This paper investigates whether Canada's universal health care system is genuinely failing or whether reported crises are exaggerated by political and economic interests. Beginning with a history of Canadian Medicare from its origins in Saskatchewan through successive federal funding changes, the paper evaluates specific claims about underfunding, hospital wait times, physician accountability, and iatrogenic harm. It then examines the privatization debate, weighing free-market arguments against equity concerns for lower-income Canadians. Drawing on government reports, statistical surveys, and comparative U.S.–Canada health data, the paper concludes that while real challenges exist — particularly in provincial funding imbalances and wait-list management — the evidence does not straightforwardly support wholesale privatization as a solution.
According to American reporters and some conservative sources inside Canada itself, the Canadian Medicare system is showing signs of extreme stress and is in danger of being bankrupted entirely. The public perception in America — and increasingly in Canada as well — is that universal care has resulted in tightly rationed care, government interference in individuals' ability to receive adequate and timely treatment, and significant budget deficits. The perception presented in media releases, such as Peter Jennings's report (February 3, 2004) on ABC, is that Canada is "struggling with universal healthcare," and that "many Canadians believe it is the healthcare system itself that is truly sick" (in: Marmor and Sullivan). Recently, many politicians in Canada — such as Premier Ralph Klein in Alberta — have been pressing for increasing privatization, claiming that "tough" reforms will improve the situation in his province (CUPE).
However, despite these media-reported failings and political maneuvers, polls in Canada have consistently shown that the universal care system is integral to the nation's conception of itself and a point of great pride. In the most recent Gallup poll to ask Canadians whether they preferred their own system to the privatized system in America, 96% responded positively and only 2% dissented (Fairness and Accuracy in Reporting). Additionally, Canada continues to have a higher life expectancy at every life-stage than the United States, consistently reports equal or superior satisfaction with health-care experiences compared to Americans, and nationally spends considerably less money per capita.
Three basic questions need to be answered: Is there a crisis? If there is a crisis, what are the causes? Once the causes are known, what sorts of policies will correct the problem — is privatization really a good idea, or are there other options? In addressing all of this, it is important to know the history of the systems involved, the supposed facts of the crisis, and what sorts of solutions are being proposed. It is also important to analyze any proposed solutions not only on how effective they might be for the health and budget of the nation, but also what their possible interactions would be with other national laws — for example, the idea of further price-setting might be blocked by trade agreements — and finally what their impact would be on both public opinion and on the powerful factions whose pleasure or displeasure can change the fortune of any policy-maker (e.g., corporations and the more educated or wealthy segments of the population).
In all this debate, it is also vital to keep in mind that this is not only an issue of social justice and life-or-death decisions — and that the wrong policy will quite literally be lethal to many people — but also that this issue may play a significant role in the way the nation defines itself. All economic, political, and even health issues aside, the way in which universal health care is handled in Canada may be vital to the way in which Canadians perceive themselves, and this is itself a form of political currency that should not be ignored. Almost every Canadian source consulted in investigating this issue mentions, at least in passing, the way in which its health care system is a point of national pride and international identity. As Roy Romanow, author of one of the most influential government reports on the subject, is quoted as saying:
"The principles of the Canada Health Act began as simple conditions attached to federal funding for Medicare. Over time, they became much more than that. Today, they represent both the values underlying the health care system and the conditions that governments attach to funding a national system of public health care. The principles have stood the test of time and continue to reflect the values of Canadians." (in: Health Canada, 2)
Any policy recommendations must absolutely take into consideration the deep emotional and social attachments that Canadians have to their system of universal care, and the instinctive reaction that the majority will have to any proposal that returns to a less equitable or more capital-driven mode of health-care delivery.
Canada has had a national Medicare program since the mid-1960s, and individual provinces were providing health care plans of various sorts for almost twenty years before that. The national system itself has evolved significantly since the 1960s. Up until the early 1990s, most of these shifts in policy were directed at creating more standardized and equitable care across the board, though in the last decade most moves have shifted in the opposite direction. Throughout Medicare's history, it has been strongly opposed by various economically interested groups, including some doctors, many large businesses (especially those with interests in pharmaceutical, medical, or insurance corporations), and of course most insurance companies. It has been most supported by grassroots and social justice forces (Health Coalition).
The history of Medicare in Canada begins with the province of Saskatchewan, where universal hospital insurance was officially established in 1947. Though by that point all ten provinces had some form of public, comprehensive insurance for in-hospital care, in 1962 Saskatchewan found that its doctors were still not particularly fond of price-setting and universally government-supported care. When the insurance provisions were extended to include more routine health care, doctors unsuccessfully went on strike for three weeks. Nonetheless, the province's program was apparently sufficiently successful that the Royal Commission recommended national universal insurance (Health Coalition; Health Canada).
