© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the January 2005 edition of BENEFITS CANADA magazine.
The Canadian healthcare system is under siege, forcing provincial governments to cut back where they can. Plan sponsors are conveniently—and, thus far, quietly—picking up the tab.
“When the going gets tough, the tough get going.” Is this saying rapidly becoming the mantra of provincial governments across Canada as they face off with the tough financial realities of the healthcare system?

Taken in isolation, the cross-country changes to provincial healthcare plans in 2004 may not seem like a big deal. But if you believe the changes are minimal, what you’re missing is the collective history of cuts and revisions that have occurred over the last 10 years.

The media and others may claim that governments don’t have a clue about managing healthcare. But look closely, and you’ll see a single-minded, precise strategy unfolding. It’s a strategy by which governments hope to avoid a serious confrontation with the Canadian public for as long as possible. In most cases, the cost-shifting is still felt by individuals, as private plans in turn ask their members for a greater share of cost-sharing. However, individuals see this cost-contribution request as coming from their plan sponsor, rather than tracking it back to changes government has made, and governments avoid looking like ‘the bad guy.’ However, that escape may no longer be possible as major change is looming just around the bend.

Canadians are justly proud of their healthcare system. One can only imagine the mayhem that would ensue if any serious attempt was made at dismantling this healthcare structure. Yet, this could indeed become a reality. The financial options currently facing governments—and, by extension, every plan sponsor and every Canadian—are bleak.

What Canadians don’t know is that the model that existed prior to 1966 (when the Medicare Act was passed) was not that different from our American neighbours. In fact, the initial driver for private employer healthcare plans was the need for insurers to create a new market space for themselves once the government program was established.

In 1984, the Trudeau government enshrined the basic principles of the national healthcare system under the Canada Health Act. Inspired by the original fundamentals of our healthcare system, five principles were stated that healthcare would henceforth focus on: public administration, comprehensiveness, universality, portability and accessibility.

But that was 20 years ago. Last year, the Canadian government drew a line in the sand and explicitly outlined the transfer payments that will be available for the next few years. Provinces cannot assume the federal government will always come to their rescue and provide the required financial aid to alleviate their over-burdened budgets; there’s no doubt that serious measures will need to be taken to balance the books.

How serious is the problem? For the past 20 years, Canadian healthcare costs per capita have been increasing slightly faster than those in the United States, according to the National Centre for Policy Analysis report, Canadian Health Care: The Implications of Public Health Insurance.

In 2001, Canada spent a greater portion of its GDP on healthcare (9.7%) than any other industrialized country with a national healthcare system. According to the Organization for Economic Co-operation and Development, although that cost is lower than the 13.9% the United States spent in 2001, healthcare costs are clearly unsustainable.

In addition to being expensive, the Canadian healthcare infrastructure is burdened by the pressure to maintain its services. For instance, in 2003, Canadians waited an average of 17.7 weeks for all types of referrals—almost double the wait of 10 years ago. Waits for service for critical conditions, such as cancer or heart surgery, can be almost as long, reports the Fraser Institute.

On the technology front, the situation is just as bad. In terms of access to expensive diagnostic tools, the Fraser Institute finds that Canada ranks 15th out of 24 countries for access to MRIs, 17th out of 23 for access to CT scanners, 8th out of 22 for access to radiation machines, and tied for last for access to lithotripters when compared to other industrialized countries, according to the Fraser Institute.

Clearly, universal healthcare—the ideal system for many— is under siege. A look at the last five years worth of policy changes to healthcare shows that provincial governments have a common understanding of the severity of the situation. A quick review of provincial plan changes in recent years reveals a startling symmetry in the cuts and choices that have been made.

2000 – The reorganization of healthcare delivery is well underway in provinces such as Alberta and Ontario in 2000. A move toward regional health centres means that hospitals deemed inefficient or outdated are closed or amalgamated with other centres. As well, legislation is established, such as the Health Care Protection Act in Alberta, which makes it legal to provide certain healthcare- sponsored services out of private facilities(e.g., specialist surgeries)even while these facilities can continue to take private clients. Prescription drug usage, premiums and approvals become the focus in Newfoundland and Labrador, Quebec and Saskatchewan.

2001 – The provincial strategy of managing the risk of increasing critical care costs becomes apparent. Alberta announces funding of routine mammogram screening for women aged 50 to 69. British Columbia introduces free influenza vaccinations for seniors, high-risk people, healthcare providers and emergency services personnel, while Ontario makes the vaccine available to all residents. Ontario also de-lists some physiotherapy services provided by physicians. Quebec adds four anti-smoking products to its provincial formulary and advises that the $500 maximum on these treatments will likely increase.

