Private Care in Canada
The following is reprinted from Public Health
Reports, a journal of the U.S. Public Health Service. It was authored
by Carolyn A. Decoster, RN, MBA and Marni D. Brownell, PhD with
the Department of Community Health Sciences, University of Manitoba.
Physicians for National Health newsletter, September
In Canada, health care is publicly insured and available to
all at no charge. Recently, financial pressures have threatened
the system and led to considerable debate about how to save it.
One proposal is to permit privately funded health care alongside
the public system, resulting in what is popularly called a two-tiered
system. This paper presents some of the arguments for and against
two-tiered health care. Using as an example cataract surgery-a
procedure that is available both publicly and privately-the authors
look at some common beliefs about private health care in Canada.
They conclude that the growth in private sector cataract surgery
does not appear to be related to cutbacks or rationing, that private
access does not necessarily shorten waiting times, and that, contrary
to popular belief, it is not only the well-to-do who pay for private
surgery in Canada.
Canadians cherish their health care system. Health care is
viewed as a right, and nobody is denied medical or hospital care
because they are unable to pay. Research in the province of Manitoba
reveals that even in the remote northern communities, over 80
percent of residents see a physician at least once a year. However,
cuts are being made to health care budgets across the country,
and there is a widespread perception that the health care system
is in peril.
The Canada Health Act of 1984 ensures universal access, comprehensive
coverage, and public funding for 1997 hospital and physician services.
Both patients and physicians experience substantial freedom of
action within the system: patients are free to chose their doctors
and to visit more than one doctor for the same complaint. Physicians
are free to prescribe treatments and to admit patients to hospitals
with little scrutiny.
Although the Canada Health Act is a federal law, its administration
is a provincial responsibility. Provinces provide annual block
grants to each hospital, which then allocates funds to its programs
and services. The majority of physicians are paid through a fee-for-service
arrangement: a claim is fled with the provincial government for
each patient service provided, and physicians are reimbursed according
to fee schedules negotiated between provincial governments and
medical associations. Although only hospital and physician funding
are mandated by legislation, many provinces have expanded their
public health insurance programs to cover prescription drugs,
home care, and long term institutional care.
Public administration with a single payer system has helped
control costs in Canada. Part of the reason that the United States
has the most expensive health care system in the world is the
administrative costs of its huge private insurance system. For
every dollar the American commercial health insurance industry
spent on health claims in 1988, it spent 33.5 cents for administration,
marketing, and overhead, while the U.S. Medicare system spent
2.3 cents and the public health care system in Canada spent 3
Although public financing in Canada has successfully controlled
administrative costs, it has been somewhat less successful in
controlling the cost and volume of services. For most of the last
30 years, Canada has spent one to two percentage points more of
its gross domestic product (GDP) on health care than the average
spent by the Organization for Economic Cooperation and Development
(OECD) countries. In 1994, per capita spending on health care-
was approximately Can$2500, or 9.8 percent of GDP. Canada was
second only to the United States, which spent $3,516 per capita,
or 14.3 percent of GDP, on health care. Health care spending grew
rapidly in Canada until the mid-1980s, but unrestrained growth
in health care cannot be publicly financed without limit, particularly
given the growing recognition that many therapeutic measures are
unproven and that health is determined by many factors outside
the health care system.
Canadian provinces finance health care through a combination
of provincial revenues and federal transfers. The contribution
from the federal government in Ottawa empowers it to enforce the
Canada Health Act since it can levy financial penalties against
provinces that contravene the Act. (An example of a contravention
of the Canada Health Act would be permitting doctors to practice
outside of the public system.) However Ottawa's contribution has
gradually declined from the original 50/50 cost-sharing agreement
to less than 20 percent of health care expenditures today. The
pace at which this contribution has fallen has escalated in recent
years as the federal government has focused on getting control
of the deficit. In 1997-1998, cash payments from Ottawa to the
provinces to assist with financing health, social services, and
post-secondary education will be $6.6 billion less than in 1994-1995-an
astounding 40 percent reduction.