Around 1966, a nationalized Medicare was created that assured universal and comprehensive medical coverage. This program balanced national and provincial financial responsibility, with Ottawa responsible for paying a full 50% of provincial health costs. This system lasted for approximately ten years, during which Canadian health care was ranked as one of the best in the world (Health Coalition).
In 1977, however, the Trudeau Liberals decided to rework the financial support of the system and replaced the 50/50 funding arrangement between Ottawa and the provinces with a form of block funding in which more of the money for each province's needs became the individual responsibility of that province. As will be discussed in more detail below, it was in this decision that the seeds of the current financial crisis — to whatever degree it is a crisis — were planted (Health Coalition).
Within a year, social observers noted that doctors and hospitals were "extra-billing" and/or charging extra user fees to patients in order to increase their revenue. Extra-billing, then as now, was the practice of charging prices above those subsidized by the state, or recommending and charging for services not covered by the state. Such arrangements could be used to allow wealthier patrons exclusive or preferential access to more talented or qualified doctors, or even to allow queue-jumping for services with waiting lists. This practice attracted public outrage once it became clear that it created a "two-tiered system" in which the poor who could not afford extra bills or user fees did not have access to the same quality of care that the rich could expect. Parliament addressed these concerns in the Canada Health Act of 1984, which was unanimously passed. Extra-billing and user fees were entirely rejected — provinces that allowed extra-billing or user fees for federally covered services suffered automatic dollar-for-dollar reductions in their federal funding. This was one of the last reforms instituted in the name of reducing the privatization of health care (Health Coalition; Health Canada).
Almost ten years later, the pendulum of political sentiment began to swing away from a commitment to universal, free-at-point-of-use health care, though responses were still mixed. In 1993, partly in response to international pressure regarding trade standardization and the lobbying of pharmaceutical companies, the Mulroney administration extended patent protection for name-brand pharmaceuticals, which had the effect of increasing medication costs. Two years later, the Canada Health and Social Transfer legislation led to significant cuts in funding for health and social programs. On the other hand, in 1997 the National Forum on Health strongly recommended that Medicare begin to include home care, more alternative and preventative treatments, and prescription drugs. They also suggested reducing profit orientation in medicine by moving away from fee-for-service payment to doctors — a change that would have encouraged only necessary tests and procedures, rather than incentivizing the maximum number of procedures per patient. The pendulum only picked up speed in 1998 when the Chrétien administration agreed to the demands of the premiers that provinces be allowed to interpret the Canada Health Act themselves (Health Coalition).
A re-evaluation of the health system appears to have been quietly underway from 1998 to the present. In 2000, legislation was presented by Ralph Klein to the legislature demanding that provinces be permitted to allow private hospitals. That same year, more budget cuts affected the health system when the "Federal Budget offers 2 cents for health care for every dollar of tax cuts" (Health Coalition). In 2002, the Romanow Royal Commission on the Future of Health Care in Canada was created to investigate the health-care situation in the nation and to foster public discussion on the subject. Their report was presented in Ottawa toward the end of the year, and in 2003 some of its suggestions regarding intelligent use of federal funding were implemented. The Commission generally supported the continuation of universal care. However, the 2003 "Health Accord" did not include any ruling against the use of federal funding contracted out to for-profit institutions — a situation that some critics claim is part of the money-crunch in the system today (Health Coalition).
As this brief overview shows, it would be erroneous to suppose that the reforms currently being proposed are historically unique, or that the system has been impervious to change over the last half-century. On the contrary, the universal care system in Canada has always been a dynamic entity, and adjustments in its makeup have both positively and negatively affected the current situation. Any future policy decisions should take Canada's health care history into account — assuming that the only option to the status quo is to abandon the system altogether ignores the fact that this system has a long history of adaptation and evolution.
Depending on who is asked, answers vary as to what precisely the crisis in Canadian health care may be. According to pro-privatization advocates, the problem lies in government management that promotes lack of choice and ends in insufficient funding, inferior treatment, rationing, and long waiting times. According to pro-Medicare defenders, the crisis is precisely the opposite: the system is experiencing "creeping privatization" (Hamilton), which is resulting in inequity of financing and inequity of care that threatens to eventually destroy the entire system. Those who are merely prognosticating point to aging populations that threaten to overdraw the resources of the younger population, and to growing disparity between Ottawa and the provinces in the balance of needs and funds. In any case, the basic claim that there is a crisis seems to rest on the same core concerns, whether stated in the present or future tense — that hospitals are or will be underfunded, that waiting lines are or will be too long, that good or sufficient treatment is not or will not always be available, and that certain groups are or will be put at an unfair disadvantage.
