What is the Canadian healthcare system like, and how does it work?
Canada has a universal health system known as Canadian Medicare, which is publicly funded and decentralized. This means that each of the country’s 13 provinces and territories manages its own health insurance plan, receiving funds from the federal government based on their population.
While all citizens and permanent residents can access necessary hospital and doctor services without paying at the time of use, the coverage for services like prescription drugs and dental care varies by province.
Additionally, around two-thirds of Canadians also have private insurance to help cover these extra costs.
Short Background
Canada’s healthcare system is built on values of fairness and equity, showing how Canadians are willing to share resources and responsibilities. Over the years, the system has changed to meet the needs of its growing population and the evolving nature of healthcare. According to the Constitution, provinces are responsible for managing hospitals, while the federal government oversees marine hospitals.
Before World War II, healthcare was mainly privately funded. However, in 1947, Saskatchewan introduced a universal hospital care plan, which led to similar plans in other provinces. By the 1960s, the federal government supported these efforts, ensuring that all provinces provided universal medical services.
The Canada Health Act of 1984 established important guidelines to ensure that healthcare was accessible and fair for everyone, while later reforms in the 2000s focused on improving primary healthcare, reducing wait times, and enhancing access to services. Overall, Canada’s healthcare system has continuously evolved to provide better care for its citizens.
Federal Authority for Providing Funding for Health Care
In Canada, the healthcare system is shaped by a division of responsibilities between federal and provincial governments. Understanding how these powers are allocated and funded is essential to grasp how healthcare services are delivered to Canadians. Here’s an overview of the federal authority in providing healthcare funding, the Canada Health Act, and the Canada Health Transfer.
Source: Figure prepared by the Library of Parliament using data obtained from the Government of Canada, Major Federal Transfers.
Constitution Act, 1867
The division of health powers between the federal and provincial governments in Canada is not clearly outlined in the Constitution Act of 1867. It mainly assigns federal responsibilities for things like quarantine and marine hospitals, while provinces are in charge of most other hospitals.
The federal government gets its health authority from laws related to public health and safety, such as the Food and Drugs Act, and uses its spending power to provide funds to provinces through the Federal-Provincial Fiscal Arrangements Act. This means that while the federal government has some control, health care is mostly managed by the provinces.
Canada Health Act
The Canada Health Act (CHA), passed in 1984, focuses on federal funding for health services. Its main goal is to ensure that all Canadians can access health care without financial barriers. To receive federal funding, provinces must meet specific criteria, such as providing a comprehensive list of insured services and ensuring coverage for everyone.
The CHA also requires that services are accessible and that patients can move between provinces without long wait times. Additionally, provinces must share information with the federal government and recognize the Canada Health Transfer in their health-related materials.
Canada Health Transfer
The Canada Health Transfer (CHT) provides financial support to provinces each year. If a province violates the CHA by charging extra fees for insured services, the federal government can reduce its funding. The amount of money each province receives is calculated based on a formula that considers the population and economic growth.
Starting in the 2017–2018 fiscal year, CHT payments increase each year based on Canada’s economic growth, ensuring that funding keeps up with the needs of the healthcare system.
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Sources: Figure prepared by the Library of Parliament using data obtained from Government of Canada, Major Federal Transfers; and Canadian Institute of Health Information, National Health Expenditure Trends, 1975–2019: Data Tables – Series A (by sector).
The Provincial and Territorial Governments
In Canada, the provinces and territories are responsible for managing most healthcare services, following the national guidelines of the Canada Health Act. Each region has its own health insurance plan that covers necessary hospital and doctor services without charging patients at the time of care. These services are funded primarily by the provincial and territorial governments, with additional financial support from the federal government.
While the Canada Health Act doesn’t define “medically necessary” services, each province decides, in consultation with local medical groups, which services qualify for coverage. If a service is deemed medically necessary, the public health plan must cover its full cost.