The decline in the federal contribution has had two major
consequences. First, the provinces are scrambling to maintain
the public health care system with substantially reduced resources.
As a result, hospitals have had their budgets frozen or decreased,
measures have been adopted to curtail physician fee payments,
and media attention to these issues has generated public concern.
Second, the provinces are less vulnerable to financial penalties
imposed by Ottawa. Given the federal government's much smaller
relative financial contribution, any further withholding of funds
only serves to dilute its power even further. These two factors
have enhanced the appeal of private sector health care.
In Canada, the term "private health care" is generally
care that is paid for by private sources: private insurance plans,
employer-provided health plans, deductibles and other out-of-pocket
expenses. Like the United States, Canada has both publicly and
privately owned hospitals, clinics, and other facilities. Ownership
is a separate issue from sources of payment; a physician in private
practice may receive all of her or _ his income from the public
health insurance program. The vast majority of physicians practice
entirely within the public sector, that is, all of the care they
provide is paid for by public sources. Very few physicians practice
entirely in the private sector; some practice both publicly and
privately. Private clinics generally offer procedures that are
not covered by the public purse. Some types of cosmetic surgery,
_ such as breast implants or tattoo removal, fall into this category.
Sometimes the procedure is covered publicly but the overhead expenses
at the private clinic must be paid for by the patient. Despite
the extra expense, patients may-and some do- opt for private health
care because they perceive waiting times in the public system
to be unacceptably long.
A Two-Tiered Health Care System
One of the frequently heard recommendations for reform is
to supplement the current public system with a parallel private
health care system for those patients who are willing to pay-creating
what is often called a "two-tiered" system. Proponents
of a two-tiered system argue that it would relieve pressure on
the public system, thus ensuring its survival. Critics of the
two-tiered option say that it would erode the public system by
destroying its broad base of support and increasing costs.
A two-tiered system is a popular concept with many doctors.
At its last two annual meetings, the Canadian Medical Association
(CMA) debated the merits of a two-tiered system; both years, resolutions
promoting a private system running parallel to the taxpayer-funded
one were narrowly defeated. The CMA has taken a leadership role
in debating the merits and appropriate place of regulated private
insurance alongside the public system.
At the 1995 CMA meeting, one speaker noted that "the
majority of people could not afford private care, and they are
the vast majority requiring the most care." Members of the
Prime Minister's National Forum on Health concur with that view.
The Forum comprises 24 Canadian health experts with a mandate
to advise the federal government on innovative ways to improve
health and the health care system. The Forum found that Canadians
care passionately about their health care system, rate equal access
and quality of care as its most important features, and believe
that two-tiered health care would erode these core values. The
forum also found that the public sector has managed the system
efficiently and effectively and thus rejected calls for private,
parallel systems. Members of the Forum warned that the private
system tends to skim off the best people-both providers and patients-and
the highest profit technologies, leaving the majority of patients
with less choice and potentially less quality.
How would a two-tiered system result in inequities? A widely
publicized account of queue-jumping serves to illustrate how private
health care can have an impact on equity of access. In the public
system, queue-jumping is allowed based on medical need, not on
the patient's ability to pay. Yet a patient in Ontario, Canada,
jumped a six-month queue for a magnetic resonance imaging (MRI)
- high technology diagnostic procedure-by using her husband's
benefits plan and paying $600. The Ontario Health Insurance Plan
(OHIP) prohibits charging for (or selling private insurance to
cover) medically necessary services that are covered by OHIP.
Nevertheless, the private insurer used by the husband's company
arranged for the MRI within a few days at a Toronto hospital where
there is normally a six to nine-month wait for non-urgent MRls.
Said the patient's doctor, "If she got an MRI because she
could pay for it, when it's a service to be covered by OHIP, that's
just not right. She needed an MRI, but she didn't need it any
more than anyone else I refer." The MRI patient queue-jumped
because her husband's employer provided private health insurance
and she had $600. Other patients had to wait.
