Theoretical Stance: The Political Economy of Healthcare Applied to the Canadian Case

In theoretical terms, the Canadian healthcare system can be analyzed through the premises of political economy, which examines “the power relations, which mutually constitute the production, distribution, and consumption of resources” (^{Mosco, 2009: 2}). This article evaluates how the Canadian healthcare system produces, distributes, and consumes health resources. The next section will explain the system’s organizational design, that is, its modes of financing and delivering services.

National healthcare systems are organized on three planes: 1) financing: how services are paid for, publicly or privately; 2) delivery: how services are delivered: publicly or privately; and, 3) allocation: how funds are allocated to service providers (Wiktorowicz, 2006: 247). One of the positive aspects of the Canadian system is that it is a single-payer system, in which 70 percent is financed with public funds. Wiktorowicz considers that “in a publicly funded healthcare system, all citizens contribute to and pay for the system of health insurance through their personal income and taxes. Important advantages include: 1) spreading the risk of illness across the entire population so that insurance is affordable to all citizens, even those with greater risk of falling ill; 2) more effective cost control over health care services; and, 3) universal coverage” (Wiktorowicz, 2006: 247). For analyzing Canadian healthcare, it is natural to contrast it to its neighbor’s, since healthcare in the United States is based on a system of private insurance. These differences are embedded in different ideological premises and political authority, as expressed by Wiktorowicz: “At the close of the twentieth century, Canada and the United States reflected diverging patterns in the organization and delivery of their healthcare systems. Each nation’s healthcare system was founded on different ideological premises and political authority, and these same forces continue to shape their evolution” (Wiktorowicz, 2006: 241-242). Apart from these differences, the two countries also have different perspectives for the healthcare system’s development and reform, and consequently debates about this are highly politicized. “These debates are based on different opinions about the role of government in health care, which arise from different values and national traditions” (Wiktorowicz, 2006: 242). These differences have arisen throughout history in Canada. As the next sub-section on the origins of Canada’s healthcare system explains in more detail, the founder of Medicare was and continues to be a very respected and popular Canadian, Tommy Douglas. He created full health coverage in his province, Saskatchewan, and this model was then expanded nationwide. As Coburn writes, “In Canada, the formation of a socialist or social democratic party, which attained power in Saskatchewan at the end of the Second World War, was crucial. This party first introduced hospital insurance, and later health insurance for hospital and doctor care. This example haunted the federal government and the other provinces. Pressure from various sources -many but not all of these originating with working-class movements- eventually led to its enactment on the federal level” (2006: 76).

Nevertheless, this welfare state policy has not been supported during the whole twentieth century. As Bryant explained, “Within the typology of welfare states, there is room for national variation. Both global and national political, economic, and social forces influence public policy and the shape of the welfare state in Canada. Within the Canadian system, these dynamics include political ideologies of the government of the day and competing interests. The rise of neo-liberalism has influenced welfare state policies in Canada” (^{Bryant, 2006: 203}). The rise of neo-liberalism in Canada could be perceived especially during the 1990s. Bryant, citing ^{Scarth (2004)}, states,

The rise of neo-liberalism in liberal political economies (for example, Thatcherism in the United Kingdom; Reaganism in the United States; and Mulroneyism in Canada) has created increased income inequalities and the weakening of social provision. Certainly, policies followed by Finance Minister Paul Martin during the 1990s reflect both a neo-liberal approach and a distinct threat to the Canadian welfare state. (2006, p. 204)

These inequalities and weak social provisions will be assessed in section three of this article, which addresses the drawbacks of the Canadian healthcare system. This article will also make comparisons with other industrialized countries. It is important to note, then, that under neoliberalism, countries increase their level of inequalities. As Coburn writes,

In the developed nations the onset of neo-liberalism has been associated with increasing within-nation inequalities. Increases in inequality have been particularly pronounced in those nations adopting more stringent neo-liberal or market-oriented politics and policies. In the early 1990s the United States, Australia, Canada, and the United Kingdom stood at the top of the income inequality ladder, while Norway, Sweden, and the Netherlands were the lowest (although by 1994 Canada had moved more toward the middle). (2006: 69-70)

