Financing models for non-CHA services in Canada: Lessons from local and international experiences with social insurance

by Sara Allin, Mark Stabile, Carolyn Hughes Tuohy | May 31, 2011

CHSRF Series of Reports on Financing Models: Paper 2

Sara Allin
Postdoctoral fellow, School of Public Policy and Governance and Department of Health Policy, Management and Evaluation, University of Toronto
Mark Stabile
Associate Professor of Business Economics and Public Policy at the Rotman School of Management and Director of the School of Public Policy and Governance, University of Toronto
Carolyn Hughes Tuohy
Professor Emeritus of Political Science and Senior Fellow at the School of Public Policy and Governance, University of Toronto

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Key Messages

  • The exclusion of prescription drugs and long-term care in Canada’s universal system is unusual from an international perspective and these gaps in coverage raise a number of equity concerns. One possibility for improving access to these services is to introduce a social insurance component alongside the existing tax-financed system.
  • Four jurisdictions with variants of social insurance models achieve universal coverage for prescription drugs (in Quebec), for health services for the working-age population (in Massachusetts), and for a comprehensive basket of services including long-term care and prescription drugs (Germany and the Netherlands).
  • In two cases, Quebec and Massachusetts, there is a large employer-based insurance market alongside government run programs that either provide public coverage (in Quebec), or that facilitate and subsidize the private purchase of insurance (Massachusetts). The public plans are financed through a mix of general taxes, income-scaled premiums, and user fees.
  • In the Netherlands and Germany the health and long-term care systems are organized around a mix of heavily regulated private for-profit and not-for-profit insurance funds, and financed through incomebased contributions and flat-rate premiums. In the Netherlands the entire population is covered by one scheme (since 2006); in Germany the majority of the population is covered in the statutory (public) scheme and high-income earners are permitted to opt for private coverage (there is compulsory insurance coverage for the whole population as of 2009).
  • Government involvement in these four cases includes general tax funding to cover lower-income earners and a complex set of regulations to ensure universal coverage and equitable access such as compulsory insurance coverage (in all jurisdictions), minimum standards for insurers with regards to both the scope (benefits) and depth (user fees) of coverage (in all jurisdictions), and mandatory participation in risk adjustment schemes for insurance funds (in Germany and the Netherlands).
  • Out-of-pocket payments play a relatively minor role in healthcare financing in all four countries, they constituted 6% of total health expenditure in the Netherlands, compared to 15% in Canada, 13% in Germany, and 12% in the United States. User fees are present in all systems along with protection mechanisms to ensure equitable access.
  • Financial sustainability relates both to the extent to which public revenues are sufficient to meet public expenditures, and to the willingness of the population to increase  public revenues to pay collectively for increasing costs. Sustainability is a concern in each of the four jurisdictions, although the focus differs.
  • The extent of redistribution of income and risk increases with the size of the risk pool and the progressivity of the contributions (the extent to which payments increase proportionally with income).
  • The experiences in the four jurisdictions reflect their different institutional and historical contexts; although they provide some useful lessons for Canada as it considers adding a social insurance component to help address the current gaps in coverage:
    • The tax base for insurance contributions should be broad
    • Risk pooling is important for any financing scheme
    • Social insurance will not improve financial sustainability on its own