Will Canada pawn or polish the jewel in the crown of its healthcare social system?

Armine Yalnizyan; Bruce Campbell
Canadian Centre for Policy Alternatives

Canada’s most treasured social programme is public health care. For almost forty years, access to doctors and hospitals has been based on need, not ability to pay. Today the very purpose of public health care is in debate, from what is funded, to how it is delivered. How has a nation that has long viewed health care as a basic human right found itself here? Public uncertainty has emerged in the shadow of growing inequality and chronic public underfunding, and has been fed by the trade agenda of expanding commercialisation.

The backdrop: growinginequality, greater vulnerability

After morethan fifteen years of aggressively pursuing policies that provide less from thestate and more from the market, the economy is growing more rapidly than that ofall other G7 nations. That’s the good news. The bad news is that economicgrowth has not led to economic security for most individuals, or for society asa whole.

Ironically,as real choices narrow for a growing number of people, those who aregetting ahead are demanding greater choice. The affluent, by agitating for morepersonal choice, are breaking a historic consensus around health care, withprofound implications for all society. Health care is the last public service tobe dragged into the battle between the need for security and the desire forchoice.

The pressure: fundinghealth care[1]

ThoughCanadian citizens for the last seven years have consistently indicated awillingness to pay more in taxes to support public health care, politicians havenot listened. Instead, they have cut taxes. Starting in some provinces in 1996,by 2000 all provinces and the federal government were cutting tax rates whilecharacterising public health care as unaffordable and unsustainable.The total impact of these cuts is estimated at almost USD 26 billion in lostrevenues in 2002 alone.[2]

As a result,public healthcare services have been starved for resources. The federalgovernment reduced healthcare transfers to the provinces by USD 5.5 billionbetween 1995 and 2000,[3]while the provinces themselves cut over USD 1 billion in the mid 1990s.[4]Inadequate labour supply stems partly from global shortages of healthprofessionals, and partly from explicit government choices. Policies over thepast decade included: limiting enrolments to medical schools and deregulatingtuition fees, which have skyrocketed; laying off thousands of nurses and otherhealth professionals; and implementing early retirement packages.

Not allmedically necessary services are publicly insured under the Canada Health Act.Access to prescription drugs and healthcare services provided outside adoctor’s office or hospital – such as nursing home care or long-term care– are not guaranteed. The degree of public coverage depends on the province ofresidence and determines the amount spent on these services, publicly andprivately.

Extendingthe Canada Health Act to comprehensively cover medically necessary care willcost billions of dollars. However, compared to the administrative savings,economies of scale and regulatory power of single payer systems, people pay evenmore when the same services are provided through increasingly privatised formsof funding. The question is not whether health care costs will increase; theyinevitably do. The only real questions are: who gets access to health services,and on what basis – need or ability to pay?

Despite thefunding cuts, between 1990 and 2000 a growing and ageing population drove publicexpenditures for health care up by 50%; private healthcare spending rose 73%.(Public spending accounts for 70% of all spending on health care.[5])Without renewed federal support, most provinces will be unable to carry thecosts alone. That means more cutbacks in public provision.

Chronic underfunding of publichealth care has led to two forms of privatisation: covert and overt.

Covert privatisation

The amountof time people spend in hospital has dropped, partly due to medical advances andpartly due to cutbacks.[6]More patients are being released from hospital “quicker and sicker,” placingmore demands on their immediate support network. It is estimated that 75% to 90%of home care is provided voluntarily by family and friends, mostly women.[7]

But fewerpeople are providing such care, due to falling birth rates, increased labourforce participation by women, more single parents and geographically dispersedfamilies. This has led to the increased use of paid home care services, whichdoubled during the 1990s.

Health careis the provinces’ single largest and fastest growing budgetary expenditure.Provinces have contained costs by de-listing insured services. Some de-listedservices, for example some intravenous transfusions,are so costly that even the non-poor face difficult financial choices. For thepoor, elderly and disabled, the choice is often between rent and food.

