The Canadian Health Care SystemMax Fanning, Roy Shillock, Joseph Olver, & Grant Close

Overview

● Historyo Governmento Financing and Delivery

● Economics of Providerso Hospitalso Physicianso Pharmaceuticals

● Economics of Patientso Costo Accesso Quality

Health Care Acts

Saskatchewan Hospitalization Act, 1947● Canada’s first publicly funded universal hospital insurance program.

Hospital Insurance and Diagnostic Services Act, 1957● Cover provinces and territories under cost-sharing program for hospital insurance.

Medical Care Act, 1966● Introduced federal and provincial cost-sharing for physician services outside of hospitals.

Canadian Health Act, 1984● Guarantees Canadian residents “reasonable access” to medically necessary insured

services without direct user fees.● Outlined principals that territories and provinces must follow to qualify for federal health

funding.

(CIHI: 1975 - 2014)

Canadian Health Act (1984) Principals

1. Public Administration - public authority responsible for admin. of health insurance plan.2. Comprehensiveness - must insure all health services insured under the Act.3. Universality - every eligible resident entitled to insured health services.4. Portability - residents receive coverage regardless of location in country.5. Accessibility - provinces/territories must provide reasonable access without discrimination.

● Post Canadian Health Act (1984-2004) - public + private health care spending => 250% o Growth Drivers:

Inflation - 113% ($42 B.) Population Growth - 35% ($13 B.) Existing and new services - 62% ($23 B.) Changes in organization and delivery of services - 41% ($15 B.)

(CIHI: Exploring the 70/30 Split)

Overall Cost Growth

● < $50 B.

● $60 B.

● $200 B.

● 7%

● 10%

● 11.2%

● Health Care Growth (1975-1991)

● Cutbacks & Disinvestment (1992-1996)

● Top Priority (1997-2008)

Total Health Expenditures % of GDPPhases

(CIHI: Health Care Cost Drivers, 2011)

Cost Containment Mechanisms

● Single Payer Financing● Universal Coverage for Hospital and Physician Services● Global Budgets● Preventive Health Services

(Davis, 1999)

Private Delivery of Publicly Funded System

● Majority of healthcare planned and delivered by regional health authorities (private), which is funded by the public sector.

● Delivery: o 75% private sectoro 25% public sector

● Financing:o 70% public sectoro 30 % private sector

(Commonwealthfund.org)

Total Health Expenditure by Source of Finance (2014)

Public Health Coverage

Primary Benefits:● Physician Services - 98%● Hospital Care - 93%Supplementary Benefits:● Home Care● Prescription Drugs● Ambulance

No-Cost Sharing(CIHI, 1975 - 2014; CommonWealthFund)

Public Health Funding

● Gov’t Payments => $141.6 B.o Territorial / Provincial - $134 B. ; (93%)

Personal & Corporate Income Taxes Sales Tax Health Premiums

o Federal - $6.8 B. ; (4.8%)o Municipal - $871 M. ; (0.01%)

● Workers Compensation and Social Security Schemes => $2.7 B.

(CIHI, 1975 - 2014)(Canadian-Healthcare.org)

Private Health Coverage & Funding

50% (14.2%)

$4.7 B. (40%)

$2.6 B. (72%)

$6.4 B. (40%)

$933 M. (16%)

40% (12.2%)

$7 B. (60%)

$936 M. (26%)

$9.6 B. (60%)

$1.5 B. (27%)

● % Private & (Total)

● Dental Care

● Vision Care

● Prescribed Drugs

● Hospital Services

Out-of-Pocket

PrivateInsurance

(CIHI - 2014 Report)

Economics of ProvidersHospitals

Physicians

Types of Hospitals● 86% private, 14 % teaching (Canada

Health Guide, 2015)

● Private 98% of market (Sloan, 2010)

Location of Hospitals• Highly concentrated in urban areas

and in South● ⅓ of patients > 60 min● ⅕ of patients > 90 min (Scott et al

2015)● All 10 top ranked Hospitals <

250 miles of Southern border (CBC Ratings)

Hospital Market Overview

28 % of provincial budgets but shrinking (Southerland and Repin, 2012)

● Low private expenditure: only 9% in 2004 (CIHI, 2005)

● 98% funded by provincial taxes in 2014 (CIHI, 2014)

○ Single Payer System efficiency (NHE Trends, 2014)

○ Improved cost containment via payment mechanisms

Hospital Market Overview

Four main mechanisms: global budgets, activity based funding, line by line, fee for services(Southerland, 2011)

Global Budgets• Fixed amount allocated annually to service• Simple, but lacks incentives ( Quality , Wait times) (Southerland, 2011)

Fee For Service (FFS)• Funding for each reported• Intended to volume of patients served, but ineffective

•In practice: 9% due to readmission (Hackbarth, 2008)

