The Study in brief

The intense debate pitting private versus public healthcare in Canada needs a reality check. Private aspects of healthcare exist in different forms and to varying degrees across Canadian provinces, largely depending on their respective legislation and regulations.
 For healthcare professionals providing insured services, most bill through the public system, but not all. The current and future scope of their role is the pressing issue at hand.

 Health Canada has had success in eliminating extra billing and user fees under sections 18 and 19 of the Canada Health Act. However, provinces have considerable authority in determining key terms like “medically necessary” or “insured services” that are covered under the Act. The result has been a diversity of approaches.
 Provinces have the legislative tools to constrain the growth of private healthcare, if that is their objective. Similarly, provinces have considerable authority to increase the scope of private healthcare, if that is their objective (even within the current parameters of the CHA), by revising provincial legislation or regulation.

 Either way, the specific policy direction undertaken would be different for each jurisdiction, as the legislative and other barriers to private healthcare (such as market size limiting the viability of private delivery) vary across provinces. This Commentary provides clarity about the different forms of “private” healthcare and a comprehensive view of the current policy landscape defining the balance between public and private healthcare.

All health systems incorporate some mix of public and private healthcare. In 2021, public sector spending in Canada amounted to 73 percent of total healthcare expenditure, exactly equivalent to the OECD average of 73 percent (OECD 2023). Yet these summary figures tell us little about the public/private contours of any healthcare system. Private healthcare can manifest in a multitude of ways, and the precise configuration of the relationship between public and private healthcare tells us more about the system than the absolute level of public or private spending.

Under the Canadian Constitution, provinces have wide-ranging jurisdiction over the provision of healthcare in Canada, both explicitly (hospitals) and through judicial interpretation (“matters of a merely local or private nature,” as well as authority over insurance). The Canada Health Act (CHA) does provide a national framework (supported by federal transfer funds) that has, for several decades, ensured a certain level of congruence across provinces in the provision of public healthcare. But each province’s health legislation is unique, and it is this interplay between federal and provincial legislation that provides a regulatory space for private healthcare. Variation across provinces means private healthcare in Canada is not a uniform phenomenon.

The objectives of this Commentary are fourfold: first, to describe the ways we can understand “private” healthcare; second, to explain the different ways provincial legislation permits or prohibits aspects of private healthcare; third, to discuss the supply- and demand-side variables causing private healthcare to take its current shape across provinces; and fourth, to analyze the relationship between provincial healthcare legislation and the CHA with reference to the expansion of private healthcare in Canada. This Commentary does not address the utility of private healthcare per se. Rather, it focuses on the confusion inherent in so many discussions referencing “private healthcare.” Both exponents and critics of private healthcare can pick and choose from numerous manifestations of private healthcare to support their respective positions. By requiring proponents and opponents to clarify precisely what they mean by “private healthcare,” the potential costs and benefits can be more clearly identified in each case.

What do we mean by “Private Healthcare”?

Critics of private healthcare point to the costs and inequities of the American healthcare system to argue against it, while proponents reference European mixed public/private models to show how effective it can be. Any discussion of the role of private healthcare should therefore first clarify what, precisely, is meant by “private healthcare.” Healthcare systems can generally be broken down into three constituent parts: delivery, financing, and regulation. Any of these elements can include a public or private (for-profit or not-for-profit) component (Wendt et al. 2009; Böhm et al. 2013; Marchildon 2022).

Delivery of Healthcare Services

Much healthcare in Canada is delivered by private providers. When medicare was introduced in Saskatchewan in 1947, physicians vehemently protested. A settlement was reached only when the province agreed to recognize physicians as private independent operators rather than as employees of the state (Marchildon 2020). This model was followed by other provinces as they introduced their own medicare legislation. Ambulance services across Canada are often private, with these companies negotiating service contracts with health authorities or provinces. Nursing care in hospitals and district nursing programs is generally provided publicly, but private nursing firms (such as the not-for-profit VON for home care, or for-profit firms supplying temporary placements in hospitals) are also commonly utilized.

