The Health of Canadians – The Federal Role

Final Report

Volume Six: Recommendations for Reform


PART IV: 
CLOSING THE GAPS IN THE SAFETY NET


CHAPTER SEVEN

Expanding Coverage to Include Protection Against Catastrophic Prescription Drug Costs

In previous volumes, the Committee highlighted a number of critical issues with respect to prescription drug insurance coverage in Canada and the cost of prescription drugs:

·        In recent years, the cost of prescription drugs has escalated faster than all other elements in health care. Spending on prescription drugs accounts for a very significant and increasing share of public sector health care expenditures.  The expectation is that the upward pressures on prescription drug costs will continue as new, effective, but very costly, drugs (particularly those genetically tailored to the individual) enter the Canadian market in the next decade.

·        The Canada Health Act does not apply to prescription drugs used outside the hospital setting, and publicly funded drug coverage varies considerably from province to province.  This contrasts sharply with the policy in many OECD countries, in which publicly funded coverage is provided for prescription drugs as well as hospital and doctor services.

·        Private insurance coverage for prescription drugs provided through employer-sponsored plans or individual insurance policies varies significantly in terms of design, eligibility and out-of-pocket costs to plan members.

·        Despite the availability of both public and private drug insurance plans, many Canadians have no coverage at all for prescription drugs.  Moreover, among those with some form of coverage (either public or private), there is substantial variation in its nature and quality.

·        Financial hardship due to high prescription drug expenses is increasingly a real risk – indeed, it is a reality – for many individual and families in Canada.

This chapter reviews trends in drug costs and examines the current level of insurance coverage for prescription drugs in Canada.  Particular attention is devoted to the absence and insufficiency of coverage for very high prescription drug expenses. The chapter presents the Committee’s observations on Canadians’ need for enhanced protection against severe or “catastrophic” prescription drug expenses, and its recommendations on how the federal government should contribute to achieving this goal.

Text Box: The Committee strongly supports the view that no Canadian should suffer undue financial hardship as a result of having to pay health care bills.  It is essential that this principle be applied to prescription drug expenses.

As stated in previous volumes, as well as in the present volume, the Committee strongly supports the view that no Canadian should suffer undue financial hardship as a result of having to pay health care bills.  This basic principle at the root of Canadian health care policy should be applied to prescription drug expenses.

 

7.1     Trends in Drug Spending[1]

The Canadian Institute for Health Information reports that since 1997 spending on drugs (both prescription and non-prescription) has been the second-largest category of health care spending in Canada, behind hospitals but now ahead of spending on physician services.  It is expected that final figures will show that in 2001, spending on drugs was equivalent to almost 50% of the amount spent on hospitals.

Spending on drugs has grown from $3.8 billion in 1985 to $15.5 billion in 2001.  During this 16-year period, data from CIHI show that spending on drugs has grown faster than inflation and beyond the rate attributable to population growth.  More precisely, from 1985 to 1992, drug expenditures increased on average by 12% annually.  Between 1992 and 1996, they grew by an average of 5% annually.  The growth rate then rose to around 10% in 1997 and 1998, and dropped to around 8% in 1999.  Although the data have not yet been finalized, the average growth rate of drug spending is expected to have been about 7% in 2000 and 9% in 2001.

Prescription drugs make up the largest component of the total spending on drugs (79% in 2001, up from 67% in 1985).  Non-prescription drugs accounted for the remaining 21% of drug spending in 2001 (compared to 33% in 1985).  For the most part, non-prescription drugs are purchased directly by consumers and paid for out-of-pocket.  By contrast, many payers are involved in the financing of prescription drugs.  They include both the public sector (provincial/territorial Pharmacare programs, federal government plans for specific groups and Workers’ Compensation Boards) and the private sector (private insurance plans and individuals).


TABLE 7.1
SPENDING ON PRESCRIPTION DRUGS BY SOURCE OF FINANCE
(Percentage)

 

1985

1988

1999

2001

P/T Governments

Federal Government

Workers’ Compensation Boards1

Sub-Total Public Sector

 

Private Insurers

Out-of-Pocket

Sub-Total Private Sector

40.6

2.3

0.5

43.4

 

N/A

N/A

56.6

42.6

1.9

0.6

45.1

 

30.5

24.4

54.9

38.2

2.4

3.1

43.7

 

33.5

22.8

56.3

42.0

2.4

4.8

49.2

 

29.9

20.9

50.8

Total All Sources

100.0

100.0

100.0

100.0

1) Data from 1997 and beyond include spending by WCBs as well as the Quebec Drug Insurance Fund.
N/A: not available.
Source: CIHI (April 2002), Drug Expenditure in Canada, 1985-2001, and Economics Division, Parliamentary Research Branch, Library of Parliament.

In 1985, 57% of prescription drug spending came from the private sector (see Table 7.1).  By 2001, it had decreased to 51%.  Correspondingly, the share of prescription drugs financed from public sources increased steadily from 43% to 49%. Table 7.1 also shows that the total proportion of prescription drugs paid out-of-pocket by individual Canadians has decreased from 24.4% in 1988 to 20.9% in 2001.  That is, an increasing share of total prescription drug spending in Canada is being picked up by public sector drug coverage plans.

CIHI data on drug spending do not include drugs dispensed in hospitals,  which it classifies as hospital expenditure. Estimates provided by CIHI in its April 2002 report suggest that drug expenditures in hospitals amounted to $1.1 billion in 2001.  In addition, the share of total hospital expenditures spent on drugs has consistently increased between 1985 and 2001, from 2.8% to 3.4%. CIHI notes, however, that the rate of growth in drug expenditures in hospitals has been slower than that of out-of-hospital drug spending. Although there may have been some shift in drug spending from hospitals to the community, CIHI stresses that more research is required to examine the relationship between drug utilization in and out-of-hospital.

Many observers expect out-of-hospital costs of prescription drugs to grow substantially in the coming years, for a number of reasons:

·        The cost of developing and marketing new drug therapies has risen rapidly as pharmaceutical companies tackle more challenging diseases and face more stringent drug approval processes around the world.

·        Rapid scientific progress has introduced the possibility of developing new genetically tailored drugs, applicable to a small number of patients suffering with chronic degenerative conditions, that are potentially extremely effective and also enormously costly.

·        Many of the newer drug therapies are targeted at chronic conditions treated at home, as opposed to acute conditions treated in hospital.

·        Changes in medical practice and new technology have replaced some hospital-based treatment with home care, which is now being provided for a number of conditions with high drug therapy costs.

The net effect is that many Canadians now incur high levels of prescription drug costs that were inconceivable only a few years ago.

7.2     International Comparisons

In comparison to selected OECD countries, Canada allocates a large proportion of its total health care spending to drugs, ranking second in 1998 to the United Kingdom.  In the same year, Canada ranked fourth for the level of drug spending per capita, after the United States, Germany and Sweden.  Spending on drugs varies greatly across countries and is influenced by numerous factors, including specific public policy traditions and institutional characteristics (reimbursement systems for users and providers, prescribing habits, etc.).[2]

Text Box: Many Canadians now incur high levels of prescription drug costs that were inconceivable only a few years ago.


TABLE 7.2
PUBLIC INSURANCE COVERAGE FOR PRESCRIPTION DRUGS

 

Formulary

Cost Sharing

Australia

§         National formulary listing only drugs that receive a positive assessment with respect to safety, quality, clinical efficacy and cost-effectiveness.

§         Therapeutic reference-based pricing.1

§         Fixed co-payment per prescription, subject to an annual ceiling. Co-payment varies by type of beneficiary.

§         Exemptions for some segments of the population.

§         Higher cost sharing for brand-name drugs when generic copies are available.

§         Individuals must pay for drugs not listed on the formulary.

Germany

§         The federal government maintains a “negative list” of drugs that are not entitled to public reimbursement.

§         Therapeutic reference-based pricing.1

§         Fixed co-payment per prescription. Co-payment varies by type of beneficiary and size of prescription.

 

Netherlands

§         National formulary.

§         Therapeutic reference-based-pricing.1

§         Fixed co-payment per prescription, subject to an annual ceiling. Co-payment varies by type of beneficiary.

§         Exemptions for some segments of the population.

Sweden

§         There is no national formulary, but each county council has developed its own list.

§         All drugs prescribed by doctors and hospitals are purchased by a single national agency, Apotekbolaget, a state-owned company that owns all pharmacies in Sweden..

§         Fixed co-payment per prescription, subject to an annual ceiling. Co-payment varies by type of beneficiary.

§         Exemptions for some segments of the population.

 

United Kingdom

§         National formulary under the NHS.

§         There is also a negative list , that excludes some drugs from NHS prescription on the grounds of poor therapeutic value or excessive cost.

§         Fixed amount per prescription.

§         Exemptions for some segments of the population.

1) Therapeutic reference-based pricing ensures that the government pays only up to the price of a lower-priced drug that is therapeutically interchangeable with, or equivalent to, the prescribed drug.
Source: Stephane Jacobzone, Pharmaceutical Policies in OECD Countries: Reconciling Social and Industrial Goals, Occasional Paper No. 40, Labour Market and Social Policy, OECD, April 2000; Donald Willison et al., International Experience with Pharmaceutical Policy: Common Challenges and Lessons for Canada, Project funded under Health Canada’s Health Transition Fund, 30 April 2001; Senate Committee on Social Affairs (Volume Three); and Economics Division Parliamentary Research Branch, Library of Parliament.

In contrast, Canada and the United States exhibit a much lower public share of spending on drugs, which is largely explained by the fact that the entire population of other countries is covered for prescription drugs by public insurance.  Also, the countries with which Canada and the United States are compared have formularies restricting the number of drugs covered under public insurance, and they impose cost sharing (co-payments, co-insurance and deductibles) with waivers for certain groups of beneficiaries (see Table 7.2).

 

7.3     Coverage for Prescription Drugs in Canada[3]

Currently, coverage for prescription drugs in Canada is offered through a mixture of public and private insurance plans described briefly below.

 

7.3.1   Public prescription drug insurance plans

With respect to public plans it is worth noting that:

1.      All provinces have public prescription drug programs that cover virtually all the drug costs of low-income seniors (those receiving GIS, the Guaranteed Income Supplement), a group that constitutes about 5% of Canada’s adult population. This group is thus fully protected from catastrophic prescription drug expenses.  All provinces except Newfoundland also offer coverage to higher-income seniors as well.

