Rethink Restrictions on Private Health Insurance

Canadian patients are entitled to make informed choices about their health care. Private health insurance carries many benefits to the broader system

In its sole reliance on government providing first-dollar coverage of medically necessary services, Canada’s health-care system is unique among high-income countries with universal health care. It also offers inferior service as a result.

Virtually all high-income countries – including Australia, Germany, Switzerland and the Netherlands – allow residents to use private insurance to pay for some or all medically necessary services.

In Canada, the role of private health insurance was litigated in the Chaoulli case in Quebec and in the recent case involving Dr. Brian Day’s surgical clinic in British Columbia. In both cases, the provincial governments took strong stands against allowing private health insurance for medically necessary services. Yet their arguments seem increasingly weak in light of ongoing developments in the health-care sector.

Why the opposition to private health-care?

One common concern, as noted in a new Fraser Institute study, is that private health insurance will so undermine universal coverage that health insurance becomes unaffordable for lower-income Canadians.

However, other countries have successfully addressed this concern through government subsidies and regulations that prevent income levels and pre-existing health conditions from interfering with full coverage of basic health care.

A related concern is that private insurance will produce a two-tier system where patients with higher incomes obtain faster or ‘better’ health care than those with lower incomes.

While private insurance would likely facilitate faster access to medical treatment were it legal, it would also likely reduce wait times for patients who rely solely on public insurance, as the patients with private insurance would rely more on resources funded by private insurers and less on resources funded by the government.

This has broadly been true in countries where private insurance is used, in part, to obtain faster access to providers (surgeons, for example). It’s no coincidence Canada has the longest wait times for medical services among all high-income countries.

Furthermore, there’s no consistent evidence that allowing private insurance markets results in poorer health-care outcomes for patients who rely solely on public insurance. Nor do private insurance markets erode political support for taxpayer-funded health insurance. By facilitating reduced wait times, private markets act as a safety net for the government insurance scheme, supporting the continued willingness of wealthier taxpayers to fund the public insurance scheme through progressive marginal income tax rates.

And it’s not just about wait times.

Relying on a single public insurer delays the adoption of medical innovations. Politicians and bureaucrats have less incentive than private-sector organizations to adopt innovations that may be costly in the short run but that have positive net benefits in the long run. In part, this is because politicians and senior bureaucrats are unlikely to be in office long enough to be rewarded (in the case of politicians, by voters) for promoting the use of costly new drugs and procedures whose benefits are realized by patients and the health-care system more broadly over time.

The emergence of personalized medicine has resulted in new drugs capable of curing hitherto incurable diseases. And much more such innovation is on the way.

These new treatment protocols are expensive in the near-term but promise to reduce ongoing costs of care over time, not to mention reductions in mortality and morbidity.

A robust private health insurance market would provide Canadians with increased options to access new medical therapies and procedures (digital consultations, for example) that public health officials, who tend to be focused on cost containment, may be unwilling to deem medically necessary under the public insurance scheme.

Canadian patients are entitled to make informed choices about their health care. Private health insurance, within our universal system, will provide more choice for patients when making some of the most critical decisions of their lives.

By Steven Globerman

Steven Globerman is a senior fellow at the Fraser Institute.

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