Canadas Health Care System

Raisa B. Deber, PhD Department of Health Policy, Management and Evaluation University of Toronto

Topics to be covered

Dimensions of health systems Paying for insured services Historical development of Canadian Medicare Organization of health services Public health system Professionals and Professionalism Trends Economic Evaluation

Dimensions of health systems

Levels of Justification for Government Involvement in Health Care

1. 2. 3. 4.

Public goods Economic or military growth Benevolence (charity) Rights

Three Dimensions of Health Systems

Financing Delivery Allocation - who pays for what services? - who delivers what services? - how are resources allocated to those delivering services?

Categories of Public and Private

Public Nation State/province Region Local

Categories of Public and Private

Private

Corporate for-profit Small business/entrepreneurs Charity/non-profit (paid employees, volunteers) Family/personal

Health System Models

Public Financing Public Delivery Private Delivery National Health Service Public Insurance Private Financing User fees for public services Private Insurance

Paying for insured services

Allocation Models for Publicly Financed Services

Clients follow money Centrally planned Regionally planned Money follows clients Managed Public Market competition competition allocation

In Planned Models Patients Follow Money Advantage: Good Cost Control

In Market Models
Money follows patients Advantage: Client responsiveness

Relationships Between Providers and Recipients of Care

2-way flow

Services (Delivery)

Service Recipients

Service Providers

Payment (Financing)

Relationships Between Providers and Recipients of Care

3-way flow Services (Delivery)

Service Recipients
Paym (Fina ent ncing )

Service Providers
t n e m Pay nt) e m e rs u b m ei

(R

Third Party Payers

Relationships Between Providers and Recipients of Care

4-way flow Services (Delivery)

Service Recipients
Payment (Financing)

Service Providers
Payment (Reimbursement)

Payment (Resource Allocation)

Third Party Payers

Provider Organizations

Payment Mechanisms can be based on:

time (salary, sessional) task (fee-for-service) case/client (capitation, DRG) In Canada: most hospitals paid by global budgets Most doctors paid by fee-for-service

Neo-classical Economics Says

Price links supply with demand

If supply fixed and demand high: Price should ??? If price free:
Demand should ???

The non-health examples

1. The taxi 2. The free trip These are market goods. Supply and demand seems to work.

The health examples

1. The ruptured appendix 2. The free surgery

These are merit goods. Supply and demand does not seem to apply.

For Necessary Care, Single

Payers Are Preferred Because:

(Contrast Canadian and US hospitals) 2. Eliminates risk selection issues 3. Payer can drive tougher deals with providers (Which providers obviously don't like)

1. Savings from administrative costs

Historical development

Historical Development: Political System

Democracy Representative Parliamentary

contrast with U.S. balance of powers) don't lobby MP, as much as lobby Cabinet and bureaucrats and health is provincial

Federal

Implications of political system

Most control over health care is provincial; much funding is federal

Fiscal federalism affects health policy

Difficult to block a determined government from acting Provincial government is both main financer and main regulator

They have more levers to control providers

Political culture imposes constraints (especially on US style models

Historical Development: Political Culture

Trusting of authority Carry through program (vs. checks and balances) (Used to be) pro government intervention

means less opposition to socialized medicine, more support for 'public goods'

British North America Act, 1867 (Constitution Act, 1982)

Distributed powers between federal and provincial government Section 91 - federal powers Section 92 - exclusive powers of provincial legislatures, includes
The establishment, maintenance and management of hospitals, asylums, charities, and eleemosynary institutions in and for the province, other than marine hospitals.

Whose jurisdiction?

Health interpreted to be under provincial jurisdiction Canadians think that service levels should be roughly equal, regardless of geography Provinces vary in their ability to pay Solution:

Federal transfer payments to provinces

Current Federal Legislation Driving Canadian Health Policy

Consists of Two Parts:
1. The rules of the game Canada Health Act, 1984 (Replaced HIDS, Medical Care Acts) The transfer of funds Canada Health Transfer to replace Canada Health and Social Transfer, 1996 (Replaced EPF and CAP)

2.