Table 2 shows that in the mid-1990s, “as governments focused on fiscal restraint, total health expenditures grew more slowly than GDP between 1993 and 1997. As a result, the health-to-GDP ratio fell each year in that period, reaching 8.7 percent in 1997” (^{CIHI, 2015: 7}). The fall in healthcare expenditures during the 1990s was caused by the economic recession in the country from 1989 to 1992. During that time, the deficit caused cuts in social expenditure. Another recession that caused healthcare expenditure cuts occurred in 2009. Following that economic crisis, the government focused on restraining programs. Health spending growth has been slower than the growth in the overall economy. Figure 1 illustrates cuts in healthcare expenditures during the 1990s, when neoliberal policies were applied, and also following the 2009 crisis.

Table 1: Indicators for the Canadian healthcare sector 

Source: Developed by the author based on ^{CIA (2016)}.

Note: According to 2013 estimates, Canada´s GDP was US$1.518 trillion. Canada is fourteenth in the world ranking by GDP. The United States ranks first with US$16.72 trillion.)

Table 2: Evolution of Canadian health expenditure as a percentage of GDP (1975 to 2015) 

Source: Developed by the author based on data from ^{CIHI (2015: 7)}.

Figure 1: Total health expenditure as a percentage of GDP, Canada (1975 to 2015) 

Although the Canadian healthcare system continues to be mostly public, some internal forces have attempted to make the private percentage bigger. Privatization is one of the main premises of neoliberalism. As Coburn stated in 2006 (78),

Today, the push toward privatization ranges everywhere from the commodification of knowledge, including knowledge about health, previously commonly held in universities, to privatization even of specific human gene pools. All of this has profound implications for the provision of healthcare. It is a daily struggle within neoliberalism to preserve any form of collective benefit.... In addition to “real” problems with the delivery of care in Canada under Medicare, it is in the interests of private health interests to make Canadians dissatisfied with public health care and to create a “crisis.”

The challenges of the Canadian healthcare system, stressed mainly by those who detract from it, were enumerated by Coburn in this short paragraph, where he compares the Canadian and the U.S. American systems:

To reduce or avoid waiting lists, to make the system more responsive to patients, and to have a more geographically equal distribution of access. The major challenge in the United States is to get access to care more equally distributed -that is, the problem of health care inequalities (particularly related to income and race)-and the huge administrative and other costs. (2006: 78)

Coburn also analyzes the relationship between welfare regimes and inequalities, writing,

Different welfare regimes and rising inequalities of various kinds have important implications for health inequalities. In general, within nations, the higher a group’s socio-economic status (SES), the higher its health status. Within nations, SES differences in health (however measured) are substantial and have been widely reported....In the United States and Canada, infant mortality rates and longevity rates are highly related to geographical region and to race and Aboriginal status....In Canada, First Nations groups show much worse health than do other Canadians. (2006: 71-72)

Section three of this article includes a sub-section dedicated to the analysis of limitations on access to healthcare, in particular due to social and geographical gaps that translate into health gaps. Coburn explains this situation in detail, comparing it to the one in the United States:

Though Canadians have fewer financial barriers to access to care, this does not guarantee equality in actual usage. Aboriginal peoples in Canada, those in isolated areas, and the poor receive less adequate or appropriate care than the less isolated and those higher in SES, but nevertheless health care is more equally provided and accessible than in the United States, and more equitably provided than before Medicare... In Canada, the implicit rationing is due to constraints on available personnel and equipment; in the United States, it is rationing by income. (2006: 78-79)

Coburn refers to wait times in Canada as one important drawback of the system, due to the lack of personnel and equipment. In the United States, on the other hand, there are more investments in these assets, but care is less affordable (2006: 78-79).

