Historical origins and early financial challenges of the NHS

UK Healthcare

Within this section of Chapter One, a historical perspective of NHS will be provided. This discussion will identify problem areas that have emerged in relation to NHS with an attempt made to address the manner in which such problems have historically influenced reform efforts.

With the passage and associated provisions of the NHS Act of 1946, NHS was implemented in the UK in 1948. The NHS Act of 1946 served as the means by which a pattern of health service finance and provision was established in the UK following World War II (Baggot, 1998). According to Baggot, on the basis of the Act, the principle of collective responsibility by the state for the establishment of a comprehensive health service system was introduced, allowing for the planned use of services by the entire population at no cost. It was also intended that equality of access to services would be incorporated within NHS as a consequence of the availability of health services at no charge.

When implemented in 1948, the main characteristics of the NHS were:

Tripartite division: Central Government - Regional Authorities - Local

Authorities

The Minister of Health was made personally responsible to Parliament for the provision of all hospitals and specialist services on a national basis.

All hospitals were nationalized under 15 Regional Boards for England and Wales, while Scotland and Northern Ireland formed separate NHS departments.

Local Authorities remained responsible for community services.

The British Medical Association (BMS) only agreed to take part only after two concessions were granted:

Family practitioners (GPs), dentists, pharmacists and opticians were left as independent contractors;

ii. Salaried hospital doctors were allowed to undertake private work outside their NHS contract.

The financing of the NHS was provided by the Government from funds raised by general taxation. Patients were not charged.

However, as noted by Le Grand, Mays and Mulligan (1998), within a short period of time, the operation costs associated with NHS very quickly became a financial problem to the Labour government. As identified by Le Grand et al., a number of spending demands for both capital investment and current expenditure emerged primarily for two main reasons:

1. The NHS represented the first national health service in the world. Therefore, it was difficult to accurately project the ever-increasing rise in demand under zero pricing.

2. The NHS inherited old and war-damaged hospital buildings and medical equipment.

Coupled with these problems, the public surged forth to receive medical services for problems that were not considered urgent. According to the European Observatory of Heath Care Systems (EOHCS) (1999), one of the assumptions behind the establishment of the NHS was that there was a "backlog" or "stock" of ill health that would decrease as health needs were met, with the demand for services then leveling off. However, this did not occur and demand on into the 1950s outstripped the funding that was available for the NHS (EOHCS, 1999). In 1951, as the costs associated with operating the NHS continued to escalate, the key principle of a free service was breached for the first time with the introduction of charges for eye glasses and dentures. During the next year, consumer charges for medicine were initiated with subsequent administrations beginning to strategize and develop plans for reform of the NHS.

As reported by EOHCS (1999), with the presence of an ongoing demand for healthcare services, extreme pressure was placed on an under-resourced hospital service. Recognition of this problem led to the development of the 1962 Hospital Plan

1962 Hospital Plan which proposed major new capital funding over the next ten years and introduced the concept of the district general hospital (DGH).

As explained by EOHCS, the DGH represented a planned approach to hospital provision whereby a unit of between 600 and 800 beds would cater for all the general medical needs of a population of between 100-000 and 150-000.

Other plans for reforms, however, were not implemented fully due to the estimated political costs and the frequent changes in governments (Le Grand et al., 1998). During 1974, as reported by Enthoven (1985), the first major administrative reorganization took place in the Labour government which, in efforts to decentralize the NHS, introduced a fourth level of management in the form of 90 area health authorities (AHAs) and district management teams (DMTs). But after a few years, it became clear that this reorganization increased the bureaucracy of the NHS without solving its problems. The next extensive reorganization was undertaken by the Conservative government which took office in 1990.

As reported by Ham (1985), when considering the increasing costs associated with the NHS, between 1949 and 1984 the real cost of the NHS increased threefold and the proportion of the gross national product spent on it increased from 3.9% to 6.2%. In the early 1980s it was estimated that a real increase in funding of 1.2% per annum was needed to meet the costs of care for an ageing population and to fund advances in medical technology. By 1987-88, the cumulative shortfall in the hospital and community health services since 1981-82 amounted to £1.8 billion, even after efforts had been directed at initiating improvement programmes (Ham, 1999). After widespread perceptions continued to grow suggesting that there was a financial crisis in the NHS as a result of the failure of various value for money strategies, the NHS Review was implemented (Klein, 1995).

In 1983, as a consequence of the attention directed towards the NHS Review, information was released on performance indicators about the NHS (Pollitt, 1985). Areas of performance covered included information regarding clinical services, finance, manpower and estate management. It was hoped that the information obtained could be used to aid health authorities in comparing NHS performance with what was being achieved elsewhere. However, as noted by Pollitt, criticisms emerged in relation to the performance findings and included:

They were dominated by data about activity and outputs (numbers of patients and operations) rather than about outcomes (impact of activities on health).

