Standing Senate Committee on Social Affairs, Science and Technology (37th Parliament, 1st Session)

Past Session:

The Health of Canadians – The Federal Role

Interim Report

Volume Four – Issues and Options

Chapter One:

Introduction

In December 1999, during the Second Session of the Thirty-Sixth Parliament, the Standing Senate Committee on Social Affairs, Science and Technology received a mandate from the Senate to study the state of the Canadian health care system and to examine the evolving role of the federal government in this area. The Senate renewed the mandate of the Committee in the First Session of the Thirty-Seventh Parliament. The terms of reference adopted for the purpose of this study read as follows:

That the Standing Senate Committee on Social Affairs, Science and Technology be authorized to examine and report upon the state of the health care system in Canada. In particular, the Committee shall be authorized to examine:

The fundamental principles on which Canada’s publicly funded health care system is based;

The historical development of Canada’s health care system;

Publicly funded health care systems in foreign jurisdictions;

The pressures on and constraints of Canada’s health care system;

The role of the federal government in Canada’s health care system.

In response to this broad and complex mandate, in March 2001, the Committee re-launched its multi-year and multi-faceted study comprising five major phases. Table 1 provides information on each individual phase and their respective timeframes.

TABLE 1

HEALTH CARE STUDY:
INDIVIDUAL PHASES AND PROPOSED TIMEFRAMES

Phase	Content	Timing
One	Historical Background and Overview	Winter/Fall 2000
Two	Future Trends, Their Causes and Impact on Health Care Costs	Fall 2001
Three	Models and Practices in Other Countries	Fall 2001
Four	Development of Issues and Options Paper	Fall 2001
Five	Hearings on Issues and Options Paper and Development of Final Report and Recommendations	Fall 2001/Winter 2002

This report constitutes volume four of a series of five reports by the Committee on the health of Canadians and on the federal role in health and health care. In this report, the Committee identifies key public policy issues with respect to the role of the federal government and presents a set of potential options for addressing these issues. In the Committee’s opinion, federal and provincial policy makers, health care stakeholders, and the Canadian public should all consider these issues and options, given that they relate to the long-term sustainability of Canada’s health care system.

During October and November 2001, the Committee intends to hold extensive public hearings across the country on the issues and options presented in this report. More precisely, the Committee will hold hearings in Vancouver, Edmonton, Regina, Winnipeg, Toronto, Montreal, Fredericton, Charlottetown, Halifax and St. John’s. Then, in January 2002, the Committee will present its fifth and final report in which it will summarize the key findings obtained during these public hearings and present the Committee’s recommendations for addressing the public policy issues presented in this report.

The issues and options discussed here have been developed on the basis of the evidence presented to the Committee during the first three phases of its study on health care. The evidence garnered from hearings with expert witnesses has been presented in great detail in the Committee’s first three reports on the role of the federal government in health and health care:

The first report recounts the history of how the federal government helped the provinces to fund hospital and physician care. It focuses in particular on the initial objectives of the federal government’s involvement in health care and raises some questions about the future role of the federal government in light of the changing health care environment (e.g. increased recourse to drug therapy, hospital out-patient services, home care and community care). This first report also traces the evolution of health care spending and health indicators over the past several decades. Finally, it looks at a number of the myths that are still current concerning the delivery and financing of health care in Canada and clarifies the reality surrounding each of these myths. The objective of the first report was to provide factual information as well as to clarify the major current misconceptions that recur in the health care debate in Canada.
The second report reviews the major trends that are having an impact on the cost and the method of delivery of health services, and the implications of these trends for future public funding. In particular, the report focuses on the pressures associated with the changing demographics of the Canadian population, the increasing use and growing cost of drugs and technology, and developments in the delivery of health services (e.g. the increased use of out-patient, home care, telehealth). This report also considers issues surrounding health research, health human resource planning (including the shortage of health care providers), rural health, disease trends and the health of Canada’s Aboriginal population. Finally, it examines how a health info-structure could help improve the delivery of health services in the future.
The third report describes and compares the way that health care is financed and delivered in several other countries (Australia, Germany, the Netherlands, Sweden, the United Kingdom and the United States), and the objectives of national government health care policy in those countries. It highlights those policies and reforms from which Canada could learn. The report also examines briefly the operation of medical savings accounts systems (MSAs) in Singapore, South Africa, the United States and Hong Kong.

The Committee learned a great deal in the course of the first three phases of its study and it has shared its findings in the three reports referred to above. The Committee hopes that people will consult the first three reports as background to the discussion of the policy options that are the focus of this fourth report.

However, the Committee feels it is useful to highlight a number of the conclusions it has drawn from its study to date, as these help set the stage for the next phase of the Committee’s work. The following section summarizes some of the main findings and observations from the first three phases of its study.

