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I would like to thank Professor Wilson for kindly supplying this excellent review for inclusion on this web site.

Privatization of The Canadian Health Care System

Not Yet and Hopefully Never


by Donna Wilson, RN, PhD
Associate Professor, Faculty of Nursing,
University of Alberta, Edmonton, Alberta T6G 2G3 


One of the last truly "public" health systems in the world can be found in Canada. Canada has not followed a recent trend by other countries to either adopt health care privatization or reprivatization (Weller & Mango, 1983). Over the past five to ten years, however, a number of individuals and groups have tried to privatize Canadian health care. They have not succeeded. The Canadian health care system can still be characterized as publicly-funded, publicly-administered, and publicly-delivered. More specifically, all medically-necessary care provided by physicians, all medically-necessary diagnostic procedures, and all medically-necessary hospital care continues to be provided to citizens of Canada without charge. In addition, various forms of health promotion, public health services, and home care are also provided to citizens without charge. Furthermore, governments are accountable to the Canadian people for running an effective health system, one which provides high quality, accessible care.

 History and Resultant Issues with the Canadian Health Care System

The Canadian health care system is and has always been popular among Canadians (Wilson & Ross Kerr, 1998). The origin of the Canadian health care system can be traced to the aftermath of both the First and Second World Wars, when returning injured veterans needed health care, and various governments felt a responsibility to provide that care. It was not until 1957, though, that the first federal Act (the Hospital Insurance and Diagnostic Services Act) was passed to ensure that all Canadians would be able to access hospital and diagnostic services as needed. Many distinct circumstances in Canada, some political, some personal, and many social, had lead to widespread support for a publicly-funded, government-run national health care system. It is remarkable that Canada was able to accomplish a national health care system or at least set enduring national health care standards, as the 1867 Constitution Act (which created Canada) had given provinces and territories the responsibility for health care, but had given the federal government the right to tax. The Canadian health care system is actually a compilation of provincial and territorial health systems, systems which are all defined by national legislation however.

In 1966, the 1957 Act was broadened to ensure public funding for physician services, as citizens of Canada were still having to pay for physician services privately. The 1966 Medicare Insurance Act thus served to create a health care system which:

1) is often referred to as "Medicare,"

2) is insurance based - with all citizens through general taxation contributing to a single payer health system,

3) was set up with a 50/50 funding arrangement between the federal government and each provincial or territorial government,

4) was and still is extensively hospital-based and illness-oriented, and

5) was and is primarily oriented to and driven by the treatment decisions that are made by individual physicians.

In 1984, the most recent federal Act to strengthen the Canadian health care system, was passed unanimously by all political parties. The 1984 Canada Health Act contained all of the same assurances of the 1966 Medicare Insurance Act, along with two important additions:

1) an accessibility clause which stipulated that there should not be any private fees or charges to Canadian citizens for medically-necessary health care, and

2) the federal government could withhold transfer payments to any provinces or territories that do not abide by the terms of the Canada Health Act. The Canada Health Act is remarkably simple legislation, yet vastly significant to health system reform initiatives (see attached copy of the Act).

Although popular, and normally perceived to be an excellent, high quality system, there have been three main issues arising out of the form that the Canadian health care system took:

1) rising costs and potential for an ongoing increase in costs (a particular concern during the 1980s and early 1990s when most governments in Canada were operating at a deficit),

2) the emphasis on diagnosing and treating illnesses after they developed, as opposed to fostering health maintenance and health promotion, and

3) some essential health care costs are not covered by public funding.

Many commissions, task forces, and surveys throughout the 20th century have studied the Canadian health care system seeking to reaffirm public need and support for this system, and to improve upon it. The most recent government-funded commission, the National Forum on Health, was initiated when it had become obvious during the early 1990s that some individuals and groups were attempting to introduce various forms of private health care across Canada. In 1997, the National Forum on Health released its final report. In that report, all components of the Canada Health Act and the existing health system were endorsed. Furthermore, the National Forum recommended expansion of public-funding and public-administration to the medications taken by Canadians outside of hospitals (as these were not publicly funded and drug costs were rising sharply) and for home care (to ensure better use of expensive hospital beds through earlier discharges and to promote wellness among chronically ill and frail elderly persons). Despite this level of support for the Canadian health care system, along with repeated surveys and polls which continue to show strong public support for the Canadian health care system (Wilson & Ross Kerr, 1998), health care privatization could still occur in Canada.

