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Canadian Medicare is, once again, under attack. Despite being wildly popular among Canadians, and internationally admired, our system of universal insurance for “medically necessary” hospital and physician services is being dismissed by critics as old-fashioned, unsustainable, economically unfeasible, and otherwise out of step with our new global times. The newspapers are full of announcements of “privatization” of hospital care in Alberta, accusations that “we already have two tier medicine” and might as well finish the job, and seemingly erudite pronouncements that we must choose between “maintaining equity” and economic good sense. Too often, however, these criticisms result from some fundamental confusions about both concepts and evidence. In consequence, they often misinterpret the actual problems with Medicare. Just as physicians cannot treat without an accurate diagnosis, healing Medicare requires that we be clear in defining our terms.

This paper provides some background information about public and private places within our health care system. It begins with some concepts and definitions, including:
• the distinction between how we finance a health care system and how we choose to deliver care;
• the various levels within “public” and “private,” and, more specifically, the difference between for-profit and not-for-profit delivery;
• the ways by which funding can flow between those who finance care, and those who deliver it;
• the nature of insurance, and the concept of “risk selection.”

It then moves to a consideration of the Canadian system, and an analysis of data about health spending. It uses the definitions and data from the Canadian Institute for Health Information (CIHI) for within-Canada comparisons, and data from the Organisation for Economic Cooperation and Development (OECD) to compare Canada with 21 other developed economies. Scrutiny of this data reveals the need for more careful interpretation of Canadian health spending. In particular, several commonly voiced beliefs are not supported by the data. Contrary to current rhetoric, we found:

• Canadian health spending is not particularly high in international terms.

- The commonly-employed measure, health expenditures as a proportion of Gross Domestic Product (GDP), reflects both health spending, and the strength of the economy. The well-publicized fact that Canadian health spending as a % of GDP had risen to 10.1% by 1993, ranking 2 nd in the OECD, reflected the stagnation of the economy (a “denominator effect”) rather than excessive spending for health care services. As that interpretation would predict, improved economic times has dropped Canada’s spending to 9.1% by 1997, and a 5th place ranking.

- Measured in terms of actual spending in US dollars per capita, Canada would have ranked in 9 th place in 1993 (rather than 2nd ) and fallen to 14th place by 1997.

• Private-sector spending is increasing more rapidly than is public-sector spending, with almost all recent cost increases arising from the privately funded sector.

• Canadian health spending is not out of control

- At first glance, Canadian health care spending, measured in current dollars, has indeed increased steadily between 1975 and 1999. However, this is not true once we adjust for inflation and population growth. Even without taking account of increased needs resulting from such factors as the aging of the population, the increased scope (and costs) of new technology, or any excess inflation within the health care sector, Canadian health spending per capita, as measured in 1992 dollars, has been decreasing between 1992 and 1997, the last year for which inflation adjusted data is available.

• The federal government’s share of provincial health care spending is far higher than has been argued by provincial governments. It is commonly argued that federal contributions have dropped from 50% to somewhere between 9% and 13% of provincial health expenditures. This is seriously misleading. Creative accounting has adjusted both the numerator and denominator of this ratio:

- As far as the numerator (federal share), in 1977, the old cost-sharing arrangements for hospital insurance, medical care insurance, and post-secondary education had been combined into a single transfer, EPF, which was made up of both cash and tax points, meaning that the baseline for federal cash transfers should be considered 25% of matched spending, not 50%. In 1996, this was transformed to the Canada Health and Social Transfer (CHST), which also added in the health and welfare programs formerly funded under the Canada Assistance Plan. Since 1977, these transfers have all been part of provincial general revenues, and provincial governments are free to determine how to spend them, further complicating the task of determining what was contributed for health. However, creative accounting has cut the imputed transfer at least in half by ignoring the yield from tax points.

- As far as the denominator (provincial health expenditures), under the old cost-sharing arrangements, the federal government matched spending only for hospitals and physicians. These amounted to about 65% of provincial health expenditures in 1997. Creative accounting assumes that all such expenditures would have been matched. Taken together, the federal share is at least three times what popular rhetoric has claimed.

Several myths are then addressed:
• the Myth of Health as an Ordinary Market Good
• the Myth of Canada as “Socialized Medicine”
• the Myth of Canada as the Most Publicly-funded System
• the Myth of Medical Savings Accounts
• the Myth of User Fees
• the Myth of Strengthening the Public System by “Freeing up Resources”
• the Myth of the Federal Government
• the Myth of “Affordability” Requiring More Private Money
We conclude by arguing that several elements of the Canadian system indeed need fixing, but that private financing of medically necessary care would severely damage the system, without fixing the real problems.

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PDF Ebook Getting What We Pay For: Myths and Realities about Financing Canada’s Health Care System