Historically, hospitals in Canada (especially those founded by religious orders) were largely based on a private, independent, not-for-profit model. As hospitals became amalgamated into health authorities, they were consolidated in provincial governments’ financial statements and their operation was generally subsumed within the public infrastructure – even as many (especially larger) hospitals with boards of directors remain not-for-profit organizations.

What, exactly, is a “not-for-profit” (NFP) organization in Canada, and how does it differ from a private or a public one? Legally, NFPs are “bodies corporate without share capital”: in other words, revenues must be directed to the mission of the organization rather than to shareholders. NFPs also enjoy specific tax breaks. Unlike fully public bodies, however, they are self-governing. Generally, they will have boards of directors who are accountable for funds raised and debts incurred. Like directors in a private company, these directors have a fiduciary responsibility to use resources wisely. Unlike private companies, directors of NFP organizations are directly responsible to the corporate entity rather than to members (i.e., shareholders). The corporate entity, in turn, is responsible to the government jurisdiction (federal or provincial) wherein it is incorporated.

Increased attention has been paid to private surgical companies. Individual medical specialists are generally considered independent private operators who contract their services to medical facilities or universities, although their payment models often include elements such as base salary, research stipend, fee for service, etc. Surgical specialists have in many provinces established discrete private businesses where bulk services (a specific number of certain surgical services) are provided over a set period for a negotiated price (e.g., the Shouldice Hernia Centre in Ontario or Scotia Surgery in Nova Scotia). They may use public infrastructure (hospital operating rooms) or provide their own physical space. There is considerable debate whether contracting these services is superior to establishing them as part of the public system (e.g., Day 2023; Lewis 2022; Longhurst 2023). However, as the funding and administration of these services is controlled by provinces (or provincial health authorities), and as patients use these services as they would fully public services (i.e., free at point of delivery), they are not considered a “two tier” form of access to healthcare. Patients cannot access these services directly; rather, they are routed through the public system. Grey areas of private service delivery, described in more detail below, include the private delivery of medically necessary diagnostic services, infusion clinics on hospital sites, and certain forms of virtual care.

Also relevant to the discussion of private delivery is the type of private entity under consideration. “Private” hospitals that are not-for-profit may in fact operate more like a public institution than a private one; here one might usefully distinguish institutions which are functionally embedded in provincial healthcare system (e.g., via accounting practices) from those that operate at arm’s length. Conversely, evidence from the United States suggests private not-for-profit hospitals can also show the kind of profit-driven behaviour more commonly seen in for-profit entities (Silver-Greenberg and Thomas 2022). Others have argued that small independent private health clinics (such as Algomed or Bluenose, in Canada) are in a different category from large American corporate entities (such as the Hospital Corporation of America) (Deber 2003).

Financing of Healthcare Goods and Services

As noted, some privately provided services (such as ambulance services or surgical clinics) are often funded publicly. And, while it is not as common, publicly provided services can be funded privately (e.g., in systems where money follows the patient, private insurers may be able to find places for their patients in publicly funded hospitals). Charitable NFP organizations can be another source of healthcare funding. In Canada, much attention is paid to the division of healthcare into services that are, or are not, insured publicly. For example, the provision of cosmetic surgery (undertaken for aesthetic reasons) is commonly private, and is paid for privately and directly out-of-pocket. The private provision of services that are publicly funded (such as cataract or hip replacement surgery), as noted, is more controversial, but is not uncommon within Canada. The main point of controversy in Canada is whether publicly insured services should also be available for direct purchase to individuals within the private sector, bypassing the public system altogether.

Out-of-pocket financing in Canada is largely targeted to healthcare services that are not covered by public insurance (the precise list of insured versus non-insured services varies across provinces). Only 12.6 percent of Canadian healthcare expenditure in 2021 was comprised of out-of-pocket spending (WHO 2023); the remainder was covered by public or private insurance.

