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THE FOLLOWING ARTICLE HAS APPEARED IN THE RECORD December 4, 2002

Coming to grips with our
health-care costs

Part 1: Back to basics

Canadian Medicare is so ingrained in our culture that no other public policy seems to strike closer to our hearts. The ongoing debate on how to cure our ailing health-care system continues to produce contradictory recommendations based on a mixture of facts, fiction, emotions and of course, politics. This is particularly true when it comes to discussing the merits of allowing the private sector to play a more important role in offsetting the high costs

Before delivering a final verdict logic dictates that we must first understand the basics and condition of our health-care system. Why public health care over private insurance Prior to the introduction of public health-care insurance in the 60s, insurance companies and other private agencies provided the bulk of sickness and accident protection. Needless to say, the private insurance market either refused coverage to high-risk clients or forced to them to pay a much higher premium to offset the risk. As for the economically disadvantaged, they were obliged to assume a relatively higher proportion of health-care costs which, of course, most of them couldn't afford.

Philosophy of Medicare

Canada's public health-care system, better known as Medicare, rests on the philosophy that health care is a basic human need and that access to necessary medical services must not depend on one's ability to pay. This is achieved by transferring the resources from the richer to the poorer and by pooling the risks between the healthy and the less healthy. Thus, all residents are guaranteed by the 1984 Canada Health Care Act, access to insurance, regardless of where they live or how much they make. Canada's "single -tier system" is based on the principle that individuals with health problems and with little or no income are subject to the same fee structure and waiting periods as high-income individuals.

Role of provincial and federal governments

Strictly speaking, the federal government has no legal authority to establish and maintain a national health-care insurance plan. Under the Canadian Constitution, health care is a field primarily under provincial jurisdiction. The federal government intervened in the health-care field by resorting to the constitutional "spending power," which enables it to make a financial contribution to certain programs under provincial jurisdiction. In order to receive federal funds to help finance their health-care programs, provincial governments must meet five requirements: portability, public administration, universality, comprehensives and accessibility. The Act provides an automatic dollar-for-dollar penalty if any province permits hospital user charges and extra-billing by physicians for insured health services.

As long as a province abides by the five principles, it remains free to organize the delivery of as many insured health services as it sees fit and can afford. It is for this very reason that Canada's health-care system is really made up of ten separate and distinct provincial health care plans. Another important feature of our publicly funded health care system is that the medical services are actually provided by the private sector. Medical fees are determined through negotiations between doctors who work out of private clinics and provincial governments. Instead of sending their bills to numerous insurance companies, as is the case in the US, our doctor's fees are paid by the provincial governments.

The costs and financing of our health system

Last year, the total public and private health care spending in Canada reached $102.5 billion. It goes without saying that the amount would have been much higher had it not been for the vast amount of philanthropy, voluntarism and informal care. According to government statistics, hospitals accounted for the largest share of spending (32 per cent) followed by retail drug sales (15 per cent), and spending on physician services (14 per cent). About 73 per cent of total health care spending (just under $2,400 per Canadian) came from public sector sources in 2001. The rest came from private sector sources, namely insurance companies and out-of-pocket payments. Employers helped fund approximately 70 per cent of the public spending through payroll taxes/health care premiums and by financing the Worker's Compensation system though annual assessments. It is also estimated that in 2001, Canadians spent at least one billion dollars to receive care in the United States

Role of private insurance

One common myth is that we have a totally public-funded system. The reality is that the private market plays an important role in covering health services that are not insured by the public plan or that are only partially insured by it. Costs of prescriptions, dental and home care, to name only a few, are not covered by the Health Care Act and we all pay for these services through out-of-pocket expenditures or through our insurance.

The costs are bound to skyrocket

The signs of a growing disaffection towards the quality of our health care have been multiplying over the last five years. The lack of nurses and medical specialists have caused longer lineups in the emergency departments and extended waiting times for surgery and treatment. Many patients lack access to modern and expensive medical technologies including high-tech diagnostic services. Precious operating rooms can sit empty because surgeons have reached their ceiling on how much they can bill the government.

Many believe that without a substantial government cash infusion the struggle to maintain a comprehensive public health insurance system will soon become futile. To complicate matters, because of Canada's demographics, our heath-care costs are guaranteed to skyrocket. The latest projections show that the 65 and over age group will triple over the next 30 years and by the year 2030, persons aged 65 and older will represent 23 percent of the entire Canadian population. The older the population the more health care dollars are required- patients in their seventies use four times as many dollars than those in their thirties.

What are our choices?

If funding is left at current levels, it is bound to lead to the rationing of both the number and quality of insured services .On the other hand, adequately funding Canada's health insurance program necessarily means paying more taxes or spending more tax money at the expense of other government priorities. Roy Romanow believes that the prescription lies with the tapping of the accumulated federal budgetary surplus. However, his critics argue that the only valid long-term solution is a system based on mixed public and non-public funding. Considering Canada's aging population, they view his projected $15.3 billion federal contribution as little more than a down payment in the years to come. Meanwhile, the provincial governments are lining up to accept the proposed cash infusion but reject any question of being accountable to the federal government on how the money should be spent.

Next Week: Part II: The private sector controversy