Overt privatisation

Corporationsadvertise to “consumers” (except where prohibited by law) or market tophysicians to increase the demand for pharmaceuticals, medical technologies anddiagnostic techniques. Public services become partially privatised through userfees and co-payment mechanisms. Delivery is privatised when an increased shareof public funds flows to for-profit service providers. All three forms of overtprivatisation are on the rise.

Moreprovinces are responding to public demands for improved access to health care byasserting that for-profit businesses can provide it “faster, better,cheaper” than not-for-profit organizations. A growing number of publiccontracts for the provision of long-term care and home-care have been signedwith for-profit suppliers in the past two years. Communities everywhere arechallenging this approach and mounting public pressure has led to some hopefuldevelopments.

InSaskatchewan, the Prince Albert Regional Authority took over for-profit labservices and achieved significant savings.After a group of citizens exposed fraud and abuse at a large for-profit UShomecare firm, the government of Manitoba imposed strict standards for care,forcing the company out. The government then purchased service provision fromnot-for-profit organisations, as it had before. Alberta has made majorinvestments to modernise its public system’s diagnostic capacity, reversing adecision to increase supply through private businesses.

These movessaved money, improved quality, or extended access by moving away from the use offor-profit service providers. They raise a serious question: why increase theuse of for-profit care in the first place?

In the fallof 2002, the governments of British Columbia, Alberta and Ontario announcedfunding for investor-owned clinics and hospitals. While small in number, theseprovincial initiatives are testing the waters about the political legitimacy of“profitisation” in health care.

Theseproposals use private investors to provide the capital, and sometimes land, tobuild or expand public infrastructure. The government leases the facility atrates of minimum payment set for 25 to 30 years (but as long as 60 years). Thesepayments exceed debt charges through public borrowing and provide a guaranteedrate of return to shareholders. The government incurs no debt but, in the end,like all renters, the public owns nothing. The contract may or may not stipulatethat the owner/investor must offer the government first right of refusal topurchase at fair market value.

In PrinceEdward Island, a government decision in 2001 to build a hospital using this sortof public-private financing scheme was reversed within months due to publicpressure. The hospital is now being built exclusively with public funds, isowned by the government, and will operate as a not-for-profit enterprise.Communities across the country are organising similar campaigns of resistance.[8]

Thecontext: accelerating commercialisation, NAFTA and GATS[9]

Contrary toassurances made by government officials, Canada’s healthcare system is notfully shielded from NAFTA and the General Agreement on Trade in Services. Thoughsafeguards for public health care exist, health insurance is an explicit servicecategory covered by these agreements. As provinces increase commercialinvolvement in public health care, they narrow the scope of existing safeguards,facilitating entry for foreign investors, and making it harder for futuregovernments to reverse the trend towards private, for-profit health services.

The conflictbetween domestic health policy and international trade policy objectives isglaring. International trade treaties are designed to facilitate and expandcommercialisation, limiting government’s regulatory discretion so thatservices are provided according to market principles: demand driven by abilityto pay, supply driven by the ability to make money. This conflicts with thepurpose of Canadian Medicare – demand and supply driven by need (with“need” defined through the “single payer” system of government purchase,and the ability to meet need constrained by the ability to raise publicrevenues).

Viewedthrough the lens of trade, public health consumers represent untapped commercialopportunities, while public health systems represent unfair competition. InCanada, public healthcare spending hasgrown at an average annual rate of over 8% over the last 25 years. Privatespending has almost doubled since 1990.[10] With over USD 63 billion,and growing, spent on health, the commercial potential in Canada is vast.

Dangersfrom trade agreements include:

·       Non-discriminationrules. If foreign health insurers lose a part oftheir market share due to the expansion of publicly insured programmes- such asdrug therapies or home-care – they could demand compensation under NAFTAexpropriation provisions or the GATS monopolies provisions. If public policiesfavour local community-based health providers or not-for-profit providers,foreign corporations could use NAFTA and GATS rules against discrimination todemand compensation or right of entry into the market. Under Most-FavouredNation rules, once any foreign provider operates in a market, all foreignproviders are entitled to the same access.

