“You get what you pay for. And what you don’t pay for, you don’t get.”
I wrote that earlier this week, about why Northern European countries have excellent public services, low levels of poverty and high levels of public health, and why the U.S. does not. (And how Canada sits somewhere in-between.) Europe’s high taxes pay for things such as better public transit and more support for the poor; the United States’s much lower taxes means they can’t afford European-style social programs.
You get what you pay for. And what you don’t pay for, you don’t get.
Some readers e-mailed and said, hang on Keller, what about innovation? What about efficiency? A well-run organization – business or government – can deliver more bang for the buck. Leadership matters. Management matters. Plans matter. Successful organizations plan to get the most from every dollar. Less successful ones do the opposite.
The readers are, of course, right.
Today, let’s look at an example of a proposed government program that, if done correctly, can deliver more than the status quo, while costing billions of dollars less. Think of that old Miller Lite advertising slogan: “Everything you always wanted in a beer. And less.”
I’m talking about pharmacare.
This week, the New Democratic Party tried to light a fire under the Trudeau government by putting forward a bill to create national pharmacare. The NDP talked about how it would give every Canadian prescription drug insurance – no small thing in a country where an estimated one in five of us has insufficient coverage, or none at all – and stressed how pharmacare could save the average Canadian hundreds of dollars a year. Those savings reflect the findings of multiple studies, as well as the experience of other rich countries.
Pharmacare would have one other big winner. It is rarely mentioned: Canadian business.
Businesses in this country already have low employee health insurance costs compared with competitors in the United States. Unlike Canada, U.S. health insurance is mostly tied to employment – and in the most expensive health care system in the world, the costs for businesses are enormous. Last year, the average annual premium for employer-sponsored health insurance with family coverage was US$22,463 per employee, according to the non-profit Kaiser Family Foundation. American employers picked up most of that cost (more than US$16,000).
Medicare, Canada’s universal public health insurance system, has largely taken those costs off employers’ plates. But there’s one big exception: prescription drugs. Drugs aren’t part of medicare.
Prescription drug spending in Canada was nearly $39-billion last year, according to the Canadian Institute for Health Information. More than $14-billion of that came from private insurance, nearly all of which is workplace insurance. Under publicly funded pharmacare, those cost to business would largely disappear.
The average business would save $750 per year, per employee, according to the 2019 report from the advisory council on pharmacare, headed by Dr. Eric Hoskins,
The other group that could save big under pharmacare? The provinces. They already run a mish-mash of 113 different drug benefit programs for seniors, low-income people, those on social assistance and children.
As a result, the provinces are paying a big chunk of Canada’s drug costs: nearly 40 per cent of drug spending in Alberta and British Columbia, 48 per cent in Ontario and Quebec, and 51 per cent in Saskatchewan, according to the Hoskins report. But since drugs aren’t part of medicare, Ottawa’s financial support is minimal.
As part of the agreement with the NDP that keeps the Liberals in power, the government promised to bring in pharmacare by the end of 2023. Yet the Liberals have shown no enthusiasm. This spring’s budget didn’t even mention the word. The reasons are politics, not economics.
Quebec already runs its own variation on pharmacare, and though its poor design has led to the highest per-capita drug spending in Canada, the province jealously guards its turf. So do other provinces. And many Canadians who are satisfied with their existing workplace insurance may not be eager to switch.
What’s more, the insurance industry can also be expected to fight this tooth and nail. As for the drug industry, whose prices would be squeezed by a single government purchaser, it has spent years pushing back, successfully, at attempts to cut high drug costs.
There are many obstacles.
But the Parliamentary Budget Officer concluded in 2017 that universal pharmacare on the NDP model would cause prescription drug spending in Canada to fall by 17.1 per cent. At the same time, by covering millions of uninsured Canadians who currently forgo medication, the number of prescriptions filled would rise by 10.9 per cent.
Pay less. Get more.
Tony Keller