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March 1, 2011

Defend and Extend Medicare!

SS Editorial

Medicare Yes!

Medicare is the single most important social program to Canadians. According to a recent Nanos Research poll, nearly 90% of Canadians strongly support and value Medicare as the most important statement that Canada is an egalitarian society.

As a single payer health insurance system that provides medically necessary services, Medicare has lengthened and improved the quality of life for tens of millions. It is also a powerful economic tool in reducing labour market health costs for employers.

Yet the Conservative government indicates it will decrease federal funding for Medicare. Finance minister Jim Flaherty stated in his October 2010 annual state of the economy address that the Canada Health Transfer (CHT), which pays for 20% of Medicare, should be limited to the rate of economic growth and the rate of inflation, a zero to 2% funding increase formula.

The implication of decreased federal health care funding is disturbing for decreases fuel debates about privatization – which causes increased costs and worsens access and quality. The process to renew the CHT, therefore, needs to begin now and should inform an approaching national election.

Medicare – History of a Public Good

Public health insurance in Canada began as provincial initiatives that became cost-shared national programs as a result of the failure of private medicine in the Great Depression.

In 1946 the Saskatchewan CCF under the leadership of Tommy Douglas introduced public hospital insurance. This became a national program in 1957 when Paul Martin Senior convinced the federal Liberals to launch a cost shared approach. Given that health is a provincial constitutional power, a national program only came into full effect in 1961 when provinces opted in – agreeing to meet minimum national standards to receive federal money.

John Diefenbaker, the Conservative Prime Minister from 1957 to 1963, created the Hall Royal Commission to examine a comprehensive health system. Justice Hall reported in 1964 to recommend a single payer system that would be universal in scope – to include medically necessary doctors’ services, and dental, vision, and mental health services. In 1966 Lester Pearson, head of a Liberal minority government, passed the Medical Care Act in response, with the aid of the New Democratic Party.

The Medical Care Act is also a national cost-shared program. It came into full effect when all provinces joined by 1972. However, while the Act was an enormous improvement, it only covered doctors’ services and catastrophic illnesses. Many other medical services such as mental health, non-hospital prescription drugs, and preventive health care are not covered. And the financial model is premised on public funding for mostly private delivery – perhaps not surprising given the political bitterness of the Saskatchewan Doctors’ Strike in 1962.

This mixed model, of public funding for the majority of medical services through private delivery vehicles, is vulnerable to market pressures.

In 1977, in the face of the first major post-1945 economic crisis, the Trudeau Liberal government sharply reduced federal funding for Medicare, from 50% to 25% of health care costs. It did so by setting caps, as now proposed by Flaherty, by cutting cash transfers for tax points (for provinces to take over federal tax room, which provinces may choose not to use), and by moving from dedicated transfers to block transfers, which allowed provinces to spend the reduced monies on other priorities. These federal cuts then worked their way down to financially strapped provinces, who responded with an increasing emphasis on personal health premiums.

In the face of massive political pressure over increased personal health costs, the Trudeau Liberals moved passage of the Canada Health Act in 1984. The Act established five principles for Medicare in Canada:
  • Public Administration - insured services are delivered on a non-profit basis by public authorities
  • Comprehensiveness - all medically necessary services delivered by doctors and hospitals must be publically insured
  • Universality - all legal residents of Canada are to be medically insured on uniform conditions and terms
  • Portability - Canadians are insured across Canada and when travelling abroad
  • Access - people should not be impeded by financial or other barriers from necessary medical services.
So far, the provinces - which do not have to abide by the Canada Health Act, and can offer, or not (like publically delivered abortion in New Brunswick), a variety of medically necessary services - have respected these principles for the sake of CHT monies. But provinces have also compelled Canadians to buy private extended health insurance as in Quebec for drugs.

Still the financial pressures continued. In the mid-1990s Paul Martin Junior, Chretien’s Liberal Finance Minister, dramatically cut federal spending. The federal contribution fell, despite a new dedicated health transfer, and Alberta seriously debated opting out of the national shared cost program. In Quebec, a Dr. Chaoulli won a court case in 2005 for consumers to buy private insurance for Medicare covered services – though the provincial government undercut this ruling by creating conditions, shorter wait lists, which have made this ruling of no effect.

The political pressure from this turn of events led to a modest restoration of shared cost contributions through the Liberals’ 2004 First Ministers Accord on Health Care Renewal. The Accord commits the federal government to a 10 year cost-sharing formula in which the amount transferred would be increased by 6% per year. But this only brings federal funding back up to the early 1990s 20% shared amount.

In other words, what looked like a new investment in health care has only restored a weakened status quo. It is this accord that will expire in 2013-14.

Why there is no Medicare Sustainability Crisis

A major media criticism, and a debate within the Canadian Medical Association, is that health care costs are outstripping economic growth rates and consuming the bulk of public budgets. Therefore, cutting public health spending and privatizing health services is the economically responsible thing to do as Medicare is becoming unsustainable.

This is utter nonsense.

Health care spending as a percentage of total Gross Domestic Product has risen since the 1970s, from 7.5% of GDP to 11.2% of GDP. This rise is in line with every other advanced economy.

