The Broadbent Blog


The winding road to a national pharmacare program

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The Report of the House of Commons Standing Committee on Health, “Pharmacare Now, Prescription Medicine Coverage for all Canadians” released on April 18 marks a step forward towards a national program covering all Canadians, but also opens up some major political questions.

The Report recommends that Canada create a universal, single payer national pharmacare program, effectively extending public health insurance from primary care and hospitals to include prescription drugs outside of hospitals.

As is documented in the report, this would extend coverage to the many, mainly working poor, Canadians amounting to some 20% of the population, who lack coverage under the current mixed system of public and private insurance programs. Depending on the exact design, a national program would also all but eliminate out of pocket drug costs which are most burdensome for lower income families.

As again documented in the report and in the recent companion study by the Parliamentary Budget Office, a national pharmacare program would almost certainly lead to huge cost savings amounting to perhaps $4 billion per year through single payer bulk buying of drugs and realizing administrative efficiencies. This is important since the costs of the current system are rising rapidly and could be much better controlled without any loss of health benefits.

The central recommendation of the Health Committee does move us forward, but the statement of the Conservative members falls well short of an endorsement and clearly envisages a continued role for private insurers and a diversity of provincial approaches to coverage. In short, there is still no all party consensus on the main issue of whether we retain a mixed system or move to a public single payer system.

As the report recognizes, creating a national plan will have to address the fact that the provinces are starting in different places and may have somewhat different priorities when it comes to financing and coverage. A national plan will have to be funded by both the federal and provincial governments through cost sharing, and it's contours will thus have to be negotiated rather than just imposed by the federal government.

Even more importantly, some one third of total current spending on prescription drugs or over $12 billion of the total comes from private insurance, which exists in the form of employer sponsored plans or individually purchased insurance. The cost of employer plans is offset by non taxation of health benefits under the personal income tax.

A key problem of moving to a single payer, universal model is that the cost of current public, mainly provincial, programs would rise, by more than $10 billion per year, while the costs of private insurance programs would fall. Many employers would welcome such a change since they would only have to pay for other costs, such as vision care and dental care, through employer health plans

As the report hints, a national pharmacare program could be funded in part by employer and perhaps employee premiums to help offset the additional fiscal cost. Certainly there needs to be a serious discussion about how to finance a much bigger, albeit much more efficient and comprehensive, public program.

It is notable that labour groups, and specifically the Canadian Labour Congress, are strong supporters of a universal, single payer program given that most union members are already covered by good plans.

The argument they have put forward is that coverage should be universal, especially including the working poor, and that the rising costs of employer plans disproportionately benefit the drug companies and the private insurance industry rather than ordinary Canadians.

The NDP statement in the report also clearly supports moving quickly to a public single payer program.

The Health Committee report somewhat muddies its central recommendation by calling for further consultations with the private insurance industry, unions and employers over how to move from the current mixed system to a public system.

As the Health Committee knows from its own hearings, we can expect the large drug companies and the private insurance industry to oppose major reforms. We can also expect some to argue that a national plan is unaffordable for governments, even if it has been demonstrated that total public and private costs would be much lower and that health outcomes would be improved.

Given the compelling evidence marshalled by the Committee, the focus now should be on how to design and fund an expansion of medicare to include pharmaceutical drugs, as opposed to tinkering with a costly and inadequate mixed system.

The federal government has promised to deliver a detailed plan on how to implement a pharmacare program before the 2019 pre election budget. It is, in fact, still unclear how far they are prepared to go.

 

Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute