Wide Variation in Public/Private Funding of Health Care Services

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Canada’s public sector funds most hospital and physician services; other countries publicly fund a larger portion of drugs and dental services.

September 28, 2005 – Countries with a large percentage of public-sector health care funding often differ in the types of coverage they offer, according to a new report released today by the Canadian Institute for Health Information (CIHI), entitled Exploring the 70/30 Split: How Canada’s Health System Is Financed. For instance, Canada funds hospital and physician services almost entirely through taxes. The public-sector share of spending for these services was 93% and 98%, respectively, in 2003. Other countries commonly apply copayments for these services. For example, the percentage of public funding for physician services was lower in France (74%) and Germany (85%) in 2003. The public portion of funding for hospitals in Germany (84%) was also lower than in Canada in 2003. However, France’s public share of hospital funding (92%) was similar to Canada’s.

On the other hand, when it comes to pharmaceutical drugs, Canada’s public sector accounted for a much smaller percentage of spending (38%) than the public sector in Germany (75%), France (67%) and the Netherlands (57%). A similar picture exists for dental care, with Canada’s public proportion at 5%, compared to 68% in Germany and 36% in France.

The report also shows that more than two-thirds (70%) of Canada’s total health spending came through the public sector in 2003, less than in the United Kingdom (83%), Germany (78%) and France (76%). However, Canada’s public share of health spending was more than that of the United States (45%) and the Netherlands (62%).

“When considering the balance of public and private spending in the health system, it is important to consider what the system does and does not cover when compared to others,” says Glenda Yeates, CIHI President and CEO. “The public/private question is much more complex than the overall funding split, given that each country has made its own decisions as to where to allocate public funds.”

Exploring the 70/30 Split looks at how Canada’s health care system is financed and includes new data on the breakdown of private-sector funding, contributing factors to increasing health care costs and provincial variations in publicly and privately funded health care services.

Private spending: insurance vs. out-of-pocket

Private-sector spending on health care reached $34.5 billion in Canada in 2002. Individual Canadians paid nearly half of that total out-of-pocket, an estimated $17 billion. Private insurance accounted for most of the rest. Between 1998 and 2002, out-of-pocket spending by Canadians increased by almost 28%, while spending by private health insurance companies increased by 51% in the same period. The bulk of out-of-pocket spending by Canadians in 2002 went to dental care ($3.4 billion), prescribed drugs ($2.9 billion), nursing homes and other institutions ($3.0 billion) and vision care ($2.0 billion).

At 15% of total health expenditure in 2002, Canada’s level of out-of-pocket spending ranks in the middle of other Organisation for Economic Co-operation and Development (OECD) countries. Our rate is similar to that of the U.S. (14%), but greater than those of France and Germany (10%) and less than those of Italy (20%) and Japan (17%).

The report also shows that residents of countries that spend more per capita on health services do not always report better access to care. According to a 2004 survey conducted in five countries, 40% of Americans surveyed said they had gone without care that they needed in the past year because of the cost. In the UK, only 9% responded that they went without care for the same reason. Of the five countries, the U.S. spends the most per capita on health care, while the UK ranks fourth in per capita spending. In Canada, 17% of those surveyed said they had gone without care in the previous year because of the cost.

Health spending is on the rise around the world, including in Canada

In 2004, Canada spent an estimated $130 billion on health care, up from $37 billion in 1984, the year the Canada Health Act was passed. Together, population growth and health sector inflation explain more than half of this increase. Between 1984 and 2004, Canada’s population increased by 6.2 million people, which accounts for 14% of the increase, or $13 billion. Health sector inflation accounts for a further 45% of growth in health spending since 1984, or $42 billion.

“In addition to population growth and inflation, changing patterns of practice, as well as new drug therapies and other innovations, help to explain why Canada now spends more on health care than we did two decades ago,” says Jennifer Zelmer, CIHI Vice President of Research and Analysis.

Public coverage also varies within Canada

While public programs in all jurisdictions cover a core set of services provided by physicians and hospitals, coverage for other types of care differs somewhat among provinces and territories. Where one lives in Canada may influence the amount one pays for certain health services. Examples include:

  • Prescription drugs: Canadian households reported spending an average of $268 out-of-pocket on prescription drugs in 2003. Among the provinces, the average amount spent varied from $200 in Ontario to $427 in Prince Edward Island. Residents in the territories reported the lowest average out-of-pocket costs.
  • Home care: In a 2003 Statistics Canada survey, for example, 65% of home care recipients in Manitoba said that they had some or all of their care covered by public funding, compared to 42% in British Columbia.
  • Flu shots: Ontario and the Northwest Territories cover flu shots for all residents. All jurisdictions except Prince Edward Island pay for flu shots for some residents. Most cover at-risk individuals, seniors and health care workers.

Canadian Institute for Health Information

The Canadian Institute for Health Information (CIHI) is an independent, pan-Canadian, not-for-profit organization working to improve the health of Canadians and the health care system by providing quality health information. CIHI’s mandate, as established by Canada’s health ministers, is to coordinate the development and maintenance of a common approach to health information for Canada. To this end, CIHI is responsible for providing accurate and timely information that is needed to establish sound health policies, manage the Canadian health system effectively and create public awareness of factors affecting good health. Visit www.cihi.ca

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