Canada: medical travel for years to come

A new study from the Fraser Institute looks at whether wait times for elective treatment in the Canadian health system could be reduced, via sharing costs with patients.  But this will be a huge ask, says Ian Youngman, so it’s reasonable to expect Canadians to be medical tourists for many years.

Canada has one of the most expensive universal healthcare systems in the developed world, and yet it routinely lags behind its international peers in key metrics of healthcare performance, such as the availability of doctors and hospital beds, and wait times for medically necessary care.  As a result, a growing proportion of Canadians seem open to the possibility of fundamental reform of healthcare in their country.

Sharing costs with the patient

The latest study from the Fraser Institute, Understanding Universal Health Care Reform Options documents the presence of mechanisms for cost sharing by patients in 28 universal healthcare systems; and evaluates the feasibility and desirability of introducing similar policies in Canada.

Cost sharing that can take the form of deductibles, co-insurance payments, or co-payments can be used to incentivise more efficient use of scarce health resources and potentially reduce wait times. Many of the universal healthcare countries that require cost sharing have shorter wait times than Canada.

Patients in Canada are currently fully covered for the costs of insured medical services; that is, patients are not directly billed for any portion of their care.

The study identifies that economic theory suggests that the distorting effects of such first-dollar insurance coverage can lead to excess demand for medical care accompanied by loss of social welfare. In Canada, the rationing of services through long wait times is one such by-product of excess demand.  Economic theory also offers a set of tools to mitigate the magnitude of this social-welfare loss through cost-sharing mechanisms.

These include:

• Deductibles: an amount up to which individuals are exposed to the full cost of treatment, after which insurance covers expenses.
• Co-insurance payments: a certain percentage of the cost of each unit of treatment is to be borne by the individual.
• Co-payments: a fixed amount paid by the patient per unit of treatment.

Study findings

The study found that the vast majority of universal healthcare systems around the world (22 of 28) expect patients to share in either the cost of outpatient primary care, outpatient specialist care, or acute inpatient care (though the latter is relatively less common) via deductibles (rarely), co-insurance charges, and co-payments.

Eight of the 10 top-performing high-income universal healthcare countries have some form of cost-sharing arrangement. These include Australia, Belgium, France, the Netherlands, New Zealand, Norway, Sweden, and Switzerland.

The study identified eight successful universal healthcare countries, which employ generous safety nets, set annual caps on out-of-pocket spending, and ensure exemptions for at-risk populations.

In contrast, Canada is one of a small minority of only six countries (of the 28 examined in this report) that either entirely eschew cost sharing by patients or do not generally expect patients to share in the cost of treatment (except for specific situations and purely private options) for core medical services within their standard universal health-care framework.

The study concludes that widespread adoption of cost sharing is unsurprising given its theoretical ability to reduce the demand for unnecessary healthcare services.  This theory is supported by a wealth of empirical studies that broadly confirm that cost-sharing mechanisms can reduce the use of ambulatory care without necessarily resulting in adverse consequences for the population.

It recommends that, if designed correctly, cost-sharing mechanisms can serve as a tool to encourage the appropriate use of medical services and reduce the magnitude of rationing as a result of excess demand.

The study suggests that Canada should consider reform that would allow provinces to experiment with, and design, a system that requires patients to share directly in the cost of medical care while protecting vulnerable populations in order to reduce social-welfare loss.

Medical travel will continue for the next decade

There is one massive legal problem with the study’s proposal. Cost sharing mechanisms for medically necessary care are explicitly prohibited by the Canada Health Act and financial penalties are imposed on provinces found in violation.

So no action can be taken at a province level.

Getting the federal government to make a major change and then get provinces and the ultra-conservative local medical professions and unions to agree it and amend the system is a significant uphill task.

So although government and medical professionals frequently attack outbound medical travel from Canada, they are not willing to do much to solve the long standing problems.

Expect Canadians to continue to be medical tourists for at least the next decade.