Several Key Events Preceding Medicare

1946: Saskatchewan hospital insurance 1948: National Health Grants program

Targeted federal grants, e.g. for hospitals, public health, training

Hospital Insurance and Diagnostic Services Act (HIDS)

Passed 1957 Introduced gradually over next few years (as provinces set up complying programs) Introduced cost sharing for "all necessary inpatient services and facilities at standard ward level, excluding payment of private physician", if terms and conditions were met.

HIDS

Covered the most expensive part of the system (acute care) Allowed adding outpatient and emergency services (by separate agreement) Omitted mental, tuberculosis, or custodial care hospitals (which were seen as being covered in other ways)

Other Key Events Following HIDS

1961 plans

All provinces have participating

But, 20% of Canadians don't have medical coverage.

1962 - Saskatchewan Medical care insurance plan,

and doctors strike

1964 - Hall I report (recommends introducing universal insurance for medical care)

Medical Care Act

Passed 1966 Cost sharing for all medically necessary physician services. At provincial discretion, could include other services (e.g., optometry, podiatry), but these not cost shared. Came into effect July 1, 1968 (2 provinces participating).

More Key Events

1966 - Canada Assistance Plan (cost shared plan for social services; eligibility based on means testing) 1971 - All provinces have participating health insurance and hospital plans considered date when Medicare in place across Canada

National Terms and Conditions

Public administration Comprehensiveness - insures all medically required services Universality Portability - insured persons are covered anywhere in Canada Accessibility - reasonable access to insured services on uniform terms and conditions which do not impede access, either directly or indirectly

Canada Health Act, 1984

Replaced HIDS and Medical Care Act Keeps same terms and conditions (more or less) fiscal penalty for direct charges to insured persons for insured services (extra billing, user fees)

Added requirements

Provision of information Visibility of federal contributions Allows designation of non-physicians as health care practitioners under the act Note: accessibility also requires reasonable compensation to providers for insured services

Comprehensiveness Under the CHA

In order to satisfy the criterion respecting comprehensiveness, the health care insurance plan of a province must insure all health services provided by hospitals, medical practitioners or dentists, and where the law of the province so permits,similar or additional services rendered by other health care practitioners.
(Canada Health Act, section 9)

Hospital Services
Means any of the following services provided to in-patients or out-patients at a hospital, if the services are medically necessary for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, namely:
(Continued)

Hospital Services (Continued)

A) accommodation and meals at the standard or public ward level and preferred accommodation if medically required nursing service, laboratory, radiological and other diagnostic procedures, together with the necessary interpretations
(Continued)

B) C)

Hospital Services (Continued)

D) E) F) drugs, biologicals and related preparations when administered in the hospital use of operating room, case room and anaesthetic facilities, including necessary equipment and supplies medical and surgical equipment and supplies
(Continued)

Hospital Services (Continued)

G) H) I) use of radiotherapy facilities use of physiotherapy facilities services provided by persons who receive remuneration therefore from the hospital but does not include services that are excluded by the regulations.
Canada Health Act, 1984

What happens if care moves outside of hospitals?

It can move outside terms of Canada Health Act Particular issues: (in Romanow, Kirby)

Home care Pharmaceutical coverage Public health, mental health, rehabilitation, But it doesnt have to

Also:

Government can cover it

Implications of health care system

System is hospital and physician oriented

Expensive, often inefficient Hard to modify

System is popular

Changes:

From cost sharing to block transfers (1977) A failed experiment??

Disadvantages of Cost-Sharing Approach

Encouraged high cost medicine Costs were unpredictable Federal government incurred costs, without receiving credit. Provincial government had priorities steered by federal programs Paid bills, but did not encourage reorganization of system. Irritant to provinces (who didnt want federal control in areas of provincial jurisdiction)

1977 Federal-Provincial Fiscal Arrangements and Established Programs Financing Act (EPF)

Change in financing of Medicare (although NOT in terms and conditions). Replaced cost sharing for medical insurance, hospital insurance, and post-secondary education with a combination of tax room and per capita cash grants, partially indexed to GNP, plus some complicated elements (equalization, stabilization, revenue guarantee) to appease poorer provinces.