Privatization - For and Against Arguments

Why is privatization an option in Canada? Two important events in recent years have been responsible for much of the health care privatization or reprivatization around the world. The first is both direct and indirect pressure by the World Bank (1993) to privatize health care delivery and funding. Many nations, particularly those that had become dependent upon the World Bank for funding, reformed their health systems or initiated health systems to conform with the World Bank preferred model of American-style privatized health care. Furthermore, many countries have followed a trend to privatization of health care, social services, education, and government services set in motion by the neoliberal viewpoints of Thatcher and Reagan, a viewpoint backed by pro-business factions (Terris, 1999).

Two books endorsing privatization, one by Douglass (1993) and another by Osborne and Gaebler (1993), have been particularly instrumental for making privatization appear beneficial in Canada. Douglass's book contains both his aim and his method for converting the public health care system of New Zealand into a system whereby "responsibility means providing for yourself and your family to the extend you can afford" (p. 1). Osborne and Gaebler, two American business consultants, also endorsed small government and entrepreneurialism. Contracting out or decentralization was one of the main thrusts of their book.

Although many provinces have considered downsizing their governments and other changes to reduce government expenditure during the fiscally challenged 1980s and early to mid 1990s, Albertans have lived through many attempts to initiate health care privatization (Harrison & Laxer, 1995; Taft, 1997). Much of this ongoing privatization initiative can be pinned on Alberta's Premier, Ralph Klein, and his majority government for repeatedly endorsing various forms of privatization and for showing support for the individuals and groups intent upon initiating private health care businesses across Alberta (Harrison & Laxer, 1995; Taft, 1997). Since 1993, many privatization initiatives have been endorsed by this long-standing conservative government in Alberta, but few have come to pass as a result of much political action by nursing and other groups for raising public awareness and concern. However, in November of 1999, Ralph Klein personally and publicly indicated that his government will pass legislation in the year 2000 to allow private, for-profit hospitals to open and being collecting public funding when providing medically-necessary health care services to Albertans. It does not seem to matter to the Klein government that virtually no legislation exists in Canada to control private health care profiteering, nor that the Klein government could instead reinvest public funds in public hospitals and other programs which have been shrunk by government funding cuts in 1993 to 1996, nor that the evidence does not demonstrate benefits of privatization.

Privatization in health care funding, delivery, and management has been said to produce many benefits (Douglass, 1993; Osborne & Gaebler, 1993), two of which are most often said to be advantageous:

1) privatization allows greater choice as to site of care or type of care provider, and also faster access to care, and

2) private businesses are more efficient and therefore less costly to the taxpayer or private consumer.

To determine if these benefits are true ones, an analysis of research reports and other reports around the world has been conducted. The ample literature demonstrates few benefits and much risk with private funding, private delivery (through contracting out or other mechanisms), or private administration of health care. A summary of six main findings and literature sources follows:

1) Reduced operating costs by private companies are likely due to lower staff wages and benefits, a reduced number of health care workers to provide patient care services, a reduction in the qualifications of health care workers, cutting corners in other ways, and thus a lower quality of care (Clark et al., 1994; Estes & Swan, 1994; Eubanks et al., 1999; Mills, 1998; Shamian, 1997; Terris, 1992).

2) The efficiency of private providers has also been linked to private businesses only offering certain types of health care services to select clients, and then only during restricted hours of operation (Estes & Swan, 1994; Fisher et al., 1994; Jones & Cullis, 1996; Rachlis & Kushner, 1994; Van De Ven & Schut, 1994). This has been called creaming, cream-skimming, or cherry-picking. One problem with this is that many private companies will compete for the same clients or right to provide the same kinds of services, and so oversupply of some health care technologies or other services in certain areas occurs (Rachlis & Kushner, 1994). Another problem is that over-treatment can occur (Glick et al., 1997; Green, 1997; Tu, Pashos & Naylor, 1997).

