When it comes to issues Canadians care about most, health care is regularly at or near the top of the list.
That was the case even before COVID exposed or magnified cracks in the health care system. Across the country, Canadians have been dealing with inflated wait times at hospitals, the closures of urgent and respite care centres, and difficulties in accessing family doctors, specialists, and ambulances. With challenges mounting, improving health care ranks among the top three issues for Albertans. And at the national level, health care has surpassed inflation as the foremost concern.
To Canadians, health care is more than just a policy or a service—it’s a cultural identity and a source of deep national pride. Canadians hold the health care system in higher regard than multiculturalism, democracy, or even hockey. And despite complaints about long wait times and difficulties finding doctors, Canadians will staunchly defend their health care system and reject talk of reform as attempts to privatize it.
This spirited defence comes despite Canada’s health care system not ranking especially well in international comparisons. In a 2021 report by the Commonwealth Fund, Canada’s health care system ranked 10th out of 11 high-income countries, with only the US performing worse. Canada ranked poorly on access to care (9th), equity (10th), health outcomes (10th), and administrative efficiency (7th). These issues persisted despite being one of the highest per capita spenders on health care internationally.
This combination of national pride and poor outcomes creates a significant barrier to reform, even in the face of severe and mounting challenges. Moreover, the complexity of the system, combined with a lack of understanding of how health care works in Canada, leaves many Canadians with misconceptions that inform their beliefs about reform.
This analysis aims to dial back the rhetoric on health care and provide a basis for understanding how Canada’s health care system actually works by addressing some commonly held myths. By providing a common language and understanding, it will be easier to have level-headed conversations about improving the system. It is essential that we move past rhetoric and address the reality of health care in Canada to ensure that our system continues to serve Canadians well.
Understanding Canada’s Health Care System through 5 Myths
Myth #1: Canada has a single national health care system
Canada’s publicly funded health care system, known as Medicare, is enjoyed and valued by all Canadians. However, what many consider to be a single national health care system is anything but.
Rather, Medicare is composed of 13 provincial and territorial health insurance plans. This decentralization has been a defining feature of Canada’s public health care system since its inception, with the provincial and territorial (PT) governments bearing primary responsibility for managing, organizing, and delivering health care services to the vast majority of Canadians.
In addition to the PT governments, the federal government also has a role in health care delivery. It is responsible for delivering services to specific groups, including First Nations people living on reserves, Inuit, inmates, veterans, and members of the Canadian forces.
The federal government also sets national standards for the broader health care system to ensure consistency across the country. It does this through the Canada Health Act, which outlines the terms and conditions that all provincial and territorial plans must meet in order to receive federal funding. Specifically, public health insurance plans must abide by the following five principles:
- Public administration: Plans must be administered and operated on a non-profit basis by a public authority.
- Comprehensiveness: Plans must cover all medically necessary services provided by hospitals, physicians, and dentists (when the service must be performed in a hospital).
- Universality: All insured residents must be entitled to the insured health services on uniform terms and conditions.
- Portability: Plans must cover all residents when they travel within Canada.
- Accessibility: Plans must not impede or preclude, either directly or indirectly, whether by user charges or otherwise, reasonable access to insured health services.
Enforcing the Canada Health Act is a challenge for the federal government because, outside of the exceptions listed above, the delivery of public health care falls under provincial and territorial jurisdiction. As such, the only way the federal government can enforce the Act is by threatening to withhold funding (i.e., Canada Health Transfer payments) from the provinces. In essence, if provinces choose to violate the Act, they stand to lose considerable amounts of federal money.
In short, because Medicare is decentralized, health care plans will look different from one province or territory to another, including what’s covered and how it’s delivered. Each jurisdiction has the responsibility and flexibility to develop its own system of delivering care. That said, all plans are subject to the five principles set out in the Canada Health Act, which are designed to ensure reasonable equity and access.
Myth #2: The federal government funds provincial and territorial health care plans
If you’ve been keeping up with the news, you’ve likely seen some intense discussions between the provincial and territorial (PT) governments and the federal government concerning a health care deal that involves the injection of tens of billions of dollars into provincial and territorial health care systems over the next decade. The crux of the discussions centred on certain requirements the federal government attached to the additional funding, including a commitment to data sharing, reducing surgery backlogs, and investing in mental health.