2.      All provinces also have programs that provide prescription drug coverage for recipients of social assistance, a group that comprised 6.8% of the population in 2000, protecting them also from catastrophic prescription drug expenses.

3.      The federal government assumes the full cost of providing prescription drugs (as well as other health services) for some Aboriginal populations and certain armed forces veterans.  These groups, which account for approximately 2% of the Canadian population, are thereby fully protected against catastrophic prescription drug expenses.

4.      Provincial governments in British Columbia, Saskatchewan, Manitoba, and Ontario have prescription drug plans targeted to the general population that provide a protective cap (in some cases based on family income) on the personal cost of drug expenses borne by individuals.

5.      Quebec mandates prescription drug coverage with an out-of-pocket cap no greater than $750 for all residents, whether under employer-sponsored programs or the provincial program. 

6.      Alberta offers to all residents a public, voluntary, premium-based prescription drug insurance plan that provides significant drug expense coverage after a three month waiting period.

In summary, a significant number of public drug plans provide a significant degree of protection against personal financial hardship to Canadians who face very high expenses for prescription drugs. However, the federal government does not directly contribute to any of the provincial plans.

 

7.3.2   Private prescription drug insurance plans

Private sector drug insurance plans contribute significantly to Canadians’ prescription drug coverage: 

1.      They are an entirely voluntary initiative, sponsored mostly by employers but also by unions, joint union/employer entities and educational institutions.  In addition, about 1% of Canadians are covered by health insurance policies purchased individually.

2.      An estimated 2.4 million Canadians belong to private-sector plans that cover 100% of prescription drug expenses, thus completely protecting their members from financial hardship attributable to very high drug costs.  An additional 300,000 have plans that, in combination with public prescription drug coverage, provide 100% coverage.

3.      An estimated 9.7 million Canadians (the 2.4 million mentioned above plus an additional 7.3 million Canadians, totalling 55% of those in private-sector plans) have private-sector plans that include an overall protective cap on the out-of-pocket costs of individual plan members.

4.      The remaining 8.1 million Canadians in private-sector plans (45% of those in private-sector plans) have coverage that, for the most part, provides substantial – but  not complete – protection from catastrophic prescription drug expenses.

In Volume Four, the Committee recounted the real-life experience of one Atlantic Canadian whose experience illustrated this last point. A professional librarian and member of a good-quality employer-sponsored plan, the individual in question faced personal out-of-pocket costs of $17,000 annually attributable to his wife’s requirement for prescription drugs that cost $50,000 a year.

The Committee recently heard of another Atlantic Canadian resident whose medication for pulmonary hypertension (a life-threatening condition) costs more than $100,000 a year.  The individual in question’s current expenses are over $4,600 monthly (or $55,000 annually) in order to cover the insurance premium, the drug, the peripherals needed to administer the drug, additional necessary medications and oxygen tanks.  An anticipated increase in dosage within the next year will increase the monthly bill to approximately $5,150, or $61,800 annually. People become eligible for government assistance in this province only once they have exhausted all their savings, including RRSPs.

 

7.3.3   Plan features and their relation to protection from severe drug expenses

While prescription drug insurance plans have many different features and attributes, only four relate to the extent of protection such plans offer against catastrophic drug expenses.  These are: deductibles, co-payments/co-insurance, annual or lifetime maximums, and out-of-pocket caps.

A deductible is the amount of drug expense that must be paid initially by an individual before the drug insurance plan reimburses any expense.  The deductible is normally applied to a calendar or plan year.  Deductibles are commonly expressed as fixed dollar amounts, but some legislated public drug insurance programs use amounts related to family income.  Deductibles, unless they are extraordinarily high, usually have minimal impact on the degree of protection a plan provides against catastrophic drug expenses.

Co-payments and co-insurance correspond to the portion of the cost of each prescription that must be paid by the individual.  Co-payments take the form of a flat amount per prescription (e.g., $5), while co-insurance requires a fixed percentage per prescription (e.g. 5%).  Co-payments can also include the pharmacist’s professional dispensing fee (as opposed to the cost of the drug itself). They do not protect individuals, as in the professional librarian example cited above, from very high personal expenses resulting from the prolonged use of very expensive drugs.

An annual or lifetime maximum restricts to a specific amount the total amount of prescription drug expenses that a plan will pay on behalf of a plan member.  Expenses in excess of this amount are to be paid out-of-pocket.  For instance, a plan with a $5,000 annual maximum would pay no more than that in a given year. The higher the maximum, the greater the protection.  It is highly unusual for public prescription drug insurance plans to impose maxima.  Some private-sector plans do, but most have unlimited coverage or specify very high annual or lifetime maxima such as a million dollars.

Finally, out-of-pocket caps are provisions of plans that restrict the total amount of deductibles, co-payments and co-insurance to be imposed on an individual during a given year.  These may be expressed either as a fixed upper limit (e.g., $1,500) or as an amount related to family income (e.g., 3%).  Many prescription drug insurance plans, particularly private-sector plans, do not have explicit caps on out-of-pocket drug expenses. This feature in a drug plan guarantees the insured individual protection against catastrophic prescription drug expenses.  The lower this limit, the higher the degree of protection.

 

7.4     An Emerging Issue: Catastrophic Prescription Drug Expenses

Generally, the direct financial impact of the rise in drug spending described above is relatively modest because the proportion of average household expenditures spent on prescription drugs remains small in absolute terms. CIHI data show that in 1999 the annual per capita expenditure on prescription drugs was $331.38, of which $75.49 was paid for out-of-pocket.

Nonetheless, some individuals and families can and do incur much more substantial expenses.  While it is important to recognize that this affects relatively few people for the moment, the Committee believes that the problem warrants careful attention because:

1.      Most important, some individuals do experience substantial personal financial hardship in paying for drug expenses, thereby frustrating the fundamental objective of Canadian health policy referred to above.

2.      Those facing a significant personal financial burden may discontinue (or not begin) treatment requiring expensive medications.

3.      Physicians may admit patients to more costly hospital based treatment so they are spared the high costs for drugs dispensed for use out of hospital.

4.      Doctors may prescribe and patients may demand cheaper but less effective drugs.

5.      Individuals may stay on social assistance rather than seek employment in order to maintain drug coverage.

6.      The drug plan to which the affected individual belongs may experience sufficient financial expenditures that it prompts the plan sponsor to limit or discontinue it, thereby reducing or eliminating drug expense protection for all members of the plan. Other drug plan sponsors may take pre-emptive action to reduce the financial risk of catastrophic drug costs to their own plans

Text Box: Two percent of Canadians (some 600,000 individuals) have no prescription drug coverage whatsoever and must assume full personal financial exposure in the event they require expensive prescription drugs.

Estimates by Fraser Group/Tristat Resources show that currently 98% of the Canadian population is covered by one or more public and/or private prescription drug coverage plans (see Table 7.3).  Two percent of Canadians (some 600,000 individuals) have no prescription drug coverage whatsoever and must assume full personal financial exposure in the event they require expensive prescription drugs.


TABLE 7.3
PRESCRIPTION DRUG EXPENSE COVERAGE IN THE CANADIAN POPULATION

Covered by

Percent of Population

Public Plans

53%

Private Plans

58%

Both Public and Private

13%

No Coverage

2%

Source: Fraser Group/Tristat Resources, Drug Expense Coverage in the Canadian Population: Protection From Severe Drug Expenses, August 2002, p. 11.

Fraser Group/Tristat Resources also analyzed the variations in the current levels of protection from severe drug expenses by province. Tables 7.4 and 7.5 show the percentage of the population of each province that would face various levels of out-of-pocket expenses when confronted with total prescription drug expenses of either $5,000 (Table 7.4) or $20,000 (Table 7.5). Each table divides the population of the province into four groups according to how much they would each pay out-of-pocket: (a) those who would pay up to $750; (b) those who would pay between $751 and $2,000; (c) those who would pay over $2,000; (d) those with no coverage at all.

Thus, for example, Table 7.4 indicates that 70% of B.C. residents with drug expenses of $5,000 pay no more than $750 out of pocket, while the remaining 30% of B.C. residents pay between $751 and $2,000. In Newfoundland, only 48% of the population who spend $5,000 on prescription drugs pay up to $750, while 24% of population of that province pay between $751 and $2,000. However, there are also 28% of Newfoundlanders who have no coverage at all and therefore have to pay the full $5,000.

For those with $20,000 in prescription drug expenses (Table 7.5), the percentages of B.C. residents with each level of out of pocket expenses remain the same. In Newfoundland, 48% of the population still pay only up to $750, and the same 28% of the population have no coverage and must pay the full $20,000. The 24% of the population that paid between $751 and  $2,000 when faced with drug expenses of $5,000, now has to pay over $2000.

While the lack of coverage for a substantial proportion of Atlantic Canada residents remains a striking feature of the national pattern, the tables also point to significant variations in out-of-pocket levels among provinces that have programs covering their entire population. Quebec stands out as having the least variation in protection levels, followed by British Columbia, Manitoba and Saskatchewan.


TABLE 7.4
Out-of-Pocket Costs for Prescription Drug Expenses of $5,000  
(percentage of population)

 

Up to $750

$751 - $2,000

Over $2,000

No coverage

Total

BC

70%

30%

0%

0%

100%

ALTA

43%

57%

0%

0%

100%

SASK

68%

24%

8%

0%

100%

MAN

84%

13%

3%

0%

100%

ONT

70%

25%

5%

0%

100%

QC

100%

0%

0%

0%

100%

NB

45%

28%

0%

27%

100%

NS

47%

29%

0%

24%

100%

PEI

48%

25%

0%

27%

100%

NFLD

48%

24%

0%

28%

100%

Canada

73%

23%

2%

2%

100%

 

TABLE 7.5
Out-of-Pocket Costs for Prescription Drug Expenses of $20,000  
(percentage of population)  

 

Up to $750

$751 - $2,000

Over $2,000

No coverage

Total

BC

70%

30%

0%

0%

100%

ALTA

43%

0%

57%

0%

100%

SASK

67%

25%

8%

0%

100%

MAN

84%

13%

3%

0%

100%

ONT

70%

12%

18%

0%

100%

QC

100%

0%

0%

0%

100%

NB

45%

0%

28%

27%

100%

NS

47%

0%

29%

24%

100%

PEI

48%

0%

25%

27%

100%

NFLD

48%

0%

24%

28%

100%

Canada

73%

20%

5%

2%

100%

Source: Fraser Group/Tristat Resources, Drug Expense Coverage in the Canadian Population: Protection From Severe Drug Expenses, August 2002, pp. 48-49.