Implications of new funding formula

Transfers under EPF went into general provincial revenues (I.e., no longer cost shared programs) Provinces have leeway on how to use these funds, as long as national conditions for hospital and medical insurance are complied with (no such requirements for postsecondary education)

Federal-Provincial Battles

What to include? What strings to attach? One time vs. ongoing funds?

The shares debate

Original formula was based on:

Population (per capita grant) Economic growth (indexed to growth in GDP)

To combat deficit, federal government unilaterally reduced indexation (to less than growth in GDP)

1986 Bill C-96 (grew at GDP 2%) 1991 Bill C-69, Government Expenditures Restraint Act (frozen; no growth with changes in GDP) 1991 Bill C-20 (extended the freeze to 1995)

Consequences of changes to the EPF formula

Growth in transfers did not keep up with growth in spending

Since cash portion was residual, it actually diminished (since yield from tax points did increase with inflation)

Fear that the cash portion would disappear

And with it the federal ability to enforce national terms and conditions

Canada Health and Social Transfer, 1996

replaced EPF and Canada Assistance Plan cut total amount put in cash floor (which couldnt bind subsequent governments) removed most CAP requirements Canada Health Act basically unchanged

Subsequent federal budgets continued changing CHST:

Increase to cash floor (e.g., set at 12.5 billion in 1996; increased to 15.5 billion, and then in 2000 federal budget to 21 billion over the next 5 years) Increase to CHST entitlements (growth rate usually set below inflation, but subject to change) One-time funding, purportedly for extra programs (e.g., $2.3 billion more, said to be for medical equipment, information technology, and primary care, in 2000 budget; funds for home care, pharmacare, primary care reform in 2003, etc.)

Same overall framework funds go into provincial general revenues

Diversionary tactics 101

The shares debate whereby the federal and provincial governments argue about whose fault it is that healthcare is under pressure

Why I call this diversionary:

There is one taxpayer Health care is under provincial jurisdiction One could argue that there have been no federal transfers earmarked for health care since 1977 If so, the only relevant issue is whether those responsible for funding services (provincial governments) have the resources they need

How to deflate the federal share of provincial Medicare spending

Numerator: provinces include only cash but not tax points Denominator: provinces include all health spending, not only physicians and hospitals (which is all that were cost-shared) Shares: ignore that transfers are also for post-secondary education and welfare, which have been cut in many provinces

Doctors and hospitals are a declining proportion of provincial health spending

60000 50000 40000 30000 20000 10000 0 1979 1975 1983 1987 1991 1995 1999

Not Cost Shared Cost shared

Data sources:

International data: OECD Health Data 2001 Canadian data: Canadian Institute for Health Information (CIHI) Note: they are not responsible for the interpretations made of their data

Canadas public share of spending is low

Looking at 22 OECD developed countries: Canadas share started below the 22 country average, ranking 14th in 1975, 18th in 1993, and 19th in 1997. At this stage, rather than being among the most publicly funded, Canada ranks above only Australia, Portugal, and the United States.

International comparisons: One view: Canadian spending looks relatively high

Following chart gives 22 OECD countries, listed in order of spending as % of GDP As measured in the proportion of Gross Domestic Product (GDP) devoted to health care spending, Canada was the fourth highest spender in 1998 (down from 3rd in 1994)

1998 Health Expenditures

% of GDP
US Switz Germany Canada France Neth Australia Belgium Norway Iceland Denmark NZ Austria Sweden Portugal Italy Japan Spain Finland UK Ireland Lux
12.9 10.4 10.3 9.3 9.3 8.7 8.6 8.6 8.6 8.4 8.3 8.1 8 7.9 7.7 7.7 7.5

Were #4

7 6.9 6.8 6.8 6

10

12

14

Source: OECD Health Data 2001

Alternatively: Canadian spending looks relatively low

Following chart gives the same 22 OECD countries, listed in the same order (spending as % of GDP) But shows data in health expenditures per capita in US dollars Canada ranked in 14th place

1998 Health Expenditures

US $ per capita
US Switz Germany Canada France Neth Australia Belgium Norway Iceland Denmark NZ Austria Sweden Portugal Italy Japan Spain Finland UK Ireland Lux
4165 3857 2697 1850 2313 2172 1718 2112 2844 2484 2730 1132 2100 2146 859 1602 1039 1737 1636 1577 2571 2244

Were #14

1000

2000

3000

4000

5000

Source: OECD Health Data 2001

Why the differences?