In terms of cost drivers, while an aging population and new medical interventions, like drug therapies, do add costs, these costs are modest – less than 1% per year as estimated in a 2010 study by the Canadian Federation of Nurses’ Unions. In fact, private health costs are the single biggest contributor to health care consuming more and more GDP.

Canada, therefore, does not devote a burdensome amount of GDP to health care. In fact, the United States, with its private insurance dominated model of health care, devotes over 16% of GDP to health spending for poorer results in terms of coverage and life expectancy.

Nor does health care consume an inordinate amount of public budgets. While the health budget portion of total provincial budgets has risen from thirty to forty percent in the last generation, this is because the provincial portion of total GDP has been shrinking. On average, Canadian provincial economic activity made up 23% of GDP in the 1990s. This has now shrunk to 19%.

What has actually happened is market conservatives have reduced the economic presence and fiscal capacity of provinces. Since health and education still need public investment, these two public goods have assumed a greater relative importance in a shrinking public economy.

The problem is not out of control health spending but out of control neoliberal politicians who have prioritized tax cuts over public goods and services.

Public Health is more Economically Efficient than Private Health

One little understood fact is that health care is more economically efficient as a public than a private good. As health economists point out, a Not for Profit approach controls costs by the power of bulk buying, regulation for the most efficient use of resources, and public administration to deliver a service, rather than to make profits. A good example of this is British Columbia that has used bulk buying of drugs and alternative therapy strategies to cut drug costs by 40%.

Drugs are the single most expensive cost driver in health spending. Therefore, the greatest cost control need in the health care system today is a national Pharmacare plan. Instead the national government, through patent law and the Drug Price Review Board, has driven prices up to promote a private pharmaceutical industry.

As for other costs, current estimates are that administrative costs in the public health sector are 2% of spending, while private administrative costs are 8% or four times as much. And, despite all the finger-pointing at health workers’ salaries, the cost of hospital health workers has declined from 75% to 60% of institutional budgets (the majority of all health spending).

A Not for Profit approach also improves access and quality. Provinces have found a variety of incentives to reduce wait lists and introduced patient advocates to raise the quality of health services. Another little known fact is that every province has had to regulate private clinics in the wake of unscrupulous medical practitioners who have prioritized profit making over patient safety.

There are, of course, bound to be issues in any system as to what is defined as medically necessary, wait times, and quality of service. But, in comparison to societies that treat health as a private good to be rationed by the size of one’s pocketbook, coverage and outcomes are far better under Medicare.

The repeated proof of the superior value of a not for profit approach is why the Hall Commission recommended that all medically necessary services – such as dental, mental and vision – be included in a public plan. Leaving a minority of medically necessary services in the private market, to be paid for by private insurance or out of one’s pocket, fosters an anarchic market that drives up costs and lessens quality.

Why an Extension of Preventive Health Would Be Even Better

While public health advocates are on the defensive, in trying to get the Conservatives to respect the Canada Health Act and renew the 2004 Accord, the logic of making health services a complete public good is compelling.

In the 1960s when the medicare system was begun, the 1966 act was described as Phase I, the responsive portion of health care in treating illness. Phase II is to implement a comprehensive primary health care system that prevents illness.

Preventive health care is a priority because it is increasingly clear that many health problems, like heart disease and diabetes, are socially determined. If you make less than $30,000 a year you are twice as likely to have diabetes. Poverty makes you sick.

There are many successful examples on a local and even provincial scale of community preventive health care. The Saskatoon Clinic is the leading municipal example of how better health outcomes are possible with an integrated medical practices approach. This dramatically reduces doctor costs (20% of total Medicare spending) by using nurse practitioners and other therapists, and avoids hospital costs (some 40% of Medicare spending).

Quebec, through the provincially networked clinic movement, the CLSC, practices preventive care on an even greater scale, while the Ontario NDP began a modest experiment in local clinics in the early 1990s that persists today.

All of these pilots demonstrate that it is possible to further reduce costs and improve access and quality by extending health care as a public good.

Full Nationalization?

The Canadian Medicare system is a complex mix of public and private funding and public and private delivery – though given the majority of all health care funding is public (70%), we have defined health care as a public good.

The record of Medicare shows we would be better off with more public funding and delivery. At a very minimum, there should be a national Pharmacare program. Given our aging population, there should also be national home, long term, and palliative care programs. And we could promote more rational measures to educate, license and use medical workers.

What we really need is a fully nationalized health system. In this way all medically necessary services, preventive and responsive, will be covered with the best mix of delivery personnel and systems that is fair to health care consumers, medical workers, and tax payers. The United Kingdom’s National Health Service, for example, only takes 8.2% of GDP for similar outcomes.

The question, however, as we approach the renewal of the Canada Health Transfer is what political will is there to maintain and extend our public goods approach to health? In the hands of Stephen Harper, who once declared that the Canada Health Act should be scrapped, the prognosis is not promising.

For a more extensive socialist analysis see Susan Rosenthal’s book Sick and Sicker: Essays on Class, Health and Health Care and for ongoing Medicare campaigns check the Canadian Health Coalition web site and Canadian Doctors For Medicare.