The Fiscal Sustainability of Universal Health Care in Canada

Gregory P. Marchildon, Ph.D.Canada Research Chair in Public Policy and Economic History

Johnson-Shoyama Graduate School of Public Policy, University of Regina, CANADA

Fiscal Space and the Financing of Universal Health Care Systems in the Americas

PAHO/WHO Regional Workshop, Washington, D.C., November 29-30, 2007

2

The Many Worlds of Fiscal Sustainability

• Originates from Latin: to hold or support• Achieving balance by not depleting or destroying

existing resources• Having a sufficient and dependable revenue

stream to finance expenditures• Romanow Commission (2002): sufficiency of

resources necessary to provide citizens with timely access to quality health services Long-term Evolving health needs

3

Universal Health Care

• Balance of resources necessary to fund a basket of public health care services available to all citizens on the same terms and conditions

• Resources = $ + L + K (= $ ?)• Categorical versus universal• Benefit entitlements versus citizen rights• Definition of public health care• Definition of same terms and conditions

4

5

Organization of the Public System in Canada

Constitution Act, 1982

Provincial and Territorial Governments Federal Government

Canadian Institutes for Health Research

Statistics Canada

Minister of HealthRegional Health

Authorities

Ministries of Health

Mental Health and Public Health

Home Care and

Long-Term Care

Single Payer

Hospital, primary care and physician Services

Canada Health Act,

1984

Health Canada

Public Health Agency of Canada

Patent Medicine

Prices Review Board

Provincial and Territorial Prescription Drug Subsidy Programs

Federal-Provincial-Territorial Advisory

Committees and Councils

Transfer payments

Canada Health

Infoway

Canadian Agency for Drugs and

Technologies in Health

Health Council of

Canada

Canadian Institute for

Health Information

Canadian Blood

Services

6

Public, Mixed and Private Systems of Health Care

Funding Administration Delivery

Public Canada Health Act services (hospital and physician services plus) and public health services

Public Taxation Universal, single-payer provincial systems. Private self-regulating professions subject to provincial legislative framework

Private professional, private not-for-profit, private-for-profit and public arm’s-length facilities and organizations

Mixed goods and service, including most prescription drugs, home care and institutional care services

Public taxation, private insurance and out-of-pocket payments

Public services that are generally welfare-based and targeted, private services regulated in the public interest by governments

Private professional, private not-for-profit and for-profit, and public arm’s-length facilities and organizations

Private goods and services including most dental and vision care as well as over-the-counter drugs and alternative medicines

Private insurance and out-of-pocket payments including full payments, co-payments and deductibles

Private ownership and control; private professions, some self regulating with public regulation of food, drugs and natural health products

Private providers and private for-profit facilities and organizations

7

Overview of Canadian Health System: Expenditure Perspective

Private Sector30.4%

Private Health Insurance

12.2%

Other3.2%

Dental and vision care, complimentary and alternative medicine, and some

long term care and home care

Out-of-Pocket Expenditures

14.4%

Commercial Insurance Firms

Not-for-Profit Insurance Firms

Public Sector69.6%

Provincial GovernmentSector63.3%

Hospitals

Long-term Care

Other Public Sector6.3%

Federal Direct4.2%

Municipal(Public Health)

0.7%

Community Care

Social Security Funds1.4%

Quebec Drug Insurance Fund

Physician Remuneration

Provincial Drug Plans

Home Care

Regional Health Authorities

Total Health Expenditures 2005$142 Billion

Worker’s Compensation

8

Public, Mixed and Private Systems of Health Care

Funding Administration Delivery

Public Canada Health Act services (hospital and physician services plus) and public health services

Public Taxation Universal, single-payer provincial systems. Private self-regulating professions subject to provincial legislative framework

Private professional, private not-for-profit, private-for-profit and public arm’s-length facilities and organizations

Mixed goods and service, including most prescription drugs, home care and institutional care services

Public taxation, private insurance and out-of-pocket payments

Public services that are generally welfare-based and targeted, private services regulated in the public interest by governments

Private professional, private not-for-profit and for-profit, and public arm’s-length facilities and organizations

Private goods and services including most dental and vision care as well as over-the-counter drugs and alternative medicines

Private insurance and out-of-pocket payments including full payments, co-payments and deductibles

Private ownership and control; private professions, some self regulating with public regulation of food, drugs and natural health products

Private providers and private for-profit facilities and organizations

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10

Universal Health Expenditures in as a Share of Total Health in Canada, 2007

Private Sector

$47.1b 29.4%

Other Public Sector

$3.5b 2.2%

Federal Direct

$5.7b3.6%

Provincial/Territorial

$103.8b 64.8%

CHA

$ 61.3%

Non-CHA

$31.9B 31.7%

Medicare$67b

41.8%

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Trends in Health Expenditures, 1976-2005