There was a considerable timelag between collection and presentation.

There were doubts about their accuracy.

They contained no measures of quality.

As a result of the NHS Review, changes were made that reflected the view that a central weakness of the pre-1989 NHS was that money did not follow the patient, but rather came in a fixed budget from the health authority. According to Klein (1995), there was little incentive under the earlier system to increase patient activity/service because this would increase costs without increasing income. The 1989 reforms which came to be known as "Working for Patients" that emerged were intended to increase efficiency through linking hospital income more directly to their activities and to give them freedom to behave entrepreneurially in responding to new opportunities. In addition, as explained by Ham (1999), efforts were also directed at strengthening management arrangements. In the new Department of Health, this was to be achieved by appointing a Policy Board and NHS Management Executive in place of the Supervisory Board and NHS Management

Board that had existed (Department of Health, 1989a). Changes also were initiated at the local level, with the composition of health authorities revised along business lines. Rather than having the previous representation of health authorities from professions working in the NHS and members nominated by local authorities, the new authorities were modeled after company/business boards and made up of health authority senior managers and a small number of non-executive directors who were appointed for their personal efforts and contributions, rather than being drawn from designated organizations or constituencies (Department of Health, 1989b). Similarly, Trusts were to be run by a board of directors (executive and non-executive) (Department of Health, 1989b).

New reforms initiated under the Working for Patients era also were directed at increasing accountability on the part of physicians in relation to their performance (Department of Health, 1989c). It was intended that this would be accomplished by the work of general managers as they assumed greater responsibility in the management of clinical activity. Where once consultant contracts had been managed at the regional level, local managers were now given the responsibility of developing and monitoring consultant job plans and contracts (Department of Health, 1989c).

In addition, other changes included in the following:

new disciplinary procedures were introduced for hospital doctors to enable disciplinary matters to be dealt with expeditiously;

emphasis was placed on involvement of doctors and nurses in management through an extension of the resource management initiative; and, medical audit was expected to become a routine part of doctors' clinical work (Department of Health, 1989d).

With the passage of the National Health Service and Community Care Act of 1990, new reforms were implemented that were the most radical since the inception of the NHS. As the government had increasingly found itself challenged by the continuing financial problems associated with the NHS, it was believed that the NHS would benefit from less government intervention and that the problems would be solved by subjecting the NHS to the disciplines of the market (Enthoven, 1985). It was therefore believe that NHS spending could be reduced by more rigorous cost controls and by encouraging those who could afford it to pay more towards their care. According to Enthoven, the focus was directed towards enabling private practice to develop and forcing more elderly people to independent private nursing homes, where they had to pay from own resources until their money ran out. Within this approach, the goals of the government as addressed by Enthoven were:

To improve its ability to control the NHS financially by separating 'health' from 'social' care and to continue offering 'free' if services were provided by the NHS staff based on 'means tested' access.

To increase the efficiency of the NHS by improving both productive efficiency and allocative efficiency.

According to Le Grand et al., (1998), the basis of the development of the 'internal market' involved the introduction of competition via the establishment of more and smaller provider-units created by breaking up the large health districts and replacing the power of the health professionals by specialist managers. Competition between providers of health care was expected not only to improve patient choice but also to supply health authorities and individual hospitals with incentives to work efficiently. However, as explained by Le Grand et al., medical personnel opposed this approach, claiming that managers and accountants were given too much power at the expense of the interest of patients. Even though the general public tended to support the perception of professionals, the government moved forward with the effort, separating the health authorities (the purchasers of health care) from the providers (the newly created Trusts).

According to Edwards (1993), in April 1991, there were a total of 57 NHS trusts and 306 GP fundholders that had begun operating; however, an internal market had not as of yet been established. By 1994 more than 400 providers accounting for 95% of NHS activity had become self-governing trusts. However, as noted by Klein (1995), even though the "labels" had changed, few of the dynamics that had plagued the NHS still existed. According to Klein, in theory, internal markets would be driven by purchasers, and would therefore lead to altering the provider dominance that had previously been associated with the NHS. As well, it was believed that the further development of health services would no longer be driven by the self-interest of consultants. However, as explained by Klein, this was not the case for the following reasons:

An asymmetry of information existed, whereby providers had both greater expertise and information about their services.

An asymmetry of managerial resources existed, as the most able and ambitious staff had mostly gone to work for provider units rather than purchasing authorities.