Chapter Two:

Summary of Main Findings and Observations from Phases One, Two and Three

2.1 Main Findings and Observations from Phase One

The definition of "medically necessary services" that guarantees Canadians access only to health services provided by doctors or in hospitals, no longer allows health services to be delivered in a way that corresponds to the reality of the 21^st century health and wellness needs of the Canadian population, nor does it even fully reflect the range of services that are actually covered under the different provincial health care insurance plans.
The more services we include in the definition of "medically necessary", the more costly the public health care system becomes. Broadening this definition raises the question of how these services should be paid for, and how excessive costs can be prevented. The question of precisely what services should be covered by government, what services should be paid for by employers, and what services should be paid for by individuals out of their own funds, either partially or fully, directly or through private insurance, is one that requires full public debate.
Canadians have opted for universal public health care insurance on the grounds of compassion, equity and fairness. The patient-centred principles of the Canada Health Act continue to express fundamental values of Canadian society. In fact, the Act has now attained iconic status.
The mechanism of a single payer to achieve the four patient-oriented principles of the Canada Health Act appears to be sound. The underlying principle of "public administration," however, is not as well understood and may need to be revisited in light of developments in the delivery of health services.
Only on three occasions has the federal government resorted to financial penalties and reduced its transfers to some provinces that were permitting extra-billing or imposing user charges. However, the federal government has never applied the discretionary penalties for failure to comply with the five principles of the Canada Health Act, despite periodic complaints regarding portability, comprehensiveness and accessibility.
Private spending already accounts for a significant and increasing proportion (approximately 30%) of total health care spending in Canada. The structure of the Canadian Medicare system, with its focus on physician and hospital costs only, has contributed noticeably to this situation.
Provincial governments are already devoting on average over one-third of their overall budget to health care; hence, the provinces have insisted on the necessity for stable and predictable federal transfers. Experts, however, agree that the need for a more stable formula for federal funding must be balanced against concerns of adequacy, affordability and sustainability as they affect both levels of government. Moreover, spending more public money on health care could mean that less was available for investment in non-medical areas that also greatly affect health.
Canadians remain deeply attached to their health care system, and want governments at all levels to address their growing concerns about its long-term viability and sustainability, and in particular, they want government to ensure more timely access to health services.
The federal government has played, and continues to play, a crucial role in promoting the health of Canadians and in financing the health care system. The issue is not whether there is a role for the federal government, but rather how the current federal role should change to adapt to contemporary realities in order to help guarantee the long-term sustainability of a high quality health care system.
Changing public expectations have already had a major impact on the shape of Canada’s publicly funded health care system, moving it away from its origins as public insurance against catastrophic medical costs towards a system that is under constant pressure to continuously expand the set of services that are expected to be provided "free" to the consumer. Dealing with expanding public expectations is thus a major challenge facing anyone who wants to reform the system.

2.2 Main Findings and Observations from Phase Two

Cost pressures on the system are real and multidimensional. They are likely to continue to grow with the introduction of new and more expensive drugs and technology, and especially over the next 20-30 years as the peak of the baby boom generation ages. It is therefore important to focus on these cost pressures as we think about how to sustain and renew Canada’s health care system.
The economic burden of illness has been estimated at $156 billion for Canada in 1998 (both direct and indirect costs). Trends in diseases and injuries can therefore have a significant impact on current and future costs of health care. It has been strongly suggested that increasing efforts in the area of health promotion and disease prevention, with a particular focus on Canadians with low incomes and low levels of education and literacy, should be key areas in public policy if we are to improve overall health status and contain health care costs.
While many Canadians enjoy high levels of health, and although Canada ranks well above most other countries in terms of the majority of health status indicators, there is definitely room for improvement. There remain disparities in health associated with age, socio-economic conditions, gender, geographic location, and so on. The health status and the socio-economic conditions of the Aboriginal population in Canada is particularly deplorable.
Enhancing the health of Canadians involves more than just curing illness. There are many complex determinants of health that interact with one another, and fostering well-being means finding ways to take them all into account. Since a multiplicity of factors determines the health of a population, there is clearly a need for collaboration and intersectoral action.
While women provide more than 80% of the paid and unpaid health care, they are only a minority of the policy and management decision makers. This means that there is a particular need to assess the consequences of health care reforms on women.
Canada’s health care system is already having difficulty attracting and training the personnel it needs in many disciplines (in the context of a growing world-wide shortage of health care human resources). Given the relative labour intensity of the health care sector, the human resource problem is more critical than any other single problem facing the system. As well, we are experiencing real problems in keeping up with the introduction of new, but very expensive, drugs and technologies that Canadians rightly expect to be made available to meet their health care needs.
Canada needs a robust, integrated and proactive health research sector. However, Canada does not compare favourably with its major competitors in terms of the amount of public funding devoted to health research. The role of central governments in the United States, the United Kingdom, France and Australia in financing health research, expressed in purchasing power parity (PPP) per capita, is much greater than it is in Canada.
It is generally agreed that rapid advances in genetics and genomics will revolutionalize health care delivery in unprecedented ways. This points to the need for multidisciplinary research that will examine the societal costs, benefits, ethical considerations and potential unintended impact of advances in genetic and genomic research.
We must move away from only tracing dollars and inputs in health care and move towards linking these inputs to health outcomes. We need to start measuring the quality and effectiveness of the health care system by its outputs, not exclusively by its inputs. This is essential if we are to know how to spend government funds more wisely in the future.
The development of a pan-Canadian health infostructure would lay the foundation for evidence-based decision-making in areas that affect the delivery of health care and the well-being of the population. An infostructure would also enhance the accountability of all players involved in the health care system – governments, providers, and patients. Canada is currently seriously deficient in this area and it is imperative to foster and maintain our capacity to manage health information.