Data from the same group also indicate that coverage for the great majority of Canadians (89%) provides a protective cap on out-of-pocket costs regardless of the amount of high prescription drug expenses.  However, 9% of the Canadian population have drug coverage plans without such protective caps, that require co-payments or have reimbursement limits.  For these individuals, out-of-pocket costs increase as their prescription drug expenses increase.

In total, 11% of Canadians are at substantial risk of significant financial hardship from high prescription drug expenses paid out of their own pockets.  Table 7.6 illustrates the out-of-pocket costs for an individual requiring prescription medications costing $20,000 per year.[4]

TABLE 7.6 

Plan Type

Plan Parameters

Out-of-Pocket Cost ($)

Deductible

Co-payment

A common employee benefit plan

0

0

0

Social assistance in many provinces

0

0

0

Indian Affairs NIHB

0

0

0

Another common employee benefit plan

$25

0

25

Alberta Seniors Plan

0

30% not to exceed $25 per prescription

About 900 (assuming 3 prescriptions per month

Quebec RAMQ for individuals under age 65

$100

25% out-of-pocket (capped at $750)

750

British Columbia Pharmacare

$800

0

800

Ontario Trillium Plan (for family income of $60,000)

4% of adjusted family income

 

2,400

Most common employee benefit plan

0

20%

4,000

Federal Civil Service

$60

20%

4,048

Alberta Non-Group Program

0

30%

6,000

No Coverage

N/A

N/A

20,000

 

In a separate analysis of claims data from a large number of employer sponsored drug plans (approximately half of all plans in Canada), research presented to the Committee showed that for the year 2000:

·        A few individuals had drug expenses exceeding $200,000.

·        About one person per thousand insured had personal medical expenses (supplemental to medicare) exceeding $10,000. The great majority of these expenses were for prescription drugs.  

Text Box: It is possible to say, therefore, with some confidence that more than 100,000 Canadians experience annual drug expenses exceeding $5,000; that number is virtually certain to increase in the years ahead.

From these data, it is estimated that some three persons per thousand or about 53,000 persons covered by private-sector plans experienced drug expenses exceeding $5,000 in the year 2000.

Published data from the Ontario Drug Benefit program suggest that the frequency of drug expenses exceeding $5,000 may be several times higher (between 10 and 20 per thousand) within public plans covering seniors and those unable to work. This is not particularly surprising since public plans cover all seniors, who represent the age segment of the population most likely to make high use of prescription drugs.

It is possible to say, therefore, with some confidence that more than 100,000 Canadians experience annual drug expenses exceeding $5,000; that number is virtually certain to increase in the years ahead. How these heavy expenses are paid – that is, how much is paid by a private insurance plan, how much by a public insurance plan and how much by the individual out-of-pocket – will, of course, vary from individual to individual.

 

7.5     Protecting Canadians Against Catastrophic Prescription Drug Expenses

In developing its proposal to expand the federal government’s role in health care to include protection against the impact of severe or “catastrophic” prescription drug expenses, the Committee has sought to accomplish two objectives.

First, and foremost, the Committee wants to make sure that no Canadian individual or family is exposed to undue financial hardship as a result of having to pay all, or even a significant fraction, of the costs of extremely expensive and/or prolonged prescription drug treatments.  This is entirely consistent with the basic public policy objectives underpinning the system of public health care insurance in Canada.

Text Box: Specifically, the Committee’s proposal calls for the federal government to take over responsibility for 90% of prescription drug expenses that exceed a certain limit that qualifies them as “catastrophic.”

Second, the Committee wants to create the conditions for long-term sustainability of current prescription drug coverage programs, both provincial public and private supplementary drug insurance plans, in the face of escalating prescription drug costs and the anticipated introduction of increasingly expensive and effective drug therapies.

The Committee’s proposed plan therefore builds on, rather than replaces, Canada’s extensive current systems of provincial prescription drug coverage and private supplementary drug insurance plans.  The Committee’s intent, therefore, is to present a feasible and realistic program that will inject new federal money into expanding available coverage in ways that will protect Canadians against undue financial hardship resulting from severe or catastrophic prescription drug expenses.

Text Box: In order to ensure uniformity of coverage throughout the country, and in order to be able to control which drugs are eligible to be covered under this program, it will also be necessary to establish a national drug formulary.

Specifically, the Committee’s proposal calls for the federal government to take over responsibility for 90% of prescription drug expenses that exceed a certain limit that qualifies them as “catastrophic.”  The federal government should establish criteria and conditions that private and provincial/territorial public plans would have to meet to be eligible to receive this federal assistance. In exchange, the federal government would assume 90% of the expense of protecting Canadian individuals and families against catastrophic drug expenses. In order to ensure uniformity of coverage throughout the country, and in order to be able to control which drugs are eligible to be covered under this program, it will also be necessary to establish a national drug formulary (see section 7.6, below).

The Committee is aware that the final parameters of the catastrophic prescription drug insurance plan would have to be established through negotiations between all the concerned parties – the federal and provincial/territorial governments as well as supplementary drug plan sponsors and carriers.  However, the Committee feels that the basic contours of the plan it has worked out constitute a realistic and acceptable framework for implementation.

 

7.5.1   How the plan would work

To qualify for federal assistance, provinces/territories would have to put in place a program that would ensure that residents of the province/territory would never be obliged to pay out-of-pocket more than 3% of their family income for prescription drugs.  That is, personal prescription drug expenses for any family of the province/territory would be capped at 3% of the individual’s total family income. The federal government would agree to pay 90% of prescription drug expenditures in excess of $5,000 for individuals for  whom the combined total of their out-of-pocket expenses and the provincial contribution for which they were eligible was greater than $5,000 in a single year. Thus, the participating provincial/territorial governments would have to pay only 10% of the cost that exceeded $5,000 of supplying prescription drugs to families who incurred catastrophic drug expenses (i.e., those whose total drug expenses exceeded $5,000 for the year).

Text Box: To qualify for federal assistance, provinces/territories would have to put in place a program that would ensure that residents of the province/territory would never be obliged to pay out-of-pocket more than 3% of their family income for prescription drugs.

To qualify for federal assistance, sponsors of private supplementary prescription drug insurance plans would have to guarantee that no individual plan member would be obliged to incur out-of-pocket expenses that exceed $1,500 per year. That is, for private-sector plans, out-of-pocket costs for plan members would be capped at $1,500 in any given year. For plans that meet this criterion, the federal government would then agree to pay 90% of prescription drug costs in excess of $5,000 for individual plan members whose total prescription drug costs exceed $5,000 per year, with the plan paying the remaining 10%. Thus, each individual plan member’s out-of-pocket costs would be capped at either 3% of family income or $1,500, whichever is less.

Text Box: To qualify for federal assistance, sponsors of private supplementary drug insurance plans would have to guarantee that no individual plan member would be obliged to incur out of pocket expenses that exceed $1500 per year. Private supplementary drug plans would retain responsibility for drug expenses up to $5000.

Private supplementary drug plans would retain responsibility for drug expenses up to $5,000, and would be strongly encouraged to put in place a pooling mechanism to assist all plans in dealing with costs in the $1,500 – $5,000 range. Private plan sponsors would, of course, be able to offer additional benefits and enhancements beyond the minimum requirements to be eligible for federal assistance.

The net result of this new program to protect Canadian individuals and families against the consequences of severe prescription drug expenses would be that no one would ever be obliged to pay more than 3% of their family income for prescription drugs. Those who are members of a private plan that participates in the federal program would never pay more than $1,500 or 3% of their family income for prescription drugs, whichever is lower. Depending on whether or not an individual is a member of a private plan, the first $5,000 in total prescription drug expenses would be paid by some combination of individual out-of-pocket spending, public and private insurance. The federal government would then pay 90% of the prescription drug costs over $5,000 incurred by any individual in the course of a single year, with the remaining 10% of the costs over $5,000 being paid by either a provincial or a private supplementary plan.

To illustrate how this program would work in practice, consider the following example.  Three individuals each incur $10,000 in prescription drug expenses in the course of a given year.  One of them, Jane, earns $60,000 annually.  Another, Bob, earns $30,000.  Both Jane and Bob are enrolled in supplementary private insurance plans that meet the federal eligibility criteria for catastrophic prescription drug coverage.  The third, Anne, is self-employed and also earns $60,000 a year, but does not have private supplementary drug insurance.  All three live in a province that participates in the federal plan.

In Anne’s case, she would seek assistance from the provincial prescription drug insurance plan.  Since 3% of Anne’s income is $1,800, she would be entitled to receive $8,200 from the provincial plan to meet her total cost of $10,000.

In Bob’s case, his out-of-pocket expenses would be capped at $1,500 under his private supplementary drug insurance plan.  However, 3% of his income is only $900. Bob would therefore be entitled to a $600 rebate from his insurance plan, so his total out-of-pocket expenditure does not exceed 3% of his income.[5]

In Jane’s case, her out-of-pocket expenses would, like Bob, be capped at $1,500 by her private supplementary plan, but since 3% of her income ($1,800) is greater than her out-of-pocket costs ($1,500), she would not be entitled to additional assistance.

Let's now suppose that Jane and Bob get married. They still each incur $10,000 in prescription drug expenses annually, for a total of $20,000. Their family income is now $90,000 ($60,000+$30,000). Their private supplementary insurance plan caps their out-of-pocket expenses at $1,500 each, for a total of $3,000. However, 3% of their family income is only $2,700.  Jane and Bob, therefore, are entitled to receive a $300 rebate from the provincial government.

The federal government’s contribution would be paid either to the provinces or to the supplementary private insurance plans, but not directly to individuals. These payments would be made at regular pre-determined intervals (quarterly, semi-annually or annually) and claims submitted to the federal program would, of course, be subject to periodic audit to ensure that they corresponded to expenses that were actually incurred.