The problem existed that some services in some areas were monopoly providers, and most purchasers and providers were locked into permanent relationships

Over time, as noted by Klein, the vocabulary of the NHS and labels associated with the internal market was gradually moderated and changed in response to such complexities. Such changes as outlined by Klein included the following:

Purchasers became commissioners: a recognition that monogamy, rather than polygamy characterized the internal market, with most purchasers and providers locked into permanent relationships in which each partner sought to modify the other.

The internal market became the managed market: a recognition that purchasing was about shaping the nature of the services available to the local population over the long-term, rather than buying to satisfy immediate wants.

Competition became contestability: acknowledging that the internal market appeared to be creating regulated local monopolies rather than a free-for-all, it was argued that this did not matter as long as new providers could move into the market and purchasers could threaten to move their custom.

Reforms emerging from the 1980s and implemented during the 1990s were also those that were focused on medical accountability and managerial responsibility. In an effort to strengthen strengthening the link between clinical and budgetary decision making, the "clinical directorate" was initiated (BMA, 1990; Institute of Health Services Management, 1990). The clinical directorate was designed as a unit based on a medical specialty or group of specialties, to which full budgetary responsibility was transferred and within which clinical and budgetary decision-making were to be combined (Salter,1994). As well, the clinical directorate was to be structured as a clinical management team, consisting of a clinical director who was a physician, senior nurse manager and business manager, with equitable distribution of responsibilities and powers (Connolly, 1991). Problems developed, however, as previously all consultants in the NHS had equal status; thus, it was difficult for the clinical director to establish himself/herself in a role of authority over his/her colleagues (Connolly, 1991). As well, as noted by Connolly, as there were all too few financial or professional incentives associated with the role of clinical director, most directors accepted the position reluctantly. Ultimately, as explained by Salter (1994), even with the implementation of the Directorates, purchasers were having to negotiate with clinicians as well as managers to ensure realistic contracts and that, for their part, clinicians were prepared to use their clinical discretion to manipulate their waiting lists to satisfy purchaser demands. Thus, the clinical directorate emerged as the primary demand-regulating unit and as Salter suggested, Trust managers found their capacity to influence what happened inside the clinical directorates varying according to the roles taken and constrained by the clinical director and senior nurse manager. According to Salter, via the clinical directorate, the long-established culture of the NHS as medically dominated continued to be reinforced.

In evaluating whether the reforms of the 1980s and 1990s were successful, as suggested by Le Grand et al. (1998), five criteria can be used as a measure of their effectiveness. The five criteria used and the results obtained by Le Grand were as follows:

Efficiency: Overall efficiency in the NHS appeared to have increased1.

Equity: Two major equity issues were examined: 1. Whether the internal market would lead to "the deliberate selection of patients both by hospitals and by fund holding practices who were easier or less costly to treat in order to protect budgets"; and, 2. Whether the reforms would lead to a two-tier system. No evidence was found that either had occurred.

Quality: This was measured by looking at the range of services offered, the lengths of waiting lists, and surveys of the public's attitude to the NHS. The overall conclusion was that the introduction of Trusts had not led to any improvement in quality but that fundholders had obtained quicker admission for their patients to hospitals and a greater provision of services in the community i.e. In or near patients' own homes).

Choice and responsiveness: No evidence was found that choice for patients had

Accountability: There was no evidence that Trusts had become more accountable to their local populations, and that "the decision making of either Health Authorities or Trusts had become more transparent to the public."

According to Le Grand et al., the separation of functions between purchasers-providers was successful and was retained by the incoming Labour government in 1997. However, as indicated by the researchers, evidence pointed to the fact that there remained too many managers in the NHS. As well, as reported by Le Grand et al., the internal market also failed because the people involved in the NHS did not behave in the kind of self-interested way that market theory demands.

As reported by the EOHCS (1999), even after reforms had occurred, the NHS remained primarily financed through central government general taxation together with an element of national insurance (NI) contributions. As displayed in Table 1, in 1996/1997, 93.7% of gross spending on the NHS in England was met from these two sources: 81.5% from the Consolidated Fund (i.e., general taxation), and 12.2% from national insurance contributions. The remainder of NHS finance (6.3%) was raised through user charges (2.1%) consisting mainly of charges for pharmaceutical prescriptions and dental charges; from repayments of NHS trust interest bearing debt (3.0%); and from other miscellaneous sources (1.2%) such as health authority capital repayments.

Table 1: NHS Sources of Finance

As was also reported by EOHCS (1999), as well as general tax-based funding, there was an estimated £7474 million of private expenditure on health care in the UK in 1996, representing 14.6% of total spending on health care in that year. According to information provided by EOHCS, fewer than 11% of the population had some form of private medical insurance. As well, there were substantial amounts of private spending out-of-pocket, taking the form of payments for private medical care, payments for long-term care and co-payments for pharmaceuticals, dental and ophthalmic services.