For the future, the question is whether Justin Trudeau’s current Liberal Party administration, traditionally left-of-center, will improve the Canadian healthcare system. There may be hope according to Bryant’s analysis:

Canada has a relatively weak welfare state as compared to other nations, and even this state is under threat. What do we know about the determinants of a strong welfare state that can assist those wishing to resist these threats and strengthen public policy in the service of health? The influence of “left political parties” is important to the development of the welfare state and its maintenance in the post-industrial capitalist era. These parties support redistribution of wealth and advocate for universal social and health programs. (2006: 204)

Origin of the Canadian Healthcare System

The Canadian healthcare system, known as Medicare, has its origins in Saskatchewan Premier and Minister of Health Tommy Douglas’s promotion of it in his province. Only three months after being elected, in July 1944, the Douglas government provided total health coverage in the province for treating mental diseases, sexually transmitted diseases, and cancer. On January 1, 1945, his government went beyond that and provided cards for accessing full health coverage, including medications, to all pensioners, mothers, and disabled individuals from Saskatchewan. In 1945, the first Medicare program was established in the poorest region of that province, granting full coverage for medical, hospital, and dental services. In 1961, the Douglas government introduced an act to implement total Medicare coverage for every Saskatchewan resident, which came into full effect in July 1962 (^{Saskatchewan New Democrats, 2008}).

In 1961, Justice Emmett Hall, also from Saskatchewan, was entrusted with carrying out a Royal Commission on Medicare. The commission wrote a report that became the basis for the Medicare system for all of Canada, based on the Saskatchewan experience. Then, Canada’s Parliament approved the Medical Care Act of 1966, known as Medicare, which guarantees access for all legal residents of the country’s 10 provinces and 3 territories. Universal coverage, according to this law, is based on need, not on the ability to pay for a service (^{Hailey, 2007}; ^{Health Canada, 2014}; ^{Canadian Museum of History, 2014}). However, in practice, as will be explained below when analyzing the system’s challenges, certain services are not covered by Medicare, which can be very costly for Canadians. Therefore, on some occasions, high costs can discourage access to health services for individuals who cannot afford them.

Since its creation, the Canadian healthcare system has accrued a number of achievements, but also a series of major challenges. Both will be addressed below. At the end of the article are the conclusions, where positive and negative aspects will be weighed against each other.

How Is Canada’s Healthc are System Financed, Organized, and Regulated?

The healthcare system is 70-percent financed by federal, provincial, and territorial taxes. Most public revenues allocated to healthcare are used to provide universal coverage (hospital and medical services) and to subsidize the cost of medications (^{Marchildon, 2013: XIII}). Additional services are also provided by the provinces and territories to certain people, such as seniors, children and low-income residents, for services not covered by the public healthcare system. Some of these supplementary benefits include prescription drugs outside hospitals, dental care, eye care, medical equipment, and appliances (such as prostheses and wheelchairs), and the services of other health professionals, like physiotherapists. The level of coverage varies across the country. Those who do not qualify for supplementary benefits under government plans can pay for these services out of pocket or through private health insurance plans. Most people are covered through their employers or on their own by private health insurance; the level of coverage varies depending on the plan purchased (^{Health Canada, 2011b} and ²⁰¹⁶; ^{Government of Canada, 2014a}; ^{Canadian Institute for Health Information, 2005}). In general, healthcare expenses are covered with income taxes, and some provinces allocate an extra monthly tax to the healthcare sector, from which those with low incomes are exempt; this is the case of British Columbia (^{British Columbia Ministry of Health, 2014}).

The administration and organization of healthcare services are highly decentralized. Provinces and territories are responsible for administering healthcare and for planning medical services (^{Marchildon, 2013: xiii}). In order to use healthcare services, a Canadian citizen or resident must present his/her health insurance card in hospitals or clinics. The insurance varies in each province and territory. If a resident of one province travels to another for medical treatment, he or she may not find full coverage. For example, “when traveling outside of Ontario but within Canada, the ministry recommends that you obtain private supplementary health insurance for non-physician/non-hospital services” (^{Ontario Ministry of Health and Long-Term Care, 2016c}).