2.3 Main Findings and Observations from Phase Three

Proposals for a "big bang" overhaul of Canada’s health care system are unlikely to achieve widespread consensus. Nonetheless, major changes may be needed if the hopes and aspirations of Canadians are to be met.
No single international model constitutes a blueprint for solving the challenges confronted by the Canadian health care system. Moreover, experts told the Committee that careful consideration must be given to the repercussions in Canada of introducing, on a piecemeal basis, changes undertaken in other countries. However, health care systems do share common features and face similar problems and pressures. Canada can learn a great deal from the experience gained elsewhere.
Many countries with a similar share of public health care spending provide coverage that is much broader than Canada, encompassing such items as prescription drugs, home care, and long-term care. This has usually been achieved with the participation of the private sector either through the imposition of user charges or the involvement of private insurance.
No single OECD country relies exclusively on private insurance to provide health care coverage to its citizens. Even in the United States, where the private sector is a dominant player in the field of health care insurance, public funding accounts for 45% of total health care spending. The fact is that health care is different from other marketable goods and services.

Chapter Three:

The Role of the Federal Government: An Overview

Before proceeding to the discussion of issues and options with respect to the role of the federal government in health and health care, it is important to understand what the role of the federal government is, and equally what it is not. As pointed out in the Committee’s first report, a considerable mythology has developed around the federal government’s role. The Committee believes that, currently, there are five distinct federal government roles in health and health care. These are outlined in the table below:

FIVE DISTINCT FEDERAL ROLES IN HEALTH AND HEALTH CARE

FINANCING ROLE: the transfer of funds for the provision of health services administered by other jurisdictions

RESEARCH AND EVALUATION ROLE: funding innovative health research and evaluation of innovative pilot projects

INFRASTRUCTURE ROLE: support for the health care infrastructure and the health infostructure, including human resources

POPULATION HEALTH ROLE: health protection, health and wellness promotion, illness prevention, and population health

SERVICE DELIVERY ROLE: the direct provision of health services to specific population groups

3.1 The Transfer of Funds for the Provision of Health Services Administered by Other Jurisdictions: The Financing Role

By far, the most well known role for the federal government involves the funding it provides to the provinces and territories to help them carry out their responsibilities with respect to health care delivery. Federal involvement in health care delivered by the provinces stems essentially from its constitutional spending power. This power is the basis for the transfer of funds under the Canada Health and Social Transfer (CHST) and for the enforcement of the conditions of the Canada Health Act.

Strictly speaking, the federal government cannot establish and maintain a national health care insurance plan because it cannot regulate the delivery of health care to individuals: under the Canadian Constitution, as interpreted by the courts, health care delivery and management is a field primarily under provincial jurisdiction. The federal government is responsible for the actual delivery of health services only to groups that fall under its jurisdiction, such as Aboriginal peoples, the Canadian Forces, veterans, and inmates in federal penitentiaries. This leaves provincial and territorial governments with the responsibility for determining such central matters as how the overall system will be organized, the administration of their public health-care insurance plans, determining how many hospital beds will be available, and what categories of health care providers will be hired. It is also the responsibility of provincial and territorial governments to approve hospital budgets and to negotiate fee scales with the medical associations.

Although the federal government is not responsible for health care administration, organization or delivery, it exerts considerable influence on provincial/territorial health care policies by using the political and financial leverage afforded by its constitutional spending power. In fact, many analysts believe that by setting the requirements for providing federal funding, the Canada Health Act, and its precursors, have to a large extent shaped provincial health care insurance plans throughout the country.

The issues relating to the federal role in financing health care concern the level of federal transfers for health care, the mechanisms used to execute them and the sources of the revenue that are used to generate them. Other related issues touch on what conditions, if any, the federal government should impose on the provinces in return for federal contributions to health care delivery.

Note that, contrary to popular perception, the Canada Health Act does not cover all health services. It only covers services provided by two health care delivery systems – hospitals and doctors – from among a number of other delivery systems. In particular, it does not cover two other delivery systems, namely drug therapy outside hospitals and home care, that have grown enormously in importance since Medicare began. Although provinces and territories have expanded the array of services insured under their public health care plans, they have not done so uniformly. As a result, public coverage for services not included under the Canada Health Act varies greatly among provinces and territories.

Although long-term care and nursing-home care are mentioned in the Canada Health Act under the definition of "extended health care services", the five principles of the Act do not apply to them. This has contributed to a lack of uniform access to these services across the country.

This situation prompted the important observation made in the Committee’s Phase One report that the concept of "medical necessity" as defined in the Canada Health Act no longer reflects the reality of the variety of delivery systems that provide health care to Canadians.

3.2 Funding Innovative Health Research and the Evaluation of Pilot Projects: The Research and Evaluation Role

This second role for the federal government has two dimensions. It involves funding all areas of health research (basic biomedical research, clinical research, health services research, and population health research) as well as the financing of pilot projects designed to test and evaluate new models of health care delivery and approaches designed to improve Canada’s health care system.