 

7.5.2   The benefits of the plan

Taken together, these measures would provide effective protection against catastrophic prescription drug expenses for all Canadians and offer additional benefits to those with lower incomes by capping out-of-pocket expenses at 3% of family income.  The plan also contains incentives for both the provincial/territorial governments and private supplementary plan sponsors to participate.

For the provinces and territories, the Committee’s plan is structured so that the federal government provides financial assistance for some coverage that all provinces/territories already offer, such as paying the costs of catastrophic prescription drug expenses of seniors and people on social assistance.  The federal contribution would therefore free up provincial money and enable provinces to pay for whatever improvements to provincial prescription drug plans are required to put in place the guarantee that no resident incur out-of-pocket costs in excess of 3% of his/her income. Furthermore, it shifts the onus from the provinces to the federal government to deal with the increasing incidence of very high (catastrophic) drug costs attributable to escalation in the cost of drugs themselves and the introduction of new, more sophisticated, and particularly expensive drug therapies.

Text Box: The net result would be, of course, a real step forward for those Canadians (roughly 600,000 people) who currently have no protection whatsoever against catastrophic prescription drug expenses.

Thus, even those provinces/territories that do not currently provide any coverage against catastrophic expenses for the working population under the age of 65 (and that might also have difficulty participating in a traditional federal cost-sharing program because of a lack of available provincial money to match the federal dollars) are likely to derive sufficient financial benefit under this program to allow them to meet the federal eligibility criterion.  The net result would be, of course, a real step forward for those Canadians (roughly 600,000 people) who currently have no protection whatsoever against catastrophic prescription drug expenses.

The Committee’s proposal would also help ensure the long-term sustainability of private supplementary drug insurance plans for those that agree to cap their members’ out-of-pocket expenses at $1,500 per year.  It would remove the spectre of extreme volatility in plan costs due to catastrophic drug expenses.  Moreover, potential plan sponsors who have hesitated to adopt supplementary prescription drug benefit plans in the past out of fear of potentially facing catastrophic drug costs may now be more inclined to introduce them.  This is particularly important for small and new businesses, enabling them to offer more competitive benefits packages to prospective employees than would otherwise be possible.

 

7.5.3   How much would the plan cost?

It is estimated that implementing this federal initiative to protect all Canadians against catastrophic prescription drug costs would cost approximately $500 million per year.  At the request of the Committee, this cost estimate was prepared using a large-scale micro-simulation model of national drug coverage constructed by the Fraser Group and Tristat Resources, researchers who have authored several major studies of prescription drug coverage in Canada.  Their most recent study, Drug Expense Coverage in the Canadian Population: Protection from Severe Drug Expenses, was presented to the Senate Committee on June 12, 2002.

The model by the Fraser Group and Tristat Resources is built on four key data files:

·        The Statistics Canada Survey of Labour Income Dynamics (SLID) sample of approximately 60,000 Canadian households provides the basic demographic characteristics.

·        The Statistics Canada Survey of Work Arrangements is used to establish supplementary drug coverage status.

·        The Plan Parameter File, which establishes the terms of the public and private plans, was developed from an analysis of public plan provisions and records of 80,000 employer-sponsored plans.

·        The Drug Need File, containing the estimated average annual drug expense for each age and gender group as well as the probability distribution by size of expense, is based on an analysis of supplementary drug plan claims data as well as published data from some public programs.

The entire model is balanced to aggregate benchmarks derived from macro statistics provided by the Canadian Institute for Health Information for the year 2000, adjusted for the characteristics of the sample frame used by the Statistics Canada surveys.

The Committee has added an additional cushion to the raw output from the model with a view to providing a prudent and robust estimate that is believed to overestimate somewhat the likely costs.

 

7.5.4   Committee’s Proposal for a Catastrophic Prescription Drug Insurance Plan

In summary, then, the Committee recommends that:

The federal government introduce a program to protect Canadians against catastrophic prescription drug expenses.

For all eligible plans, the federal government would agree to pay:

§         90% of all prescription drug expenses over $5,000 for those individuals for whom the combined total of their out-of-pocket expenses and the contribution that a province/territory incurs on their behalf exceeds $5000 in a single year;

§         90% of prescription drug expenses in excess of $5,000 for individual private supplementary prescription drug insurance plan members for whom the combined total of their out-of-pocket expenses and the contribution that the private insurance plan incurs on their behalf exceeds $5,000 in a single year.

§         the remaining 10 % would be paid by either a provincial/territorial plan or a private supplementary plan.

In order to be eligible to participate in this federal program:

§         provinces/territories would have to put in place a program that would ensure that no family of the province/territory would be obliged to pay more than 3% of family income for prescription drugs;

§         sponsors of existing private supplementary drug insurance plans would have to guarantee that no individual plan member would be obliged to incur out-of-pocket expenses that exceed $1,500 per year; this would cap each individual plan member’s out-of-pocket costs at either 3% of family income or $1,500, whichever is less.

 

7.6     The Need for a National Drug Formulary

It is clear to the Committee that, in order to implement its plan to protect Canadian individuals and families from catastrophic prescription drug costs in a uniform and equitable manner across the country, it will be necessary to establish a national drug formulary.  The concept of a national drug formulary was brought to the Committee’s attention by a number of witnesses during its study.

A drug formulary refers to a list of prescription drugs that are supplied under public drug insurance plans.  A “national” drug formulary does not mean that the federal government alone would be responsible for determining which prescription drugs would be on it.  Rather, a national formulary is best conceived in terms of harmonization among the federal, provincial and territorial participants together with the participation of other interested stakeholders.

As the Committee noted in Volume Four of its study, the benefits of a national drug formulary include the following:

·        Elimination of the potential for log-rolling, or pressuring one province to add a drug to its formulary because another has already done so;

·        Enhanced ability to undertake and make available nationally the research needed to understand whether the benefits of a new (and costlier) drug genuinely represent a significant improvement on existing (and cheaper) drugs.[6]

The establishment of a national drug formulary could lead the way to the creation of a single national buying agency – one that covers all provincial/territorial/federal jurisdictions.  The substantial buying power of such an agency would strengthen the ability of public prescription drug insurance plans to negotiate the lowest possible purchase prices from drug companies.

Given the plan to protect Canadians against catastrophic prescription drug costs, a national drug formulary would mean that all Canadians would receive comparable coverage and access to drugs regardless of where they lived.  It would also enable the funders of the program to exercise control over which drugs were eligible for coverage. The Committee believes that, since the federal government will be funding 90% of the cost, it is essential that the federal government be at the table when these decisions are made. Moreover, given the potential for exponential growth in the costs of new drug therapies, the funders of the program will have to agree jointly which drugs are covered under the plan. The Committee therefore recommends that:

The federal government work closely with the provinces and territories to establish a single national drug formulary.


CHAPTER EIGHT

Expanding Coverage To Include Post-Acute Home Care

8.1 Brief Review of Key Points about Home Care from Volumes Two and Four

Spending on home care in Canada (both public and private) has increased continually over the past two decades (see Figures 8.1 and 8.2).  In previous Volumes, the Committee noted that there is no consensus about what services should be included in the definition of home care. Home health care services can cover some acute care (intravenous therapy and dialysis, for example), long-term care (for individuals with degenerative diseases such as Alzheimer’s or chronic physical or mental disabilities), and end-of-life care for those with terminal conditions. In addition to health care, home care can include social support services such as monitoring, homemaking, nutritional counselling and meal preparation. It extends along a wide continuum of care.

There are two basic kinds of home care providers: formal caregivers such as nurses, therapists, and personal support workers; and informal caregivers, usually family members or friends. The 1998/99 Population Health Survey found that the majority of those who reported needing care in the home due to aging, chronic illness or disability received no formal, publicly funded care whatsoever. Between 80% and 90% of all home care provided to people with these needs is unpaid. The survey did not report the extent to which needs not paid for from public funds are being paid for privately, met by informal caregivers, or simply not met.

Text Box: The need for home care will become a major challenge as the baby boomers age, average life expectancy rises, health care delivery becomes both more de-institutionalized and more technologically complex, and as work and social patterns decrease the availability of informal care-giving by family members.

The need for home care will become a major challenge as the baby boomers age, average life expectancy rises, health care delivery becomes both more de-institutionalized and more technologically complex, and as work and social patterns decrease the availability of informal care-giving by family members. The Committee heard that home care can fulfill a number of functions, notably:

·        it substitutes for services provided by hospitals and long-term care facilities;

·        it maintains clients’ capacity to remain in their current environment, usually their homes, as an alternative to moving to another and often more costly venue such as a long-term care facility; and

·         it reduces dependency, primarily by providing monitoring at additional short-run but lower long-run costs.

Many witnesses contended that when home care is substituted for acute care – usually hospital-based care – it should be considered the same as acute care delivered in other settings and, accordingly, should be encompassed under the Canada Health Act.

Currently, each province and territory offers some form of home care program, but not as a “medically necessary” service under the Canada Health Act. Therefore, publicly funded home care programs vary greatly across the country in terms of eligibility, scope of coverage and applicable user charges. Although its provision has increased in most provinces in recent years, public spending on home care still represents a small proportion of overall provincial health care budgets.

Recent studies suggest that although home care is generally cost-effective, it is clear that in many cases institutionalized care remains more efficient, particularly for the frail elderly. Of course, institutionalized care is always more convenient for service providers.

But cost and the ease of service delivery are not the only factors to be taken into account. Many people want to receive care if it is available to them in their homes, rather than in institutions.

In Volume Four (section 8.10), the Committee outlined four options for federal contributions to the financing of home care:


1.      A National Home Care Program

Under this option, the federal government would increase its transfers to assist the provinces and territories to develop home care programs in their respective jurisdictions. The federal government would work closely with the provinces and territories to develop national home care standards, a critical issue if home care is to become a fully integrated component of Canada’s health care delivery system.


2.      Tax Credit and Tax Deduction to Home Care Consumers

The federal government could offer enhanced financial assistance to home care consumers through tax changes that build upon existing income tax provisions. Alternatively new tax incentives could be created to encourage people to put money aside for their long-term care needs.


3.      Creating a Dedicated Insurance Fund to Cover the Need for Home Care

Using a dedicated, capitalized insurance fund approach such as that suggested by the Clair Commission in Quebec, home care could be offered as benefits in kind or as monetary benefits.


