number of hospital beds per person in Canada is comparable to the United States (1 for every 244 people in Canada, and 1 for every 826 people in the United States). There is 1 physician for every 476 Canadians (compared to 1 for every 253 people in the United States). Canadian physicians are fairly evenly split between general practitioners and specialists. Hospitals in Canada are as well-equipped to deliver technologically advanced medical procedures as hospitals in other industrialized countries. However, the cost constraints of the Canadian system have made the use of certain expensive diagnostic equipment, such as MRIs, considerably less widespread than in the United States.
There is some debate among economists about the role of national health insurance in controlling health care costs, but it is evident that the Canadian health care sector, because of the government’s involvement, spends considerably less on health care than the United States. There are numerous reasons for the cost difference, but the major factors include the lower administrative costs associated with single-payer insurance, the yearly spending caps set by global hospital budgets, and the negotiation of uniform billing fees with provincial physician associations.
VI HISTORY
Canada’s system was created through two major innovations. The first innovation was government-funded insurance to cover hospital costs. The second initiative was government-funded insurance to pay for medical services outside of hospitals.
A Provincial and Federal Initiatives
T. C. Douglas From 1944 to 1961, T. C. Douglas was premier of Saskatchewan, in a government led by the socialist Co-operative Commonwealth Federation. During his tenure, the province introduced a public hospital insurance plan that became the foundation for Canada’s national health insurance system.Archive Photos/Express Newspapers
Until the 1940s, the government was not very involved in health care. It mostly focused on efforts to improve public health, such as disease control and food and drug regulation. In addition, local governments provided charitable hospitals and medical care for indigent people. Canadians paid for health care either directly out of their pockets or through private insurance.
The first real initiatives for developing public health insurance on a wide scale originated in the provinces. In 1947 the Saskatchewan government, led by the Co-operative Commonwealth Federation, a social democratic party, inaugurated the first hospital insurance plan in North America. The plan used public funds to cover the costs of hospital services. The success of this plan and similar plans in other provinces convinced the federal government to pass the Hospital Insurance and Diagnostic Services Act in 1957. This legislation allowed the federal government to share in the cost of provincial hospital insurance plans. By 1961 every province in Canada had set up a hospital insurance plan.
In 1962 the Saskatchewan government introduced a further innovation: a medical insurance program that used public funds to reimburse doctors for the services they provided to patients outside of hospitals. This again proved to be a successful model. In the Medical Care Insurance Act of 1966, the federal government agreed to share provincial health costs for medical care outside of hospitals. By 1971 every province had a medical insurance plan in operation, and Canada’s health insurance system was fully in place.
In 1984 the federal government combined the 1957 and 1966 laws into the Canada Health Act. This legislation reinforced the underlying principles of the previous health insurance programs, including public administration, comprehensive benefits, universality, and portability. In addition the new law emphasized a fifth principle, equal access, which was designed to prohibit practices such as extra-billing that presented potential financial hardship for some patients.
Federal financial support for health care has varied over time. Prior to 1977 the federal government paid an agreed-upon percentage of provincial medical costs. In 1977 the Established Programs Financing Act replaced this system with a single payment for health care, known as a federal block transfer payment; this new payment was based on provincial population. At various times in the 1980s and early 1990s the federal government froze or reduced those payments as part of a movement to contain health care costs and reduce federal spending in general. Beginning in 1996 federal funding for provincial health systems was combined into a super-grant, the Canada Health and Social Transfer (CHST). The CHST combined federal contributions to health care, higher education, social assistance, and other social services into one lump sum. In the CHST, the federal government provided fewer funds for health care. However, in the 1999 budget the federal government renewed its commitment to health funding and injected new money into the health care sector.
As federal health care contributions declined in the 1980s and 1990s, provincial governments came under pressure to control health care costs. Many provinces attempted to make health care services more efficient by combining or closing hospitals. Some, like Québec, attempted to shift the emphasis of health care delivery to preventative and community care. Most provinces also implemented controls on physicians, such as salary caps for specialists. Governments have also attempted to control demand by extending the waiting lists for certain surgical procedures or discontinuing coverage of some services that are not medically necessary.
B Attitudes Toward the System
Physicians have displayed an ambivalent attitude toward public health insurance in Canada. On the one hand, government involvement guaranteed universal coverage and did away with the problem of collecting payments from patients and insurers. On the other hand, government involvement necessarily meant some regulation of the profession, including the fees that doctors charge for their services. Some provincial medical associations resisted the introduction of public medical insurance because of this regulation. In Saskatchewan in 1962 and Québec in 1970, physicians went on strike to protest the introduction of government-funded medical insurance.
A consensus eventually emerged. Doctors agreed to respect the fees negotiated with provincial governments in return for the freedom to practice medicine on a fee-for-service basis. This consensus was threatened when some physicians began to charge higher fees than those covered by provincial insurance by extra-billing. The federal ban on extra-billing in the Canada Health Act in 1984 led most provinces to prohibit the practice. In Ontario, where extra-billing was most widespread, the ban prevailed only after a bitter strike by doctors in 1986.
Public opinion polls commissioned by the National Forum on Health in 1994 found that Canadians were profoundly attached to equity and universality in health care. Other polls in the late 1990s showed negative reactions to expenditure cuts and efficiency measures in hospitals. The public saw these cuts as compromising the quality of and access to health care. This perception, along with examples of overcrowding at certain emergency rooms, led to a public backlash against the cuts. In many provinces, as well as at the federal level, politicians became sensitive to public discontent and injected more funds into the health care sector.
Whether demand for expensive health services can be controlled by deterrents such as waiting lists, or whether such controls will lead to greater desire for private medicine remains to be resolved. Canada is one of the very few public health care systems that does not allow some measure of partial payment by patients, such as co-payments, deductibles, or user fees, for services primarily paid for by insurance. Canada is also one of a dwindling number of countries that has not experimented with two-tier medical delivery, in which private health insurance is allowed to cover the same services as public insurance.
The Canadian health care system is at an important and potentially controversial crossroads. On the cautionary side, there seems to be a growing unease about whether the system can be sustained. Can a system that essentially shuts out the private market for health services in an era in which demand for health care is increasing at a remarkable pace survive? On a more positive note, the Canadian health care system is regarded as among the most effective—and popular—of any industrialized country. The Canadian system continues to combine the best features of any successful health care system and offers high-quality, comprehensive care for all citizens at reasonable cost.