For over 40 years the federal government has contributed to the financing of health research. In fact, up until 1994, the federal government was the main source of funding for health research in Canada. The Canadian Institutes of Health Research (CIHR) is currently the principal federal funding body for health research.

From time to time, the federal government also fulfils its role in health research by giving financial support for initiatives, or pilot projects, that are designed to encourage innovation in health care delivery. The $800 million the federal government agreed to contribute to primary care reform, as part of the federal/provincial agreement of September 2000, illustrates this role. Other examples include grants under the Health Transition Fund (1997-2001), which supports pilot projects undertaken jointly with provincial and territorial governments in the fields of Pharmacare, home care, primary care and integrated service delivery, as well as the Canada Health Infostructure Partnerships Program (2000-2002) which supports provincial and territorial projects using new information technology in health care.

3.3 Support for the Health Care Infrastructure and the Health Infostructure: The Infrastructure Role

A third federal role involves contributions to the health care infrastructure. This involves financing improvements to the health care system as a whole, as opposed to helping fund physicians and hospitals whose services are directed to individual patients.

The Hospital Construction Grants Program of 1948 provides an early but significant example of this role. Under this program, the federal government paid the full cost of building hospitals in every province and territory. As a result, from 1948 to 1960, the number of hospital beds in Canada increased at a rate that was twice that of population growth.

Another important example of federal support to health care infrastructure is provided by federal funding for health information systems designed to enable health care providers to make better informed decisions (through, for example, the development of electronic patient record systems). Support given to the provinces through funding that is targeted towards specific goals, such as the acquisition of health care technology provided under Bill C-45 (October 2000), is another example of federal funding aimed at health care infrastructure.

If the federal government were to decide to develop (or help to develop in co-operation with the provinces) structures and processes to ensure greater accountability in the health care system, this too would fall under the federal government’s role in health care infrastructure. Similarly, the publication of an annual report by the federal government on the health of Canadians and on the quality and efficiency of the health care delivery system, along with recommendations for improvements, would be a federal contribution to improving the accountability of the system.

3.4 Health Protection, Health and Wellness Promotion and Disease Prevention: The Population Health Role

A fourth role for the federal government encompasses health protection, health and wellness promotion and disease prevention. Health protection includes activities such as food legislation, the approval of drugs and devices, environmental protection, the regulation of biotechnology, and disease surveillance. Health and wellness promotion as well as disease prevention stand in contrast to the first federal role which focuses on the treatment of illness. This role involves encouraging Canadians to adopt healthier lifestyles, and takes into account the impact of the broader determinants of health on the health of the population.

The best known examples of the federal role in the fields of promotion and prevention include campaigns to reduce tobacco consumption; the Canada food guide which promotes healthy eating habits; campaigns that target youth with information about the danger of sexually transmitted diseases; Heart Health, a multi-level and multi-year strategy for the prevention of cardiovascular disease; and Active Living, a program designed to encourage Canadians to lead a more active, less sedentary, lifestyle.

The federal role related to the promotion of good health and well-being also encompasses consideration of the broader determinants of health which lie mainly outside the realm of health care delivery, using what are often called "population health strategies". These strategies are based on the fact that health status can be improved by investing in a variety of fields – including the environment, economic policy, income support, education, literacy, etc. – where the federal government plays a role.

There are many critical trade-offs that must be made between the population health and the financing roles. For example, studies suggest that health promotion and disease prevention programs can bring substantial long-term benefits, in terms of reduced cost for the health care system and improved quality of life for Canadians. Thus, experts argue that it might be possible to achieve a better return on the health care dollar by promoting healthier lifestyles for Canadians than by spending the same amount of money on the treatment of illness.

Similarly, evidence suggests that investing in population health strategies, such as early childhood development, improved housing conditions and enhanced literacy capabilities, can generate more benefits in the long run in terms of overall health status than would spending more on health care delivery. Yet, for a variety of reasons, there is significant public pressure on the federal government to focus overwhelmingly on its first role, often to the neglect of its population health role.

3.5 The Direct Provision of Health Services to Specific Population Groups: The Service Delivery Role

A fifth role played by the federal government lies in the direct provision of a variety of health services to particular population groups. The federal government is responsible for the provision of health care, including primary care, to First Nations and the Inuit communities, and some health services to the RCMP, Correctional Services, the Armed Forces and veterans. Indeed, the federal government delivers health services to more Canadians (approximately three quarters of a million) than several provinces do. Later in this report the Committee raises specific issues with respect to the delivery of health care to Aboriginal Canadians and suggests potential public policy options for addressing those issues.

Beginning with Chapter 7 of this report, a series of public policy issues and options for addressing them are presented. Each issue stems from one or more of the five federal roles outlined above. First, however, we turn to a discussion of what the public policy objectives with respect to each of the above five federal roles ought to be.

Chapter Four:

The Role of the Federal Government:
Objectives and Constraints

It is important to develop a coherent vision for the role of the federal government in fostering the health and well-being of Canadians and in financing the health care system. The continued involvement of the federal government is essential to the renewal of public policy in this area. The Committee’s third report on comparative health care systems suggests that it is very unlikely that a "big bang" approach to health care renewal would work in Canada. Therefore, the focus of any vision for the federal government’s role in health and health care needs to include a set of public policies and programs that could be implemented incrementally in collaboration with the provinces, territories and all stakeholders.