·       IntellectualProperty Rights. WTO and NAFTA intellectualproperty rules require a minimum of 20 years of monopoly patent protection andforbid the stockpiling or export of generics. This is driving up drug costs andrestricting the availability of affordable medicines to cope with healthemergencies. A vivid example is the “Cipro” affair: in October 2001, Canadawas almost blocked by a major pharmaceutical company when it tried to purchaseenough antibiotic (patented or generic) to treat mass exposure to anthrax, abio-terrorist threat of unknown proportions at the time.

The response: what should theCanadian government do?

Trade andpublic health objectives have conflicting principles. They cannot both lead.Health care is a quintessential human right. Canada recognised this when ithelped author the Universal Declaration of Human Rights in 1948 and signed ontothe International Covenant on Economic, Social and Cultural Rights in 1976. Thehallmark principle of the Canada Health Act is equity of access. The Canadiangovernment must take decisive action now to halt the commercialisation of healthcare before the trade treaties make it too costly to reverse. This action shouldinclude:

·        Explicitly recognising the primacy of international human rights law overtrade and investment treaties.

·        Pursuing universal exemptions for public health services with allnegotiating partners (not just country-specific exemptions) at the WTO DohaRound and the FTAA negotiations.

·        Withdrawing its support for investor vs. state dispute settlementprocedures that allow investors to directly challenge public policy measures.

·        Withdrawing its 1995 GATS commitment covering health insurance.

·        Opening the government’s trade policy position to full public scrutinyand participation, including full disclosure of all negotiation sessions anddocuments.

·        Assuring high quality care by establishing and enforcing clear nationalperformance standards in return for public funds.

·        Expanding public provision of health care to include drugs and medicallynecessary treatments, and increasing federal financing to make this possible.

TheCanadian choice

Nations arecharacterised by the way they define and meet the basic needs of all theircitizens. The provision of health care based on need, not ability to pay, meansthat every person has access to the solidarity of all when struck by illness.This evokes the meaning of Canadian citizenship more effectively than does apassport or an army, a currency or a diplomatic corps.

The choicesmade by the federal government in the next year will not only characterise whatkind of nation we are; they will also signal what can be expected or hoped foramong people elsewhere. Public health care is the jewel in the crown of oursocial programmes and social achievements. Whether our governments see it as atreasure or an asset to be liquidated remains to be seen.


[1] Access to acute healthcare services (doctors and hospitals) has been a right of citizenship since 1966, but today there is intense debate about the future of healthcare. Three provincial commissions have recently made recommendations regarding the funding and delivery of public healthcare. At the federal level a Senate Committee and an appointed Commission will recommend changes for the federal role in healthcare by the end of 2002.

[2] Finance Canada, The Fiscal Balance: The Facts, October 2002, see http://www.fin.gc.ca/toce/2002/fbcfacts4_e.html

[3] Calculated from Finance Canada, Backgrounder on Federal Support for Health in Canada, 29 March 2000.

[4] Calculated from Canadian Institute for Health Information (CIHI), National Health Expenditure Data, 1975 – 2001 (NHEX), Table D.3.1

[5] CIHI, NHEX, Table A.2

[6] CIHI, Hospitalisation Statistics, Table 3: Hospital Days and Average Length of Stay for Canada, Provinces and Territories, 1994/95 to 1999/00. Ottawa: September 2001.

[7] Canadian Home Care Human Resources Study, Phase I Final Report, Ottawa: February 2002, p.4

[8] see http://www.healthcoalition.ca

[9] The following draws from Matthew Sanger and Scott Sinclair, Putting Health First: Canadian Healthcare Reform, Trade Treaties and Foreign Policy. www.policyalternatives.ca.

[10] CIHI, NHEX 1975 – 2001. Ottawa: 2002. Series C.