So how is healthcare insurance structured in Canada?

Public insurance: In all provinces, most medically necessary healthcare services are largely funded on a tax-based model, where citizens support healthcare services through their general tax contributions. Some provinces do require provincial inhabitants to pay “healthcare premiums” but, as these contributions simply go into the provinces’ general operating funds, rather than a bespoke account used only for healthcare, these premiums can be considered simply as another form of taxation. As a condition of receiving federal health transfers, the CHA requires that each province has a public insurer. Böhm et al. (2013) argue, for this reason, that states such as Canada and Australia, which are structured on a public insurance system, are more properly considered to possess “national health insurance systems” rather than “national health systems,” as typified by the UK.

Each province has the authority to determine what it insures publicly (which is why coverage for “medically necessary services” varies across provinces). In general, medically necessary services provided by physicians and in hospitals are covered (as required by the CHA) but, as explained below, this is much more complicated than it appears. Services such as vision care and dental care provided in hospitals are also generally covered, as are diagnostics, physiotherapy, and other related services.

Provinces are not required to cover everyone: those in the armed forces or federal penitentiaries, for example, are insured by the Government of Canada. Although provincial healthcare systems provide many of the services for these specific groups, the provinces are reimbursed by the federal government. Those injured in the workplace are usually covered by workers’ compensation. Certain categories of migrants (such as refugees) are also insured federally until they receive permanent citizenship status, whereupon they fall under provincial insurance. Depending on the type of work and the length of stay, migrant workers are insured both through provincial health plans and workers’ compensation programs (for a fuller discussion, see Fierlbeck and Marchildon 2023).

Most provinces expand public health insurance beyond what is required by the CHA. While the CHA does not specifically mandate the public provision of dental care, optometry services, and pharmaceuticals outside of hospitals, provinces generally have some form of coverage of these services for vulnerable groups. These are determined either by cohort (e.g., seniors or children), service (pharmacare or dental care), income category (below a certain ceiling), or some combination of all three. These programs vary considerably across provinces.

Private health insurance: Formally, there are several types of private health insurance, each serving a different function.

• Supplementary health insurance covers any goods or services that are not covered by public insurance. In Canada, these include companies like Blue Cross, Sun Life, or Canada Life Assurance. Any healthcare system incorporating public insurance will also have an array of private and private not-for profit supplementary health insurance companies which generally cover vision care, physiotherapy, pharmaceuticals, travel insurance, etc.
   
• Complementary health insurance completes the cost of a service, where public or social insurance only pays partial costs. In many countries, for example, public insurance will only cover around 60 percent – 80 percent of hospital stays, pharmaceuticals, primary care, and sometimes even emergency care. In these cases, private insurance will “top up” the remaining costs so patients do not have to pay out-of-pocket. Some insurers may ask patients to pay the remaining costs up front, and reimburse them after the fact; others may cover the costs at point of payment. This “top up” system is not common in Canada, but in Quebec (which mandates pharmacare insurance) private insurers are allowed to cover any co-pays for pharmaceuticals that patients must pay directly for amounts not covered by the mandated insurers.
   
• Substitutive health insurance applies in systems (e.g., in Germany) where citizens earning above a set income are allowed to opt out of public insurance systems altogether, and use private for-profit insurance to cover medical needs.
   