Ratios have numerators and denominators Dont just look at health spending Look at what the economy can sustain

As the economy improves, the ratio of spending to GDP falls

16 14 12 10 8 6 4 2 0
19 60 19 63 19 66 19 69 19 72 19 75 19 78 19 81 19 84 19 87 19 90 19 93 19 96

Canada United States

United Kingdom 22 country average

The national picture:

Again, contrary to current rhetoric, Canadian health spending was not out of control, at least until 1997 After that, some catch up Basically, returning us to where spending would have been without cuts (and not making up the lost spending)

Is Health Spending Rising in Canada?

100,000 80,000 60,000 40,000 20,000 0 1979 1975 Private Province 1983 1987 1991 Other public 1995 1999

Spending in million $

Including most recent data..

140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1979 1975 Private Province 1983 1987 1991 1995 1999 2002

Other public

Spending in million $

Not if you adjust for inflation and population growth

2500 2000 1500 1000 500 0 1979 1975 Private Province 1983 1987 1991 Other public 1995

Spending in 1992 $ per capita

Including most recent data

3,500 3,000 2,500 2,000 1,500 1,000 500 0 1979 1975 1983 Private Province 1987 1991 1995 1999 2003

Other public

Spending in 1997 $ per capita

Crisis? Or Catch-Up?

Method: Take CIHI data, expenditures per capita, in 1997 $ Compute trend-line, using actual data for 1975 to 1992 Extrapolate what would have been, had spending continued to grow at that rate Graph, and compare

Total health spending catching up

Total health expenditures, in 1997 $ per capita
4000 3500

spending, 1997 $ per capita

3000

2500

2000

1500

1000

500

81

78

80

82

77

79

83

76

75

91

95

96

94

98

93

97

99

87

90

92

00

86

89

01

84

85

88

p f/ 20 03

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

19

19

20

year Total health expend Extrap total (1975-92)

20

02

f/

Provincial spending still not caught up

Provincial health expenditures in 1997 $ per capita: crisis or catch-up?
2500 2000 spending, 1997 $ per capita

1500

1000

500

75

77

76

78

00

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

01

p f/ 20 03

20

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

year

Prov health expend

Extrap Prov (1975-92 trend-line)

20

02

f/

The First Law of Cost Containment

The easiest way to contain costs is to shift them to someone else

Public share of expenditures

Canada, 1997 Doctors Hospitals Capital Oth. Inst Drugs Oth. Prof Total 0 20 40 % 60
11.1 69.4 30.6 69.1 80.8 90.6 98.8

80

100

Source: CIHI

Organization of health services

Organization of Health Services: Federal Government

fiscal role steering, leadership, coordination role (e.g., health promotion) special issues (e.g., quarantine, food and drug safety, medical devices, research) special groups (e.g., First Nations, military) For further information, see: www.hcsc.gc.ca

Organization of Health Services: Provincial Government

Has the primary responsibility for health, including:

education regulating professionals financing hospitals, physicians, etc. public health managing the system

getting more oriented to doing this

Organization of Health Services: Local/Regional Government

Only services delegated to them by provinces In every province but Ontario, regional authorities manage an array of services In earlier years, some local governments were involved with building/running civic hospitals In some provinces (including Ontario), a major role in managing and delivering public health

Regional authorities

Geographically based, with responsibility for a defined population Replace individual local boards for individual sectors (e.g., hospitals, home care) and place these under a common management structure with a common budget Considerable inter-provincial variation in which services are under the jurisdiction of these boards, how the boards are set up (elected, appointed, mixture), and what powers the boards are given