CHAPTER TWO

Review of Healthcare Systems in OECD Countries

As reported by Gruber and Madrian (2001), recent findings have suggested that the UK falls significantly short in terms of health and well-being when compared with other OECD countries, which is indicative of ongoing problems associated with the NHS. According to the researchers, the UK ranks an average of 9th out of 13 countries on 16 available health indicators. Countries in order of their average ranking on the health indicators (with the first being the best) are Japan, Sweden, Canada, France, Australia, Spain, Finland, the Netherlands, the United Kingdom, Denmark, Belgium, the United States, and Germany. In light of the immense disparities between the UK and other OECD countries, it appears important to further understand the nature and extent of some of the differences that may exist in healthcare systems. Therefore, an effort will be made to provide a review of the major types of health insurance systems utilized currently within Japan Sweden, and Canada. A brief comparison will then be made between these systems and the NHS in the UK.

Japan

On the basis of information provided by the National Institute of Population and Social Security Research (NIPSSR) (2003), Japan has a health insurance system based on universal health care and public insurance. Via this system, the public mandatory insurance program allows for medical services to be obtained through an occupation-based and region-based insurance system. For those covered under occupation-based system, that which is known as Employees' Health Insurance is offered. As explained in information provided by NIPSSR, employers of a certain size and over offer their employees access to a health insurance association which is known as association-managed health insurance. There are currently approximately 1800 associations operating within Japan. For those who work at smaller firms, the government provides a collective health insurance which is called Government-managed Health Insurance. In addition, special professions such as civil servants, day-laborers and seamen form separate nation-wide professional associations. Those who are not covered by the Employees' Health Insurance are required to participate in a region-based insurance, called the National Health Insurance, for which the municipalities (more than 3,000) act as the independent insurers (NIPSSR, 2003).

As explained by NIPSSR (2003), in terms of the financing of Japan's public health insurance system, multiple options are used including premiums, subsidy from the general budget of the government, and co-payment from patients. Each of the following financing options are utilized:

Employees' Health Insurance: Insurance is financed through a premium representing a fixed percent of employee's salary, which is shared equally by the employers and the employees.

National Health Insurance: Financing occurs through premiums that differ among local governments, most often determined and levied on the basis of income, property, and number of insured within a household.

For both insurance schemes, a substantial government subsidy is also used.

As explained by NIPSSR (2003), other features of Japan's health insurance system include the following:

As health insurance in Japan is universal, users are able to choose any medical service providers.

The coverage of health insurance and the prices of medical services are standardized by law, and thus, all persons receive the same medical service at equal price.

Under the system, the health care costs for those aged 70 and over are separated from health care system and shared by all insurance schemes due to the rising costs associated with providing health care for the elderly. As well, Long-Term Care Insurance requires contribution from those aged over 40 and covers a variety of at-home and institutional services for those over 65 and judged as in need of long-term care.

Sweden

On the basis of information provided by the Swedish Institute (2001), while Sweden is most often thought to have a well-developed welfare state of which a universal social insurance system is a recognized component, the Swedish welfare state has never been entirely universal, since the right to various social benefits in Sweden is not only based on residence but also on assessed needs, participation in the workforce and voluntary affiliation. However, as noted by the Swedish Institute, even though severe economic conditions during the 1990s impacted the social insurance system, the system continues to incorporate features that remain extensively universal while facilitating a high level of public support.

As explained in information provided by the Swedish Institute (2001), the welfare state in Sweden had its beginnings in the late 19th century when the State first started to pay out contributions to voluntary health insurance schemes under legislation passed in 1891. Subsequent legislation further established the system when compulsory employer responsibility in the event of occupational injury was implemented in 1901, an essentially general pension system (though with a wealth restriction) in 1913, and a system for sickness benefits in 1931. This was followed by a national basic pension and national child allowance in 1947 and an extension of income-related occupational pensions and sickness benefits in the 1950s and 1960s. During the 1970s, parental insurance, public sector childcare and other social service production (with an attendant high level of employment for women) was implemented. As reported by the Swedish Institute, the Swedish Social Democratic Party largely influenced the ongoing development and implementation of a universal social insurance system with the Social Democrats remaining in control politically with few interruptions since 1932. However, the system is said to have maintained cross-political party legitimacy with all political parties jointly attacking the system in the 1990s as a primary factor influencing Sweden's economic problems.

According to the Swedish Institute (2001), with the emergence of an economic crisis during the 1990s, cuts were directed at the social insurance system, including qualification periods, when no benefits were paid, were reintroduced into the health and unemployment insurance systems, and the levels of benefit and indexation of pensions were reduced for a time. While economic recovery has occurred, restoration of benefits has only partially occurred.