So yes, the federal government does play a role—an important one—in funding provincial and territorial health care plans. However, the federal government is not the sole, or even the primary, funder of health care in Canada.
That year, the federal government made an agreement with the provinces whereby it lowered its personal and corporate income tax rates so that the provinces could fill the “tax room” by raising their tax rates by an equivalent amount. The goal was to increase provinces’ ability to pay for their own health care, post-secondary education, and social services. Although this was a one-time transfer and tax rates have risen and fallen multiple times since, the federal government still considers this 1977 transfer to be part of its annual contribution to provincial spending in these areas.
However, for the sake of simplicity, we will consider this tax transfer (i.e., “tax points”) to be a matter of the past and not relevant to the present situation.
Presently, the provinces and territories are responsible for about 78% of Medicare’s expenses, with the federal government providing the remaining 22% through cash transfers via the Canada Health Transfer (CHT).
This cost-sharing arrangement has been a constant source of tension and debate since Medicare was first established. Initially, federal cash covered about 35% of health care costs. However, the federal contribution did not keep pace with overall health care spending by the provinces. In the late 1970s, the federal government’s contribution fell to around 25%, and in the early 2000s, it declined even further to a range of 14-19%. More recently, the federal share has varied between 20-24% of public health expenditures.
The premiers have repeatedly asked the federal government to take on a larger share of health care costs. In 2015, they called on the government to increase the CHT to cover 25% of all health spending. In 2020, with the arrival of COVID, the premiers again began applying more pressure on the federal government. This time, they called for the federal government to become a “full funding partner” in health care and raise its contribution to 35%.
We’ve discussed who pays for Medicare, but not how they pay for it. That’s next.
Governments pay for Medicare using general revenue raised through taxation, such as personal and corporate income taxes and sales taxes, payroll levies, and other income sources. Provinces may also choose to charge a health premium to their residents to help pay for publicly funded services. However, these premiums are not directly linked to the provision of health care services. Alberta previously levied health care premiums on its residents, but these were ultimately eliminated in 2009.
Health care delivery represents a huge cost to government; for the provinces and territories, it can consume up to 40% of their entire budgets. And as the population ages, spending pressures will continue to mount (the per capita cost of delivering health care rises rapidly as people age). As such, there is an urgent need for sustainable funding solutions—which may include looking at the cost-sharing arrangement with the federal government—and efficient delivery models to ensure Canadians have access to high-quality health care services.
To sum up, health care funding is a shared responsibility between the federal and PT governments, financed through general taxation. That said, the PT governments shoulder the bulk of the load.
Myth #3: 100% of total health spending is publicly sourced
Contrary to popular belief, government does not have a monopoly on health spending in Canada. While the public sector accounts for the majority of health spending (72% of the total in 2022), the remaining 28% comes from the private sector. Approximately half of these private expenditures come from private supplemental health insurance plans, and the other half comes from out-of-pocket payments from patients.
So yes, while Medicare is publicly funded and free for patients at point-of-service, it does not cover the entire range of medical goods and services that Canadians consume.
In effect, there is a three-layer system for financing health services in Canada.
Layer one comprises what Canadians typically think of when we think about the health care system—publicly financed Medicare, which provides all medically necessary hospital, diagnostic, and physician services at no cost to the patient at point-of-service, as is required by the Canada Health Act.
Layer two services are financed through a mix of public and private funding and include outpatient prescription drugs, institutional long-term care, and home care. Public coverage for these services varies by province or territory; any services not covered by public plans require private health insurance or out-of-pocket payments.
Layer three health care services are entirely financed privately—either through private health insurance or out-of-pocket payments. These services include routine dental and vision care for adults, physiotherapy, and prescription drugs.
As you navigate the health care system, many of the services you need will be covered by publicly funded health care insurance programs—visits to your family doctor, x-rays, and surgery. But many services that improve our physical and mental health and wellness—such as vision care, dental care, and prescription medication—will need to be paid, either fully or partially, with private funds.