4.      Specific Measures Aimed at Informal Caregivers

The reduction in in-patient hospital services has increased the burden of care on families and friends of home care patients. Currently, more than 3 million Canadians – mostly women – provide unpaid care to ill family members in the home. This option would provide further financing support for Canada’s informal caregivers, using the Canada Pension Plan (CPP) and/or Employment Insurance programs to assist those who leave the workforce temporarily to provide informal care.

 

8.2     Other Options

These options were focused on federal involvement in all three aspects of home care (substitution, maintenance and prevention). The only specific aspect that was raised in Volume Five was in relation to the development of a national health info-structure and concerned the need to invest in tele-homecare. In Volume Five, the Committee also announced its intention to produce a thematic study on the issue of home care in the near future.

In subsequent testimony, the Committee heard that it is important to consider devising a national home care strategy in stages, beginning with the function of home care as a substitute for acute care.

Health Canada showed in 1999[7] that on a national basis, one-third of home care’s clientele has acute needs and two-thirds employ its long-term services (Table 8.1).  The latter are recipients of continuing care, while the former are post-acute care recipients, usually those requiring services for a short period following hospitalization.  Recent hospital transformations through closures, mergers, reductions in lengths of stay, and changes to the size and function of hospitals have shifted the traditional home care caseload, putting greater emphasis on post-acute home care recipients.

Text Box: Recent hospital transformations through closures, mergers, reductions in lengths of stay, and changes to the size and function of hospitals have shifted the traditional home care caseload, putting a heavier emphasis on post-acute home care recipients.

Home care is no longer the preserve of the elderly.  Forty-five percent of home care recipients in Ontario are under 65 years of age and 15 percent are children.[8] Moreover, the services profiles are distinct for the two main groups of home care clients.  The post-acute care group receives care for a short period, generally less than 90 days; the other, made up primarily of elderly and disabled people, receives care on a continuing basis.  For short-term recipients, nursing services make up the lion’s share (63.0%) of home care received; the remaining services are divided between personal support (20.6%) and various other therapies (16.4%).  In contrast, for continuing care recipients, personal support is the most prevalent service (59.2%), followed by nursing care (35.5%); therapeutic services are rarely necessary.[9]


Table 8.1
Percentage of acute, long-term, and other clients, 1996-97 (jurisdictions where data are available)

Province/
Territory

Acute Care
Clients

Long-Term
Care Clients

Others

Total

B.C.

56.4

34.5

N/A

90.9

Alta.

41.0

52.0

7.0

100.0

Sask.

22.9

70.5

6.6

100.0

Que.

21.1

63.7

15.2

100.0

N.B.

53.3

46.6

N/A

99.9

P.E.I.

20.0

75.0

5.0

100.0

Y.T.

16.6

73.7

9.6

99.9

Canada

33.0

58.0

8.7

99.7

 

The Committee believes the model of home care delivery pioneered in New Brunswick should be highlighted.

 

8.3     The Extra-Mural Program in New Brunswick

Founded in 1981, under then Health Minister, now Senator, Brenda Robertson (a member of this Committee), the New Brunswick Extra-Mural Hospital (NBEMH) was Canada’s first government-funded home-hospital program. It is often cited as a possible model for other jurisdictions. Designated as a Hospital Corporation under the New Brunswick Hospital Act, its services were eligible to be insured by the province. “The mission of the NBEMH was to provide a comprehensive range of coordinated healthcare services for individuals of all ages for the purpose of promoting, maintaining and/or restoring health within the context of their daily lives.”[10]

In 1996, a major restructuring of the NBEMH took place. A change in legislation changed the status of the NBEMH from that of a Hospital Corporation to its current status as an Extra-Mural Program (EMP). Management of the existing service delivery units devolved to the eight Region Hospital Corporations (RHCs). The RHCs manage hospital facilities, community health care centres (four sites in the province), and the Extra-Mural Service Delivery Units located in their territory. While management of service delivery has been decentralized, overall direction, including development, standard setting, funding, and monitoring of the EMP is the responsibility of the Hospital Services Division of the New Brunswick Department of Health and Community Services.

Thirty service delivery sites provide for the delivery of EMP services to clients across the entire province. Staff includes clinical coordinators, liaison nurses, support staff, and field staff representing the disciplines of clinical nutrition, nursing, occupational therapy, physiotherapy, speech language pathology, social work, and respiratory therapy. All professional staff members are employees of the EMP who work in interdisciplinary teams. Support services such as homemaking and meals-on-wheels are contracted. Direct care staff provides the case-management function as well. Nursing services are available 24 hours a day, seven days a week, while all other disciplines deliver services Monday to Friday.

Clients of the program fall into one of four categories or groupings:

·        Acute Care: The objective is to facilitate early discharge or prevent admissions to more costly facilities, including hospitals; to improve or restore function through the provision of assessment and intervention in clients’ natural environments. Services include, but are not limited to, selective chemotherapy, oxygen therapy, diabetes management, IV therapy, wound care, intravenous hydration and medication administration, and post-operative rehabilitation.

·        Continuing Care: the objective is to maintain and prevent further deterioration in health/function so that individuals can remain in their current environments for as long as possible. Services include, but are not limited to, oxygen therapy; medication assessment, management, and monitoring; seating and positioning; adaptive equipment aids/prescription; support for individuals on mechanical ventilation; and group therapy.

·        Promotive/Preventive Care: The purpose is to provide information, advice, or any planned combination of educational and organizational supports to maintain or enhance health; to prevent the occurrence of injuries, illnesses, chronic conditions and their resulting disabilities.

·        Palliative Care: the objective is to provide interventions that help alleviate pain and manage the symptoms of a terminal illness; to provide support and respite to individuals and their informal support networks so individuals may die at home or delay admission to a medical care facility for as long they so choose.

Assessment, treatment, education, and consultation are a component of each type of care. The services provided are intended to promote client independence for as long as possible. At its inception the budget for the EMP was $250,000. As shown in Table 8.2, in a province with a total population of just over 750,000 it has grown into a program with a budget around $40 million. It offers an example of how it is possible to phase in a comprehensive home care program over time.

 

8.3.1   Building on the New Brunswick example: direct referrals to home care

The Committee took particular note of the fact that the New Brunswick EMP enabled doctors to refer patients directly to the program. Cheryl Hansen, Provincial Director of the EMP, told the Committee that “between 50 to 60 per cent of the EMP total caseload is for acute care services or is the acute care replacement and substitution function of hospitals.” In her brief to the Committee she further indicated that “approximately 55% of acute care clients are admitted directly from the community,”[11] without having been admitted to a hospital. The Committee highlights this aspect of the EMP in the hope that other jurisdictions will consider developing similar programs that offer the possibility of extending the range of services available to Canadians under the Canada Health Act in an effective and cost-efficient fashion.

Text Box: […] “approximately 55% of acute care clients are admitted directly from the community,” without having been admitted to a hospital. The Committee highlights this aspect of the EMP in the hope that other jurisdictions will consider developing similar programs that offer the possibility of extending the range of services available to Canadians under the Canada Health Act in an effective and cost-efficient fashion.

 

Table 8.2
Extra-Mural Program – assorted data 

 

1996-97

1997-98

1998-99†

1999-00†

2000-01*‡

Staff (FTE)

527

590

592

608

668

Separations3

10,866

11,972

12,680

13,924

19,941

Nursing Visits1, 3

270,145

275,586

295,817

326,630

282,813

Rehab. Visits2, 3

34,107

64,080

93,459

87,946

78,609

Other Visits 3

40,457

42,587

43,522

45,040

39,148

Total Visits

344,709

382,253

432,720

459,616

400,570

Gross Expenditures ($M)

$28.6

$31.7

$35.0

$37.2

$39.7

Average Cost / Visit 3

$83

$83

$81

$81

$99

Average Cost / Separation 3

$2,632

$2,662

$2,758

$2,674

$1,990

Source: New Brunswick Department of Health and Wellness, Annual Report 2000-2001.
Notes:
1.  Includes occupational therapy, physiotherapy and speech language pathology visits.
2.  Includes social work, clinical nutrition, and respiratory therapy visits .
3.  For 1999-2000 fiscal year only, due to the implementation of a new EMP information system, statistics are estimated based on activity data collected from April to September 1999.
†   Staffing and volume increases attributed to the Rehabilitation Services Plan
*   Preliminary data
‡   Statistics may vary from previous years as EMP went live with a new information system in 2000-01 (EMP Information System). Collection of statistics is according to New Brunswick MIS guidelines in 2000-01.

 

8.4     Organizing and Delivering Post-Acute Home Care

In this section and the two that follow, the Committee outlines its specific proposal for a national program to provide publicly funded insurance coverage for post-acute home care, that is, for people requiring treatment at home following an episode of hospitalization.[12]  We describe mechanisms for the financing, delivery and organization of home care following hospitalization.

Text Box: …the Committee believes it is important to focus at this time on the financing, organizing, and delivery of post-acute home care.

Although other types of home care services are also important contributors to good health, the Committee believes it is important to focus at this time on the financing, organizing, and delivery of post-acute home care. The Committee’s objective is to stimulate the development of a new national program that provides public insurance coverage for services that are now delivered to Canadians in their own residences and are not therefore covered under the provisions of the Canada Health Act. Although we do not now propose a comprehensive home care program, the Committee is convinced that it is important to begin with what we believe to be a fiscally feasible expansion of the health care safety net in Canada.

 

8.4.1   Definition of post-acute home care

Post-acute home care refers to the provision of home care services to patients who have experienced an episode of hospital care.  The first challenge to face in developing a national program for post-acute home care is in the identification and classification of home care following hospital care and linking relevant home care services to an initial episode of hospital care, whether in-patient care or same-day surgery.

Text Box: …the Committee is convinced that it is important to begin now a fiscally feasible expansion of the health care safety net in Canada. We believe our proposed program meets the test of fiscal feasibility.


8.4.1.1     When does Post-Acute Home Care (PAHC) servicing start?

Fortunately, studies have explored the definition of post-acute home care (PAHC) in the context of health service restructuring.[13] Most experts have defined post-acute home care recipients as individuals who received their first home care visit within 30 days of their in-patient or same-day hospital discharge date. Initiation of home care beyond 30 days of discharge is unlikely to be directly related to previous hospitalization.[14] An interval shorter than 30 days might exclude episodes of home care that were related to the prior hospitalization but were postponed because of scheduling or other difficulties.

