Introduction
The most efficient mechanisms to offer services and goods are the markets. Nonetheless, markets are not essentially the best means to distribute everything. All the markets need some form of regulation. As a result, a government-run court system ought to be present in all the legal markets to enforce legal contracts. A number of individuals argue that a free market mechanism distributes healthcare most efficiently whereas others disagree arguing that healthcare should be privatized. In fact, a number of people always claim that healthcare ought to be more private than public. The debate about healthcare raises the question of whether it is a public good, a private good, or somewhat of both. The provision and financing of healthcare in many countries around the world have always involved several actors and institutions some of whom are private, and others are public. Consequently, it appears an economic error to consider healthcare as a public good, but a moral mistake to treat it as a private good. Privatization is essentially a process whereby governments shift some of their responsibilities or activities to the private sector. There are various limitations that come with privatization of healthcare. For this reason, this paper centers on the privatization of healthcare in Canada and examines its various drawbacks as well as its effects on both GDP and growth.
Historical Background
The Hospital Insurance and Diagnostic Services Act was in essence, voted for in 1957 by the Canadian Parliament. The act guaranteed federal spending of 50 percent for the provincial hospital insurance programs that were first based on the model setup by Tommy Douglas in 1947. He ensured that Woodrow Lloyd, his successor in the government was capable of introducing the universal medical coverage in 1962. Emmett Hall, Royal Commission on Health Services head took up the universal medical coverage cause in 1964. The universal medical coverage campaigned for a countrywide health insurance plan. In 1966, the Medical Care Act introduced the health insurance plan. In addition, the Act offered an additional 50-50 cost-sharing deal if the provinces met the four criteria of universality, portability, public administration, and comprehensiveness. It was in 1968 when the Canadian government started to implement the Medical Care Act, and all Canadians were assured access to necessary medical services by 1971 regardless of health, employment, or income. In 1984, the Canadian Health Act was drafted after protests as a result of increasing healthcare costs. The Act defines as well as solidifies the Canadian Medicare principles. When the Canadian Medicare was introduced in December 1966 through the Medicare Care Act, it was essentially an innovative and bold measure that was based on the enviable concept of offering indispensable Medicare coverage for all the citizens.
In the present day, the Canada health care system is in fact, among the most egalitarian throughout the world. From the beginning, her public healthcare system has always been based on private provision of care but public funding. The Canadian government purchase most healthcare services like home care from the organizations and most physicians are in private practice. What’s more, the state does not own most hospitals as well as other healthcare institutions. In addition, many Canadians have always claimed that healthcare ought to be more private. The healthcare system in Canada is essentially designed to be portable, accessible, publicly administered, comprehensive, universal, and mostly free of charge at the point of use (Irvine, Ferguson, & Cackett, 2002). Therefore, Canada offers universal healthcare coverage that is available to all citizens on equivalent terms and conditions and devoid of payment at point-of-service for most physician and in-hospital services. The Canadian principle that all the insured individuals should get medically necessary healthcare on the need basis instead of their ability to pay ensures comprehensiveness, accessibility, and universality of their healthcare system.
The health care system in Canada is privately run but funded publicly. Rachlis (2007) asserts that roughly 30 percent of healthcare in Canada is financed privately whereas 70 percent is financed publicly. He goes further and claims that the public finance rate in Canada was just marginally below than 72.1 percent of OECD countries for 2005. The tax dollars fund the healthcare system in Canada. The total healthcare expenditure in 2004 in Canada was projected at $130 billion. The expenditure was roughly 10% of GDP where the private sector expenditure totaled $39.2 billion and public sector spending $ 91.1 billion (Irvine, Ferguson, & Cackett, 2002).
Reasons for Canadian Government Intervention in Health Care
There are some justifications for the Canadian government intervention in the country’s healthcare. As described above, the major healthcare funding sources in Canada are the governments since they play a crucial role within the insurance market. The government intervention proponents cite administrative efficiency as well as social equity and economic factors. First, the proponents claim that private insurance market fails to have a regard for the economic equality. According to them, the people with low income and health problems in a private insurance market would be subjected to a similar fee structure as the individuals with high-income. The economically disadvantaged citizens would assume a higher health care costs proportion. Therefore, government intervention ensures increased access to the insurance despite a person’s ability to pay. Second, public healthcare insurance yields more efficiency in terms of economies of scale and administrative costs than private insurers.
What’s more, the advocates argue that the intervention by the government is required to correct the potential problems for the social equity of the private insurance market operations. Therefore, according to these proponents, government insurance can essentially correct the private market inadequacies through protecting the many citizens as well as avoiding the unfair premium hikes. Therefore, the governments in Canada favor the public healthcare insurance over private healthcare insurance, and this makes the scope of private healthcare insurance to be limited. However, the government in Canada is not involved in the public insurance health services delivery. Thus, the private sector is largely involved in the delivery of healthcare within the country. In fact, the hospitals are to a great degree private, not for profit organizations and most physicians are in the private practice.
