Sara Allin, University of Toronto

The policy option presented here was chosen to stimulate discussion, but is only one of several options examined by the author in the report Financing models for non-Canada Health Act services in Canada: Lessons from local and international experiences with social insurance


About the presenter

Sara Allin is assistant professor at the School of Public Policy and Governance at the University of Toronto and a senior researcher at the Canadian Institute for Health Information. She has published in numerous peer-reviewed journals in health economics and social science. Her research interests include equity in health and healthcare and comparative health policy. She received her PhD in social policy from the London School of Economics and Political Science and was a CHSRF-CIHR postdoctoral fellow at the Department of Health Policy, Management and Evaluation at the University of Toronto.

Main concern/problem

Currently, prescription drugs are not universally covered under Canada’s public health insurance systems. This exclusion results in equity concerns. There are strong arguments that support the medical necessity of prescription drugs, raising the question why a medically necessary form of healthcare should be publicly insured in hospitals, but not otherwise.

Proposed Option

Raising revenues through a social insurance model may be one way to achieve universal coverage of prescription drugs. The option examined is to add a social insurance component to the largely tax-financed system to improve access to prescription drugs. This approach would not replace or overhaul the existing taxfinanced hospital and physician care that is currently in place on a universal basis in Canada.


Universal coverage of prescription drugs will help alleviate equity concerns in Canada arising from the current fragmented method of financing drugs and the variations in public coverage that exist across the country. Redistribution of income and of risk increases with the size of the risk pool and the progressivity of the contributions (the extent to which payments increase proportionally with income).

Experience/evidence of success

The Netherlands and Germany achieve universal coverage for health services, including prescription drugs, using a mix of heavily regulated private commercial and private not-for-profit insurance funds that are independent from government. In Massachusetts and Quebec, employer-based insurance markets exist alongside government programs. In Quebec, government-sponsored coverage is financed by a mix of premiums and taxes. The Massachusetts program facilitates and subsidizes the individual purchase of private insurance for the working-age population. Although the extent of general tax financing is relatively low in all cases except Quebec, there is a strong regulatory function to ensure universal coverage and equitable access. All the jurisdictions have compulsory insurance coverage, low rates of uninsurance, and a strong role for private insurers (both for profit and not- for profit).

Challenges and limitations

The implications of these financing arrangements for equitable access depend on the regulations that are in place, for example to ensure that minimum standards are upheld and to prevent insurers from selecting ‘good risks’ and excluding some population groups. Measures include open enrolment and risk adjustment mechanisms. Each jurisdiction faces challenges with financial sustainability, which has led to increases in contribution rates over time.

Considerations for Canada

First, the tax base for the insurance contributions should be broad. Second, risk pooling is important. A single risk pool would eliminate the equity and sustainability concerns stemming from risk segmentation and risk selection that could result if there were multiple insurers. Third, social insurance as a method of financing healthcare will not guarantee financial sustainability; however, the diversification of financing that could be achieved by social insurance and the closer link between the financing mechanism and the benefits that are received may increase public support for paying collectively for rising costs. Social insurance could be used to raise revenue to expand coverage of prescription drugs. However, current experiences indicate that financial sustainability is affected by a range of factors, including the pharmaceutical policies in place.