In addition to the essential services provided, most provinces offer extra benefits for specific groups, such as low-income residents and seniors, covering costs for things like prescription drugs, ambulance services, and dental care not included in the Canada Health Act.
Many of these additional services are paid for privately, meaning individuals who do not qualify for public coverage might pay out-of-pocket, rely on employer-based insurance, or purchase private insurance. Each province also has a workers’ compensation agency, funded by employers, that provides care for workers injured on the job.
Read: Health Insurance Options in Canada for Non-Residents
Total Public and Private Health Spending
Source: Figure prepared by the Library of Parliament using data obtained from Organisation for Economic Co-operation and Development, “Revenues of health care financing schemes [for 2018],” OECD.Stat (database), accessed 29 December 2020.
Since 1975, healthcare spending in Canada has steadily increased, with total expenditures rising from $100 billion in 2000 to an estimated $264.4 billion in 2019. This means that spending per person reached about $7,068 that year, up nearly $200 from 2018.
Although the elderly population has been growing, it has not been the main reason for rising healthcare costs; instead, factors like inflation and population growth have played a bigger role. For example, while healthcare spending for individuals over 60 years old can reach almost $30,000 by age 90, the overall increase in spending is driven more by other economic factors than just the aging population.
In 2019, most healthcare spending went to hospitals, doctors, and medications, making up 57% of total costs. Interestingly, the share of money spent on hospitals decreased from 45% in 1975 to about 26.6% in 2019, as more treatments are now done outside of hospitals and hospital stays are shorter.
Public funding accounts for about 70% of healthcare expenses in Canada, mainly from provincial and federal taxes, while the remaining 29.6% comes from private sources, including insurance and out-of-pocket payments. Compared to other countries, Canada’s public healthcare spending is relatively high, though countries like Norway and Sweden spend even more publicly on health services.
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Current Funding
Canada’s healthcare system is mostly funded by the public sector, with about 70% of the money coming from government sources and 30% from private sources. In 2016, total healthcare spending was estimated to be $228.1 billion, which is roughly 11.1% of the country’s GDP. Most of this money goes to hospitals (29.5%), medications (16%), and doctors (15.3%).
While spending on healthcare varies by province, on average, provinces use about 38% of their total budgets for healthcare. In 2016, the average spending per person across Canada was projected to be $6,299, with amounts ranging from $5,822 in Québec to $7,256 in Newfoundland and Labrador.
Canada’s Health Care: A Public-Private Mix
Canada’s healthcare system is mostly funded by public money from both federal and provincial governments, with the federal contribution making up about 23% of public funds. Nearly 75% of healthcare costs are covered by these public sources, while the rest comes from private funding. This mix of funding is similar to many other countries, though some have even higher public funding levels.
The federal government has also committed to supporting mental health and home care, and in July 2020, it signed an agreement to help provinces manage extra healthcare costs due to the COVID-19 pandemic.
Overall, Canada is dedicated to providing accessible healthcare for all its citizens.
FAQS
What percentage of healthcare funding in Canada comes from public sources?
Approximately 70% of healthcare funding in Canada comes from public sources, including federal and provincial government contributions.
How does the federal government contribute to healthcare funding?
The federal government contributes to healthcare funding primarily through the Canada Health Transfer, which accounts for about 23% of public funds, along with additional targeted support for areas like mental health and home care.
What is the role of provincial governments in healthcare funding?
Provincial governments are responsible for administering and funding healthcare services in their regions, using a significant portion of their budgets—around 38% on average—for healthcare.
What portion of healthcare costs is covered by private funding?
About 30% of healthcare costs in Canada are covered by private funding, which includes private insurance and out-of-pocket expenses paid directly by individuals.
How has COVID-19 impacted healthcare funding in Canada?
In response to the COVID-19 pandemic, the federal government signed the Safe Restart Agreement in July 2020, providing additional funding to provinces to help manage the increased healthcare costs associated with the pandemic.