American Journal of Law & Medicine

Universality, quality & economics: finding a balance in Ontario and British Columbia. (Quality of Care and Health Reform: Complementary or Conflicting)


National economies worldwide are in disarray, evidenced by escalating debts and growing deficits. As countries struggle with their faltering economies they are hard pressed to fulfill commitments of social programs made in more prosperous times, much less take on new government initiatives.(1) The current experiences in health reform in the United States present an interesting example of the dilemmas governments now face when they embark on new ventures.(2) While great political pressures have been launched and high expectations abound, the reality of American health reform quickly reveals that expanded access will come at a high price that won't be offset easily by conventional cost containment or market forces.(3)

In the search for an acceptable model for health reform, it was popular for policy makers and academics to turn their attentions to the health systems of other nations. Recommendations were made that the US should adopt a German or Canadian solution for our health problems.(4) But as we now have identified a direction for reform, foreign-born solutions seem less compelling. Still, as we grapple with the complexities of implementation, we should not return to our typical domestic myopia. Health and economic problems are universal. Beyond issues of structure, important lessons remain in the ways other nations have approached the management and reform of their health systems. One should view quality issues from a comparative perspective, since other western nations have maintained population health with far less micromanagement of medical practice.

This article explores recent developments in Canada's health care system on a provincial level. It looks beyond broad national issues which have received widespread attention, and it focuses on recent attempts of two provinces to modify their health plans. This article examines reforms in Ontario, Canada's largest province, and British Columbia, the nation's fastest growing. The article examines the various strategies the two jurisdictions are following to alter their health systems in the face of current economic realities. As this article is part of a symposium dealing with quality, where applicable it will review discussion of how the two provincial plans have attempted to grapple with the systemic and clinical issues relevant to the quality of medical care. But as quality in the Canadian context relates more to the general operation of the system, this piece will focus on structural changes that will ultimately impact the quality of care, as opposed to the more current orientation toward evaluation of physician performance. Finally the piece will explore whether the changes taking place in the two provinces provide American health policy makers with helpful insights in addressing broad issues of both access and quality.


Public health insurance remains one of the cornerstones of Canadian social policy. In spite of current fiscal pressures, provincial health insurance generally remains very popular with the Canadian public.(5) While publicly supported health insurance dates back to the early part of the 20th century, it wasn't until after World War II that the federal government significantly involved itself with the passage of the Hospital Insurance and Diagnostic Services Act in 1957.(6) Through the 1957 law the federal government provided matching funds which led to all ten provinces operating hospital insurance programs. Support and momentum for a publicly-sponsored medical care program developed in the early 1960s, and led to the passage of the Medical Care Act in 1966.(7) Under the new Canadian medicare program the federal government contributed 50% of the funding to the provinces, provided each had health plans offering necessary hospital and medical benefits, available to all, and that those benefits were transferable and publicly managed.(8)

The Canadian medicare program came into being at a time of growth and prosperity for Canada, and in five years all provinces were participating in the program.(9) The provinces oversee the actual administration of health insurance, so in effect Canada really has ten distinct health care plans. The glue that binds the Canadian system are the 5 principles first spelled out in the Medical Care Act (public administration, comprehensiveness, universality, portability, accessibility) and later reiterated in the Canada Health Act of 1984.(10) Critics have pointed out, however, that the five principles put few restrictions on the provincial delivery of health care.(11) For example, the notion of universality may provide coverage for all, but the determination of what is a covered, medically necessary service can vary across plans. Analyses of provincial spending for health demonstrate a considerable variation in per capita health spending among provinces. This fact, together with varying interpretations of necessary services, has created disparities.(12)

The Canada Health Act expressly prohibits the practice of balanced billing, having physicians charge patients additional amounts beyond what the provincial fee schedule allows.(13) Provinces that permit balanced billing risk being penalized by Ottawa, but even so, the practice has been permitted by some jurisdictions.(14) The ban on user fees represents a fundamental belief that such a practice would pose a serious access problem for low income Canadians and thus would erode the principle of universality. With current cost pressures there is now serious debate about adding provincial user fees to discourage overutilization.(15)

In order to understand the ten provincial health plans that compose the Canadian medicare system, one must have a general awareness of the funding dynamics between the federal and provincial governments. Unlike the United States, provinces in the Canadian federation have considerably more power and responsibility for public programs than the central government.(16) The difficulty is that the provinces lack the necessary resources to fulfill their responsibilities, thus they are dependent on the assistance of the federal government. What has evolved is a complex system of government financing, a mingling of federal and provincial dollars dictated by various formulas.(17) In providing funds it has been national policy to assure equity across provinces, thus poorer jurisdictions have received higher federal matches to guarantee parity of benefits across the nation. As might be expected, tensions have developed between Ottawa and wealthier jurisdictions who feel that they have to bear an undue burden to maintain uniformity in social programming.(18)

The original funding format for medicare entailed a 50% federal-provincial match.(19) The arrangement proved to be unpopular with both sides. Ottawa complained that it was too open-ended, making the federal government captive to provincial expenditure patterns. In turn, the provinces objected to what they considered to be undue influence over their respective health plans by the federal government. In 1977, in order to set up a new block funding arrangement for health and secondary education, Ottawa created the Established Programs Financing System (EPF).(20) Under EPF, Ottawa set a per capita contribution it would make to the provinces which had the effect of creating a financial ceiling that was independent of the amounts expended by a particular province. In turn, Ottawa agreed to make half of its contributions to health and education in the form of cash grants, and it relinquished some tax points (share of tax power) which then let the provinces obtain the other half of the federal match through tax revenue.(21) The federal transfer(22) was to increase yearly through an escalator based on population growth, and an increase in gross domestic product (GDP).(23) As a result of the national deficit, however, the federal government reduced the escalator, first by 2% less than GDP growth, and then by a further 1%.(24) In 1990, Ottawa froze the EDF cash grants for two years, and a year later that freeze was extended by two additional years.(25) The upshot of the federal action is that cash transfers are declining, and if current trends continue, they will be wiped out by the year 2000.(26)

