“Insurance” can’t fix Canada’s pharmacare problem

In my last post, I explained how Canadian provinces are moving toward a model of “catastrophic” drug coverage instead of a pharmacare model more comparable to our “Medicare” system. Depending on the province, public coverage against catastrophic drug costs means that patients must pay between 3% and 10% of their household income before any public subsidy kicks in.

Catastrophic coverage sounds like a good idea to many people: lower the cost of public drug programs by only covering people against medical “catastrophes.” The problem is that it is based on flawed logic in health care contexts.

The problem stems from thinking about public policies to cover prescription drug costs as though the problem to be fixed was just a matter of providing “insurance” against random catastrophes, like having one’s home burn down in a fire.

If health needs for prescription drugs occurred randomly and typically just once in a lifetime to people, then high deductible coverage might be viewed as a good way to make people pay for routine costs (e.g., maintenance on your home), while still insuring them against the random chance of an unfortunate catastrophe.

But insurance for drug costs is nothing like fire insurance. Population-based data from British Columbia and from Manitoba confirm that needs for high costs prescription drugs are seldom one-time events. People with the highest needs for prescription drugs require thousands of dollars’ worth of medicines, and they typically have such needs year-after-year, often until death.

People with chronic health needs do not need insurance against some unpredictable risk of illness; they need subsidies for their predictable health care needs. Asking them to pay from 3% to 10% of their family incomes out-of-pocket before subsidies kick in is tantamount to putting a tax on illness.

The ethics of this may be most acute in cancer care, where Canadians may be under the impression that they are fully covered for treatment costs. They are not.

As more and more cancer care leaves the hospital setting – owing to new drug development and deliberate policy decisions to reduce the use of hospitals – patients must bear more and more of the cost of the care. This can add up to thousands of dollars in out-of-pocket costs under catastrophic drug benefit programs.

Some people argue that this too is OK because private insurance can fill the gaps in coverage left by catastrophic drug plans offered by government. This is regrettably untrue.

A recent study found that one in ten Canadians don’t take their medicines as prescribed because of cost. Lack of insurance is the biggest reason that Canadians have such difficulties filling their prescriptions. Data from Statistics Canada indicates that only half of Canadian workers have supplemental medical coverage that might cover prescription drugs – and only a third of Canadians who work for small businesses have such coverage.

Those who don’t have insurance through work can find it hard to buy insurance on their own. People with pre-existing conditions – such as diabetes, asthma, or heard disease – may not be insurable and may even get kicked off of insurance plans when they change jobs or graduate from school.

These barriers to private health insurance cannot be overcome easily. Either the government has to provide universal health insurance – as we do with our “Medicare” system – or government must tightly regulate. Regulation must effectively make a standard package of insurance coverage mandatory for all citizens (the healthy and the unhealthy) and must prohibit firms from discriminating against patients on the basis of their health status. No country has ever overcome the insurance market failures in health care without one of those two solutions. Even the United States has embraced this reality with its Affordable Care Act.

Maybe it’s time that Canadians came to terms with this and developed a sustainable way to stitch the gaps in our pharmacare patchwork. That’s why experts from a range of backgrounds are coming together in February to start a national conversation about prescription drug coverage in Canada: Pharmacare 2020 – envisioning Canada’s future in this critically important component of health care.

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  • Linda Wilhelm says:

    As someone who lives with severe Rheumatoid Arthritis medications are, unfortunately a fixture of my daily life if I want to be able to function. Most people with RA can be treated with a relatively inexpensive medication, methotrexate and not having RA adequately managed results in tremendous costs, not just to the healthcare system but also in long term disability. There are a small percentage of patients who do not respond to or who cannot tolerate methotrexate and they require a more expensive medication which, despite their high cost still provides savings to the system. Until a National Pharmacare program becomes a priority for all governments and they finally understand that this is too big a problem for one jurisdiction to solve I fear we will not see any improvement in the current situation and a healthcare system that does not meet the needs of Canadian patients.

  • Colleen Fuller says:

    As Linda Murphy points out, many (especially smaller) employers are cancelling drug coverage for employees because of high premium costs. Even unionized workers are losing benefits because of the increase in part-time work. It’s also a mistake to think that employees are equally covered – if you are a young female working in retail you are probably NOT among the 19% who have benefits in that sector. The most likely employee to be covered by benefits is white, male, highly educated and in the upper income brackets. Not exactly a fair, balanced and equitable solution to the lack of a national pharmacare program.

    • Chris Bonnett says:

      I agree that health coverage – whether public or private – is not effectively adapting to changes in many facets of life. We have a 50-year old model that is growing less adequate with each year…and no one wants to touch it! Private health insurance isn’t perfect, but it’s pretty good for those who have it – the majority of Canadians. It would be better still if a similar quality of coverage were available to all.

      Although we collect lots of data, important information and insight is missing. There are no reliable data on how many employers have health insurance, or its scope. All plans and insurers are not the same, so generalizing creates problems in matching problems with appropriate solutions. Many young women have access to health benefits, and certainly lots of white men don’t. Some of them really need it, and others have very affordable health costs.

      It’s pretty easy to spot problems, but I’d really like to see us start to advance ideas – even if it’s a different take on medicare – and a willingness to discuss, experiment, and act on what will help those in need.

  • Chris Bonnett says:

    Governments have not acted to implement any comprehensive pharmacare plan that treats all Canadians the same. In that void, it’s a good thing most of us have access to drug insurance through our workplaces, trade or alumni associations, or unions. Far from perfect, but better than waiting for governments to act on a file for, say, almost 50 years.

    Instead, perhaps provincial governments and private insurers and employers should connect and collaborate to close gaps in coverage and create minimum coverage standards. Regulation, as Dr. Morgan notes, is an option that could replace the ideology that has created so much ‘two-tier’ tension – and inaction. New Brunswick is considering a new drug plan for the uninsured that proposes to mandate employers to provide coverage to (at least) the provincial standard; Quebec has done so since 1997.

    Not perfect, but it’s still progress.

  • Linda Murphy says:

    Excellent article (as usual) Steve.

    Loss of private insurance is another component which has become all to prevalent as lean ecomomies and rapidly changing technology forces bankrupcy on companies once thought blue chip.

    So Canadians should not be sanguine about this. Elderly seniors like my parents end up paying over $650 in uncovered medication charges for quite common conditions (e.g., Alzheimer’s and osteoporosis).


Steve Morgan


Steve Morgan is an associate professor at the University of British Columbia.

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