Hospital Payment Mechanisms

Activity Based Funding (ABF)• Receive funds based on the type, volume and complexity of service• Advantage: Powerful incentives:

payment – cost = additional earnings• **Similar to our PPS and DRG**

Line by Line• Sums line items (inpatient nursing service, diagnostic imaging test)• Priority services funding, resource efficiency, quality

incentives

Hospital Payment Mechanisms

Expected Result: Activity Based Funding Supplementing Global Budgeting• GB was popular due to simplicity ( > 80% hospitals) (Southerland, 2011) and ability

to control cost• GB Losing ground due to ABF’s favorable qualities • declined 11 % from 2007-2009 (Deber, 2009)

Explanation: • Stronger economic Incentives: Quality, Access (Southerland, 2011), (Patterson,

2007)• Better for acute services (Street, Vitkainen, Bjorvatn, 2007), (Ettelt & Nolte, 2010)

Hospital Payment Mechanisms Going Forward

Physician Demographics

Gender:• 53% Female (NPS, 2014)

Race: • 60% white, 20% Asian, 5% Black, 4% Latino (NPS, 2013)

Location: • > ⅔ urban location

Age: • Avg. age 49.3 in 2014, 47 in 2008 (CIHI, 2014)

Profession:• 54% primary care, 46 % specialist (Matthews. 2013)

Physician DemographicsSmall, growing population

•2.2 physicians per 1,000 < US and OECD avg. (OECD Health Statistics, 2014)

• Grew 4% since 2001 (OECD Health Statistics 2014)

• Just over half are Primary Care (Matthews, 2013)

Growing portion of national expenditures• faster than wages for other health and

social services workers• Explanation: Fees Growth 3.6%

annually

Economics of Physicians: Geography

• Insufficient amount of Physician in both rural practices and northern territories (CIHI, 2012)

• Explanation: Not enough physicians from rural locations• NCBI (2012) found distance from high school to be only statistically

significant variable in predicting location of practice (p<.0001)

• Result: All provinces and territories offer “return-for-service” agreements to retain physicians in rural communities (Matthews, 2013)

Economics of Physicians: Pay For Performance• Motivation: improve the quality of health care services,

specifically primary care physicians• To incentivize quality of care

• Result: Modest improvements in quality•2.1 % in return visits (Rosenthal, 2007) •0.9 % in mortality (Rosenthal and Frank, 2006)

• Possible Explanations: • physicians are utility-maximizers • Presence of non-pecuniary factors• incentives embedded in complex compensation systems

Nurses, Drugs, and Cost to Patients Overview• Nurses

• Background• Issues

• high average age• shortage• high turnover rate

• Pharmaceuticals• Financing• Issue: Adherence

• Economics of Patients: Cost• Supplementary care• Current trends

Nurses

• 1/3 of health care labor force• Registered Nurses

• 75% of regulated nurse workforce• 1 : 127 nurse to population ratio (1 : 117 in United States)

• Licensed Practical nurses• Psychiatric nurses

• Demand for nurses growing• Aging population requires more health care

• 65+ population from 13%-19% from 2007-2022

• Increasing rates of injury and chronic conditions

• Supply for nurses also growing

Issue: Rising average nurse age• Growth of nurse supply

• Approximately same growth as population (Canadian Institute for Health Information, 2012)

• 2008-2012: nurse supply grew by 9%

• Average age of registered nurse in 2011: 44.8

• 11.9% 60 yrs or older• Retiring nurses contribute to a

nursing shortage• Estimated today’s shortage:

22,000

Issue: Rising average nurse age

Issue: Shortage in Supply

• Predicted shortage of 60,000 by 2022 (Canadian Nurses Administration, 2009)

• Shortage lead to higher overtime rates•10.5% in 1992, 29% in 2010

• 20,627,800 hours of overtime in 2010

• Nurse shortages → more patients per nurse

• Patient mortality increases 7% for additional patient assigned

• Leads to high nurse turnovers, lower quality of care, lowered health safety of nurses

Issue: High Nurse Turnover• $42,000 to replace medical surgeon nurse, $64,000 to replace

specialty nurse (Stachota, 2003)• Reasons for high turnover:

• Poor, unsafe workplace conditions (Shields, 2006)• Nearly half of nurses reported having a needle or other sharp object injury• 3/10 nurses report being assaulted by a patient in past year

• Low job satisfaction, overworked• Leads to higher depression and blood pressure rates, lower job performance

(Picard, 2006)• Significant policy changes need to be implemented

Pharmaceuticals

• 16.3% of total health expenditure, second to hospital spending• One of fastest growing components in health care spending

Pharmaceutical Financing

Why are drugs cheaper in Canada?