Canada currently spends considerably less per capita on health care than the United States does, though not as little as certain other nations with state-managed care. In 2003, Canada averaged $3,839 per capita, approximately 10% of its gross domestic product (GDP). In terms of health spending as a percentage of GDP, Canada spends significantly less than the United States, slightly less than Switzerland, and slightly more than France. Canada pays for about 71% of total health care expenditures with public-sector money, while the United States pays for only about 44% with public-sector money ("The Cost of Health Care"). Consider statistics from a few years earlier: "Canada insure[d] 100 percent of its citizens for $2,250 per person in 1998 while the United States expended $4,270 per person insuring only 84 percent of [its] citizens" (Marmor and Sullivan). Calculating only the public-sector share, Canada was paying roughly $1,597 per person while America was paying approximately $1,879 — meaning Canada spent less per capita in public money than the United States did, while still providing universal care. It should be noted that these lower rates of expenditure in no way produce lower public health indicators; Canada has a healthier and longer-lived population than America (Marmor). This comparison shows that if Canadian hospitals are underfunded, it is not because federal care is inherently more expensive to the state or to individuals than privatized care, but because Canada is simply allocating fewer resources to the area. Of course, this in itself does not prove or disprove the existence of underfunding or the possible superiority of privatized care in other respects.
There may or may not be a genuine problem with underfunding in the Canadian system. Most reports on the subject claim that problems exist, and these appear to have originated when federal funding to the provinces was first reduced. However, some would argue that to some degree these deficits are problematic only insofar as they are made so by industry advocates.
Data on total per-capita health spending in Canada between 1975 and 2004 show that the real costs of medicine have been slowly increasing ever since 1977–78 and are currently almost twice what they were in 1975. This would tend to indicate a significantly larger budget burden than existed thirty years ago. Meanwhile, from 1977 to the present, the percentage of health spending coming from Ottawa rather than from the provinces has been steadily decreasing — from 50% in 1975 (Chaudhry) to roughly 15% at the current time — indicating that the provinces' burden has grown even more than rising costs alone would suggest. There is, by any measure, something of a budget crunch.
However, the data also show a puzzling pattern. The point at which Ottawa first cut its share of costs corresponds to the emergence of extra-billing. A subsequent two-year period in which Ottawa temporarily suspended all transfer payments to the provinces coincided with costs actually stopping their increase. Even when payments were resumed at around 30% two years later (Chaudhry), costs continued to remain stable. The point at which the Chrétien government was convinced by the provinces to begin the process of privatization then follows approximately six years of almost perfectly stable expenditures. This pattern suggests that the much-announced crisis of increasing costs used to justify privatization may be at least partially manufactured. As Marmor and Sullivan observe, "In all countries with national health-insurance programs, doctors and other health-care professionals justify their demands for medical care with claims of critical shortages — a tactic known as 'orchestrated outrage.' Under these circumstances it is easy to find an 'expert' who claims to foresee catastrophe; pending disaster is a great way to justify increased funding."
Between 1970 and 1993 — the period for which these particular records are available — the number of physicians practicing in Canada increased by about 2.3% per year (Chaudhry). Considering that doctors in Canada, as in America, are generally paid on a per-procedure basis, a higher number of doctors would tend to "create the demand for their own services" (Chaudhry), either by influencing patient expectations or by working within a system that rewards volume. Doctors may have been experiencing critical shortages of revenue even when patients were not actually requiring additional care.
Despite these theories, there is a general consensus that some degree of funding shortfall exists relative to an ideal situation.
"Survey evidence on wait times and their policy implications"
"Adverse event rates and accountability in universal vs. private care"
"Equity stakes of privatization for rich and poor Canadians"
This issue will continue to play an important role in politics. It is a major political issue, and it is not made easier by the obvious clashes of class and business interests. On the one hand, it would be easy to be idealistic and suggest that public policy should be made entirely on the basis of majority interests. However, from a purely realpolitik standpoint, those who have the ability to move the levers of power — the educated, the wealthy, and business leaders — carry outsized influence over any policy outcome. From an immediate standpoint, this might seem to favor privatization. From a humanistic or liberal standpoint, however, it would be a mistake to privatize Medicare, and it would alienate a great many Canadians. As the evidence reviewed in this paper suggests, Canadian Medicare faces real but manageable challenges — particularly in the areas of provincial funding imbalances and wait-list management — that do not, on balance, justify dismantling a system that continues to deliver universal coverage at lower per-capita cost than its American counterpart. Whether the sentiment of the majority can be harnessed to defend that system against well-financed interests remains the central political question.
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