If the Trudeau government wants to create a national pharmacare program, it basically has two options.
It can go for a radical remake of the existing landscape by expanding medicare – which today only covers hospital and doctor visits – to include prescription medicines. That was the original vision of many of medicare’s founders. As with medicare, every Canadian would have drug coverage through a public plan; as with medicare, private insurers would be largely or entirely cut out of the game.
Call that option Big Bang Pharmacare.
Or Ottawa can work within the status quo, under which an estimated 95 per cent of Canadians already have some drug insurance either through an employer or a provincial plan covering groups such as seniors. However, more than 10 per cent of Canadians say they sometimes don’t fill prescriptions, or cut pills in half, because, even with insurance, the cost is just too high. Ottawa could negotiate with the provinces to close those coverage gaps.
Call that Small Change Pharmacare. The majority of Canadians would see little or no change in their drug coverage, which in most cases would still come from their employer.
Each of these pharmacare approaches can be made to work. Each also presents challenges.
In theory, Big Bang Pharmacare should deliver both big health gains and big cost reductions; that’s why a lot of academics favour it. Last year, Canada spent an estimated $39.8-billion on drugs, more than it spent on physician services. The average OECD country spends one-third less for every person, because Canada’s current system, involving thousands of workplace insurance arrangements and scores of provincial government plans, is unco-ordinated, negotiates poorly with pharmaceutical companies and overpays for medicines relative to countries with equal or better health outcomes.
A number of research studies, including from the Parliamentary Budget Officer and the University of Ottawa’s Institute of Fiscal Studies and Democracy, have suggested that moving to a Big Bang Pharmacare model would mean significantly lower national drug spending.
But, although spending by businesses and individuals would fall, public spending would rise. The provinces won’t go for that unless Ottawa picks up most of the bill, or all of it.
Most importantly, Big Bang Pharmacare would mean that tens of millions of Canadians with private insurance would move to a public plan. The public plan would have to be as good or better than the existing private plans, or else the government would be facing millions of very unhappy voters.
On the plus side, most businesses will love Big Bang Pharmacare, since the large and growing cost of providing employees with drug insurance would be taken off their hands.
As for Small Change Pharmacare, its great advantage is that it faces few political hurdles. It’s unlikely to meet with provincial opposition, including from conservative premiers ideologically opposed to expanding government. It’s also unlikely to face much public opposition, since the average person with employee drug insurance would keep that coverage.
However, Small Change Pharmacare runs the risk of doing nothing to lower extremely high drug spending. It could even make things worse. The lesson from Quebec is instructive.
Two decades ago, Quebec created its own Small Change system by ordering every resident to have drug insurance. Overnight, all Quebeckers were insured. Achieving that looked to have been cost-free. But over time, it has turned into a major economic and political liability. Costs have steadily increased, individual premiums have risen, co-pays on prescriptions are high and the average Quebecker spends $1,495 a year on drugs and insurance – twice as much as the average Ontarian.
So, what should Ottawa do? It should keep its eye on the prize. Pharmacare must guarantee that all Canadians have drug insurance, just as medicare guarantees that all have hospital and physician insurance. It must guarantee that nobody faces cost barriers to necessary medicine, just as nobody in Canada is charged when they visit a hospital or a doctor. And it must control drug costs – which medicare does far better than the health-care system in the United States.
Pharmacare has the same goals as medicare. However, it doesn’t necessarily have to achieve them the same way, or look like a carbon copy. Both the Big Bang and Small Change models can be made to work – or can be designed to fail. More on this next week.