The Case for Medicare

The 40-year struggle for universal health care - from private failure to public success

Private medicine dominated Canadian health care until the mid-1940s. Canadians who couldn't afford to pay for a doctor or hospital bed generally relied on charity or went without care. Some sacrificed homes and life savings to get medical attention for desperately ill family members. This still happens in the United States, the only developed nation without a universal, publicly-funded health care system.


The federal government establishes Medicare 1966-68; and strengthens it with the Canada Health Act, 1984

Saskatchewan Premier Tommy Douglas - the Father of Canadian Medicare - set the stage for Canadian Medicare when he introduced a public insurance plan for hospital services in his province in 1947, and physicians' services in 1962.

In 1966 Lester Pearson's federal Liberal government followed Douglas` lead by introducing The Medical Care Act. Implemented in 1968, the Act set out the principles of Medicare:

  • coverage of all necessary physician and hospital services - comprehensiveness;
  • availability to all insured citizens - universality;
  • access to all under uniform terms and conditions, in particular, regardless of ability to pay -accessibility;
  • a single payer for all covered services, i.e. the government - public administration; and,
  • ability for citizens to use their coverage across the country - portability.

The Canada Health Act

In 1984, responding to a proliferation of direct charges by physicians to patients, the Trudeau Liberal government introduced the Canada Health Act (CHA). Passed unanimously by the federal parliament, the CHA allows the federal government to deduct one dollar from federal transfers to any province for every dollar of direct patient charges in that province. The CHA, for a period, ended user fees for insured physician and hospital services.

Accountability for healthcare spending decreases

In the 1968 legislation, the federal government offered the provinces a dollar of cash transfers for each dollar they spent on healthcare programs that met the principles in the federal legislation. The proportion of healthcare funding, and the form of that funding, subsequently changed. The provinces negotiated a transfer of "tax points", allowing them to levy taxes, which they could use for (among other things) healthcare delivery. Determining federal contributions to health care (and thus holding the federal government accountable) became even more difficult when, in 1996, the federal government rolled education and health funding in to a single package, the Canadian Health and Social Transfer (CHST).

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The 1990s - Governments cut healthcare funding

In 1992, Canada spent 10.2% of its gross domestic product (GDP) on health, more than any country other than the United States. In the mid-1990's, troubled by their large budget deficits, the federal government made huge cuts in transfer payments to the provinces, and provincial governments ended the practice of substantial yearly increases in healthcare funding. Yearly increases in health spending averaged 11.1% from 1975 to 1991, but dropped to increases of 2.5% annually in the late 1980s and early 1990s.

As a result, increases in health spending failed to keep pace with economic growth, and health spending dropped to 9.2% of the GDP, an extraordinary decrease that did not occur in any other industrialized country. Even after the catch-up spending of the last few years, described shortly, Canadian health spending as a percentage of GDP approximates that of 1992. In the same period, all other OECD countries had increases in health spending of 1.5% to over 2% of the GDP.

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The 2000s - Governments play catch-up in healthcare spending

      • An immediate infusion of federal dollars and increased accountability for the way those dollars are spent.
      • Creation of the Health Council of Canada to facilitate collaborative leadership in health and new approaches to primary care
      • Stable and predictable long-term funding
      • More integrated, team-based care
      • Investment in diagnostic technologies and training programs to reduce waiting lists
      • Centralized management of waiting lists
      • A national home care strategy and improved service to rural and remote communities
      • A National Drug Agency and improved coverage of prescription drugs.

The Romanow Report

Since 2000 federal-provincial relations have been characterized by periodic federal-provincial agreements, in which the federal government has gradually made up its reductions in health transfers of the mid-90s. The trend was spurred by Roy Romanow's 2002 landmark report on health care reform.

After a dozen focus groups, 21 days of public meetings and several dozen expert reports, Commissioner Romanow concluded Canadians place high value on equitable access to high quality health care delivered on the basis of need, and not ability to pay. Among his recommendations:

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A new federal-provincial deal

In February 2003, the provinces reluctantly signed on to a deal that represented significant increases in funding, with few (if any) accountability strings attached. Given the extent of prior funding cuts, the explosion in expensive health technology, and the aging population in the context of a system that tends toward more aggressive treatment of the elderly, it is no surprise that these increases proved inadequate.

