Unbiased Analysis of Today's Healthcare Issues

Sustainability of Canadian Health Care System in Doubt?

Written By: Jason Shafrin - Oct• 29•13

Canada’s spends far less on health care on health care than the U.S.  According to the CIA World Factbook, in 2010 Canada spent 11.3% of its GDP on health expenditures compared to 17.9% of GDP in the U.S.  Nevertheless, a Society of Actuaries (SOA) report claims that Canada may be in a tenuous fiscal situation.  In 2012, provincial health care spending was 8.1 percent of GDP and this figure is project to rise to 18.9 percent of GDP by 2037 without any government action.  As Canada ages, the tax base will decrease and the demand for health care services will rise.

The SOA report presents the following key findings.

  • Assuming no governmental steps to curb health care expenditures, provincial/territorial spending on health care is estimated to increase at 5.1 percent real growth per year, increasing from 44 percent today to 103 percent of total provincial/territorial revenues by 2037.
  • Even after assuming some governmental action (for the base scenario, see Appendix 4) to limit real  growth  rates  to  3.5  percent—and  thus  to  decrease  2037  health  care  expenditures  by  30 percent—health care will still absorb 69 percent of total revenues available to provinces/territories by 2037 (86 percent of own-source revenues).
  • The proposed changes to Canada Health Transfer (CHT) will impact total revenues available to provinces/territories, reducing the federal government’s portion of  provincial/territorial  health care expenditures from the current 21.0 percent to 14.3 percent by 2037.
  • The supply of physicians needs to increase by at least 46 percent over the next 25 years just to keep up with increased demand for services as a result of aging and population growth.

The article also provides a nice review of the Canadian healthcare system, which I review below.

Canadian Health System Overview

In Canada, health care delivery is considered a provincial jurisdiction, and provinces/territories effectively directly administer most of the health care system. Still, the federal government sets national standards by providing funding support—the Canada Health Transfer (CHT)—to provinces/territories for health care expenditures. International  data  shows  that,  in  2010,  about  71  percent  of  Canadian  health  care expenditures were paid from public sources, effectively placing it below most OECD countries.


The  largest  provincial/territorial  health  program  is,  by  far,  Medicare,  which  in  fact  consists  of  two programs:  (1)  Hospital  Insurance,  which  started  in  1958, and  with  all  provinces/territories  having programs  in  place  by  1961;  and  (2)  Medical  Insurance,  which  started  in  1968 , and  with  all provinces/territories  having  programs  in  place  by  1972…The Canadian federal  government also directly administers health care for groups such as the military and  inmates  of  federal  prisons.

Under the Canada Health Act of 1984, outpatient prescription drugs are not required to be covered, but some provinces have drug programs that provide coverage for certain populations, such as seniors, low-income families, those on social  assistance, or those with certain medical conditions.

Preimums for public insurance

In  general,  health  care  expenditures  are  paid  by  provinces/territories  using  funds  from  their  general revenues. Only British Columbia directly imposes a fixed monthly premium to citizens, which is waived or reduced for those on low income. Ontario and Quebec also impose some kind of premium, sometimes referred  to  as  a  tax  or  contribution,  which  is  based  on  income.


Family physicians in Canada are chosen by individuals. A patient wishing or needing to see a specialist must be referred by a general practitioner.  Most physicians receive a fee per visit, at rates negotiated between the provinces/territories and the medical associations.

Private Insurance

About 30 percent of the cost of health care is assumed by the non-public sector, including the private sector (insurance companies and private employee benefit plans) and out-of-pocket payments from Canadians.  This mostly goes toward services not covered or only partially covered by Medicare, such as prescription drugs, complementary medical services, dental care and vision care.

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