The federal healthcare system is regulated by the Canada Health Act of 1984, which guarantees that health services are universal, accessible to every resident and public (^{Health Canada, 2014}). Health Canada objective is “to protect, promote, and restore the physical and mental well-being of residents of Canada and to facilitate reasonable access to healthcare services without financial or other barriers” (^{Government of Canada, 2014a}: section 3 of the 1984 Act). This act establishes the criteria and conditions for federal and provincial health services. It also establishes that through the Canada Health Transfer, the government will provide a contribution in cash to the provinces every fiscal year. In order for them to receive their contributions, they must comply with the following criteria: a) public administration; b) comprehensiveness; c) universality; d) portability; and e) accessibility (^{Government of Canada, 2014a}, sections 4-7 of the 1984 Act).

Evolution of Healthcare Expenditure in Canada

It is good news to know that healthcare expenditures in Canada have risen from 1975 to 2015. Nevertheless, there have been periods of recession, such as the mid-1990s and after the 2009 financial crisis, whose effects were felt in 2011.

Table 2 gives details on health expenditures during four phases: 1) 1975 to the early-1990s; 2) the mid-1990s; 3) the late 1990s to 2010; and, 4) 2010 to 2015.

The information provided in Table 2 is graphically represented in Figure 1, below.

As explained in Table 2, the fall in healthcare expenditures during the 1990s can be explained by the recession the country experienced from 1989 to 1992. During that time, the deficit caused a cut in social expenditure. In the 1990s, the number of nurses and hospital staff was reduced, spurring physicians to emigrate to the United States. At that time, provincial commissions were created to propose a restructuring of the healthcare sector. Likewise, the press contributed to spreading the population’s concerns by publishing stories of people who had not been covered by the public sector, pointing out, furthermore, the growing conflict between Ottawa and the provinces, in particular Alberta, Ontario, and British Columbia (^{Canadian Museum of History, 2014}).

During the 1993 federal election campaign, the Liberal Party promised to renew its commitment to Medicare. During the 1994-1997 government of Prime Minister Jean Chrétien, the National Health Forum was organized by both federal and provincial ministers of health. One of the problems detected was the absence of information on the quantity and the type of services available, the requirements of human and material resources, and the costs generated by the healthcare sector. To deal with this, the Canadian Institute for Health Information (CIHI) was created, which has since produced annual reports on healthcare issues (^{Canadian Museum of History, 2014}).

In the beginning of the twenty-first century, public opinion was divided between those who supported Medicare and its detractors. In the polls, healthcare issues have been highlighted as Canadians’ main concern (^{Canadian Museum of History, 2014}). In 2004, the Decennial Action Plan for Improving Health Care established as priorities providing public coverage for home and end-of-life care and reducing wait times. Likewise, in 2005, the Pan-Canadian Public Health Network was created to establish a solid federal and provincial structure to deal with public healthcare emergencies as well as chronic diseases (^{OPS, 2012}).

From 2006 to 2010, Canada experienced an economic recession that has presented challenges (^{OPS, 2012}) that will be addressed in the next section. Nevertheless, Table 3 shows that during those years per capita health expenditures continued to rise.

Table 3: Canada´s health expenditures (per capita, current prices, current PPPS) (2000-2015) (US dollars) 

Source: Developed by the author based on data from the ^{OECD (2016)}.

Nota: (P) = Provisional data.

Table 3 shows that there has been an uninterrupted increase in health expenditure per capita from 2000 to 2015 (^{OECD, 2016}), except for during the 2009 recession. The CIHI presented more recent figures in October 2015, which show even higher numbers. According to this source, health spending in Canada in 2015 was projected to reach Can$219.1 billion, representing 10.9 percent of Canada’s GDP in 2015. This amounts to Can$6 105 per Canadian, compared to projections presented in Table 3, of just Can$4614 per capita.

According to CIHI, among 29 countries with comparable accounting systems in the OECD in 2013, expenditure per person on healthcare was the highest in the United States (US$9 086). Canada was in the top quartile of countries in terms of per-person spending on health, at US$4 569; this was less than Denmark (US$4 847) and more than France (US$4 361), Australia (US$4 115) and the United Kingdom (US$3 364) (^{CIHI, 2015}).