• Duplicative (or “dual” or “parallel”) health insurance is the source of most political controversy in Canada. Duplicative insurance privately covers services that are also offered in the public sector. Four provinces (Ontario, Manitoba, Alberta, and PEI) explicitly prohibit duplicative insurance, three (Saskatchewan, British Columbia, and Quebec) explicitly permit duplicative insurance under certain conditions (i.e., only for certain services, only if the insurer is private not-for-profit, only for services provided by practitioners outside of the public system), and three (Newfoundland, Nova Scotia, and New Brunswick) neither expressly permit nor prohibit it (Appendix Table A2).1 The advantage for those with duplicative insurance is that they can access these services quicker, or access more enhanced variants of these services. It is really with this particular kind of private insurance that the issue of “two tier” healthcare arises. The argument in favour of duplicative insurance is that it “takes pressure” off of the public system (e.g., Globerman 2020), while other research has found that public wait times actually increase when publicly insured services become privately available. One reason given for this is the depletion of resources from the public sector. Policy analysts also suggest that those offering private services have incentives to keep public wait times longer, as patients will only find private services attractive if they cannot easily access them in the public sector (e.g., Besley et al. 1998; Duckett 2005). Countries such as the UK that permit duplicative insurance nonetheless continue to have considerable issues with long wait lists in the public health system (e.g., Duncan et al. 2023).
   
• Private not-for-profit insurance: Another category of health insurance that causes much confusion is statutory health insurance (SHI; also referred to as “social health insurance” or the “Bismarck health system”). This system is quite common in Europe, although the precise configuration varies across states. In this model, health insurance is not covered in the first instance through general taxation revenue. Rather, workers and employers pay into “sickness funds,” which provide health insurance benefits depending on the terms negotiated. These sickness funds are technically “private” bodies operating on a not-for-profit basis. They are, however, highly regulated in their authority and function. Because of the degree of regulation – and the importance of the social function they fulfill – they are generally considered a form of “public” insurance. However, governments tend to differ in their approach to consolidating these operations into government expenditures.2  Jurisdictions using this model of health insurance have different methods for covering unemployed or retired persons, often including funds directed from government taxation revenue or from pooled sickness funds.

Regulation of Healthcare Financing and Delivery

The nature of “private” healthcare is determined not only according to the way services are delivered or funded but, more importantly, according to the way they are regulated. Permitting a “private” form of health service or insurance is not an all-or-nothing condition; governments have the authority to determine the terms and conditions under which these services are to be offered. There can, for example, be limitations on the kinds of services offered or insured, on the professions allowed to offer them, on the prices that can be set for them, where they can be provided, and so on. These limits, as discussed below, can be enough to discourage the provision of health services even when these services are technically legal, as the terms within which private services are allowed may not be sufficiently profitable. In the European Union (EU), governments are more restricted in their ability to regulate private healthcare services because, ultimately, the ethos of the EU is to maintain the free movement of goods and services. Fully public health services are under the authority of member states but, where states utilize private components in their healthcare systems, attempts to limit the ability of private health firms to compete can result in charges of breaching fair-competition regulations. In Canada, however, there are fewer restrictions on the limits that provinces can place on private health providers, given the political will to do so. The regulatory aspects of healthcare financing and delivery will be addressed in more detail in the next section.

Private-public Partnerships

Another category of “private” healthcare is the implementation of private-public partnerships (P3s) in healthcare (McKee et al. 2006). In the past, this has been limited to large capital projects, such as the construction of hospitals, but more recently the implementation of P3s has expanded to the point where verdicts on their effectiveness can be rendered. Importantly, there is no single model of public-private partnerships; each is generally negotiated on its own terms. Proponents explain the logic of this approach as capturing the advantages of both systems: governments can access more competitive financing for projects, while firms undertake the process of construction more efficiently with each day of overrun increasing the cost of a project. Critics argue that the logic of P3s rests in the effectiveness of offloading costs to the other partner, and that the party with the most expertise in negotiating P3 contracts (generally large multinational firms with experience in this area) are those who are most able to shift costs. At the same time, because P3 projects allow costs to be diffused over a long period of time, budget-conscious governments have been eager to enter into these agreements.