Organization of Health Services: Voluntary Groups

Independent not-for-profit organizations, usually with their own boards of directors Play a major role in:

health care delivery (e.g., hospitals, meals on wheels, etc.) Fund-raising, research, advocacy (e.g., disease agencies) Social action, community support (e.g., self-help groups) System management (e.g., professional regulatory bodies)

Public health system

Public Health

provincial, but can be delegated to local governments. Activities include:

maternal and child health Nutrition health education communicable disease control public health labs dental health sexually transmitted disease control occupational health environmental sanitation outbreak investigation

Many homes

Not all public health activities conducted by public health departments. Other departments of government (including schools), private health providers, etc. do considerable public health activities

Environmental health Occupational health and safety Health promotion Immunization

Professionals and Professionalism

Characteristics of Professions

Expertise based on body of theoretical knowledge Application of this knowledge in form of specialized skills and competencies Commitment to professional code of ethics Strategic and operational autonomy (what you do, and how you do it)

Practical elements to definition of professional

Specialized knowledge Self-regulation Established training programs Certification procedures Risk to public from unqualified practitioners Agency relationship with clients Provision of services

In health care, professional self regulation implies:

Existence of a college to deal with registration, standards of practice, maintenance of competence, complaints, protection of public Legislative authority for delegating these responsibilities (e.g., Regulated Health Professionals Act)

Ontarios approach to professional regulation

Deals with controlled acts Defines which professions are allowed to perform which of these acts I.e., particular professions may no longer have monopoly over particular services

Distinguish between professional colleges and professional associations

E.g., College of Physicians and Surgeons of Ontario responsibility for professional self-regulation Ontario Medical Association responsible for representing interests of the profession

Some current trends:

Disputes about rents - how much to pay providers, skill mix, distribution, etc. Disputes about public-private mix - who should pay for what re-balancing - shifting the emphasis from hospitals/doctors to the community (but also de-insuring) re-organizing - especially regionalization

Setting Priorities in Health Care: The role of economic evaluation

Copyright, 1996 Dale Carnegie & Associates, Inc.

What are we trying to do?

A number of terms are used: - Technology assessment - Health outcomes - Economic analysis - Clinical guidelines

What Is Health Care Technology?

The set of techniques, drugs, equipment, and procedures used by health-care professionals in delivering medical care to individuals, and the systems within which such care is delivered.
US Office for Technology Assessment definition (Quoted in Banta and Behney, 1981)

How Broadly Should We View Technology?

The definition tells us:

Technology is not just what we do, but how we do it.

Indeed, we can view technology as:

Physical objects Forms of knowledge Or part of a complex set of human actions

What Is Technology Assessment?

Learning from controlled experience. Question: What aspects of the experience do we wish to assess?

What We Are Trying to Do (in Whatever Language)

Balance costs and consequences

Critical point: We are always comparing at least two alternative courses of action (call them A and B)

Steps in the Economic Analysis

Define the alternatives being compared (option A vs. Option B) Compute the costs of A and B Compute the consequences of A and B Do the math Select the best option

Measuring Costs
Relatively straight-forward (which is not to say that it is easy) Issues include: Discount rate Whose costs should be included? Which costs should be included?

Direct vs. Indirect costs; Fixed vs. Marginal costs

Measuring Consequences

Many types of consequences could be examined. But most usually focus primarily on clinical impact - safety, effectiveness Difference between examining consequences for individual and for population. Statistically, need to know how great, and how likely, benefits are.

Four Types of Economic Analysis

Cost Cost Cost Cost

minimization benefit effectiveness utility

Cost Minimization

Assumes that consequences of A and B are the same.

Example: brand name vs. clinically identical generic drug

Therefore, take the option with the lowest cost Simplest: dont even have to measure the consequences

Cost Benefit

Assumes that consequences of A and B can both be measured in the same monetary unit as the costs.

Example: contracting out a service or providing it by internal staff

Therefore, take the option with the best pay back (return on investment) In health, can result in some odd computations

Cost Effectiveness

Assumes that consequences of A and B can both be measured in the same (non-monetary) unit

Example: life years gained

Therefore, take the option with the best bang for the buck

Cost Utility

Assumes that consequences of A and B can both be measured in the same (non-monetary) unit, adjusting for the quality of life

Example: quality-adjusted life years (QALYs) gained

Therefore, take the option with the best bang for the buck

But Which Consequences Should We Include?