To sum up, the main achievements of the Canadian healthcare system, from its creation until 2015, have been 1) the relatively high expenditure, both as a percentage of GDP and per capita, if compared with other OECD countries; 2) the fact that 70 percent of the system is publicly financed; 3) services are highly decentralized, making provinces and territories responsible for administering healthcare and planning medical services; 4) the system is regulated by the Canada Health Act of 1984, which guarantees that health services are universal, accessible to every resident, and public.

The Canadian healthcare system definitely has a series of advantages. But it is not perfect. Below is an analysis of the major challenges it faces.

Limitations to Public Coverage: Private Coverage Can Be Expensive

Another disadvantage of the Canadian healthcare system is that Medicare does not cover all medical services. Likewise, healthcare depends on where the patient is being treated -in a hospital or not- and what province he/she lives in. For a province to receive federal funds for healthcare programs, it must comply with the basic requirements stipulated in the Canadian Healthcare Act, which include the “necessary medical attention” in healthcare matters. However, this concept is not defined; it is discretional and up to free interpretation by each province, including hospital care and the care given by family physicians. On the other hand, some services not covered by the public healthcare system actually should be considered necessary and therefore be covered. Dental and psychological services as well as home care are cases in point (^{CFHI, 2011}).

Hospital care absorbs around 30 percent of healthcare sector spending and this percentage is decreasing. Medical services provided by health professionals who are not physicians in general take place outside hospitals. Dental services are an example of this: 94 percent are covered directly by patients or by private insurance companies. Oral health, then, is related to the possibility of being able to afford it and not to the need for medical attention. Many Canadians cannot afford this service and sometimes their condition worsens and they have to resort to dental emergencies in hospitals, where they only receive antibiotics and painkillers that do not treat the underlying issue. Furthermore, if the situation becomes more serious, the risk is that the patient must be admitted in a hospital, and the costs are absorbed by the public service (^{CFHI, 2011}). This is an example of how healthcare outside hospitals, provided by non-medical professionals, is available only for those who can afford it and is not based on prevention, but rather on repairing the damage.

As for the access to prescribed medications, each province decides to what extent patients will be covered by the public system. In general, throughout Canada, around 40 percent of these medications are covered by the state and the remainder must be absorbed by private companies or by the patient him- or herself. This payment varies widely among provinces. For instance, an individual who has to pay Can$20 000 annually in medication will not pay anything in the Northern territories; that is, he/she will be fully subsidized. In the province of Quebec, he/she will only pay around Can$1 500; Can$8 000 in Saskatchewan; and Can$20 000 in Prince Edward Island (^{CFHI, 2011}). Again, here we can see another disparity among provinces and territories.

A Major Challenge: Aging of the Population

We can foresee that healthcare sector expenses as a percentage of GDP will continue to increase for the next few decades. This is because the Canadian population is aging, and changes in public policies will be needed as a result. This aging trend is due to decreasing fertility rates and increasing life expectancy. In 1971, only 8 percent of the population was made up of people over 65; this figure increased to 14 percent in 2011, and it is still expected to increase up to 36 percent by 2036 (^{Echenberg, Gauthier, and Leonard, 2011}).

The federal government finances pensions for elders (Old Age Security, or OAS) and the Guaranteed Income Supplement (GIS) for low-income people over 65 years of age. In 2009, the OAS cost Can$27.1 billion, and GIS benefits, Can$7.7 billion. Due to the aging of the population, OAS and GIS payments are expected to quadruple between 2009 and 2036. The employer pays the Canadian Pension Plan (CPP) to the employee. The employer-employee contributions rate increased from 3.6 percent in 1986 to 9.9 percent in 2003. In order for the program to be maintained, between 2011 and 2016 reforms have been planned to encourage older employees to continue working. For instance, the penalty for retiring at 60 -instead of 65, which is the usual age- will increase from 30 percent to 36 percent, while the bonus for retiring at 70 will increase from 30 percent to 42 percent (^{Echenberg, Gauthier, and Leonard, 2011}).

