American Journal of Law & Medicine

Canadian Medicare: can it work in the United States? Will it survive in Canada? (Implementing U.S. Health Care Reform)


Canada's system of universal health insurance, which, in a probable effort to confuse Americans, we call Medicare, is both popular and, in general, highly successful.(1) It combines relatively stable costs (admittedly at the high end for industrialized nations, but considerably less than the cost in the United States) with favorable health status measurements, universal coverage, and a high degree of public popularity. The Canadian model is a major point of pride for Canadians, and a model that is receiving increasing attention in the United States.(2) The system, however, is under increasing strain within Canada.(3) That fact must not rule out consideration of the Canadian model since many of the pressures are not unique to Canada. Rather, they are problems shared -- to a greater or lesser degree -- by most Western health systems, and include:

-increasing costs and an economy that may no longer be able to bear them;(4)

-the uncertain relationship between increased spending for medical services and improvements in health status;(5)

-the efficiency and effectiveness of existing delivery systems;(6) and

-responsiveness to consumer needs and demands.(7)

Therefore, a proper evaluation of the merits of the Canadian system focuses on its comparative ability to respond to seemingly universal problems. Of course, other issues are more idiosyncratic to Canada, particularly the impact of its constitutional crisis.(8)

This Article discusses the Canadian health care system, focusing on both its advantages and its limitations. Part 11 introduces the Canadian system, placing it within a typology developed to distinguish among the public and private aspects of health care financing and service delivery. Parts III and IV then examine some advantages and disadvantages of the Canadian model, with particular emphasis on the limits of market approaches to health care. Part V delineates some of the strains that Canada's system is currently experiencing, and notes the risk that provincial governments will choose to shift costs to patients as a short-term expedient, even though this will result in long-term harm. The Article concludes in Part VI with some speculation on the applicability of Canada's system to the current United States health care reform debate.


Canada's health care system has been widely reported, and misreported, in the current U.S. debate about health care policy. Consider these excerpts from a speech given by former President George Bush:

The Canadian health care system, typical of a government-run national health care system, suffers from basic structural flaws that are bound to lead to long term problems with cost, access, and quality


Patients must endure long lines and wait for surgery and access to advanced technology. High quality care is rationed by limiting physician access to new, life-saving technologies. In British Columbia, for example, it takes an average of 6 months to get a coronary bypass, 3.5 months to get a tonsillectomy, 4 months to get a hysterectomy. For speedy and quality care, many Canadians simply go to the United States.

Neither providers nor consumers have incentives for efficiency or to control costs. Under Canada's National Health Care System, costs are growing faster than in the United States.

Instead of making their own choices, consumers under the Canadian model are forced to rely on government bureaucrats to make their health care choices.

A Canadian-style plan would require from $250 billion to $500 billion a year in new taxes.(9)

If this and similar alarms were accurate, few would advocate imposing such a flawed system on anyone. Fortunately, they are not. Canada's system indeed has its flaws, but they are not precisely those indicated by Mr. Bush's speechwriters.

First, it must be noted that Canada does not have a "government-run national health care system," but rather a series of provincial health insurance plans that work within a set of broad national standards. This is a direct consequence of the 1867 British North America Act, Canada's Constitution. This Act placed most of health care under provincial jurisdiction.(10) As a result, the Canadian health care system is essentially a series of provincially managed insurance plans that must comply with federal guidelines in order to obtain federal resources. Therefore, a Canadian-style plan in the United States would entail a series of state-run plans, rather than a single plan directed from Washington.

However, Canadian provinces vary greatly in size and fiscal capacity, as do American states. Accordingly, Canada's federal government became involved in providing revenues to the provinces through a variety of programs. "Fiscal federalism" has become an important component of most policy fields in Canada. In health care, its role has been crucial.(11)

The federal role in health care started with a series of special purpose grants for public health programs and hospital construction. Canadian Medicare began in the late 1950s with the Hospital Insurance and Diagnostic Services Act ("HIDS"),(12) which cost-shared provincial insurance for hospital-based services on the condition that the provinces comply with a series of national conditions. By 1961, all provinces and territories had set up participating plans. In 1966, the Medical Care Act(13) Cost-shared physician services, and all provinces enacted participating plans by 1971. Although the 1977 Federal-Provincial Fiscal Arrangements and Established Programs Financing Act ("EPF")(14) altered the funding formula away from cost sharing to a mixture of tax points and block funding,(15) the requirement to comply with the national conditions remained and was reinforced in the 1984 Canada Health Act.(16)

To receive federal cost sharing, these Acts specify that provincial plans must comply with a set of "national standards," often referred to as the "pillars of Medicare." They require that all provincial plans contain the following five elements:

(1) universal coverage for all eligible residents. Narrow exclusions are provided for individuals otherwise covered, such as members of the military.

(2) comprehensive coverage for all medically required hospital and physician services. This includes office visits and preventive care as well as drugs and diagnostic testing provided to inpatients. Most provinces also provide coverage for other sectors and services (particularly outpatient and home-based services, mental health and public health), although such services are not required under the federal legislation and, hence, are not considered "insured services" under Medicare.

(3) accessibility. The definition of "reasonable access" in the Canada Health Act includes a prohibition of any direct charges for insured services, and, therefore, does not allow co-payments or deductibles for physician or hospital care.(17) In contrast, many of the provincial plans still use means tests and co-payments for services they choose to provide that are not required under Medicare (for example, drugs, ambulance services, and long-term care).

(4) portable coverage for insured services anywhere in Canada. This requirement is essential to coordinating a series of provincially-run plans.

(5) public administration, which means that there is, at best, a minimal role for private insurance in covering services not included in Medicare, such as semi-private rooms, drugs, or dental care. This feature probably explains why the American health insurance industry is so opposed to the Canadian model, and has had such strong incentives to misrepresent it.

Thus, adoption of a Canadian-style model in the United States would require a system of revenue sharing between federal and state governments, and the establishment of a series of locally run payment agencies that work within national guidelines. Each payment agency would function much like a large, prepaid, group practice in which all providers in the area agree to accept assignment, all residents are insured, and a provision is made for insured persons to receive needed care in other localities through a series of reciprocal portability agreements.

Federal revenue sharing plays a critical role in the Canadian model. Because significant fiscal disparities often exist across regions, federal cost sharing is essential to ensuring the provision of a uniform level of services nationwide. In fact, much of the current ferment over Canadian Medicare is traceable to the federal government's efforts to curb its budget deficit by reducing its commitment to revenue sharing. This has been accomplished by shifting the financial burden to the provinces through a series of unilateral alterations to the cost sharing formula.(18)

The Canadian model can be contrasted with other health care systems through a typology that Adams, Curry, and I constructed(19) as shown in Figure 1. It distinguishes between the public and private sectors, and between the financing and delivery of health care.


FINANCING Public Private


Public                                              U. … 

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