The broad objectives for the federal role in health care and wellness promotion form the necessary backdrop to choosing which option is best suited to addressing each of the policy issues presented in later sections of this report. The choice of one option over another necessarily implies that one is "better" than the other. "Better" in this context can only be evaluated in relation to outcomes measured against a specific public policy objective.

Therefore, the Committee believes that it would be useful to articulate the set of proposed objectives for each of the roles for the federal government that were described in the previous section. The Committee recognizes that some people may prefer a different set of objectives, and that is as it should be. There are many differing views on what federal policy objectives, and hence federal policy, should be.

The Committee welcomes opinions on its set of public policy objectives, issues and options and wants to hear about other options and their related objectives. Nevertheless, by proposing its own set of public policy objectives, the Committee hopes that it will encourage everyone who wants to argue for specific policy options also to state as clearly as they can what they believe the objectives of federal health policy should be. This will help the Committee to better understand the linkages between the various proposed policy options and specific sets of policy objectives as it formulates its final recommendations.

4.1 Objectives for the Financing Role of the Federal Government

The federal government’s involvement in the financing of health care has a long history. It is clear that without federal funding Canada’s health care system would not be what it is today. Federal transfers to the provinces and territories have been essential to the development of a system of public health care insurance plans across the country that offer comparable benefits, and many Canadians believe that federal funding is essential to the maintenance and renewal of our health care system. Therefore, the Committee proposes that the first objective of the federal financing role be to provide a level of funding that ensures the sustainability of Canada’s health care system and that fosters health care reform and renewal.

During the initial phase of its study, Tom Kent pointed out to the Committee that the original objectives of the Hospital Insurance and Diagnostic Services Act (1957) and the Medical Care Act (1966) were the following:

"To ensure that every Canadian had access to all medically necessary services regardless of their ability to pay for those services."

and

"To ensure that no Canadian suffered undue financial hardship as a result of having to pay health care bills."

These public policy objectives were reaffirmed in the Canada Health Act of 1984 through its four patient-oriented principles: universality, comprehensiveness, accessibility, and portability, where:

Universality means every Canadian;
Comprehensiveness means all medically necessary services;
Accessibility means regardless of the patient’s ability to pay;
Portability means that patients can move from one province to another without facing a gap in coverage.

The Committee proposes that the two statements given above continue to be the primary policy objectives for the financing role of the federal government, and that the four patient-oriented principles remain the foundation of federal involvement with respect to the first role of the federal government. This does not necessarily mean that the principles cannot in any way be modified – some may require further refinement through a more precise definition and a clearer articulation of their scope and limits.

The final principle of the Canada Health Act – the principle of public administration – is of a completely different character. It does not focus on the patient but is rather the means of achieving the ends to which the other four principles are directed. In the view of the Committee, this distinction between ends and means explains much of the current debate about the Canada Health Act and Canada’s health care system. People who agree completely with the desired ends of a public policy can nevertheless disagree strongly on the means of achieving those ends. The principle of public administration is not well understood and, in our view, might need to be revisited.

Since the inception of the Canada Health Act, on a number of occasions the federal government has imposed financial penalties to discourage provinces from allowing extra-billing and user charges, but it has never penalized provinces for non-compliance with the five principles. According to the November 1999 report of the Auditor General of Canada, there are outstanding cases of non-compliance, involving the patient-oriented principles of portability, comprehensiveness and accessibility. Clearly, then, there are problems in interpreting those principles and in enforcing them. These issues must be resolved if we are to have a system that is focussed on the patient and that is uniform across the country.

In considering health care policy issues, it is important to keep in mind that federal legislation restricts the universality of coverage to health services provided in hospitals and by doctors. This was a logical way to meet patients’ needs in the late 1950s and 1960s since nearly hospitals and doctors then provided 70% of the cost of the entire health care system. Today, however, less than 45% of total health care spending is attributable to hospital care and physician services.

During the late 1950s and 1960s, the only major channel for the delivery of health care services, other than doctors and hospitals, was nursing homes. Since the federal government was already contributing to senior citizen incomes through the Canada Pension Plan (CPP), the Old Age Security program (OAS), and the Guaranteed Income Supplement (GIS), it was felt that access to these services was being adequately ensured through those programs.

Today, home care, drug therapy, and treatment by other health care professionals (e.g. physiotherapists, diagnostic technicians, midwives, nurse practitioners, occupational therapists, etc.) have become commonplace, yet when they are delivered outside the walls of a hospital, these services are not eligible for coverage under the Canada Health Act. This has created a situation where publicly funded access to these services, many of which are frequently medically necessary, is not offered in a uniform way across the country, when it is offered at all.

In short, a number of trends, combined with public expectations, have overtaken the original design of the system. Making the distinction between that which is formally covered under the Canada Health Act and the actual array of services that are required to meet the total health care needs of Canadians is critical to the development of future public policy. However, this distinction is not made in the vast majority of public commentary on the current system. Most commentators still speak as if patients are assured uniform publicly funded access to all health services under the Canada Health Act.