Text Box: The Committee therefore proposes that post-acute home care recipients should be defined as individuals who received their first home care visit within 30 days of their in-patient or same-day hospital discharge date.

The Committee therefore proposes that post-acute home care recipients should be defined as individuals who received their first home care visit within 30 days of their in-patient or same-day hospital discharge date.

 
8.4.1.2    When does PAHC servicing end?

While there appears to be consensus in the literature on the definition of who should initially qualify as a PAHC recipient, the identification of those home care services that are relevant or attributable to the original hospitalization represents a greater challenge. The current ad hoc solution has usually been to impose an arbitrary date beyond which further in-home servicing may be presumed to be unrelated to the original reason(s) for hospitalization.  In some instances this cut-off date has been one year after discharge;[15] in other cases it has been 60days.  One rationale for use of the 60 day limit is that it is consistent with the short stay (or short term) classification of home care episodes; episodes of home care that extend beyond 60 days are then classified as long stay (or continuing care).

It is important to note, that over 50% of PAHC recipients are discharged from home care before 30 days of home care have elapsed, and almost 70% before 60 days; only 12.7% receive PAHC past six months.  The Committee has decided to adopt a cut-off date of three months, that is a period inbetween 60 days and six months.  Hence, somewhere in the range of 75-80% of PAHC recipients will have been discharged from home care before the three months have elapsed.

The Committee therefore recommends that:

An episode of PAHC should be defined as all home care services received between the first date of service provision following hospital discharge, if that date occurs within 30 days of discharge, and up to three months following hospital discharge.

 

8.4.2   Organizational arrangements for PAHC

The national estimates of the total cost of the Committee’s PAHC program will be derived below. The manner in which such funds are allocated and the mechanisms used to assign responsibility for the organization and delivery of such care are tremendously important. This section outlines mechanisms for the finance, organization and delivery of PAHC.

Control and responsibility for the organization and delivery of PAHC varies across Canada but is usually the responsibility of organizations that are distinct from hospitals.  This has created parallel sets of entrenched interests, pitting organizations responsible for hospital care against those responsible for home care, and creating conflict that has foreclosed on or restricted opportunities for service integration, stifled innovation and put unnecessary limits on service cost-effectiveness.

Therefore the Committee believes that it would be a mistake to continue to fund those organizations charged with the distinct responsibility to negotiate, select, approve, and evaluate (internal or external) contractual arrangements with home care providers.  The development (or perpetuation) of a separate program for PAHC that entails another set of vested interests would do little to ensure that funding follows the care recipient. The financing of PAHC should be first directed to hospitals, and the Committee recommends that:

 

Financing for post-acute home care should be first directed to hospitals.

There is an abundance of evidence to indicate that hospitals respond in predictable ways to financial incentives.  The introduction of service-based reimbursement, whereby hospitals are reimbursed at a fixed rate for each type of service delivered (in keeping with the Committee’s recommendations on hospital funding in Chapter Two), would provide incentives to shorten lengths of stay and to shift the hospital caseload toward day surgery and away from in-patient care.[16]  Furthermore, given the relationship between PAHC and hospital care, the introduction of service-based reimbursement for hospitals would increase their demand for PAHC.[17]

Text Box: Directing the funding for the provision of PAHC to hospitals will allow them to benefit from the potential cost-savings associated with shorter lengths of stay, thereby encouraging the uptake of home care and greater use of PAHC.

Directing funding for the provision of PAHC to hospitals will allow them to benefit from the potential cost-savings associated with shorter lengths of stay, thereby encouraging the uptake of home care and greater use of PAHC.[18] In contrast, if a separate organization were financed for the provision of in-home care, the potential cost-savings achieved through either shorter hospital stays or the use of day surgery would be much less likely to be captured, and hence, would not have a direct impact on decisions regarding service provision. 

Consequently, the Committee believes that efficiency gains in the provision of both hospital care and PAHC are better advanced through the vertical integration and joint financing of these services, and recommends that:

In order to encourage innovation and service integration, and to enhance the efficient and effective provision of necessary health care irrespective of the setting in which such care is received, a service-based method of reimbursement for PAHC should be developed in conjunction with service-based arrangements for each episode of hospital care.

Furthermore, in the Committee’s view, PAHC programs should not be restricted only to nursing and therapy services. This could lead to distorted patterns of practice because PAHC recipients, like many patients using other forms of home care, utilise a full array of home care services. Limiting the scope of services covered under the program might encourage hospitals to substitute nursing services for other kinds of personal support services that would be more cost effective, raising, rather than lowering, the aggregate cost of care. 

This point was reinforced by the experience of the New Brunswick Extra-Mural Program. In her brief to the Committee, Cheryl Hansen indicated that one of the lessons they learned was that:

The acute care substitute function of homecare requires a comprehensive team working collaboratively to meet the needs of the client and family. An essential component of acute care services is the provision of appropriate short term home support services e.g., homemaking.[…]The funding and provision of adequate short term support needs to be addressed in order for the replacement/ substitution function of homecare to occur in a fashion that ensures quality service for the client and family.[19]

For these reasons the Committee believes that the reimbursement arrangements for the provision of home care following hospital care should be flexible in order to encourage innovation and efficiency and recommends that:

The range of services, products and technologies (including prescription drugs) that may be used to facilitate the use of home care following hospital care not be restricted.

 

8.4.3   Who provides PAHC?

The Committee recognizes that the methods by which PAHC is organized and delivered is a separate question from how these services are funded, and that many different forms of service delivery are feasible.  In some circumstances, hospitals may provide the services themselves; in others, hospitals may contract with not-for-profit or for-profit home care service providers; in yet other circumstances, hospitals may contract with third-party agencies that sub-contract with home care service providers.

Text Box: In some circumstances, hospitals may provide the services themselves; in other situations hospitals may contract with not-for-profit or for-profit home care service providers, or in other circumstances hospitals may contract with third party agencies that sub-contract with home care service providers.

The organizational options for PAHC are many and offer a variety of potential benefits.  First, the establishment of separate third party home care agencies may present some hospitals with an opportunity to pool resources and gain economies of scale in service provision, despite the potential to incur additional contracting and other administrative costs. 

Second, hospitals may develop dedicated in-home service teams to deal with the particular community circumstances faced by care recipients. 

Finally, hospitals may contract-out (or out-source) the provision of PAHC to home care service providers. This arrangement has a number of advantages. It can permit service specialization by providers familiar with circumstances in the community; it offers the prospect of service integration between hospital and PAHC; and it yields opportunities to take advantage of cost savings associated with improvements in patterns of care.

The Committee therefore recommends that:

Hospitals have the option to develop contractual relationships directly with home care service providers or with transfer agencies that may provide case management and service provision arrangements.

Regardless of the organizational arrangement selected, the providers of PAHC should receive service-based reimbursement.  As described in detail in Chapter 2, the amount of money a provider is paid under service-based funding depends on the acuity of the case being treated. Thus, service-based funding levels would be determined by clinical guidelines. This method ensures that the PAHC service providers receive a flat rate for their services to a specific patient, thereby encouraging service innovation and integration, and enhancing the efficient and effective allocation of health care services.

Text Box: Regardless of the organizational arrangement selected, the providers of PAHC should receive service-based reimbursement.

Reimbursing home care service providers with a fixed, predetermined payment offers a number of incentives.  First, providers may retain residual income and therefore have the incentive to select the most efficient ways of delivering services.  Second, to take advantage of economies of scale and scope, both vertical and horizontal service integration may occur.  Such integrated organizations may be in a better position than other organizations to delegate tasks cost-effectively and improve the continuity of care.  Third, to the extent to which payment exceeds the costs incurred in service provision, incentives exist for such organizations to compete for additional care recipients.[20] 

However, there is a negative incentive given that this reimbursement method also tends to encourage the avoidance of care recipients with high service needs, i.e., “cherry-picking.”  Also, in the absence of a vigilant program of evaluation, organizations may be tempted to skimp on service provision, potentially leading to diminished quality of care.  Consequently, the determination of an appropriate risk-adjusted service-based payment that closely reflects the service needs of PAHC recipients and the introduction of a systematic program of outcome performance, are policies that must be developed in concert with modified funding schemes to ensure cost-effective and uniformly accessible PAHC of high quality.

The Committee therefore recommends that:

Contracts formed with home care service providers should include, in addition to service-based reimbursement arrangements, mechanisms to monitor service quality, performance and outcome.

 

8.5     The Cost of a National Post-Acute Home Care Program

8.5.1   How to calculate the cost of a national PAHC program

As shown in Figure 8.3 (at the end of this chapter), there are wide interprovincial variations in per capita public home care expenditures in Canada, variations that persist even after adjusting for the age-sex composition of the underlying population.  While the average per capita public funding for home care in fiscal year 2000 was $87.51, there was a four-fold variation in such expenditures, ranging from the highest in New Brunswick ($193.76) to the lowest in Prince Edward Island ($47.85) and Quebec ($51.89).[21]   These variations are due, in part, to the extent to which the provincial publicly funded home care program is extensive (as it is in New Brunswick) or quite restricted (as it is in Prince Edward Island and Quebec).

Nationally, public home care expenditures were $2,690.9 million in fiscal year 2000.[22] In order to identify the proportion associated with PAHC, the Committee used methods based on previous work in Ontario for the Health Services Restructuring Commission.[23] All home care recipients were identified for fiscal year 1997 and assigned to one of four mutually exclusive categories, as shown in Figure 8.4 (at the end of this chapter), based on their use of home care in relation to an episode of hospital care. 

Home care recipients were first classified according to whether they had had an episode of hospital care, whether inpatient or same-day surgery, during fiscal year 1997.[24]  If they had had an episode of hospital care, the pattern of home care provision within 30 days of discharge was analyzed.  If the first home care visit following hospital discharge took place within thirty days, the pattern of use of home care services in the 30 days prior to hospitalization was analyzed.  Accordingly, the four home care recipient categories were: no hospitalization; no PAHC; PAHC without prior home care; and PAHC with prior home care.

The use of home care services and the average cost of such services were analyzed for one year following either the first home care service date (for recipients who did not receive PAHC) or the first home care service date following hospital discharge (for recipients who received PAHC).