Lets use as our example: Shortening length of stay by discharging patients early, with or without home care

Evidence says we can do this. Should we?

Ideal Form of Assessment

Ideally, we would conduct a randomized controlled trial (Hard to interpret results if we only discharge the healthiest patients.) Often, not possible. May also use other approaches (including qualitative, simulation models, etc.)

Consequences: Mortality

Did the patient live or die? Can measure mortality rates fairly easily. Issues: over what time period? (30 days?) What, if any controls? (Reason for mortality? Age? Severity of illness?)

Consequences: Hospitalization

Did the patient require readmission? Can measure re-admission rates to your own institution fairly easily. Issues: over what time period? (30 days?) What, if any controls? (Reason for admission? Age? Severity of illness?)

Consequences: Quality of Care

Did the patient get bed sores? Did wounds heal? Not routinely collected. No agreement on appropriate measures (but progress is being made)

Consequences: Quality of Life

What was the quality of life? Much harder to measure - enormous controversy about appropriate measurements. Data not routinely collected Ethical issues - what is the value of a life spent with a disability?

Consequences: Satisfaction With Care

How satisfied was the patient? Even harder to measure Data not routinely collected Relates to intangibles and process variables - continuity of care, provision of information, etc. - which usually has little direct relationships to outcomes

Consequences: Impact on Family

How were the caregivers affected? Even harder to measure - enormous controversy about appropriate measurements. Data not routinely collected Ethical issues - what responsibility do family members have for one another?

Consequences: Impact on Profession

How were the providers affected? Impact on institution, professions, individual providers Even harder to measure Short term or long term? Ethical issues - how important is to to ensure well paid, skilled jobs?

Consequences: Impact on Society

Are there broader societal, ethical, etc. Implications? Even harder to measure Usually ignored, except in obvious areas (e.g., Reproductive technology)

What is difficult to measure still can be important

Beware the tendency to ignore soft or difficult to measure outcomes Beware the technocratic fallacy - that is, the tendency to disguise value choices behind seemingly technical decisions

Technocratic Issues Disguise Value Choices

One example: Discount rate: Should it be 5%? 3%? 0% Looks technical, but...

What is the payback for a prevention program whose effects will be seen in 30 years?

1 year 30 years 0% 1000 1000 1% 990.09 741.92 3% 970.87 411.98 5% 952.38 231.37

Value of $1000, after 1 and 30 years, varying discount rate

1000 900 800 700 600 $ 500 400 300 200 100 0

0% 1% 3% 5% 1 year 30 years Elapsed time

Two Types of Small Benefits:

Mass = small benefit to large population High tech = large benefit to small population
100 90 80 70 60 50 40 30 20 10 0

Mass "high tech"

lo w

hi g

Translating Technology Assessment Into Policy

Costs vs. alternatives
Benefits vs. alternatives

Higher Same Higher Tough Yes Same Lower No No

Who cares?

Lower Yes Yes Tough

No

Technocratic Issues Disguise Value Choices

Another example: Who decides? Whose costs and consequences matter? Are there procedural justice issues?

How Can Providers Be Involved?

At one level: Part of quest for evidence-based practice May be critical for providers to help justify the value of what they are doing, and to stop doing what cannot be justified

How Can Providers Be Involved?

At a deeper level: Those who help set the agenda and write up the minutes can control the results of a meeting Those who determine which costs and consequences will be considered, and how they will be measured, can control the results of an evaluation

How Can Providers Be Involved?

Help define assessments Keep an eye on process issues Ensure seemingly technical issues dont camouflage ideological/ethical assumptions Ensure that the issues addressed are those relevant to patient care

(As well as to provider working conditions?)

For Canadian data:

The Canadian Institute for Health Information

http://www.cihi.ca/eindex.htm

Especially: Health Care in Canada series Health Canada

http://www.hc-sc.gc.ca/english/index.htm

Background papers on financing and delivery: www.m-thac.org (Working papers)