As a result, the 2004 federal election became, to a large degree, a debate about the future of health care in Canada. Less than two months after the election, Liberal Prime Minister Paul Martin convened a First Ministers' conference on health care. The ultimate deal that emerged from this meeting provided for a $41-billion federal infusion into the system over 10 years, a sum that was trumpeted by the federal government as closing the "Romanow Gap".

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Missed opportunities for federal and provincial governments

Commissioner Romanow recommended the federal government use its leverage with the provinces to "buy change" - in other words, to ensure new money would be targeted to meaningful healthcare reform and fixing the system. Despite the stated intentions of all governments to direct new money into healthcare, however, the 2003 and 2004 accords did not stipulate that expenditure be targeted toward particular needs (e.g. training health personnel), or innovations (e.g. integrated multidisciplinary, chronic disease management), nor did it provide sufficient accountability mechanisms to ensure that money flowed into these important areas.

This has led to concerns that governments may not be flowing money into areas where change is most needed, and research in some provinces indicates that planned increases in expenditures fall short of the money provided by these two large cash infusions.

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The privatization of universal health care

The Canadian health care industry represents an untapped market for investors and insurance companies, but it`s a challenging way to make money; investors could sell enhanced access to create a second tier of health services, they could ``cherry pick`` low risk, low cost patients, leaving the sickest patients to the public system, compromise care and sell unnecessary services.

Inevitably, privatization of our healthcare system would have winners and losers; the winners would be private investors, the insurance industry and those Canadians wealthy enough to buy their way to the front of the line, and thereby avoid waiting for diagnostic tests or treatments. The losers would be the vast majority of Canadians who would face not only longer wait lists but also deteriorating standards.

Two key factors explain deterioration in publicly funded care when a parallel private system exists. First, scarce human resources are extracted from the publicly funded system, a particularly Canadian concern given the current shortage of nurses and doctors in our country. Second, a parallel private system decreases pressure from politically influential, privileged Canadians for maintaining the quality of publicly funded care.

Other losers would be those Canadians who feel pressured to buy private insurance but forego other potentially more important purchases, like high-quality childcare or a post-secondary education, large corporations whose employees would demand private health insurance as a condition of employment would also suffer. To the extent that this happens, Canadian industry would lose its competitive advantage relative to the United States.
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The Chaoulli Decision

Championed by a few think tanks and advocacy groups (such as the Fraser Institute and National Citizens' Coalition) and a few outspoken media commentators, Medicare opponents received a huge boost from the Chaoulli decision of June 2005 (click here to read our bulletin describing the case) when the Supreme Court of Canada, by a 4-3 vote, declared that Quebec's prohibition of private insurance for publicly insured services violated the provincial Charter of Rights. With regard to the Canadian Charter of Rights, the decision split 3-3.

Most legal opinions see the Chaoulli decision, which flowed from a perception of excessive wait times for procedures such as joint replacements, as having limited implications. However, more important than its legal implications has been its political impact. The decision has resulted in increased pressure for a two-tiered private insurance alternative, as well as for increased for-profit health care delivery. Most recently, Quebec has responded to the Chaoulli decision with a plan which, at first look, provides little threat to public funding of care, but potentially increases the role of investor-owned for-profit health care provision. Potentially even more serious are initiatives in British Columbia, and off and on again in Alberta, which could make the provision for open queue-jumping and ready access to private insurance for publicly insured services.

New Charter challenges are underway in Ontario and Alberta.

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What about doctors?

Doctors who work in privately funded for profit facilities and value higher incomes over the delivery of equitable care might benefit from privatization, if they could put up with the increased bureaucracy and scrutiny of care that would accompany the introduction of private health insurance. Still, most doctors would not be better off. Conditions in the public system would worsen, the average patient would be sicker and frustrations would be higher. With two tiers of patients there would also be two tiers of physicians. Collegiality would undoubtedly suffer.

The truth is that Medicare is not only good for patients; it is also good for doctors. The case for Medicare is as strong today as it was in the 1960s, and is now buttressed by strong research and by decades of physician experience and Canadian commitment to the values it represents.

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