Myth #4: Publicly funded health services must be delivered by public institutions
According to the Canada Health Act, Medicare must be managed by a public agency on a not-for-profit basis, in line with the principle of public administration discussed earlier. This principle, and indeed none of the other four principles, say anything about the requirements for the ownership structure of the institution delivering that health service.
The Act does not prohibit the provinces and territories from allowing private health care providers from delivering, and being reimbursed for, publicly funded health services. As long as the provincial and territorial health insurance programs are administered publicly, health care services can be delivered by public or private providers.
This principle is poorly understood. The expansion of private delivery is sometimes seen as a threat to Canadian Medicare when, in fact, private delivery has been a component of Medicare since it was first introduced.
Perhaps the most common example of private delivery of publicly funded health care in Canada is your family doctor (if you have one). Most doctors practice as private physicians and are incorporated as small businesses, billing the government for each patient they see under fee-for-service agreements (most commonly). So, every time you visit your family doctor, you are accessing privately delivered health care.
Another commonplace example of privately delivered health care are clinics that provide lab and imaging services, where services are paid for with public dollars. Here in Alberta, lab and imaging services are offered by both private and public clinics. For example, lab services are provided by Alberta Precision Laboratories, a public clinic, and DynaLIFE Medical Labs, a private, for-profit clinic. Similarly, diagnostic imaging services in the province are delivered both publicly by Alberta Health Services and privately by Mayfair Diagnostics. Nonetheless, patients are unlikely to notice any substantial difference between the public and private clinics as both deliver necessary services at no cost at point-of-service.
Moreover, while hospitals in many provinces and territories, including Alberta, tend to be publicly owned, they can also be private, not-for-profit corporations, as is predominantly the case in Ontario.
In short, because the ownership structure of institutions delivering health services is not governed by the Canada Health Act, services funded by Medicare can be delivered either publicly or privately.
Myth #5: A move to expand private delivery is a move to “American-style” health care
Those that fear an expanded role for private delivery equate private health care to the system that exists in the United States. It is seen as the antithesis of Canadian Medicare, where profits come first, and patients come second. This belief isn’t held by everyone, though it certainly is a fear held by some.
Perhaps by virtue of geography, Canadians tend to view health care delivery as falling under one of only two options: our way or the American way. But in fact, there are a dozen other countries offering different models from which to draw lessons and inspiration if we wish to improve our health care system.
The health care system in the US is often characterized by its high costs, unequal access to care, and its reliance on private insurance. Indeed, when it comes to health care, the US is an outlier among its peers. Per capita health care spending is 2.7x the OECD average and over 50% higher than the next highest country. And of that spending, 45% comes from private sources compared to the OECD average of only 25%. At the same time, this large health expenditure is not translating into better health outcomes. Life expectancy is lower, and avoidable mortality rates are higher in the US than in other OECD countries that spend less per person on health care. So, while some elements of the US system, such as the emphasis on innovation and technology, may be advantageous, many other aspects are not, especially if you are not affluent. Individuals with significant financial resources can afford better and expedited health care; even Canadians with deep pockets will sometimes opt to travel to the US for treatment.
Expanding private delivery of healthcare in Canada does not necessarily mean adopting the US system. In fact, many other countries with universal healthcare, such as France and Germany, have a mix of public and private providers. Furthermore, expanding private delivery could help strengthen the Canadian health care system by providing additional options for patients and reducing wait times for certain services.
Furthermore, it is important to note that expanding private delivery does not mean abandoning the principles of universality and accessibility that are so important to Canadians in their health care system. The five principles set out in the Canada Health Act ensure that any expansion of private delivery would need to be done in a way that ensures equitable access to care for all Canadians, regardless of ability to pay.
Canada’s health care system is at a breaking point, and Canadians recognize that we cannot carry on in the same way. Nor should we, even if the challenges subside.
If we are to meaningfully improve health care in Canada and become an international top performer, we need to start having honest conversations about what kind of reform the system might need to become a more efficient, accessible, and high-quality system. And we cannot have those conversations without first understanding how the current system works.
Emma Dizon, Policy Analyst