Empirical evidence suggests that the effectiveness of P3 projects in Canada has been quite varied (Murphy 2008; Vining and Boardman 2008; Siemiatycki 2015). More recently, provinces have expanded the use of P3s to include large outlays for medical infrastructure. These agreements, often known as “value partnerships” or “managed equipment service agreements,” generally focus on diagnostic equipment – providing MRIs, CT scans, and X-rays – and they range from 15 to 30 years. The private partner will source, install, and maintain this equipment over the life of the agreement. As the private partner owns the equipment and covers the cost of installation, there are minimal upfront costs for the public partner. Other advantages of this model include a reduction in equipment downtime, decreased administrative burden in monitoring equipment maintenance, protection from unpredictable costs involved in equipment failure (CADTH 2022), and a replacement plan for equipment that reaches the end of its recommended useful life. At the same time, long-term service contracts can diminish flexibility in accessing different equipment over the lifespan of the contract, and the private contractor may demand confidentiality agreements which could diminish the transparency and accountability of the process. Like other forms of P3s, the effectiveness of managed equipment services will largely depend on the specifics of negotiated agreements, including clearly defined outcomes and expectations, as well as transparent and accountable protocols and public scrutiny of this documentation (CADTH 2022).

Internal Markets

While “internal markets” are not formally an aspect of private healthcare per se, they frequently arise in discussions of the utility of private healthcare mechanisms in the reform of public healthcare. Most famously employed in the Thatcherite reforms of the National Health Service in the United Kingdom, this model simply divides public healthcare professionals into “purchasers” of acute care services (usually primary care professionals) and “providers” of acute care services (usually hospitals). The theory underlying the purchase-provider split is that GPs will select the best value for money, obliging hospitals to compete by offering quality services for less. While the results of Britain’s experiment with the internal market are mixed at best (for a discussion of the internal market reforms see, e.g., LeGrand, Mays, and Mulligan 1998; and Ham 2007), a number of other countries (such as the Netherlands) have since incorporated this mechanism into their own healthcare systems.

Conclusions

The nature and extent of private healthcare provision has always been a subcurrent in discussions of Canadian healthcare. As Flood and Archibald clearly demonstrated in 2001, however, the precise nature of private healthcare depends upon the structure of provincial legislation. In general, provinces with a critical mass of population and wealth had to be more actively restrictive in their policy instruments regarding private healthcare, with smaller provinces able to enjoy a more liberal legal framework safe in the knowledge that low demand would make the opportunity immaterial. While legal frameworks are generally holding firm, the practice and context of healthcare provision have been changing rapidly. Both supply and demand pressures are making private healthcare more available and more attractive to those requiring healthcare.

This Commentary has not discussed the provision of duplicative private health insurance in Canada. The experience of post-Chaoulli Quebec has shown that the demand for duplicative insurance is still limited given the current policy framework (see Quesnel-Vallée et al. 2020). Nonetheless, if private service provision becomes widespread, and the demand remains constant (or increases), provinces that permit private insurance (but have not experienced demand) may well see its tentative development within their jurisdictions, while provinces where duplicative insurance is proscribed may experience greater political pressure to allow it.

Laverdière (2023) has argued that a “plausible interpretation” of the CHA is that “transfer reductions can only occur when the public system in a province or territory does not provide satisfactory access to medically necessary services.” This is not an incorrect observation per se; it merely confuses the legal and political aspects of the CHA. Whether provinces have met the contractual conditions to expect the funds set out by Ottawa is a largely technical matter. The success that Health Canada has had in eliminating extra billing and user fees under sections 18 and 19 is illustrative of the utility of a clear and specific set of requirements that are monitored and enforced (with the added incentive that provinces can recoup any past losses if they make prospective changes). More complicated are the charges that provinces have been non-compliant with the CHA beyond sections 18 and 19. Because provinces have considerable authority in determining key terms like “medically necessary” or “insured services,” it is difficult to make justiciable claims against provinces for non-compliance more broadly. The contest over diagnostic services and virtual care will be an interesting one. But the terms of the dispute are more political than legal. As in the past, the federal government is using the CHA as a political statement to affirm its commitment to public healthcare; as such, the legal outcome of the controversy may be less important than the political battle.