The privatization of healthcare financing versus privatization of healthcare delivery
The privatization of healthcare financing is not same as privatization of healthcare delivery. The healthcare delivery privatization means greater reliance on the institutions and people outside government for both production and provision of the health services. On the other hand, privatizing the financing is essentially realized through transferring the funding burden away from the public healthcare insurance plans towards the private insurance companies or their clients. The difficulties with regards to privatization in Canada revolve around healthcare financing since as already described above the delivery of healthcare is largely private. The long-term care institutions and hospitals in Canada are privately owned and not-for-profit though the government funds them.
Healthcare financing privatization can essentially be realized in two ways: either passively or actively. Passive privatization is the gradual transfer towards the non-institutional care that is provided within the home and community. Therefore, health care financing is privatized passively through transferring care outside the traditional settings. In Canada, shorter hospital stays as well as less invasive medical techniques have allowed the citizens receive additional medical care in their community and homes. Consequently, the Canadian government does not insure numerous services considered medically essential as they are not provided by the physicians or in hospitals. On the other hand, active privatization is essentially the direct outcome of the total or partial de-insurance of the publicly financed health services. Therefore, healthcare financing is privatized actively through containing the public healthcare expenditures. Most provinces in Canada during 1990s limited the healthcare coverage that was offered under their healthcare insurance plans in an attempt to balance their budgets and decrease public healthcare expenditures (Lewis et al., 2001).
Shortcomings of privatization of health care in Canada
Concerns have essentially been growing concerning access to as well as physician services and quality of hospital in public health care system of Canada. Additionally, many individuals think that the private medical practice in Canada is illegal. There are numerous drawbacks of privatization of healthcare in Canada. One of the major drawbacks of privatization of health care in Canada is that it results to a “two-tier” system. Under this system, some patients pay privately and obtain priority access to the healthcare whereas the other patients that use publicly funded health services ought to face longer waiting times (Rachlis, 2007). The problem began when the federal government in Canada implemented its policy on the private clinics in 1995. The categories of private clinics in Canada include fully private clinics and semi-private clinics. The former are the facilities, which do not receive government funding implying that the patients ought to pay all the health care expenses, and the provincial health care insurance plan does not reimburse the physicians. On the other hand, the later are facilities, which get public financial support for the medically essential services under a provincial health care insurance plan. However, these facilities demand payment from the patient.
The creation of fully private clinics does not bring about a decrease in the provincial transfers. Additionally, the provisions regarding user charges or extra-billing do not apply in fully private clinics. Therefore, the federal government may choose to intervene through invoking the accessibility criterion in the instances where the fully private clinics threaten the access to the public system insured services. The facility fees in the semi-private clinics present a difficulty since the individuals who can manage to pay for them receive faster access to the health care services.
Additionally, the use or consumption of medical services in Canada may be lower than optimal consumption due to health care privatization. This problem might be brought about by the numerous privatized hospitals in Canada where many individuals might be reluctant to take private health care insurance as they underestimate the benefits of health care (Hurley, 2010). The under-consumption of the medical services in Canada may lead to the fall of medical markets. Moreover, health care generates a number of positive externalities that may not be achieved under healthcare privatization (Hurley, 2010). The success of the economy may essentially be as a result of a good medical system since in such a system people are usually treated efficiently that facilitates the improvement of the labor productivity.
The other negative aspects of healthcare privatization in Canada are the problems of direct billing and extra billing. With health care privatization, the physicians may collect payments from the patients instead from the public plan. As a result, this might have an adverse effect on the access to the health care services by the patients. In essence, the patients should bear the up-front expenditure of the health care and afterwards look for repayment from the public plan. However, a number of provinces in Canada prohibit the opted-in physicians from billing the patients directly. On the other hand, under extra-billing, a physician charges the patients extra costs or additional fees for the services that are covered with the public plan (Rachlis, 2007). Therefore, in such cases, the physicians obtain payments from both public plan and charges from the patients. In addition, the patients either pay the extra charges out of their pockets or have their private insurance to cover the extra costs. From the viewpoint of physicians, extra-billing attraction is in essence, the ability to set their price devoid of restriction and to have a public plan subsidize those prices partially.
