Canada’s spends far less on health care on health care than the U.S. According to the CIA World Factbook, in 2010 Canada spent 11.3% of its GDP on health expenditures compared to 17.9% of GDP in the U.S. Nevertheless, a Society of Actuaries (SOA) report claims that Canada may be in a tenuous fiscal situation. In 2012, provincial health care spending was 8.1 percent of GDP and this figure is project to rise to 18.9 percent of GDP by 2037 without any government action. As Canada ages, the tax base will decrease and the demand for health care services will rise.
The SOA report presents the following key findings.
- Assuming no governmental steps to curb health care expenditures, provincial/territorial spending on health care is estimated to increase at 5.1 percent real growth per year, increasing from 44 percent today to 103 percent of total provincial/territorial revenues by 2037.
- Even after assuming some governmental action (for the base scenario, see Appendix 4) to limit real growth rates to 3.5 percent—and thus to decrease 2037 health care expenditures by 30 percent—health care will still absorb 69 percent of total revenues available to provinces/territories by 2037 (86 percent of own-source revenues).
- The proposed changes to Canada Health Transfer (CHT) will impact total revenues available to provinces/territories, reducing the federal government’s portion of provincial/territorial health care expenditures from the current 21.0 percent to 14.3 percent by 2037.
- The supply of physicians needs to increase by at least 46 percent over the next 25 years just to keep up with increased demand for services as a result of aging and population growth.
The article also provides a nice review of the Canadian healthcare system, which I review below.
Canadian Health System Overview
In Canada, health care delivery is considered a provincial jurisdiction, and provinces/territories effectively directly administer most of the health care system. Still, the federal government sets national standards by providing funding support—the Canada Health Transfer (CHT)—to provinces/territories for health care expenditures. International data shows that, in 2010, about 71 percent of Canadian health care expenditures were paid from public sources, effectively placing it below most OECD countries.
The largest provincial/territorial health program is, by far, Medicare, which in fact consists of two programs: (1) Hospital Insurance, which started in 1958, and with all provinces/territories having programs in place by 1961; and (2) Medical Insurance, which started in 1968 , and with all provinces/territories having programs in place by 1972…The Canadian federal government also directly administers health care for groups such as the military and inmates of federal prisons.
Under the Canada Health Act of 1984, outpatient prescription drugs are not required to be covered, but some provinces have drug programs that provide coverage for certain populations, such as seniors, low-income families, those on social assistance, or those with certain medical conditions.
Preimums for public insurance
In general, health care expenditures are paid by provinces/territories using funds from their general revenues. Only British Columbia directly imposes a fixed monthly premium to citizens, which is waived or reduced for those on low income. Ontario and Quebec also impose some kind of premium, sometimes referred to as a tax or contribution, which is based on income.
Family physicians in Canada are chosen by individuals. A patient wishing or needing to see a specialist must be referred by a general practitioner. Most physicians receive a fee per visit, at rates negotiated between the provinces/territories and the medical associations.
About 30 percent of the cost of health care is assumed by the non-public sector, including the private sector (insurance companies and private employee benefit plans) and out-of-pocket payments from Canadians. This mostly goes toward services not covered or only partially covered by Medicare, such as prescription drugs, complementary medical services, dental care and vision care.