In terms of administration of the social insurance system in Sweden, as reported by the Swedish Institute (2001), local public social insurance offices are given this responsibility. Even though the system is administered locally, funding occurs at the municipal, county and national level via taxes and social insurance contributions.

According to the Swedish Institute (2001), the National Social Insurance Board supervises the local offices and maintains decision-making on certain regulations and issue recommendations on the application of social insurance legislation. The local offices are organized on the basis of 18 counties located throughout the country with several branch offices in each county. While the National Board of Health and Welfare assume some supervisory role in the management of the social insurance system in Sweden, as noted by the Swedish Institute, this role has been severely limited by the autonomy of the municipalities and county councils who are responsible for implementing the programs under the system. According to the Swedish Institute, the Ministry of Social Affairs maintains ultimate responsibility for legislative and budgetary issues of relevance to the social insurance system while the Ministry of Industry, Employment and Communications retains responsibility for unemployment insurance.

As a component of the social insurance system in Sweden, health insurance and health care are financed via compulsory employers' contributions and individual social security contributions deducted from incomes (Swedish Institute, 2001). As further explained by the Swedish Institute, the 18 county councils that administer social insurance programs finance the costs of medical care directly from an income tax levied on all those living in the county who are in paid employment. According to the Swedish Institute, approximately 80% of tax revenues go to running the health care system and to subsidizing patient fees. Patients assume a proportion of the health costs when consulting a health care service, ranging from approximately 8 to 38 dollars. While all of Sweden's residents are entitled to compensation for medical care, those individuals who have earned at least $750 annually through gainful employment are entitled to cash benefits for loss of income while ill.

As explained by the Swedish Institute (2001), compensation for medical care is intended maximize the individual's tax contribution while keeping private costs down. Consequently, individuals do not have to pay more than approximate $10 per day for long-term hospitalization; dental care for children under the age of 18 is free, as is insulin; subsidies are payable for preventive dental care and a charge limitation protection limits the cost of dentures; individuals do not pay more than $163 per year for prescriptions/medicines; and for other forms of health care, there is a ceiling of individual costs of $112 per year. As well, as reported by the Swedish Institute, those on pensions never pay more than one-third of their pension in patient charges.

Canada

According to information provided by the Canada Health Act Division (CHAD)(2003), the Canadian health care system currently represents efforts that have been initiated and which have evolved during a forty year period. In 1947, the province of Saskatchewan became the first to develop and implement public, universal hospital insurance. As noted by CHAD, in 1957, the Canadian government passed legislation allowing the federal government to share in the cost of provincial hospital insurance plans. By 1961, all 10 provinces and two territories had public insurance plans that provided comprehensive coverage for in-hospital care.

As further explained by CHAD (2003), Saskatchewan once more set the pace for Canada in 1962 by providing insurance for non-hospital related health care services. In 1968, the Canadian government followed by enacting legislation for insurance for non-hospital health care, with all provincial and territorial insurance plans extended to include doctors' services by 1972.

On the basis of a health services review in 1979, as reported by CHAD (2003), it was determined that while health care in Canada ranked among the best in the world, extra-billing by doctors and user fees levied by hospitals were creating a two-tiered system that threatened the accessibility of care. In response to these concerns, Parliament passed the Canada Health Act in 1984 to discourage hospital user charges and extra-billing by physicians. As explained by CHAD, the Act provides for an automatic dollar-for-dollar penalty if any province permits such charges for insured health services.

According to CHAD, the Canada Health Act represents Canada's federal health insurance legislation. The primary objective of the policy is to protect, promote and restore the physical and mental well-being of residents of Canada and to facilitate reasonable access to health services without financial or other barriers.

As explained by CHAD, the Act establishes criteria and conditions related to insured health care services and extended health care services that the provinces and territories must meet in order to receive the full federal cash contribution under the Canada Health and Social Transfer (CHST). As well, as noted by CHAD, the Act aims to ensure that all eligible residents of Canada have reasonable access to medically necessary insured services on a prepaid basis, without direct charges at the point of service for such services.

According to CHAD (2003), there are five principles associated with the Canada Health Act which have come to represent the cornerstone of the Canadian health care system. The principles are as follows:

public administration: the administration of the health care insurance plan of a province or territory must be carried out on a non-profit basis by a public authority;

comprehensiveness: all medically necessary services provided by hospitals and doctors must be insured;

universality: all insured persons in the province or territory must be entitled to public health insurance coverage on uniform terms and conditions;

portability: coverage for insured services must be maintained when an insured person moves or travels within Canada or travels outside the country; and accessibility: reasonable access by insured persons to medically necessary hospital and physician services must be unimpeded by financial or other barriers.