3). Creaming is usually accompanied by dumping. Private companies do not want to provide care for unprofitable patients. Often this means the general hospital must meet the needs of the "general" public through 24 hour, 7 day a week service provision. (Baier, 1993; Brider, 1987; Clark et al., 1994; COBRA, 1989; Elliott, 1993; Estes & Swan, 1994; Fisher et al., 1992; Fried et al., 1987; Legal questions, 1998; Mohr, 1997; Rachlis & Kushner, 1994; Rhodes, 1993; Schiff & Ansell, 1996; Scott, 1986; Tammelleo, 1996; Southard, 1998; Terris, 1992; Van De Ven & Schut, 1994).

4) Legislative and other controls to prevent dumping and other issues arising out of privatization are needed, but few are effective (Baier, 1993; Bhat, 1996; Blaxill & Hout, 1991; Blumstein, 1996; Chang et al., 1998; Elliott, 1993; Hard, 1991; Kuttner, 1997; Mills, 1998; Mohr, 1997; Plunkett, 1996; Terris, 1992).

5) There are additional costs to contracting out health services from public to private providers, and to operating a private health care business versus a public service (Ashton; 1998; Bostrom, 1995; Chang et al., 1998; Fried et al., 1987; Hard, 1991; Himmelstein, Lewontin & Woolhandler, 1996; McPake & Banda, 1994; O'Neil, 1994; Saunders, 1997/98). Some of this cost is to provide a profit or return on investment (Bell et al., 1998; Bhat, 1996; Clark et al., 1994; Estes & Swan, 1994; Evans, 1997; Finkelstein et al., 1998; Fried et al., 1987; Gilson et al., 1994; Glasser, 1998; Horne & Beck, 1991; Leigh & Bernstein, 1997; Lynch et al., 1995; Mawajdeh, Hayajneh & Al-Qutob, 1997; McPake & Banda, 1994; Mills, 1998; Mohr, 1997; Padgett et al., 1993; Smith & Lipsky, 1992; Terris, 1992). 6) Finally, there is no guarantee that all necessary health services will be provided when the health system is not universal (Brotman, 1992; Caudill, 1993; Clark et al., 1994; Padgett et al., 1993; Terris, 1992).

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Principles of the 1984 Canada Health Act (Excerpts)


Note: The exact wording of relevant sections of the Canada Health Act is used below.

In order that a province may qualify for a full cash contribution...for a fiscal year, the health care insurance plan of the province must, throughout the fiscal year, satisfy the criteria: (a) public administration; (b) comprehensiveness; (c) universality; (d) portability; and (e) accessibility. Canada Health Act, 1984, c. 6, s. 7.

Public Administration. In order to satisfy the criterion respecting public administration,

(a) the health care insurance plan of a province must be administered and operated on a non-profit basis by a public authority appointed or designated by the government of the province;

(b) the public authority must be responsible to the provincial government for that administration and operation; and

(c) the public authority must be subject to audit of its accounts and financial transactions by such authority as is charged by law with the audit of the accounts of the province.

Comprehensiveness. In order to satisfy the criterion respecting comprehensiveness, the health care insurance plan of a province must insure all insured health services provided by hospitals, medical practitioners or dentists, and where the law of the province so permits, similar or additional services rendered by other health care practitioners.

Universality. In order to satisfy the criterion respecting universality, the health care insurance plan of a province must entitle one hundred per cent of the insured persons of the province to the insured health services provided for by the plan on uniform terms and conditions.