The federal government has argued that the growing value of tax points offsets the decline in cash transfers, and in fact the level of federal transfers has actually increased.(27) But critics point out that Ottawa is not exactly giving provinces tax revenue, for the responsibility of collecting the tax revenue is left to the provinces.(28) Regardless of where the debate comes out over the equity in changes in federal health financing, the fact is the provinces are being forced to contribute more of their own funds to support health programs. Growth in health care expenditures increased 42% for all provinces over the past four years while federal transfers for this period remained constant.(29) In Ontario and British Columbia health care costs have increased by more than 50% since 1988 while the share of health costs borne by the federal government has declined to 15%.(30)

Since the mid 1980s, the growing federal deficit problem has influenced Ottawa's posture toward social programs. National policy has been motivated by a belief that unless the Canadian debt can be reduced, the economy will not sustain social programs over the long term.(31) Thus the large items in the federal budget, particularly social and income transfer programs (pensions, family allowances, social welfare benefits, education and health) have become prime targets of budget-cutters. As the provincial mandates to provide necessary medical services remain constant, they place the provinces under increased financial pressure to meet their obligations. The increased responsibilities for health care and social programs generally, together with sluggish regional economies and persistent provincial deficits, have collectively contributed to a national trend across provinces to reexamine and reform health plans.(32)


The roots of universal health care coverage in Ontario date back to 1959 when Ontario enacted the Ontario Health Insurance Plan (OHIP), thereby providing citizens with access to hospital care regardless of income.(33) In 1966, a voluntary insurance plan for physician services was introduced with the province providing assistance for low income residents.(34) Ontario joined the Canadian national medical care plan in 1969 and became part of the larger scale federal-provincial cost sharing arrangement that eventually resulted in universal health insurance coverage across Canada.(35) OHIP originally consisted of 35 private insurance plans and a separate government plan which were all required to meet standards developed by the province.(36) In 1972, the hospital and medical plans were combined into the OHIP, and the involvement of private insurers in basic health insurance coverage was phased out.(37)

During its twenty-plus years of experience, OHIP has provided Ontario's ten million residents with comprehensive medical care, and in the process, supported a large state of the art health care system. Coverage under OHIP includes most hospital and physician services.(38) The Ontario Drug Benefit Plan provides drug coverage for senior citizens and social assistance recipients.(39) Payment for Ontario's health system comes from a complex mix of federal and provincial tax revenue, deficit borrowing and employer payroll taxes.(40) Physicians are typically paid on a fee for service basis with the amounts determined by an annual fee schedule negotiated between the Ministry of Health and the Ontario Medical Association.(41) In addition, nursing homes are reimbursed on a fee-for-service basis.(42) Hospitals receive an annual global budget, adjusted each year for inflation, new programs, and growth.(43) Total health care expenditures for Ontario in 1993 were projected to be $17 billion, consuming 34% of the province's annual revenues.(44)

Categorizing the health insurance plan in Ontario and other provinces as a health system is somewhat of a misnomer in that it really is a payment mechanism that was superimposed on an already-developed private sector. While universal coverage has given the Ontario Ministry of Health (the overseer of OHIP) great power, provincial regulators have been forced to contend with a delivery system that has grown outside the bounds of government regulation and is not the product of careful planning. The Ministry has recently expanded its role beyond that of a funding agent and has adopted a wide range of regulatory initiatives geared toward creating a more rationalized delivery system.(45)


It is difficult to understand the current status of health care in Ontario without some appreciation of the economic and political context within which it functions. As an enterprise dependent on government funding, the manner in which the Ministry of Health meets its mandates is tied to the provincial economic climate. Up until 1990, health care budgets in Ontario experienced a 10% annual growth reflecting a robust regional economy.(46) But since the early 1990s, Ontario has suffered a deep recession that has strained the province's ability to meet its obligations for social programs.(47) Coupled with a downturn in the Ontario economy, the federal government also struggles with a growing deficit and with debt payments that consume a significant percentage of budgetary revenues.(48) Ontario has experienced a leveling of federal transfer payments while overall health care costs have risen by 50% in the last four years.(49) The decline in federal support raises interesting questions about whether Ottawa will be able to hold Ontario to the dictates of the Canada Health Act.(50)

It would be one-sided, however, to attribute recent health care changes to economics alone. In the mid 1980s, power shifted in Ontario from a Tory to a Liberal government.(51) The Liberals introduced a social philosophy in health that was community- and public-health oriented, laying the seeds for many of the changes that would occur in the 1990s. Liberal Premier David Peterson convened a Council on Health Strategy which identified five broad health goals, and drafted three reports directed toward moving health care out of institutional settings.(52) The Premier's Council identified a number of areas as particularly problematic, including uncontrolled costs, discordant funding, lack of provider and consumer incentives, lack of alternatives to institutional care, poor treatment coordination, and a need for a longterm care system.(53) As the political party currently in power in Ontario, the New Democratic Party (NDP) has continued the Council's work. Even more than the Liberals, the New Democratic Party has a very strong commitment to public health and community-based services.(54) The NDP government has close links to Ontario's powerful labor movement, and it increased hospital workers' wages after coming to power in 1990.(55) The current history of the NDP in Ontario is one colored by the realities of a dramatic economic downturn which saw the Ontario deficit grow in three years from $2. …

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