Another argument against a two-tiered system is that it has
the potential to drive up costs. First, there are the obvious
costs to consumers who elect to pay for private services, including
deductibles and co-payments. In addition, there are other, less
obvious implications of allowing a privately funded system to
coexist with the publicly funded one. Consumers who pay for private
services may object to paying taxes to support the public system
since they have chosen not to use it, thus weakening support for
the public system. Additionally, the question has been raised
whether physicians-who are trained at enormous public expense-should
be permitted to opt out of the public system.
Does growth in the private sector relieve pressure on the
public sector? Do private clinics offer faster service? Are private
clinics used by the well-to-do, leaving more room in the public
system for those who can't afford to pay? While the answers to
these questions are still not clear, recent experience with cataract
surgery can shed some light on them.
The Example of Cataract Surgery
Because of technological improvements, cataract surgery which
previously required absolute bed rest for several days and thick,
distorting glasses that limited patients' mobility, can now be
done safely and quickly on an outpatient basis. Laser surgery
and lens replacement allow vast improvements in vision and hence
in quality of life. In recent years, the growth in rates of cataract
surgery across Canada has been remarkable.
From 1991-1992 to 1993-1994, age-standardized cataract surgery
rates increased 15 percent. We cannot measure the medical necessity
of these procedures, but we can look at how rates of cataract
surgery vary between provinces. Large variations in rates of surgery
in similar populations suggest that at least some procedures may
not be medically necessary. According to a recent report from
the Health Services Utilization and Research Commission of Saskatchewan,
in 1993-1994, age-and sex-adjusted rates of cataract surgery across
Canadian provinces ranged from 12.9 to 23.5 per 1,000 population
ages 50 and older, an 82 percent difference. The provinces of
Manitoba, New Brunswick, Quebec and Ontario, which collectively
comprise 69 percent of the Canadian population, each had a rate
of approximately 17 per 1,000. Alberta's rate, at 23.5 per 1,000
population, was 38 percent higher than in the above four provinces,
and the rate for residents of Saskatoon, Saskatchewan, was a remarkable
80 percent higher, at 30.6 per 1,000 population. It is doubtful
that disease incidence fully explains such wide variations in
rates: a substantial body of research has documented variations
in rates of procedures that appear to be unrelated to disease
Private Sector as an Escape Value
Does growth in the private sector relieve pressure on the
public sector? Researchers at the Manitoba Centre for Health Policy
and Evaluation (MCHPE) explored the interaction between private
and public sector growth in cataract surgery in a recent report
on hospital downsizing in Winnipeg. Winnipeg is home to over half
of Manitoba's population and has seven hospitals, including two
tertiary care teaching facilities. From 1991-1992 to 1994-1995,
approximately 20 percent of Winnipeg's hospital beds were closed
due to cutbacks in provincial government funding. Cataract surgery
has been consolidated at one of the community hospitals but is
also available at three private clinics in Manitoba, two in Winnipeg
and one in Brandon, Manitoba's second largest city.
These data (Figure 1) suggest that private sector growth cannot
be explained by public sector rationing or cutbacks and that private
sector growth does not relieve the pressure on the public sector.
From 1990-1991 through 1995-1996, the number of cataract surgery
procedures expanded rapidly in both public and private sectors
in Manitoba. While cataract surgery in the private sector grew
from 284 to 660 procedures (a 132 percent increase), in the public
sector during the same years there was an increase from 3,556
to 6,211 procedures (a 75 percent increase).
Another claim of the two-tiered proponents is that private
clinics can offer faster service. A recent survey by the Alberta
branch of the Consumers' Association of Canada investigated this
belief. In Alberta, as in Manitoba, ophthalmologists may operate
in a public hospital, a private clinic, or both. The Consumers'
Association conducted a telephone survey of ophthalmologists'
offices and clinics in five Alberta cities. They asked how long
it would take to get an appointment with the ophthalmologist and,
if cataract surgery were recommended, how long the wait would
be for surgery.
