Can Obamacare Work For Canada?

A U.S.-style mandate for the purchase of health insurance could work for Canadian drug plans.

We like to think that we have universal health coverage here in Canada, but when it comes to covering retail drug costs, we have an American-style health care system.

Only around 50 per cent of total drug expenditures are covered by the public purse, mostly for the elderly and those receiving social assistance. Everyone else has to pay for it out of pocket or through private insurance, usually obtained through their employer.

The Canadian Institute for Health Information estimated that in 2004, 79 per cent of Canadians had some sort of insurance coverage for retail drug costs. That means that around 20 per cent of Canadians have no coverage for drugs. Many of these individuals have lower incomes and work part-time or not at all.

Would an Obama style mandate for the purchase of insurance to cover drug costs in Canada be a good policy? Given Canadian values of solidarity and equality with respect to our public coverage of hospitals and doctors, we wouldn't be constrained by the Republican Party's concerns about liberty in making this change. Indeed, we would presumably embrace reforms that work towards full public coverage for drugs as we have for hospitals and doctors. But would Canadians be enthusiastic about using mandates to purchase insurance?

In the U.S., Obama's mandated health insurance coverage will involve subsidies for middle-income earners to make health care affordable. Insurers will no longer be able to deny coverage for people with pre-existing conditions. The expected increase in federal government spending associated with Obamacare will be offset by reductions in Medicare and Medicaid entitlements. It may be necessary to regulate health insurers to prevent them from just passing cost increases on to premium payers.

What should we do in Canada when it comes to drug costs? Which entitlements in our health care system or other government programs would we cut to offset the costs of mandates? Would Canadians demand stronger regulation of private drug insurers to keep premiums manageable should insurers seek to pass the costs of higher payouts onto the insured? Or would Canadians accept the higher costs of the drug insurance mandates without concern for these issues?

Perhaps the most notable omission in the American health care bill was the public option for insurance. Had it been included, I am not sure if it would have weakened or strengthened what Americans will wind up with, but it certainly swung the debate in Congress and in the media towards how much government involvement in American lives the country wants. What got lost, however, was the discussion over whether a public option would have been superior to the use of mandates.

Instead of such mandates, would Canadians prefer if the federal and provincial governments just added drug coverage to their health care responsibilities? Despite the concerns raised around the rise in drug costs over the past decade, the level of expenditure is not particularly onerous for a government to consider taking on. Using 2004 numbers from the CIHI, this would result in total public payment for drugs doubling from around $9 billion to $18 billion, or from $300 to $600 per capita. Assuming the prescription drug costs of the uninsured 20 per cent of the population are proportional to the costs of the covered 80 per cent, covering those without insurance would add another $4.5 billion per year, or $140 per capita per year, to public health care expenditures in Canada.

To understand the choices of American legislators and the potential model for Canada that Obamacare may provide, we need to move beyond rhetoric and cheap criticism. If the American health care system needed fixing, then presumably so does the drug insurance system in Canada.

Mandating and subsidizing the purchase of insurance to cover this level of expenditure does not seem like a particularly burdensome expense to take on, especially in comparison to the magnitude of the health care costs Obama is addressing.

But if we can do better than mandates with a public option then we need to make that case. Given the historic changes in the United States, it would seem odd that Canadians, with their strong support of public health care, would continue to tolerate old U.S.-style health care for their drug coverage.