In 2011, people over 65 accounted for 14 percent of the population, but they were assigned around 44 percent of annual healthcare expenditures, both federal and provincial. Total spending on the Canadian healthcare sector exceeded Can$191 billion in 2010. Federal and provincial government expenditures together have grown faster than the economy, increasing from 5 percent of GDP in 1975 to 7 percent in 2010. Given the aging of the population, by 2036, healthcare sector spending is expected to be between 9 and 12 percent of GDP. Patient demand will increase in areas that are not always provided universal coverage, such as medications, long-term care, home care and end-o-life care. Responding to these demands will depend on economic growth, on innovations in more efficient provision of healthcare services, on the health of people over 65, on the result of the negotiations on coverage, on tax collection and on the financing/indebtedness ratio. As for the care given to patients in their homes, according to 2011 data, one out of every four Canadian employees takes care of a dependent elder at home. Seventy-five percent of those employees are middle-aged women. In the future, the increase in expenses and the decline in hours worked could represent financial problems (^{Echenberg, Gauthier, and Leonard, 2011}).

Great Dissatisfaction over Wait Times

Dissatisfaction over the wait times has been recurrent during the last decade. In 2006, Dr. Brian Day was quoted in a New York Times article, saying, “This is a country where dogs can access a hip replacement in one week, but humans must wait between two and three years” (^{Krauss, 2006}). In 2004, the government signed an agreement with the provinces to allocate a total of Can$5.5 billion for reducing wait times. The agreement mentions, for instance, the goal of reducing the wait time for a hip replacement to 26 weeks (104 days) (^{CBC News, 2006}).

In April 2007, former Prime Minister Stephen Harper announced that the provinces and territories would have their wait times guaranteed by 2010 for the following areas, which would be prioritized by the provinces: cancer, hip and knee replacement, heart problems, diagnosis and imaging, cataract surgery, and primary care (^{Nation Talk, 2007}). By the beginning of the Justin Trudeau government, this goal had not yet been met.

For the last few years, provincial Ministries of Health have published the wait times for receiving care in emergency rooms and by specialists on their web sites. For instance, Ontario’s Ministry of Health offers web surfers a list of wait times for emergency rooms, surgeries, magnetic resonance imaging, and computing tomography. When doing a search on March 24, 2014, to find out how long a patient would have to wait to get hip replacement surgery, selecting Alexandra Hospital, the system gave the following result: the wait time was 205 days (Ministry of Health and Long Term Care, 2016a). This wait time was longer than the 104-day goal set by Stephen Harper in 2007. After repeating the same search on the same website on September 30, 2016 for the same hip replacement surgery at the same hospital, the result was 209 days and the target announced increased to 182 days (Ministry of Health and Long Term Care, 2016a; 2016b). In two and a half years, wait times had remained almost the same, but they were still high. Moreover, they continue to be higher than the projected target.

Likewise, according to 2013 data from the Commonwealth Fund International Health Policy Survey, Canada had the longest wait times for seeing a family doctor of the 11 developed countries in the OECD: Australia, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States. The survey indicates that only between 31 percent and 46 percent of Canadians, depending on the province where they live, can see a doctor on the same day or on the day after the request, when it is not an emergency. The highest percentages in other developed countries were 48 percent in the United States, 76 percent in Germany and 72 percent in New Zealand (^{CBC News, 2014}).

In summary, the major challenges faced by the Canadian healthcare system analyzed above are 1) geographical and health disparities among provinces and territories; 2) the high cost of procedures not covered by the public system, such as oral health; 3) aging of the population and consequently the need to increase health expenditure in the near future; and, 4) wait times. In other publications it will be interesting to continue assessing other major challenges detected by the PAHO in 2012: care for chronic and mental diseases as well as for addictions and the need to reduce the high cost of new technologies.

In the conclusions, I will weigh the achievements and challenges as well as assess how the healthcare system will evolve.