The initial appointment to see the specialist was available
within three to four weeks. But there were intriguing differences
in the waiting times for surgery. For surgeons who operated only
in public hospitals, the prospective "patients" were
told that they would have to wait from two to eight weeks for
cataract surgery; the average was six weeks. In contrast, the
waiting times for surgery at private clinics were from one day
to four weeks. However, the waiting times were lengthy-up to a
year for surgery performed in public hospitals by surgeons who
operated in both public and private sector settings. Patients
in Alberta whose doctors operated both privately and publicly
would get the impression that the wait to have surgery in a public
hospital was far longer than the wait for surgery in a private
clinic. What these patients would not know is that if they had
gone to a surgeon who operated only in the public hospital, the
waiting time would have been far shorter. Thus, patients' perceptions
of longer waiting times in the public sector would be influenced
by which physicians they consulted.
In both Alberta and Manitoba, public insurance pays the surgeon's
fees for both public and private cataract surgery. Public insurance
also pays for all of the support services at public hospitals,
whereas private clinics charge patients a facility fee for overhead
and support services. The private facility fee in Manitoba ranges
from $510 plus the price of the lens in one facility to $ 1,273
including the lens in another. In Alberta, private patients pay
a facility fee that is between $700 and $1,275-twice the documented
overhead at two of Alberta's public facilities performing the
operation. There is a clear financial incentive for surgeons who
operate in both public and private facilities to channel their
patients to their private practice.
Another example of how privately funded health care drives
up costs also comes from the Alberta Consumers' Association. Basic
eye examinations were no longer publicly insured as of December
1994. Prior to de-insurance, Alberta Health reimbursed optometrists
and ophthalmologists $35.94 for a routine eye examination. A survey
of optometrists and ophthalmologists by the Alberta Consumers'
Association found that just five months after de-insurance, the
average cost had risen to $46.79, a 30 percent increase.
Income Level of those Using Private Services
Are only the wealthy paying for cataract surgery, leaving
the public system for those who cannot afford to pay? We looked
at the relationship of income and use of the private sector in
Manitoba, and our data suggest the answer is no.
We determined the mean household income of neighborhoods in
Winnipeg using 1991 public use Census data. Data were aggregated
into geographic units with an average population of 700 people.
Based on mean household income, these geographic units were ranked
from poorest to wealthiest and then grouped into five population
quintiles, each containing 20 percent of the city's population.
Each Winnipeg resident was linked to a geographic area by
six-digit residential postal code, and thus for each resident
a quintile income rank was assigned, with Q1 being the poorest
20 percent and Q5 the wealthiest. This approach has been used
in previous research using administrative data.
The overall age- and sex-adjusted rate of private clinic cataract
surgery per 1,000 Winnipeg residents fluctuated from year to year:
0.61 in 19931994, 0.52 in 1994-1995, and 0.68 in 1995-1996. (These
rates include not only the three private clinics in Manitoba but
also a well-publicized clinic in Alberta that attracts a few hundred
Manitoba consumers every year.) Surprisingly, over one-third of
private clinic cataract procedures on Winnipeg residents were
performed on residents of neighborhoods in the lowest two income
quintiles (Figure 2). Out of 446 private cataract procedures on
Winnipeg residents in 1995-1996, 178 were performed on patients
from neighborhoods in the lowest two income quintiles. This pattern
holds true for 1993-1994 and 1994-1995.
Is private sector growth caused by rationing or cutbacks in
the public sector? Evidently not. Do private clinics provide faster
service? Sometimes, but the differences may depend on the individual
physician's type of practice. Are only the wealthy being channeled
to the private sector? No. Fully one-third of Winnipegers who
paid for their cataract surgery in 1993-1994 were from the city's
low-income neighborhoods. Do private clinics increase costs? Yes,
for the patients who pay for the service, the cost is significant,
approximately $1,000. In the case of cataract surgery, the benefits
of a two-tiered system are far from proven.