Via these principles, the Act is intended to further insure the following:

The Act aims to ensure that all residents of Canada have access to necessary hospital and physician services on a prepaid basis.

The Act provides the provinces and territories with criteria and conditions that they must satisfy in order to qualify for their full share of federal transfers under the Canada Health and Social Transfer (CHST).

As explained by CHAD, the Canada Health Act also contains provisions that ban extra-billing and user charges, including no extra-billing by medical practitioners or dentists for insured health services under the terms of the health care insurance plan of the province or territory; and, no user charges for insured health services by hospitals or other providers under the terms of the health care insurance plan of the province or territory.

As explained by CHAD (2003), efforts have been made to insure that the federal and provincial/territorial governments work closely together in the administration of the insurance plan. For this purpose, in 1999, the Social Union Framework Agreement (SUFA) was established as a means to insure that the parties worked collaboratively to avoid and resolve intergovernmental disputes, while also maintaining the legislative provisions of the governments involved. According to CHAD, guidelines were included within SUFA for the development of the process in the areas of intergovernmental initiatives, including the interpretation of the Canada Health Act principles. Subsequently, in 2000, efforts were initiated to develop a dispute avoidance and resolution process consistent with SUFA and the federal government's obligations under the Canada Health Act.

As well, as explained by CHAD (2003), the federal government also legislated the documentation of all relevant information as to the degree to which provincial and territorial health insurance plans had satisfied the criteria and conditions for payment under the Health Act via the use of the Canada Health Act Annual Report. The report is submitted on an annual basis of Canada's parliament for review. According to CHAD, the approach to gathering and completing this information has been collaborative, where provinces, territories and the federal government have worked together to supply the information needed by the Minister of Health to fulfill the responsibilities inherent in administering the Act.

Under the Canada Health Act, as explained by CHAD (2003), services defined which specify the health services provided and covered under the plan include the following:

Insured health care services are medically necessary hospital, physician and surgical-dental services provided to insured persons.

Insured hospital services are defined under the Canada Health Act and include medically necessary in- and out-patient services such as standard or public ward accommodation; nursing services; diagnostic procedures such as blood tests and x-rays; drugs administered in hospital; and the use of operating rooms, case rooms and anesthetic facilities.

Insured physician services are defined under the Act as "medically required services rendered by medical practitioners." Medically required physician services are generally determined by physicians in conjunction with their provincial and territorial health insurance plans.

Insured surgical-dental services are services provided by a dentist in a hospital, where a hospital setting is required to properly perform the procedure.

Extended health care services as defined in the Canada Health Act are certain aspects of long-term residential care (nursing home intermediate care and adult residential care services), and the health aspects of home care and ambulatory care services.

As well, as explained by CHAD (2003), insured persons under the Canada Health Act represent eligible residents of a province or territory. A resident is defined in the Canada Health Act in relation to a province as: a person lawfully entitled to be or to remain in Canada who makes his home and is ordinarily present in the province, but does not include a tourist, a transient or a visitor to the province. Persons excluded under the Canada Health Act include serving members of the Canadian Forces or Royal Canadian Mounted Police and inmates of federal penitentiaries.

In order for provinces and territories to qualify for the full federal cash contributions stipulated under the Canada Health Act, as explained by CHAD (2003), the following criteria must be met:

Public Administration: The public administration criterion, set out in section 8 of the Canada Health Act, applies to provincial and territorial health care insurance plans. The intent of the public administration criterion is that the provincial and territorial health care insurance plans be administered and operated on a non-profit basis by a public authority, accountable to the provincial or territorial government for decision making on benefit levels and services, and whose records and accounts are publicly audited.

Comprehensiveness: The comprehensiveness criterion of the Canada Health Act requires that, in order to be eligible for federal cash transfer payments, the health care insurance plan of a province or territory "must insure all insured health services provided by hospital, medical practitioners or dentists (i.e. surgical-dental services which require a hospital setting) and, where the law of the province so permits, similar or additional services rendered by other health care practitioners."

Universality: Under the universality criterion, all insured residents of a province or territory must be entitled to the insured health services provided by the provincial or territorial health care insurance plan on uniform terms and conditions. Provinces and territories generally require that residents register with the plans to establish entitlement. Newcomers to Canada, such as landed immigrants or Canadians returning from other countries to live in Canada, may be subject to a waiting period by a province or territory, not to exceed three months, before they are entitled to receive insured health care services.

