It is inaccurate to say that Canada has an entirely publicly funded health care system. 

While often described as a publicly-funded system, only about 70% of health care costs are paid for publicly, with the remaining 30% paid for privately. 

In Ontario, medically necessary hospital and physician costs are entirely covered by the public health care system. However patients pay privately for many drugs, dental care, eye care, physiotherapy and other services. 

Many politicians speak about Canada’s health care system as if virtually everything is paid for by governments. However, this isn’t true – about 70% of health care is publicly paid through taxpayers’ dollars, with the remaining 30% paid for through private insurance or out-of-pocket payments. How does Canada compare with other countries in the public/private mix?

How history shaped what’s in and out of Medicare

Public health insurance in Canada developed in two stages, first with the introduction of the Hospital Services and Diagnostics Act in 1957, which established provincial health care plans to cover hospital care. In 1966, the Medical Care Act extended these provincial public insurance programs to include physician fees. During that time, the vast majority of healthcare spending went toward physicians and hospitals. Over time there has been a change in allocation of healthcare expenditures – for example there has been an increase in the proportion spent on prescription drugs. To learn more about who pays for prescription drugs in Canada, and what some policy options are regarding prescription drug coverage, click here.

In 1984, the federal government passed the Canada Health Act which reaffirmed many of the principles set in legislation 20 years earlier, stating that “continued access to quality health care without financial and other barriers will be critical to maintaining the health and well-being of Canadians.”

The Canada Health Act tied federal funding transfers to specific conditions – universality (meaning every Canadian is covered to the same degree), comprehensiveness, accessibility, portability and public administration. The comprehensiveness principle required provincial insurance programs to cover all medically necessary hospital and physician services. But there is no definition for “medically necessary” provided in the Act, and provinces have interpreted this differently. As the population ages, and the way that health care is delivered changes, there are growing debates about what services should be covered publicly and what services Canadians should be responsible for paying on their own.

Private financing of health care in Canada

Privatization, in numerous forms, is part of Canada health care. Private health care has been described as “anything beyond what the public system will pay for.” For example, if you’re in hospital, public insurance will pay for the cost of your bed in a shared room, but if you have private insurance, or want to pay out of pocket, you can upgrade to a private room, for a price.

Private clinics have also opened in many provinces across Canada, offering services such as imaging, diagnostic tests and low risk surgeries, for a fee. Another significant area of private spending is on outpatient prescription drugs. Although some patients are covered by provinicial governements, many are not, and pay for medications through private insurance, out of pocket payments, or a combination of the two.

Derek Burleton, Deputy Chief Economist of TD Economics and author of a recent report on the sustainability of health care in Ontario says that when “provincial governments try to contain costs and deal with deficits” it will “put pressure on the private sector to pick up the slack.”

How does Canada compare?

Private health care spending is a higher proportion of overall health care spending in Canada than in many other comparable countries. Mark Stabile, Director of the School of Public Policy and Governance at the University of Toronto says that “with the system that we have set up in Canada, which systematically excludes prescription drugs” it is no surprise that “there is going to be a large private component” of health spending. Stabile notes that other health care systems such as the United Kingdom do have parallel private systems. However, they tend to be small. Stabile describes these parallel private systems as “focused on a small number of clients and doing a small number of things” noting that “it is unlikely that you will get open heart surgery in a private system because it’s not going to make them money.”

The mix of what is paid for publicly and privately in Canada differs from comparable countries. The table below provides a snapshot of health services that are paid for publicly and privately in Canada, the United Kingdom, France, New Zealand and the United States.

Health Spending in Canada & Comparable Countries

	Canada	United Kingdom	France	New Zealand	United States
Public	Physician and hospital services, with varying levels of support for groups related to prescription drug coverage, eye care, dental care, home care, and ambulance services.	Preventative care, inpatient and outpatient care, physician services, inpatient and outpatient drugs, dental care, mental health care, rehabilitation	Hospital care, ambulatory care, prescription drugs. Some preventative services for certain populations.	Public health prevention & promotion, inpatient and outpatient hospital care, primary health care, inpatient and outpatient prescription drugs, mental health care, dental care for children, disability support services	Eligibility for public programs (Medicare and Medicaid) are based on age and income levels and cover inpatient and outpatient care as well as physician services.
Private	There is varying degrees of coverage for prescription drugs, eye care, dental care, home care and ambulance services.	Supplementary private insurance for choice of specialists, queue jumping for elective surgery, better services while in hospital	Cost sharing to some publicly-provided services including hospital care, visits to family doctors and prescription drugs	Co-payments for general practitioner and nurse services, prescription drugs, private hospital or specialist care and adult dental care	Private and employer insurance cover the the majority of residents.
Private Public Split	70% public30% private	87% public13% private	76% public24% private	78% public22% private	47% public53% private
Total health care costs per capita 2009	$4363	$3487	$3978	$2983	$7960

Recent data from the Organization of Economic Co-operation and Development show that the amount of private spending on health is greater in Canada than in similar countries such as the United Kingdom, Belgium and New Zealand, but not the United States. Private spending on health in Canada reached $56.6 billion in 2010.

Not all experts agree who Canada should be looking to when comparing health spending and coverage. Ted Marmor, a professor of Public Policy and Management at Yale University argues that “from a cost containment standpoint, Canada ought to be properly compared to the United States, which is its closest neighbour” and that the “relative performance [of the Canadian health care system] is most closely related to the United States”. For example, many analysts believe that one of the reasons Canadian physicians are among the most highly paid in the world is because they can easily move to the United States if Canadian wages are uncompetitive. However, despite our proximity to the United States, Canada spends 45% less on health care than the United States, according to the Organization of Economic Co-Operation and Development.

Health spending in Canada: what’s next?

The public/private spending mix is a controversial issue. It is important for Canadians to understand where, when and why public and private dollars are being spent on health. The debate persists about the appropriate mix of private and public spending, and who should pay for what services and providers.

Is more private health care inevitable? In the current fiscal environment, is more public spending feasible? What is the appropriate mix of health care spending to ensure good value, sustainability and quality of health care for Canadians?