Americans unhappy with their health care system often point to Canada’s ‘universal health care’ system as a model that the United States of America should adopt to provide every American with ‘full health care for free’.  Unfortunately for most Americans, they are unaware that such a system would not provide every one of them the same level of care they currently enjoy.  The truth of the matter is that in addition to waiting times for services, an inadequate availability of doctors in some areas, and slower rates of adoption of advanced technologies, Canada’s system doesn’t cover dentists, chiropractors, and pharmaceuticals that many consider part of a holistic health care model.

In recent years, grumblings have grown louder for Canada to introduce a ‘National Pharmacare’ program to ensure that all Canadians have access to the pharmaceutical drugs needed to maintain their health at the best possible level.  In June 2019, the Advisory Council on the Implementation of National Pharmacare issued its 184-page report on the subject (the “Hoskins Report).  The conclusion of the report is nicely captured in the following:

Our council has heard the stories of thousands of Canadians and listened to a wide range of perspectives. The time for universal, single-payer, public pharmacare has come. This is our generation’s national project: better access to the medicines we need, improved health outcomes and a fairer and more sustainable prescription medicine system. Let’s complete the unfinished business of universal health care. That can be our promise, and our legacy, to each other and to all future generations.


Who would say no to this grand project to do right by every Canadian?  Well as usual, the people who have to pay for the project might want a say.  When smart people have to determine how much Canadians spend on prescription drugs you can imagine all the assumptions and estimates that get into the formula.  There is no Wikipedia page to give a tidy answer.  The Hoskins Report comes up with the following answer:

When the total spend on prescribed drugs is expressed by source of payment, approximately $17 billion is paid for by governments (likely about $15 billion after confidential rebates), $8 billion privately and $5 billion out of pocket.

So, if taxpayers are going to be picking up the private sector and out of pocket $13 billion a year then government will need to find an extra $350 a year per Canadian from personal and corporate taxes.  That doesn’t sound too expensive to me especially when considering that corporations will be saving $8 billion and individuals will be saving $5 billion to offset the tax hit that they must obviously take.

Actuaries Step In

This month, the Canadian Institute of Actuaries, anticipating growing interest in the subject of pharmacare, and even the possibility of it becoming an election issue soon, has published a paper Pharmacare: Is There a Pill for That?

Not every member of the profession in Canada thinks that our professional organization should venture into discussions which are 80% actuarial science and 20% politics.  I hold the view that if actuaries aren’t speaking up to inform decisions that are largely underpinned by actuarial analysis then we are missing an opportunity to make sure governments make informed decisions.  The key is to respectfully recognize that the government is free to follow or not follow the advice offered while at the same time acknowledging that individual actuaries can disagree with the views of the majority of actuaries that gave input to the paper and share an alternate viewpoint.

In the majority, the CIA Task Force concluded that it was premature to throw out the current system for a wholesale replacement by our governments.  The CIA recommendation is summarized as:

We agree that no Canadian should be left without prescription drug coverage. However, we believe the best way to achieve increased health outcomes across the country is through a Canada-wide framework with elements managed by the federal government, provincial/territorial governments, and private insurance.

The Why?

The CIA Task Force report is a breezy 18 pages and is beautifully presented with colour and graphics to take you through the meat of the discussion without much effort.  But if you don’t have time, the rationale for the recommendation largely boils down to three factors:

  1. There is no agreement on the cost of a national pharmacare including administration and no concrete evidence that there will be cost savings.  Cost shifting undoubtedly, but savings maybe not.
  2. There is some low hanging fruit by better coordinating the efforts of governments, employers, and insurers such as negotiating prescription drug prices nationally and establishing a Canada-wide formulary for drug coverage.
  3. The transition from a multi-payer model to a single-payer solution is not one that can be imagined on paper and implemented instantaneously by the Federal Government without gaining agreement from Provincial Governments and giving some notice to employers about their role going forward.

The right answer

I don’t work in health care and when I had my chance, I wrote in asking if the CIA shouldn’t be supporting the grander vision of removing employers from the equation since not everyone enjoys a relationship with an employer willing to provide drug coverage.  Longer term I do think that is the right answer.

Cynics might want to point to actuaries working within the existing system as the rationale for the CIA not boldly recommending moving ahead with the National Pharmacare solution envisioned by Team Hoskins.  I don’t think this is the case.  I think that it is natural for actuaries to see the risk in a major overhaul of the system and the advice isn’t to never realize the Hoskins Dream but rather to make sure we carefully move through the steps necessary to ensure success.

Just one example will be the significant challenge to get consensus on a national formulary – the list of drugs that will and will not be covered by the program.  We all know that we face difficult choices in deciding what gets covered and what does not and something as basic as one list across all governments and employers has eluded us thus far.

Given our government’s lack of success implementing their own Phoenix Payroll System, I would say the ‘walk before you run’ is the best advice we can give today and hopefully one day in my lifetime we will at least be jogging to the finish line.

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