In addition, the Canada Health Act is misunderstood to mean that there should be no role for the private sector in delivering health care. This is clearly not prohibited, nor was it intended to be prohibited, by the Canada Health Act. The clearest possible illustration of this fact is that over 95% of Canadian hospitals are operated as private not-for-profit entities and that doctors operate, in effect, as private businesses.

When the hospital care and medical insurance plans were started, two significant decisions were made with respect to the method by which these programs would be funded and delivered:

No means test would be required of patients before they received medical services. This decision was made because it was felt that a means test would discourage low income patients from seeking medical assistance, since they would feel it was demeaning to have to say they were "poor" in order to receive full medical care.
A central provincial department or agency would administer the program in each province. This decision was made in order to have the hospital care and medical insurance plans gain the efficiencies of a "single payer" model. (This "single payer" aspect is reflected in the principle of public administration enshrined in the Canada Health Act). Public administration as a principle is often misunderstood to mean that in the current system a role for the private sector in the delivery of health care is prohibited. That is not the case.

One final point is worth observing. When public funding for hospital and physician services began, the underlying principle was that they would be insurance plans in which individuals might be expected to pay part of the cost of the health services they received. However, as explained in point 1 above, no such payment could be required up front, at the point of service, since it might discourage low income Canadians from seeking medical care.

This is why the 1957 Act was called the Hospital Insurance and Diagnostic Services Act and why some provinces (e.g. Alberta and British Columbia) have for many years charged their residents annual health care premiums. It is also why the original Liberal Party policy resolution at its 1961 convention proposed that the cost imposed on the health care system by receiving treatment would be added to everyone’s taxable income at the end of each year, and income tax would be paid on part of that amount (subject to a maximum in order to avoid undue financial hardship).

The Committee makes these observations in order to encourage Canadians to "think outside the box." For example, if one concludes that additional funds are needed to provide health care, particularly to people who otherwise do not receive services such as drug therapy and home care, then it might be important to consider such options as a health care premium, or some form of post-service income graduated payment.

THE TRANSFER OF FUNDS FOR THE PROVISION OF HEALTH SERVICES ADMINISTERED BY OTHER JURISDICTIONS

The Committee proposes that the objectives of the federal government’s financing role in health and health care should be:

To provide a stable level of funding that ensures the sustainability of Canada’s health care system and that fosters reform and renewal;

To ensure that every Canadian has timely access to all medically necessary services regardless of their ability to pay for those services;

To ensure that no Canadian suffers undue financial hardship as a result of having to pay health care bills;

To ensure that the four patient-oriented principles of the Canada Health Act (universality, comprehensiveness, accessibility, and portability) are applied.

4.2 Objectives of the Research and Evaluation Role for the Federal Government

The Committee believes that the following three objectives ought to apply to the research and evaluation role of the federal government:

To foster the development of a solid base of innovative health research in Canada that compares favourably with that of other countries in terms of both health research funding levels and health research outcomes;
To encourage the foundation of a knowledge-based health care sector by facilitating the transfer of knowledge from the research community to public policy makers, health care providers and the general public;
To provide appropriate financial support for joint federal, provincial and territorial initiatives that will encourage and facilitate innovation and advancement in health care delivery through pilot and evaluation projects.

In proposing these objectives the Committee recognizes that they are relatively non-controversial. Indeed, the federal role in health research has existed for over four decades. The main concern raised in this regard during the Committee hearings was that Canada’s expenditures on health research were low in comparison with other industrialized countries. It was recommended that the federal share of total spending on health research should be increased to 1% of total health care spending from its current level of 0.5%. In the view of several witnesses who testified before the Committee, this would bring the level of the federal contribution to health research more in line with that of central governments in other countries.

Similarly, federal support for reform of the primary care sector that was announced as part of the federal/provincial agreement in September 2000, is an excellent example of action being taken in relation to the second objective listed above. The Health Transition Fund (1997-2001), a federal initiative supporting provincial and territorial pilot projects in fields such as integrated service delivery, is another good example of federal government intervention as part of its research and evaluation role. These programs are well accepted by provincial governments and enhance our understanding of the impact of reform in health care delivery.

FUNDING INNOVATIVE HEALTH RESEARCH AND EVALUATION OF INNOVATIVE PILOT PROJECTS

The Committee proposes that the following objectives should apply to the second role of the federal government:

To foster the development of a solid base of innovative health research in Canada that compares favourably with that of other countries;

To encourage the foundation of a knowledge-based health care sector by facilitating the transfer of knowledge from the research community to public policy makers, health care providers and the general public;

To provide appropriate financial support for joint federal/provincial/territorial initiatives that will encourage and facilitate innovation and advancement in health care delivery through evaluation of pilot projects.

4.3 Objectives of the Infrastructure Role for the Federal Government

The Committee proposes the following objectives for the third federal role in health and health care:

To lay the foundation for evidence-based decision-making in areas that affect both well-being and the delivery of health care, while ensuring the protection of privacy, confidentiality and security of personal health information;
To monitor the health of the population and the state of the health care system and to report these findings to Canadians;
To develop, in collaboration with the provinces and territories, an appropriate structure and process to ensure greater accountability in the system;
To assist provinces and territories in financing needed health care infrastructure, such as new medical technologies and the costs related to their ongoing operation;
To co-ordinate, in collaboration with the provinces and territories, the planning of human resources in health care.