Portability: Residents moving from one province or territory to another must continue to be covered for insured health care services by the "home" jurisdiction during any waiting period imposed by the new province or territory of residence. The waiting period for eligibility to a provincial or territorial health care insurance plan must not exceed three months. After the waiting period, the new province or territory of residence assumes responsibility for health care coverage. Residents who are temporarily absent from their home province or territory or from Canada, must continue to be covered for insured health care services during their absence. This allows individuals to travel or be absent from their home province or territory, within a prescribed duration, while retaining their health insurance coverage. However, the portability criterion does not entitle a person to seek services in another province, territory or country, but is intended to permit one to receive necessary services in relation to an urgent or emergent need when absent on a temporary basis, such as on business or vacation. As well, if insured persons are temporarily absent in another province or territory, the portability criterion requires that insured services be paid at the host province's rate. If insured persons are temporarily out of the country, insured services are to be paid at the home province's rate.

Accessibility: The intent of the accessibility criterion is to ensure that residents of a province or territory have reasonable access to insured hospital, medical and surgical-dental services on uniform terms and conditions, either directly or indirectly, by charges (user charges or extra-billing) or other means (e.g., discrimination on the basis of age, health status or financial circumstances). In addition, the health care insurance plans of the province or territory must provide: reasonable compensation to physicians and dentists for all the insured health care services they provide; and payment to hospitals to cover the cost of insured health care services. As well, reasonable access in terms of physical availability of medically necessary services has been interpreted under the Canada Health Act using the "where and as available" rule. Thus, residents of a province or territory are entitled to have access on uniform terms and conditions to insured health care services at the setting "where" the services are provided and "as" the services are available in that setting.

According to CHAD (2003), the following conditions also must be met in order for provinces and territories to quality for federal insurance cash benefits:

Information: The provincial and territorial governments are to provide information to the Minister of Health as required, in relation to insured health care services and extended health care services, for the purposes of the Canada Health Act.

Recognition: The provincial and territorial governments are to recognize appropriately the federal financial contributions toward both insured and extended health care services.

Extra-billing and User Charges: The provisions of the Canada Health Act which discourage extra-billing and user charges for insured health services in a province or territory are clearly specified within the Act. If it can be determined that either extra-billing or user charges exist in a province or territory, a mandatory deduction from the federal cash transfer to that province or territory is required under the Act. The amount of such a deduction for a fiscal year is determined by the federal Minister of Health based on information provided by the province or territory in accordance with the Extra-billing and User Charges Information Regulations described below.

Extra-billing: Under the Canada Health Act, extra-billing is defined as the billing for an insured health service rendered to an insured person by a medical practitioner or a dentist (i.e. A surgical-dentist providing insured health services in a hospital setting) in an amount in addition to any amount paid or to be paid for that service by the health care insurance plan of a province or territory. Extra-billing is seen as a barrier or impediment for people seeking medical care, and is therefore contrary to the accessibility criterion.

User Charges: The Canada Health Act defines user charges as any charge for an insured health service other than extra-billing that is permitted by a provincial or territorial health care insurance plan and is not payable by the plan. User charges are not permitted under the Act as, like extra-billing, they constitute a barrier to access.

As explained by CHAD (2003), a number of other regulations are associated with the Health Act that allow the federal government to administer the plan in the following areas:

prescribing which services to include in the CHA definition of "extended health care services;" prescribing which services to exclude from hospital services;

prescribing the types of information that the federal Minister of Health may reasonably require from a province or territory to qualify for a full federal transfer; and prescribing how provinces and territories are required to give recognition to the Canada Health and Social Transfer in their documents, advertising or promotional materials.

According to CHAD (2003), while the Canada Health Act requires that insured health services be provided to insured persons in a manner that is consistent with the criteria and conditions set in the Act, not all Canadian residents or health services fall under the scope of the Act. There are two categories of exclusion for insured services:

services which fall outside the definition of insured health care services; and certain services and groups of persons are excluded from the definitions for insured services and insured persons.

As further explained by CHAD (2003), medical services which fall outside of the definition of insured health care are provided at provincial and territorial discretion, on their own terms and conditions, and vary from one province or territory to another. Additional services that may be provided include pharmacy, ambulance services, optometric services and dental services. Such services may specifically be targeted to specific population groups (e.g., children or the elderly, or social assistance recipients), and may be partially or fully covered by provincial and territorial health insurance plans.

As further noted by CHAD (2003), there may be a number of services provided by hospitals and physicians that are not considered medically necessary, and thus are not insured under provincial and territorial health insurance legislation. Uninsured hospital services for which patients may be charged include preferred hospital accommodation unless prescribed by a physician, private duty nursing services, and the provision of telephones and televisions. According to CHAD, uninsured physician services for which patients may be charged include telephone advice, the provision of medical certificates required for work, school, insurance purposes and fitness clubs, testimony in court, and cosmetic services.