Five-Year Averages 1976-1980

1981-1985

1986-1990

1991-1995

1996-2000

2001-2005

Total health expenditure (THE) as % of GDP 7.0 8.0 8.5 9.6 9.0 10.0

Canada Health Act (CHA) services as % of THE 58.1 56.7 55.4 51.7 46.2 43.3

CHA services as % of GDP 4.1 4.5 4.7 5.0 4.2 4.3

Non-CHA services as % of THE 41.9 43.3 44.6 48.3 53.8 56.7

Non-CHA services as % of GDP 2.9 3.5 4.7 4.6 4.9 5.7 Mean annual growth rate in THE 12.8 12.4 8.9 4.0 5.8 7.7 Mean annual growth rate in CHA services 11.6 12.2 8.2 1.8 3.8 6.8 Mean annual growth rate in non-CHA services 14.6 12.7 9.8 6.3 7.5 8.4 Mean annual growth rate in GDP 12.6 9.1 7.0 3.6 5.8 4.8 Mean real annual growth rate in THE 3.3 4.2 4.0 1.6 4.0 5.2 Mean real annual growth rate in CHA services 2.2 4.0 3.3 -0.5 2.1 4.3 Mean real annual growth rate in non-CHA services 4.9 4.5 4.8 3.9 5.7 5.9 Mean real annual growth rate in GDP 3.6 3.1 2.3 2.0 4.3 2.5

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Real Growth Trends, 1976-2005

Average Growth Rate

(in percent per year)

Medicare 2.6 %

Non-Medicare 5 %

GDP 3 %

Total Health care expenditures as a share of GDP in Canada and selected countries, 1960 to 2002

0

2

4

6

8

10

12

14

161

96

0

19

70

19

80

19

85

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

% o

f G

DP

AUST CAN FR SWE UK US

Public Health Care Expenditures as a share of GDP in Canada and selected countries, 1960 to 2002

0

1

2

3

4

5

6

7

8

91

96

0

19

70

19

80

19

85

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

% o

f G

DP

AUST CAN FR SWE UK US

Comparative Health Status Indicator Rankings (OECD rankings in brackets)

Life Expectancy at

Birth(1999)

Potential Years of LL per 100,000

(1997)

Perinatal Mortality per

100,000 (1999)

DPT Immunization% of Children

(1997)

Measles Immunization% of Children

(1998)

SWEDEN 1 (4) 1 (1) 2 (7) 1 (2) 1 (6)

CANADA 2 (5) 2 (8) 3 (13) 4 (22) 2 (7)

AUSTRALIA 3 (7) 3 (9) 1 (3) 6 (25) 5 (18)

FRANCE 4 (8) 5 (15) 4 (17) 2 (8) 6 (19)

UK 5 (18) 4 (10) 5 (18) 3 (18) 4 (15)

USA 6 (20) 6 (22) 6 (20) 5 (23) 3 (13)

Comparative Disease Indicator Rankings (OECD rankings in brackets), 2000

  Malignant Neoplasms

(2000)

Cerebro-vascular

Diseases (2000)

RespiratorySystem

Diseases(2000)

IschaemicHeart

Diseases(2000)

SWEDEN 1 (2) 5 (11) 1 (4) 4 (16)

CANADA 4 (15) 1 (2) 3 (10) 3 (12)

AUSTRALIA 2 (8) 4 (5) 4 (12) 2 (11)

FRANCE 5 (18) 2 (3) 2 (8) 1 (3)

UK 6 (20) 6 (18) 6 (25) 6 (22)

USA 3 (14) 3 (4) 5 (22) 5 (21)

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Comparatives Trends in real PUHE, PRHE, and THE, cumulative % change, 1990-2001

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Nature of Regionalization Reforms

• Had been urged for decades before by policy experts

• Fiscal crisis of early 1990s finally pushed most governments to act

• “Big bang” structural change

• Little idea of actual consequence: i.e. a high level of uncertainty

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Stated Policy Goals: Regionalization

• Better align resources with population needs• Integrate planning and management of services• Shift emphasis to illness prevention and health

promotion (from acute care)• Improve service quality and EBP• Provide accountability for “system”• Increase public participation

Source: Lewis and Kouri (2004)

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Current Debates

• Fiscal sustainability

• Federal-provincial conflict

• HHR shortages and wait time pressures

• Public-private boundaries– Chaoulli decision in Supreme Court and role

of private health insurance– Private delivery and contracting out

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Underlying Fiscal Sustainability Challenges

• Transformation of primary health care

• Effective management and policy/program experimentation at RHA level

• Prescription drugs: major cost driverCountervailing powerPrescription and utilization behaviour

• Electronic (patient) health records

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2001 - % Excellent or Good

2003 - % Excellent or Good

BC

AB

SK

MB

ON

QC

NB

NS

PEI

NL

YK

NT

NU

CANADA

84.0

83.6

85.6

80.3

84.5

85.0

82.8

85.3

89.6

88.9

81.7

80.5

70.8

84.4

82.8

85.7

88.4

85.6

87.1

89.0

86.9

87.3

88.6

86.1

85.3

79.1

77.1

86.8

Political Sustainability: Public Satisfaction

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Concluding Observations

• Canadian Medicare and European v. US trajectory

• Evidence from introduction of more recent universal health care systems

• The revenue and responsibility challenge

• Public financing of universal health care and the choices available