Section 18 of the Canada Health Act prohibits extra billing by the provinces. In a situation where a province lets extra-billing, the Canadian government pursuant to Section 20 of the Canada Health Act ought to regain the amounts that such a province had charged through extra-billing. For instance, on several occasions, the Canadian federal government has regained the transfer payments on the basis of dollar-to-dollar as a result of extra-billing in provinces like Nova Scotia and Newfoundland, among others. All the provinces must use two types of measures to prevent the extra-billing in their compliance with Canada Health Act. The measures include “public subsidy elimination” and “direct prohibition.” The public subsidy elimination measure deters extra-billing indirectly through getting rid of any public cover for services that opted-in physicians supply as well as for services that opted-out physicians supply. As a result, the services demand that opted-in and opted-out physicians supply diminishes since patients ought to pay for services offered with wholly private funds.
Moreover, the function of private clinics, which provide X-ray, computed tomography scanning services, and magnetic resonance imaging raises the concerns over the Act’s accessibility criterion. The dangers of the widespread private clinics are queue jumping. For instance, the people that can manage to pay might be diagnosed quickly and go back for treatment at a public funded system one step ahead of the patients waiting for diagnostic tests. Therefore, health care privatization in Canada leads to inequality. What’s more, in Canada, many consider the physicians as government employees instead of private health care workers. Thus, this implies that every family nurse, practitioner, and the surgeon is paid via the government that regulates their earnings. The competition for patients who spur health care employees to turn out to be better at their specialties and occupations is not present. Thus, this reduces the individuals willing to pursue careers along the medical line.
Effects of privatization of health care on the Canada’s GNP as well as growth
The privatization of healthcare in Canada has effects on the country’s GNP as well as Growth. The health care system of Canada costs 4500 dollars per individual every year. It is the sixth among the OECD nations. Canada’s medical system is funded publicly, but the private sector provides most services (Fierlbeck, 2011). Canada is among the countries that spend the most on the health care (Lewis et al., 2001). In fact, the entire spending on health per capita in Canada is 4,808 dollars. In addition, the yearly growth of entire health care spending is plus 8 percent making her the sixth in the world. The Canadian government in 2009 funded roughly 70 percent of the healthcare costs in the country that is somewhat less than the OECD average of public health expenditure. A half of the private health spending originates from the private insurance while the out-of-pocket payments supply another half. The country’s total health care spending in 2012 was expected to reach 207 billion dollars, averaging 5,948 per individual. The health care system of Canada has a great impact on the country’s economy. For instance, in 2001, the Canada’s health care spending topped 100 billion dollars. In addition, the Canadians spend an individual income of about 3,300 per capita on the health care. The Canadian health care funding at the provincial level is between one-third and one-fifth of what the provinces spend on the social programs.
The public sources in Canada contribute roughly three-quarters of all the health care funding while the private sources such as private insurance and businesses contribute the remainder (Fierlbeck, 2011). In 2011, the proportion of GDP that Canada spent on health care reached 11.6 percent. The health care expenditures in Canada have been growing increasingly. The significant drop in fertility rate and significant improvements in the life expectancy within Canada have been the reason the population in Canada has increasingly become older. It is expected that the ratio of the elderly population to working-age population will nearly double over the next twenty years. The aging population will affect the Canadian public finances through putting growing pressure on the public expenditures for the age-related programs like elderly benefits and health care. Therefore, this will further increase the GDP proportion of Canada’s health care spending. The federal funding for the health care in Canada through the Canada Health Transfer was expected to continue growing at 6% past 2013/2014 financial year. In addition, starting in 2017/2018 financial year, the health care federal funding is anticipated to grow at a growth rate of nominal GDP.
Conclusion
Conclusively, the health care system in Canada employs a fee-for-service system where there is collective coverage for the health care services. The health care expenditure in Canada has increased over the previous numerous years. Since the late 1990’s, the health care expenditure as a proportion of Canada’s GDP has also increased. In numerous provinces, health care has been taking a larger share of the provincial budget over the previous decade. The Canadian Health Care Act generates inflexibility through limiting the choices available to the provincial governments hence this increases inefficiency in the healthcare sector. For this reason, the Act should be amended to reduce the limitations of privatization. What is meant by “medically necessary services” or “comprehensiveness” should be clarified in the Act. Clarification will bring about a number of benefits. For one, the larger uniformity in the range of services throughout Canada could be realized, and as a result, this will end the provincial health care insurance plans balkanization. In addition, clarification would assist in defining the medical necessity, taking into consideration imperative factors such as ethical, economic, and clinical considerations. What’s more, there will be a clarification of the health care services for which public sector ought to be responsible.
References
Irvine, B., Ferguson, S., & Cackett, B. (2002). Background briefing: The Canadian health care system. Civitas Foundation, 2.-
Rachlis, Michael. (2007). Privatized health care won't deliver. Toronto, Ont.: Wellesley Institute.
Lewis, S., Donaldson, C., Mitton, C., & Currie, G. (2001). The future of health care in Canada. BMJ, 323(7318), 926-929.