Two estimates are offered for the proportion of total home care costs attributable to PAHC.  The first (high) estimate is based on the proportion of home care recipients that received PAHC, while the second (low) estimate is based on the proportion of expenditures attributable to such care.  While 42.8% of home care recipients received PAHC services, only 26.5% of total home care expenditures were attributable to such care.  The use of both estimates on which to base the cost of a national PAHC program recognizes the uncertainty associated with developing cost estimates for a program of this kind, given the absence of a health information system relating to the use of home care services.

 

8.5.2   What about hidden costs?

In addition to home care service costs, other costs associated with the provision of PAHC are hidden in other provincial spending categories.  Drug costs are a major item that is hidden.  For fiscal year 2001, the Ontario Drug Benefit (ODB) program expenditure attributable to home care recipients was estimated at $86.8 million.[25] While this amount probably underestimates provincial drug program costs associated with the provision of home care, it may be used to approximate the hidden costs associated with the provision of PAHC.[26]

 

8.5.3   How much will a national PAHC program cost?

A calculation done for the Committee combined estimates of the hidden costs with those for the direct service costs and, converting to 2002 dollars, used the growth in home care funding in Ontario between fiscal years 2000 and 2002 of 11.9% and estimated the cost of providing post-acute home care for a one-year period following hospitalization. This yielded a total cost estimate for a national PAHC program of between $1,021.1 million and $1,511.8 million for fiscal year 2002.[27]  Given that the Committee has recommended a period of three months’ coverage, it is legitimate to fix the estimated cost of the program at approximately $1,100 million per year. The Committee recognizes that this estimate is probably somewhat high.

 

8.6     Paying for Post-Hospital Home Care

The Committee believes the cost of a national PAHC program should be shared equally between the provincial and federal governments. It therefore recommends that:

The federal government establish a new National Post-Acute Home Care Program, to be jointly financed with the provinces and territories on a 50:50 basis.

This brings the total cost (in fiscal year 2002 dollars) of a National PAHC Program to be borne by the federal government to approximately $550 million per year.

It is also necessary to ask, however, whether the person receiving the home care – the patient – should also contribute to the cost of this expansion of publicly insured health care services. There are two ways of looking at this question.

The first is that the need for this expanded service arises as a result of the individual’s having been in hospital and that the service is therefore simply an extension of hospital care which, under Medicare, should be “free” to the patient and paid entirely out of public funds. Moreover, one advantage of implementing this option of providing first-dollar coverage is that, since the full cost of home care coverage will be paid by the PAHC program, there is no reason for patients to object to shorter hospital stays. That is, no disincentive is introduced to the transfer of patients from high-cost hospital care to less expensive non-hospital care. This increases the likelihood of realizing efficiency gains for the health care system as a whole.

The second approach is that since patients are, for the most part, paying currently for at least some aspects of this home care service, it is reasonable that patients continue to pay a small part of the cost, provided that the actual dollar amount paid by the patient is adjusted in proportion to his or her income. The amount paid by the individual patient should be small enough to meet the test of the Committee’s second objective for publicly funded health care, namely, that no Canadian should suffer undue financial hardship as a result of having to pay health care bills.

One method that has been suggested for implementing this second approach involves treating insured services as taxable benefits. Using this model, at the end of each year, people who had received services under the PAHC program would be sent a statement from the provincial government indicating the total cost of the home care services obtained. This cost would then become a taxable benefit. Patients could be protected against undue financial hardship as a result of having to pay this increased tax by capping the maximum amount of additional income tax any individual would have to pay at 3% of the individual’s income.

This second view holds also that any new public money spent for expanded health care services should benefit those Canadians who can least afford to pay for these services; those who can afford to make a financial contribution to the cost should do so. Only by adopting this approach to the expansion of the public health care system, this argument continues, can Canada afford to close the widening gaps in the health care safety net. Indeed, this is one of the reasons the Committee’s proposal for an insurance program to protect Canadians against catastrophic drug costs includes an element of “patient pay.”

Nevertheless, with respect to its proposed new PAHC program, the Committee, after considerable reflection, agrees with the first view. Although it is concerned about the precedent of first-dollar coverage for expanded publicly funded services, the Committee believes that the advantages in terms of encouraging efficiency – encouraging the transfer of patients from higher-cost hospital beds to lower-cost home care beds – and equity, outweigh the disadvantages. With respect to the expansion of public health insurance to include post-acute home care, the Committee therefore recommends that:

The PAHC program be treated as an extension of medically necessary coverage already provided under the Canada Health Act, and that therefore the full cost of the program should be borne by government (shared equally by the provincial/territorial and federal levels).



Figure 8.4:  Home Care Recipients and Mean Expenditures (in 2002 Dollars)

 

 



CHAPTER NINE

Expanding Coverage to Include Palliative Home Care

Throughout the different phases of the hearings, the importance of palliative and end-of-life care was brought to the Committee’s attention. Palliative care is a special kind of health care for individuals and families who are living with a life-threatening illness that has reached such an advanced stage that death is on the horizon.

The goal of palliative care is to provide the best possible quality of life for the terminally ill by ensuring their comfort and dignity and relieving pain and other symptoms. Palliative care is designed to meet not only the dying person’s physical needs but also his or her psychological, social, cultural, emotional and spiritual needs and those of his or her family as well.

9.1     The Need for a National Palliative Home Care Program

Palliative care can be offered in a variety of places — at home, in hospitals, in long-term care facilities, and occasionally in hospices. As was reported by the Senate Subcommittee to Update Of Life and Death in June 2000, palliative care services in Canada are often fragmented and frequently nonexistent. Patients may not have access to palliative care services until very close to death and in many cases not at all. The report also indicated that palliative care in hospitals is usually paid for by a provincial health plan, which typically covers professional care and drugs, medical supplies, and equipment while the person remains in the hospital. In long-term care facilities, however, residents may be required to pay varying amounts for their care and supplies.

Text Box: The Committee believes that there is a clear need to ensure that proper palliative care is universally available, and that it is provided in a manner that respects the wishes of the dying person and his or her loved ones.

The Committee believes that there is a clear need to ensure that proper palliative care is universally available, and that it is provided in a manner that respects the wishes of the dying person and his or her loved ones.

Different components of the health care system are involved in the many facets of palliative, end-of-life care.  From a policy perspective, it is important that the federal and provincial/territorial governments work together to ensure that Canadians are well cared for and have choice in care at the end of their lives.

The Committee recognizes the importance of providing access to palliative care services for Canadians of all ages and across all relevant sectors of the health care system, hospitals, hospices, community services, as well as non-governmental organizations. It also recognizes that enabling universal access to palliative care services at all of these sites would require major changes that would be very hard to implement.

Recent studies have estimated that while over 80% of Canadians die in hospital, fully 80-90% of Canadians would prefer to die at home, close to their families, living as normally as possible. But the services necessary in the home are often not available. Where they do exist it is usually as result of initiatives taken at the community level or by local institutions and regional health authorities, rather than as a consequence of government policy intended to reach the whole Canadian population.

Text Box: While the Committee is aware that there are important limits to what the federal government can achieve directly in this area, it is nonetheless convinced that it is essential for the federal government to make a substantial contribution to making palliative care services available to Canadians in their homes.

The Committee is convinced that it is essential for the federal government to make a substantial contribution to making palliative care services available to Canadians in their homes. However, it has proven impossible to obtain the data that would permit accurate estimates of the cost of a national palliative home care program. None of the experts or potential sources of accurate statistical information on palliative care with whom the Committee consulted had detailed costs on palliative home care. Nonetheless, the Committee believes the federal government should set aside the funds now to cover the initial costs of a program that should be developed in conjunction with the provinces and territories and paid for on a 50:50 cost-sharing basis. The Committee therefore recommends that:

The federal government agree to contribute $250 million per year towards a National Palliative Home Care Program to be designed with the provinces and territories and co-funded by them on a 50:50 basis.

 

9.2     Financial Assistance to Caregivers Providing Palliative Care at Home

In addition to helping establish a national program to pay the costs of end-of-life care for Canadians who choose to die in their own homes, there are also other measures that the federal government should consider in order to alleviate the burden that now falls on the shoulders of thousands of informal caregivers. These are discussed in this section and the ones that follow.

Text Box: In addition to helping to establish a national program to pay the costs of end-of-life care for Canadians who choose to die in their own homes, there are also other measures that the federal government should consider in order to alleviate the burden that now falls on the shoulders of thousands of informal caregivers.

Most of the costs of care in the home are currently assumed by the dying person’s family. During Phase Two of its study, the Committee was told that, in general, the majority of informal caregivers are women who must often simultaneously manage responsibility both for aging parents and their own children while also holding down full-time paid work. This combination of responsibilities can not only lead to stress-related illness and loss of work time for the caregiver, but may also increase the risk of neglect and mistreatment of those receiving care.

In its 1999 report, Caring about Caregiving: The Eldercare Responsibilities of Canadian Workers and the Impact on Employers, the Conference Board of Canada found that 48% of those providing personal care in the home said it was very difficult to balance their personal and job responsibilities; 42% of them experienced a great deal of stress in trying to juggle their various roles; 57% felt that they did not have enough time for themselves; 53% cut back on sleep; and 44% had experienced minor health problems in the past six months.

These statistics, which apply to all caregivers at home and not just those delivering palliative care, illustrate how reliance on informal caregivers imposes costs on Canadians, while at the same time saving the health care system money. If care were not provided informally, in all likelihood greater costs would be incurred by hospitals and other providers.

In Volume Four, the Committee insisted on the importance of providing support to informal caregivers. It recognized that current tax provisions are inadequate to compensate informal caregivers for the time and resources they provide. The Committee highlighted the fact that the National Advisory Committee on Aging (NACA) had recommended that the Canada Pension Plan (CPP) and the Employment Insurance (EI) program be adjusted to accommodate individuals who leave the workforce temporarily to provide informal care.

Text Box: Many working Canadians are faced with stark choices as they try to balance the need to provide for their family with caring for a terminally ill family member. Minimizing the amount of lost income during this temporary but very difficult period would be an important first step toward improving the situation facing family caregivers of dying individuals.