2002 – This year was rife with provincial plan changes. In Alberta, provincial healthcare premiums increase for the first time since 1995 and the province’s extended health program, covering a portion of expenses for eyeglasses, dentures and dental services, comes to an end.

British Columbia removes routine eye examinations for residents aged 19 to 64 from its provincial plan. The supplementary benefit practitioner coverage also changes dramatically. Services provided by chiropractors, physiotherapists, naturopaths, podiatrists and massage therapists are de-listed. Only those residents who qualify for provincial premium assistance will continue to have access to coverage. As well, the monthly B.C. Medical Services Plan premium increases from $36 to $54 for single residents, from $64 to $96 for couples, and from $72 to $108 for family coverage.

Manitoba also reduces paramedical coverage by cutting back the reimbursement amount for chiropractic services. New Brunswick and Nova Scotia join B.C. in reducing coverage for seniors under their provincial drug plans, and dental services are eliminated for children whose families have coverage under private plans in Nova Scotia. Quebec increases the maximum for anti-smoking treatments in the provincial formulary and Saskatchewan eliminates the $850 maximum semi-annual deductible on prescription drugs. In Saskatchewan, families may apply for assistance in situations where spending on prescription drugs exceeds 3.4% of their total income.

2003 – This is the year of Severe Acute Respiratory Syndrome(SARS). It is also the year when long-term financial repercussions to the system came hard on the heels of the Kirby and the Romanow reports on healthcare in Canada. Not surprisingly, few services are cut this year, and there is even some backtracking on a previous reduction: Nova Scotia reinstates the ability to coordinate coverage for dental services provided to children whose families also have coverage through private programs.

Generally, in 2003, other provincial changes focus on promoting education(like the demonstration of dispensing programs in Ontario), introducing additional coverage(like diabetic supplies in Saskatchewan, Alzheimer’s treatments in Nova Scotia, the palliative Drug Care Access program in Manitoba, and the meningitis C vaccination program for children in P.E.I.), or revising provincial coverage costs for seniors(like those in Nova Scotia, B.C., and Quebec).

2004 – In 2004, the spectre of SARS has receded, and economic realities are once again the primary healthcare drivers. Reductions in service are once more the order of the day as Ontario cuts chiropractic coverage, and physiotherapy services are restricted to seniors in long-term care facilities or receiving home care.

Manitoba and Saskatchewan focus on curbing rising prescription drug costs, as Saskatchewan commits to a review of drug classifications and Manitoba plans to “fasttrack” generic drug approvals to provide a more cost-competitive environment for Canadian consumers. In Ontario, routine optometry exams are restricted to children, seniors and high-risk individuals. On the illness prevention front, Nova Scotia, Ontario, Alberta and B.C. introduce coverage for children and high-risk individuals for vaccines against meningitis, chicken pox, hepatitis A, and influenza.


It’s pretty clear that most of these changes have been about finding someone else to pay the bills the provinces can no longer afford. But Canadians aren’t yet feeling the government’s hand in their pocket directly. Instead, private plans are filling the gap and becoming a viable alternative when governments increase premiums to cover the unavoidable rise in cost of providing service.

Most plan sponsors and their consultants have taken a close look at their plan designs and benefit philosophies in response to this provincial downloading. It’s often been a challenge to manage the additional demands on their benefits programs once the provincial coverage is reduced or removed, and plan sponsors whose intent was only to provide employee assistance after the provincial benefit was exhausted, are now wrestling with the legacy of their plan designs.

Today, about 30% of all Canadian healthcare costs are paid by the private sector, either individually or through private plans, according to the Canadian Institute of Health Information. When you’re talking about an overall expenditure of more than $121 billion, this translates into a price tag greater than $36 billion. And it’s not going to get any better. The 2004 changes in Ontario alone are expected to result in private health plan cost increases of up to 6%, depending on plan design, according to Toronto-based Morneau Sobeco’s internal research.

The provincial healthcare programs across Canada have been in place for nearly 50 years, and during that time the public perception of them has gone from being an appreciated benefit to an entitlement. The addition of private plans in the mix merely added to the general complacency of the Canadian public. But our ailing healthcare system needs resuscitation, and it’s clear that the provincial changes to date have been following the path of least resistance—a little trim here and a little tuck there—all in places where no one would feel a dramatic change at any one time.

Popular expressions have a way of being true. Canadians and their plan sponsors can expect that, at this critical juncture in the history of healthcare, provincial governments will know that they should “get tough” and take the aggressive measures required to keep the healthcare system viable. Will they? Employees and plan sponsors can seek to be active partners in directing this change.

Jacqueline Taggart is a principal in the communication consulting practice of the Toronto office of Morneau Sobeco. Jamie Farrell is a consultant in the benefits consulting practice of Morneau Sobeco in Toronto.