Portability. In order to satisfy the criterion respecting portability, the health care insurance plan of a province

(a) must not impose any minimum period of residence in the province, or waiting period, in excess of three months before residents of the province are eligible for or entitled to insured health services;

(b) must provide for and be administered and operated so as to provide for the payment of amounts for the cost of insured health services provided to insured persons while temporarily absent from the province on the basis that

(i) where the insured health services are provided in Canada, payment for health services is at the rate that is approved by the health care insurance plan of the province in which the services are provided, unless the provinces concerned agree to apportion the cost between them in a different manner, or

(ii) where the insured health services are provided out of Canada, payment is made on the basis of the amount that would have been paid by the province for similar services rendered in the province, with due regard, in the case of hospital services, to the size of the hospital, standards of service and other relevant factors; and

(c) must provide for and be administered and operated so as to provide for the payment, during any minimum period of residence, or any waiting period, imposed by the health care insurance plan of another province, of the cost of insured health services provided to persons who have ceased to be insured persons by reason of having become residents of that other province, on the same basis as though they had not ceased to be residents of the province.

Accessibility. In order to satisfy the criterion respecting accessibility, the health care insurance plan of a province

(a) must provide for insured health services on uniform terms and conditions and on a basis that does not impede or preclude, either directly or indirectly whether by charges made to insured persons or otherwise, reasonable access to those services by insured persons;

(b) must provide for payment for insured health services in accordance with a tariff or system of payment authorised by the law of the province;

(c) must provide for reasonable compensation for all insured health services rendered by medical practitioners or dentists; and

(d) must provide for the payment of amounts to hospitals, including hospitals owned by or operated by Canada, in respect of the cost of insured health services.

Definitions Contained in the Canada Health Act

Dentist means a person lawfully entitled to practice dentistry in the place in which the practice is carried on by that person;

Extended health care services means the following service, as more particularly defined in the regulations, provided for residents of a province, namely, (a) nursing home intermediate care service, (b) adult residential care service, (c) home care service, and (d) ambulatory health care service;

Extra-billing means the billing for an insured health service rendered to an insured person by a medical practitioner or a dentist in an amount in addition to any amount paid or to be paid for that service by the health care insurance plan of a province;

Health care insurance plan means, in relation to a province, a plan or plans established by the law of the province to provide for insured health services;

Health care practitioner means a person lawfully entitled under the law of a province to provide health services in the place in which the services are provided by that person;

Hospital includes any facility or portion thereof that provides hospital care, including acute, rehabilitative or chronic care, but does not include (a) a hospital or institution primarily for the mentally disordered, or (b) a facility or portion thereof that provides nursing home intermediate care service or adult residential care service, or comparable services for children;

Hospital services means any of the following services provided to in-patients or outpatients at a hospital, if the services are medically necessary for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, namely, (a) accommodation and meals at the standard or public ward level and preferred accommodation if medically required, (b) nursing service, (c) laboratory, radiological and other diagnostic procedures, together with the necessary interpretations, (d) drugs, biologicals and related preparations when administered in the hospital, (e) use of operating room, case room and anaesthetic facilities, including necessary equipment and supplies, (f) medical and surgical equipment and supplies, (g) use of radiotherapy facilities, (h) use of physiotherapy facilities, and (i) services provided by persons who receive remuneration therefor from the hospital, but does not include services that are excluded by the regulations;

Insured health services means hospital services, physician services and surgical-dental services provided to insured persons, but does not include any health services that a person is entitled to and eligible for under any other Act of Parliament or under any Act of the legislature of a province that relates to workers' or workmen's compensation;

Insured person means, in relation to a province, a resident of the province other than (a) a member of the Canadian Forces, (b) a member of the Royal Canadian Mounted Police who is appointed to a rank therein, (c) a person serving a term of imprisonment in a penitentiary as defined in the Penitentiary Act, or (d) a resident of the province who has not completed such minimum period of residence or waiting period, not exceeding three months, as may be required by the province for eligibility for or entitlement to insured health services;

Medical practitioner means a person lawfully entitled to practice medicine in the place in which the practice is carried on by that person;

Physician services means any medically required services rendered by medical practitioners;

Resident means, in relation to a province, a person lawfully entitled to be or to remain in Canada who makes his home and is ordinarily present in the province, but does not include a tourist, a transient or a visitor to the province.

** A copy of the Canada Health Act and a 108 page overview of the Canadian health care system can be found at the following website:

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This page prepared by Professor Donna Wilson
Formatted for the www by J Michael Wynne
April 2000