With increased support in the form of a policy to provide caregivers with financial and information resources, dying Canadians would have access to quality care and would be able to choose where they wished to spend their final days. Increased assistance to caregivers would ensure that they have the knowledge, skills, income security, job protection and other supports they require to provide care to the dying while maintaining their own health and well-being throughout the dying and grieving process.

Many working Canadians are faced with stark choices as they try to balance the need to provide for their family with caring for a terminally ill family member. Minimizing the amount of lost income during this temporary but very difficult period would be an important first step toward improving the situation facing family caregivers of dying individuals.

In Volume Four, the Committee referred to statistics from NACA that estimated that providing benefits through the EI system to persons leaving the workforce to care for an ailing relative would increase the overall cost of EI by about $670 million per year. This estimate was based on the total number of caregivers and a 10-week period of benefit payment. Using figures from Statistics Canada on the actual number of palliative care patients, and reducing slightly the period of eligibility for benefits, the Committee has determined that the overall cost to the EI system for providing benefits to informal caregivers who were caring for palliative care patients would be significantly less than NACA had calculated.

In 1999, 219,530 Canadians died. Not all, however, required palliative care. By eliminating accidental deaths and certain types of illness, the Committee has determined that approximately 160,000 Canadians can be expected to require palliative care in any given year. Using the average EI rate of $257 per week and a period of 6 weeks (instead of the 10-week period used by the National Council on Aging), providing EI benefits to individuals providing palliative care in the home would cost approximately $240 million per year. The Committee believes that up to six weeks of leave should be granted to employees who provide palliative care to a dying relative at home, and that the federal government should consider allowing employees who take advantage of this leave to be eligible to receive EI benefits. The Committee therefore recommends that:

The federal government examine the feasibility of allowing Employment Insurance benefits to be provided for a period of six weeks to employed Canadians who choose to take leave to provide palliative care services to a dying relative at home.

 

9.3     Caregiver Tax Credit

The Employment Insurance system is not the only avenue that exists for providing support to caregivers. Tax credits are another option. The 1998 budget recognized that families caring for an ill loved one required government assistance, and implemented a tax credit that applies to individuals residing with, and providing in-home care for, an elderly parent or grandparent or an infirm, dependent relative. This credit reduces combined federal-provincial tax by up to $600.

The federal government also provides a medical expense tax credit. This credit allows Canadians to deduct the cost of certain medical devices, aids or equipment. A number of other tax credits also exist, including the disability tax credit and the attendant care expense deduction.

The Committee recommends that:

The federal government examine the feasibility of expanding the tax measures already available to people providing care to dying family members or to those who purchase such services on their behalf.

 

9.4     Job Protection

Under the Constitution, the provinces have the primary responsibility for labour legislation, including job protection. However, there are areas that fall under federal jurisdiction, including the federal public service, military personnel, and individuals working in federal penitentiaries. People employed in these areas are governed by the Canada Labour Code and the Treasury Board assumes responsibility for employees of the federal government.

With regard to job protection, it would be possible for the federal government to take a leadership role in ensuring that people under its jurisdiction who take time off from work in order to care for a dying relative not endanger their employment status. The Committee therefore recommends that:

The federal government amend the Canada Labour Code to allow employee leave for family crisis situations, such as care of a dying family member, and that the federal government work with the provinces to encourage similar changes to provincial labour codes.

Furthermore, the federal government could take additional steps with regard to its own employees. The Committee recommends that:

The federal government take a leadership role as an employer and enact changes to Treasury Board legislation to ensure job protection for its own employees caring for a dying family member.

 

9.5     Concluding Remarks

The federal government can provide strong leadership and support for dying Canadians and their families, in particular by ensuring that Canadians who choose to die at home have access to the services that they need to do so with dignity. A new cost-shared palliative home care program would represent a major step toward making this possible.

Text Box: The federal government is in a position to provide strong leadership and support for dying Canadians and their families, in particular by ensuring that Canadians who choose to die at home have access to the services that they need to do so with dignity.

As well, the additional measures recommended in this chapter would significantly improve the situation confronting family members who care for the dying at home. The Employment Insurance option would provide immediate financial assistance. Moreover, it would likely trigger job protection legislation in the provinces, as did extended maternity benefit legislation. The disadvantage of this option is that it is only available to insured workers. Tax credits, on the other hand, have the advantage of providing broader coverage. However, such credits do not offer earnings replacement during the time of need, nor would they likely help to initiate job protection legislation.

Taken together, all the measures recommended in this chapter constitute a package that, if implemented, would mark real progress towards making quality end-of-life care for Canadians a reality.


[1] Most of the information provided in this section is based on data from the Canadian Institute for Health Information, Drug Expenditure in Canada, 1985-2001, Ottawa, April 2002.  The media release for this report is available on CIHI’s Website at http://secure.cihi.ca/cihiweb/dispPage.jsp?cw_page=media_24apr2002_e

[2] Stephane Jacobzone, Pharmaceutical Policies in OECD Countries: Reconciling Social and Industrial Goals, Occasional Paper No. 40, Labour Market and Social Policy, OECD, April 2000 (www.oecd.org).

[3] This section is based on information provided by Fraser Group/Tristat Resources, Drug Expenses Coverage in the Canadian Population: Protection From Severe Drug Expenses, August 2002. This study was sponsored by the Canadian Life and Health Insurance Association at the request of the Committee.

[4] While this is not a common occurrence, approximately 4,000 individuals in private plans exceeded this level of expense in 2000. A comparable figure for public plans is not available.

[5] Note that it should be possible to work out a payment plan that enables people who are not in a position to wait for a rebate from the government at the end of the year to benefit from a credit at the point of purchase, or some similar scheme to reduce their actual out of pocket expenses to a manageable limit.

[6] Volume Four, p. 71.

[7] “Provincial and Territorial Home Care Programs: A Synthesis for Canada,” Health Canada, June 1999.

[8] Laporte A, Croxford R, Coyte PC: Access to home care services The role of socio-economic status. Presentation at the Canadian Health Economics Research Association Conference, Halifax, May 2002.

[9] Ibid.

[10] Brief to the Committee, p. 3.

[11] Brief to the Committee, p. 3.

[12] The Committee wishes to acknowledge the invaluable assistance of Dr. Peter Coyte in the preparation of its proposal for the development of a national publicly funded program for post-acute home care. Professor Coyte is Professor of Health Economics and CHSRF/CIHR Health Services Chair at the University of Toronto. He is also the Co-Director of the Home and Community Care Evaluation and Research Centre, and the President of Canadian Health Economics Research Association. Many of the specific recommendations were developed by Professor Coyte in a background paper prepared at the request of the Committee.

[13] Coyte PC, Young W: Regional variations in the use of home care services in Ontario, 1993/1995. Canadian Medical Association Journal, 161:4, 376-380, 1999; Coyte PC, Young W: Reinvestment in and use of home care services, Technical Report No. 97-05-TR, Institute for Clinical Evaluative Studies: Toronto, Ontario, November, 1997; Coyte PC, Young W, DeBoer D: Home care report for the Health Services Restructuring Commission. Report to the Health Services Restructuring Commission, Health Services Restructuring Commission: Toronto, 1997.

[14] Hollander M: The costs, and cost-effectiveness of continuing care services in Canada. Queen's-University of Ottawa Economic Projects Ottawa,1-113, 1994; Coyte and Young (1999); Coyte and Young (1997); Coyte, Young and DeBoer (1997); Kenney GM: How access to long-term care affects home health transfers. Journal of Health Politics Policy and Law, 83: 412-414, 1993.

[15] Coyte and Young (1999); Coyte and Young (1997); Coyte, Young and DeBoer (1997).

[16] A variety of studies have explored the classification of linked episodes of hospital care and PAHC. Based on the work performed for the Health Services Restructuring Commission in Ontario, for example, each inpatient and same day surgery hospitalization could be assigned to one of twenty-five mutually exclusive and exhaustive Major Clinical Categories (MCCs) in the case of inpatient care, and one of six Day Procedure Groups (DPGs) in the case of same day surgery. [Coyte and Young (1999); Coyte and Young (1997); Coyte, Young and DeBoer (1997); Kenney (1993); Canadian Institute for Health Information: Length of stay database by CMG. Ottawa. Canadian Institute for Health Information, 1994. Canadian Institute for Health Information: DPG booklet. Ottawa. Canadian Institute for Health Information. 1996.]

[17] Kenney (1993); Kenney GM: Understanding the effects of PPS on Medicare home health use. Inquiry, 28: 129-139, 1991.

[18] Kenney (1993).

[19] Brief to the Committee, June 17, 2002, p. 7.

[20] Valdeck BC, Miller NA: The Medicare home health initiative. Health Care Financing Review, 16:1, 7 – 16, 1994; Phillips BR, Brown RS, Bishop CE, et al: Do preset per visit payments affect home health agency behaviour? Health Care Financing Review, 16:1, 91‑ 107, 1994.

[21] Health Canada: Health expenditures in Canada by age and sex 1980-81 to 2000-01. Health Policy and Communications Branch, Health Canada: Ottawa, August, 2001.

[22] Ibid.

[23] Coyte and Young (1999); Coyte and Young (1997); Coyte, Young and DeBoer (1997).

[24] See Figure 8.4.

[25] Peter Coyte, Personal Communication, Mr. Carl Marshall, Associate Director, Administration, Finance and Eligibility, Drug Programs Branch, Ontario Ministry of Health and Long -Term Care, 2002.

[26] Suppose the identified ODB program expenditures attributable to home care only represents the hidden costs incurred by those under sixty-five years of age during their home care episode.  Under this assumption, estimates of the hidden costs associated with an episode of home care are $627.97 (in 2001 dollars). Since these costs are assumed to be uniform across all categories of home care recipients, they may be used to compute a “hidden cost” inflation factor for PAHC.  This inflation factor may be defined as one plus the ratio of the hidden costs ($627.97) to the cost per PAHC recipient.  The latter depends on the home care costs attributable to PAHC recipients divided by the number of such recipients (137,915 from Figure 4).  Using figures from Ontario, in conjunction with the high estimate for PAHC costs, the hidden cost inflation factor is (1.1731), while this factor is (1.2796) when using the low estimate for PAHC costs.

[27] The low estimate was calculated as $2,690.9 million * 1.119 * 0.265 * 1.2796, while the high estimate was derived as  $2,690.9 million * 1.119 * 0.428 * 1.1731. 


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