As discussed earlier, as explained by CHAD (2003) the Health Act definition of "insured person" does not include members of the Canadian Forces, persons appointed to a position of rank within the Royal Canadian Mounted Police, persons serving a term of imprisonment within a federal penitentiary, and persons who have not completed a minimum period of residence in a province or territory (a period that must not exceed three months). The exclusion of these persons from insured health service coverage predates the adoption of the Canada Health Act and is not intended to constitute differences in access to publicly insured health care.

CHAPTER FOUR

World Health Organization and Health Care Funding

In having reviewed documents published by the World Health Organization (WHO), little evidence exists that suggests that WHO has established a clear-cut position on health care funding. WHO was established by the United Nations on 7 April 1948 as the specialized agency for health. The overall objective identified as associated with the organization is the attainment by all peoples of the highest possible level of health. Health is defined in WHO's Constitution as a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. Major policy questions of the organization are identified by the World Health Assembly. While evidence clearly documents that WHO has been passionately involved historically and currently in many important health concerns, in reviewing policy statements, fact sheets, and publications produced by the organization, no evidence exists that documents the organizations position on health care funding. What is clear is that WHO believes that access to adequate health care is a basic human right. However, the issue of how humans can gain access through funded health care programs does not appear to have been addressed by the organization. An extensive review of the documents made available on the organizations web site: (http://www.who.int/en/.)provided no documentation suggestive of the WHO's position on health care funding. The six core functions identified as associated with the organization were as follows:

Articulating consistent, ethical and evidence-based policy and advocacy positions

Managing information by assessing trends and comparing performance; Setting the agenda for, and stimulating research and development

Catalysing change through technical and policy support, in ways that stimulate cooperation and action and help to build sustainable national and inter-country capacity

Negotiating and sustaining national and global partnerships

Setting, validating, monitoring and pursuing the proper implementation of norms and standards

Stimulating the development and testing of new technologies, tools and guidelines for disease control, risk reduction, health care management, and service delivery.

While these functions may be suggestive of the critical need to explore health care funding options, it does not appear that this issue has been the focus of historical and recent efforts by WHO.

Current Trends in Healthcare Privatization

As countries struggle with funding options for healthcare services, as demonstrated within the literature, growing consideration has been directed toward privatization of healthcare. According to a recent editorial in the BMJ (2002), a fundamental assumption that has proven true with privatization efforts is that the main business of healthcare services, that is looking after patients, remains in the public sector, even when the private sector offers the seeming opportunity to inject capital, pick up much of the risk, and build and run buildings much more efficiently than the public sector. While partial privatization has been suggested as a favorable option, as noted within BMJ (2002), the costs associated with privatization will higher not lower in the long-term. Risk is not well transferred. Private companies make money by building hospitals that are smaller than are needed, and much money is wasted on the process. Furthermore, the public tends to remain distrustful of large companies and their accounting practices.

According to McGregor (2001), an underlying assumption associated with privatization is that private market mechanisms (i.e., supply, demand, price) are more efficient than public ones as they generate profit and allow the benefits (i.e., choice, quality, accessibility) to trickle down to the consumer. However, as noted by McGregor, privatization is largely based on a philosophy of individualism (i.e., all members of society should be treated equally with no preferential treatment). Consequently, under privatized healthcare systems, there is the tendency to believe that if an individual can afford to buy health care, they are wealthy of being served as they are perceived as contributing to economic growth rather than prohibiting such growth by using public services paid with money that could be used to stimulate innovation and competition in the global economy. As suggested by the World Bank (1997), accompanying the notion of establishing a free market is the idea of decentralization, for the purposes of transferring power arrangements and accountability from one level of government to another. Decentralization is suppose to: bring about a more rational and unified health service that caters to local preferences; improve implementation of health programmes; decrease duplication of services; reduce inequalities; contain costs as a result of streamlining; increase community involvement in health care; improve integration of health care activities between public and private agencies; and, improve coordination of health care services. Essentially, as explained by the World Bank, decentralization is supposed to improve equity, efficiency, accountability and quality of health care. However, as noted by the World Bank, there is little evidence that decentralization and privatization of health care actually works. As central government responsibilities are devolved to local level, according to the World Bank, evidence suggests that health care systems become smaller, less accountable, less visible and less accessible.

Eichler, (1997) suggested that in shaping the discourse of health care policy it is important that society be kept from becoming an economy. Similarly, Barlow (1998) argued that the rights of people need to be placed before the rights of capital with the definition of a citizen remaining at the social level rather than an economic level. As further summarized by McGregor (2001), in prohibiting decentralization and privatization, the interests of social groups are served rather than that of transnational corporations and global capitalists. McGregor concluded by emphasizing the importance of restoring the public service ethos rather than supporting the private sector ethos. Only through the empowerment of a caring, civil society can a balance be established in relation to the profit-driven private sector.