This is part one of a two-part series.
In the past few years, government actions have positively impacted private health care plans by saving them money, a truly unique situation. However, it’s important to recognize that this has been an exceptional circumstance, one not likely to be repeated in the next round of government healthcare changes.
The two changes that have resulted in unprecedented savings for private drug plans since 2009 were: many best-selling prescription drugs lost patent protection in Canada; and provincial governments legislated price reductions for generic drugs that, in many cases, applied to both public and private drug plans.
Governments everywhere struggle under the weight of government debt and need to reduce government expenses. Austerity measures have ranged from mild to severe, but in many cases have resulted in significant economic impact.
In Canada, austerity has not yet become part of the daily lexicon. However, a quick look at the provincial deficits and debts would indicate that this may soon change.
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As of this fiscal year, only Saskatchewan is expected to run a budgetary surplus. Ontario’s deficit has been a potential concern for years, but now even oil-rich Alberta is showing signs of an imbalance between government revenue and expenditure.
While the exact figures vary by province, approximately 50% of the provincial government budgets now go towards healthcare.
This number is forecast to rise in the near future as our aging population puts increasing demands on the healthcare system. For provincial government budgets, deficit reduction will shortly become an urgent goal, and that deficit reduction will almost certain to include a reduction in government health expenditures.
Necessity is the mother of invention
Expect to see Canadian provinces get more creative with their interpretation of the Canada Health Act in their need to reduce health expenditures. And, since the provincial governments pay for the majority of the healthcare bill today, what may seem like a small reduction in the provincial government health expenditures could mean a large off-loading of costs to the private sector.
In the past, when services or costs were de-listed by the government plan sponsors often made the decision to cover them on behalf of their employees. Many plan sponsors cannot afford to do this anymore.
What kinds of changes might governments make?
- De-listing of services
Services such as physiotherapists, chiropractors, ambulances, eye exams and dental visits for children were once covered by provincial healthcare programs. What services might be de-listed next? Lab tests? Elective surgeries? Treatment for conditions that are a result of poor lifestyle choices? Some of these are already starting to be debated.
- User fees
Historically a no-no under the Canada Health Act, could a $10 user fee (waived for low income individuals) for using an emergency room be feasible as a way to encourage more cost effective types of care such as clinics and doctor’s offices? As governments look to better manage their own health budgets, the use of financial incentives to change consumer behaviour could be a very powerful tool.
Income testing
Several provinces already use income testing for prescription drug coverage. One of the most politically acceptable ways to implement user fees into the healthcare system would be to charge those who can afford to pay. Ontario will begin charging “wealthy” seniors (those earning over $100,000) more for their drug coverage beginning in 2014. What else might the wealthy be able to pay more towards in the health care system?
If the government begins to download costs, will plan sponsors pick up the costs on behalf of their employees? Based on their existing insurance contracts, or union bargaining agreements, will they have a choice?
A new era of tough decisions for plan sponsors is coming soon.