Is the CHA obsolete? The demand that the CHA should be revised, either to prevent or facilitate private healthcare, is misplaced. The instruments determining the extent of private healthcare largely rest, as they always have, with the provinces and the political will of their electorates. In the past, the best barrier to privatization has been an effective and responsive public system. For this reason Ottawa’s role in funding provincial healthcare remains paramount. Provinces have the legislative tools to constrain the growth of private healthcare, if that is their objective. Similarly, provinces have considerable authority to increase the scope of private healthcare, if that is their objective (even within the current parameters of the CHA), by revising provincial legislation or regulation.

Either way, the specific policy direction undertaken would be different for each jurisdiction, as legislation and other barriers to private healthcare (such as market size) vary across provinces. For example, should Ontario wish to expand the private provision of healthcare, it could simply rescind sections 15(a) of the Ontario Health Insurance Act and section 10(3) of the Commitment to the Future of Medicare Act (along with the corresponding regulations). To expand the scope of private healthcare, the nine provinces that already allow physicians to opt out of the public insurance system have a number of mechanisms at their disposal. These include permitting physicians to charge above the current fee schedule where that is now explicitly prohibited, reimbursing patients who use private-sector physicians where they do not already do so, or permitting “dual” or “duplicative” insurance where it is currently prohibited. The greatest effect would be in the wealthier and more populous provinces where a critical mass of individuals who would be willing to pay to access these services would make private healthcare a viable commercial venture. The scope for expanding private healthcare in smaller provinces is more restricted, but still could be facilitated by, for example, allowing physicians to bill above the public fee schedule.

Similarly, provinces can use legislative mechanisms at their disposal to further restrict the expansion of private healthcare by, for example, refusing to reimburse patients who have paid physicians directly for services listed as “insured services” (as some already do). Doing so could also potentially expand private healthcare by increasing the number of non-participating physicians (who are outside the purview of the CHA). However, this could in turn be addressed by restricting the fee schedule of non-participating physicians or, like Saskatchewan, by permitting liberal private care only up to the point that it is deemed to undermine public care. Moreover, simply by changing the definition of “insured services” from “medically required services provided by physicians” to “medically required services provided by physicians and nurse practitioners” (which can in some jurisdictions be done through orders-in-council alone), some provinces could forestall the expansion of private nurse-practitioner-run clinics. Provinces can also control the precise scope and nature of additional private healthcare services by tightly regulating the specific terms under which these services are permitted. Quebec, for example, has for years allowed private health insurance only for specific procedures; Saskatchewan permits private health insurance, but only if offered by non-profit entities. Privatization, in this way, does not necessarily entail a “wild west” of unrestricted commercial ventures. At the same time, provinces that pursue this route will also have to commit considerable resources for monitoring and ensuring compliance (where currently most provinces simply utilize a complaint-driven system).

Canada’s unique federal system means that fears of privatization can also be useful in leveraging more funding from Ottawa. Rather paradoxically, provinces have an incentive not to contain the growth of private healthcare within their borders in order to make the case that more public funding is necessary. At the same time, Ottawa has agency with regard to going beyond the mandated provisions of sections 18 and 19. It could demand provinces cleave to the spirit of the CHA by publicly insuring services regardless of whether they are provided in the way they were when medicare was first conceived. Ultimately, however, governments are responsive to their electorates. The legal intricacies that exist in the nexus of provincial legislation and the CHA will always remain secondary to the wider political opposition to, or support for, private healthcare. To engage in this political debate, however, it is important to understand clearly what private healthcare is and is not, and how it manifests within the legislative landscape of each jurisdiction. For the Silo, Katherine Fierlbeck.

Dr. Fierlbeck is cross-appointed to the Department of Community Health and Epidemiology, the Department of International Development Studies, and the European Studies Program at Dalhousie University. She is a Senior Research Fellow at the Healthy Populations Institute, and is on the research committee for the MacEachen Institute for Public Policy.