• Price controls• “Existing drugs cannot increase in

price by more than the rate of inflation”

• “New drugs cannot cost more than similar drugs for the same illness”

• “Breakthrough drugs cannot cost more than the median price for the drug in other countries”

• Effects• Reduces incentives for companies

to create innovative drugs• Delayed drug launches (Kessler)• Fewer choices for consumers

Issues with Pharmaceuticals: Out-of-pocket costs• Canada Health Act- Privatized

prescription drugs• 2/3 of Canadian households have

to pay for a portion of their prescriptions out-of-pocket (Statistics Canada, 2009)

• Canada Community Health Survey

• 9.6% of respondents who received prescription engaged in cost-related non-adherence (CMAJ, 2012)

• Publicly funded health care system: incentivizes low-income patients to engage in cost related nonadherence

• One period prescription drugs partially covered, one period drugs fully covered

• More hospital visits during month of cost-sharing prescriptions than fully covered

• Conclusion: drugs and hospital visits are substitutes (Anis, 2005)

Economics of Patients: Cost to Patients

• Canada’s Universal Health Care System• No charge to patients when receiving hospital and physician services

• Supplementary plans- Direct cost to patients- 11.7% of healthcare spending

• 2/3 of Canadians have private insurance, which provides • Prescription medications• Dental care• Ambulance services• Eye care• Nursing home care

Cost to Patients

• Out of pocket spending has increased over past decade• Households spent about $1112 on health services in 1998, $1523 in 2009• Reasons for increased out-of-pocket spending

• Delisting of some services by health insurance programs• Increase in prescription cost to patients

•Shift to higher deductible programs (Daw, 2012)

• Percentage of private health insurance premiums collected and benefits paid decreasing (Law, 2014)

• Reserve funds for long-term disability

Access & Quality Overview:

Access & Wait Times- Routine & Primary Care

- Emergency Care

- Specialty Care

Quality- Infant Mortality and Life Expectancy

- Cancer and AMI Mortality Rates

- Public Opinion of Canada’s Healthcare Quality

Waits for Routine & Primary CareAccess to Family Physicians (major concern of the country):

- Focus group study conducted by Ipsos-Reid across Canada in 2007 on behalf of the CMA (top three issues/concerns)

1)People had been searching for a family physician for several years without success 2)People with a family physician were frightened about the prospect of their doctor retiring 3)People with a family physician reporting waits of three or four weeks to get an appointment

Commonwealth Fund Survey (2007)

- Lowest rate of same-day physician appointments- Highest rate of 6 or more days to see their physician

Health Council of Canada Survey (2007)

- Of the 26% of patients who require routine primary care, 45% waited too long and 30% said it was difficult to get an appointment

National Physician Survey (2007)

- Specialist asked to rate their patients’ access to family physicians - Arrangements for care for their patients outside of normal office hours

Access to Emergency Room Care:- Focused study on wait times by the Canadian Institute for Health Information (CIHI):

‘Health Care in Canada, 2012: A Focus on Wait Times’

- Highest percentage of people with at least one visit to the ED in the past two years

- Highest percentage waiting for four hours or more before being treated

Wait time continuum in the Emergency Department:- ED Total Length of stay

- Time Waiting for Physician Initial Assessment

- Time To Disposition

- Time Waiting for Inpatient Bed

Waits for Emergency Care

Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries

Emergency Room Use in the Past Two Years

What is Canada’s Percentage (ER)?

Access to Specialty Care:

Fraser Institute Study (2007)

- Average wait time between referral by a family physician and consulting a specialist

National Physician Survey (2007)

- Need for improvement: Rating of patient access to other specialists by family physicians

Additional barrier to timely patient access to specialty care:

- Three consequences to a family physician's inability to order advanced diagnostic tests.

1) A patient’s wait time for total care is delayed 2) The consulting physicians time is used inefficiently 3) The health care system is overburdened

Waits for Specialty Care

Costs of Waiting

Patient costs

Caregiver costs

Health Care System Costs

Health Care System Costs to GDP

Other Access Issues• Geographic Location

- Canada’s size & physical makeup

- The geographic distribution of physicians

Canadian Institute for Health Information (CIHI), 2012

Quality: Canada Vs. United States

Infant Mortality Rates:

Adult Life Expectancy:- Canadian Life Expectancy in 2012 (Males, 80.3 years old & Females, 84.2 years old)- American Life Expectancy in 2012 (Males, 76.4 years old & Females, 81.2 years old)

Cancer Mortality: International Comparison

AMI Mortality: International

Public Opinion of Healthcare Quality: U.S, Canada, Great Britain

United States:48% Very/Somewhat Satisfied

Canada:52% Very/Somewhat Satisfied

Great Britain:42% Very/Somewhat Satisfied

Follow-Up Questions:

- What aspects of the Canadian Healthcare System would you like to see the United States adopt?

- What do you see as the biggest problem facing the Canadian Healthcare System today?