The first objective under this federal role relates to the development of a health infostructure. The health infostructure that has already been envisioned by the federal government will enhance health care delivery and allow for the sharing of health-related information by connecting health care providers, facilities, communities and patients across the country to. Telehealth, electronic health records and Internet-based health information will be the main building blocks of the pan-Canadian health infostructure. This is certainly an ambitious and costly undertaking which will take years to bring into being. Most experts believe, however, that it is essential to do so if we wish to acquire sound information on the health of Canadians, the state of our health care system, and on the efficiency and effectiveness of health service delivery and distribution. Privacy, confidentiality and security issues are of paramount importance in the development of a Canadian health infostructure.

The second and third objectives given above may well be more problematic for some people who feel that there should be no role for the federal government with regard to establishing the accountability of provincially delivered programs. The Committee rejects this view. We believe that, given the substantial amount of money the federal government contributes to the provinces for health care delivery, accountability to federal taxpayers requires that the government understands how well, or how poorly, their contributions are being spent.

In addition, the Committee believes that making available to Canadians the information that is necessary to enable them to compare the performance of the health care delivery systems across the country can only contribute to enhancing the overall quality of Canada’s health care system. The affirmation of a role for the federal government in this regard is not meant to tread on provincial prerogatives, but rather to allow all Canadians to judge how their tax dollars are being spent, including by the federal government in its role of provider of services to specific population groups.

The last objective the Committee wants to propose for the infrastructure federal role would help ensure that Canadians have timely access to medical equipment and that sufficient resources are provided to cover operation and maintenance costs.

SUPPORT FOR THE HEALTH CARE INFRASTRUCTURE AND THE HEALTH INFO STRUCTURE

The Committee proposes that the following five objectives should apply to the third role of the federal government:

To lay the foundation for evidence-based decision-making in areas that affect both well-being and the delivery of health care, while ensuring the protection of privacy, confidentiality and security of personal health information;

To monitor the health of the population and the state of the health care system and to report these findings to Canadian stakeholders;

To develop, in collaboration with the provinces and territories, an appropriate structure and process to ensure greater accountability in the system;

To assist provinces and territories in financing needed health care infrastructure, such as new medical technologies and the costs related to their ongoing operation;

To co-ordinate, in collaboration with the provinces and territories, the planning of human resources in health care.

4.4 Objectives for the Population Health Role of the Federal Government

During Phase Two of its study, the Committee held specific hearings on disease trends and was told that the pattern of diseases had changed significantly during the 20^th century, shifting away from infectious diseases and towards non-communicable diseases. Chronic diseases such as cancer and cardiovascular disease are now the leading causes of death and disability in Canada, while unintentional injuries are the third most important cause of death. The overall economic burden of illness is significant in Canada: it was estimated at $156 billion in 1998.

The Committee was told that many of the causes of disease, disability and early death are preventable, or at least deferrable, and that people should not only be able to live longer lives, but also to spend more of their lives disability free. It has been suggested that increasing efforts in the area of health promotion and disease prevention, with a particular focus on Canadians with low incomes and low levels of education and literacy, should become key areas of public policy if we are to improve the overall health status and contain health care costs.

The Committee believes that the federal government has an important role to play in the fields of health protection, health and wellness promotion and disease prevention. Accordingly, we believe that the following objectives ought to apply to the population health role of the federal government:

With respect to health protection: to strengthen our national capacity to identify and reduce risk factors which can cause injury, illness, and disease, and to reduce the economic burden of disease in Canada;
With respect to health promotion and disease prevention: to develop, implement and assess programs and policies whose specific objective is to encourage Canadians to live a healthier lifestyle;
With respect to wellness: to encourage population health strategies by studying and discussing the health outcomes of the full range of determinants of health, encompassing social, environmental, cultural and economic factors.

The Committee recognizes that there are important difficulties associated with the evaluation of health outcomes, because many factors, and not only the quality of the available health services, affect an individual’s state of health. These factors often take many years to manifest themselves, and it is well known that the political world responds much more readily to shorter-term than to longer-term concerns. It is also a very complex matter to locate the precise factors that lead to specific health outcomes, since these are often the result of the interaction of multiple causes.

But there is also considerable evidence that health promotion, illness prevention and policies that are concerned with the overall well-being of the population improve health outcomes, and may also contribute to a more effective deployment of health and health care resources. While the fiscal constraints (see below) under which the health care system operates make it essential that the programs selected be those which give the greatest return for each dollar spent, the Committee believes it is essential that the federal government invest heavily in this area.

HEALTH PROTECTION, HEALTH AND WELLNESS PROMOTION AND ILLNESS PREVENTION

The Committee proposes that the following objectives ought to apply to the population health role of the federal government:

With respect to health protection: to strengthen our national capacity to identify and reduce risk factors which can cause injury, illness, and disease, and to reduce the economic burden of disease in Canada;

With respect to health promotion and disease prevention: to develop, implement and assess programs and policies whose specific objective is to encourage Canadians to live a healthier lifestyle;

With respect to wellness: to encourage population health strategies by studying and discussing the health outcomes of the full range of determinants of health, encompassing social, environmental, cultural and economic factors.

4.5 Objectives for the Service Delivery Role of the Federal Government

The Constitution Act, 1982 recognizes three groups of Aboriginal peoples – Indians, the Inuit and Métis. The Indian population includes both status and non-status Indians. The Indian Act sets out the legal definitions that apply to status Indians in Canada: status Indians are those registered under the Act, while non-status Indians are not registered under the Act. The Métis are of mixed Indian and European ancestry. The Inuit live primarily in Nunavut, the Northwest Territories and northern parts of Labrador and Quebec. The Inuit are not covered by the Indian Act, but, following a 1939 decision of the Supreme Court of Canada, they do receive certain benefits from the federal government.

The responsibilities of the federal government with respect to Aboriginal peoples are to status Indians living on reserve and the Inuit. The federal government provides health services to status Indians living on reserve and the Inuit, while the health care needs of the other Aboriginal peoples are seen as the responsibility of the particular province or territory where they reside. Other services and programs provided by the federal government to status Indians living on reserve and the Inuit include social assistance, schools, infrastructure (such as water and sewer services), housing, public health, etc.

Canada’s total Aboriginal population was estimated at 1,399,500 in 2000. Currently, 12 federal government departments offer programs for Aboriginal peoples. Total expenditures for these programs are estimated at $7.3 billion for 2001-2002. Despite a large federal investment targeted at improving the health and well-being of Aboriginal peoples, very significant health and socio-economic disparities persist between the Aboriginal population and the broader Canadian population. Furthermore, during the Committee hearings, status Indians off-reserve, non-status Indians and the Métis stressed that their unique health care needs often fall between the cracks of public policy.

The health of Aboriginal Canadians is a national disgrace. The Committee believes that, given its constitutional responsibilities, the federal government must take leadership and act immediately to reverse the poor health and socio-economic conditions that plague many Aboriginal communities. Therefore, we propose the following objectives with respect to the direct provision of health services:

THE DIRECT PROVISION OF HEALTH SERVICES TO

ABORIGINAL CANADIANS

The Committee proposes that the following objectives ought to apply to the service delivery role of the federal government:

To take a leadership role in ensuring inter-jurisdictional co-ordination of health care delivery to all Aboriginal peoples;

To ensure adequate access to culturally appropriate health services and ensure the full participation of the Aboriginal population in the design and implementation of these services;

To implement and sustain population health strategies specifically designed for Aboriginal peoples.

4.6 Constraints on the Role of the Federal Government

There are two major constraints on the federal government with respect to how it can meet the set of objectives outlined above – one is constitutional, the other is fiscal.

With respect to the constitutional constraint, it is generally accepted that the delivery of health care to Canadians at large is a matter of provincial/territorial jurisdiction. The federal government is not responsible for the administration and delivery of health care except in the case of specific groups of people, such as the First Nations and the Inuit. This constraint clearly has an impact on the scope of future federal interventions and means that much federal, provincial and territorial negotiation will have to accompany any new initiatives.

In terms of the fiscal constraint, a few brief points are worth noting. First, the selection of one federal health care strategy over another will be influenced by the capacity and political willingness of governments at all levels to raise additional revenue and on the willingness of taxpayers to pay to generate this extra revenue. Government fiscal capacity combined with taxpayers’ willingness to pay will determine the types of program that can be launched, and whether such programs will be broad universal ones or more narrowly targeted programs. Public opinion polls suggest that Canadians have mixed views on whether they are prepared to pay higher taxes to improve the health care system. While cuts to personal income tax are important to Canadians, reinvesting in health care is also rated as a high priority.

Related issues concern the most appropriate means for generating additional revenue if it does not come from the general tax base: should it come from health care premiums, user charges, a surtax on income? Should the health care costs incurred by an individual be added to his/her taxable income? These options will be addressed in more detail in Chapter 8.

It is also important to recognize that additional investment in the field of health and health care will involve significant trade-offs between competing objectives. How much should we spend on health care versus how much should be devoted to wellness promotion and illness prevention? Should we spend less on treating illness and more on population health strategies such as early childhood development, literacy, housing, environment, income distribution, etc.?

What new programs should be developed (if any) and how they should be financed are some of the policy issues raised in the options sections of this report. However, when considering these issues it is worth remembering that other countries, and not just the United States, already spend a higher proportion of their GDP on health care than does Canada. For example, while health care expenditures in Canada account for 9.5% of GDP, this is below both Switzerland (10.4%) and Germany (10.6%). It is also worth noting that many countries with a similar share of public health care spending provide coverage that is much broader than Canada. This has usually been achieved with the participation of the private sector in a variety of ways that have included the imposition of user charges or the involvement of private insurance.

Moreover, health care spending as a percentage of GDP in Canada has declined since its peak of 10% in 1992. This downward trend has since been reversed and, from 1998 on, the share of the GDP devoted to health care has been stable at 9.3%. However, some witnesses (including the Honourable Marc Lalonde, former federal Minister of Health and of Finance) argued before the Committee that it may be necessary for Canadian expenditures on health care to return to the 10% level if the objectives of the first federal role in health care are to be met. Others have suggested that the share of public health care funding be set at a predetermined level. The desirability of implementing suggestions such as these is discussed in greater detail in the options chapters of this report.