Complementary sources of finance
In 1975, public sector health expenditure represented 76.4% of total health expenditures in
Canada, while the private sector accounted for 23.6%. By 1994, the public share of total health
expenditure had declined to 71.8%, while the private share had increased to 28.2%. Examining
health expenditure trends in real per capita terms (1986 CAD), the public share of total health
expenditure in Canada increased slightly over the period 1975–1994. Real per capita public
health expenditure was 74.7% of the total in 1994, compared to 73.8% in 1975. Real per capita
private health expenditure was 25.3% in 1994 compared to 26.2% in 1975. From 1975 to 1994,
the federal share of total health expenditure declined from 30.9% to 25.5%. The 5.4% decline in
the federal share was offset by a 0.8% increase in combined provincial, municipal and workers’
compensation expenditures, and an increase in private expenses from 23.6% in 1975 to 28.2% in
1994.
Changes in the relative levels of public and private funding have occurred over the last two
decades. One reason for this is related to the dominant structures in each funding source. In
public sector funding, hospital and physician spending have been declining, thereby forcing down
overall public costs. An overriding reason for the reduction in hospital and physician spending is
the successful implementation of public health expenditure controls at both the federal and
provincial level. For example, the enforcement of global hospital budgets and the reduction in
physician budgets have enabled the provinces to successfully control overall public health
expenditures. Moreover, the relative reduction in federal transfers since 1990 has generally forced
many provinces to address cost pressures in their systems. At the same time, cost increases in the
private sector have been due primarily to two fast growing sectors – pharmaceuticals and other
professionals – which are primarily outside publicly funded health care
Out-of-pocket payments
In 1993, out-of-pocket payments for health care service totalled over CAD 7.6 billion and were
the largest source of private health spending, i.e. 40%. Out-of-pocket payments represented about
10% of total health expenditures (public and private). The major categories of expenditure for
out-of-pocket payments were prescribed and nonprescribed drugs and dental care.
Cost-sharing for publicly insured services is discouraged by the Canada Health Act which
provides for dollar-for-dollar deductions from federal transfer payments for user fees associated
with insured hospital and physician services. Therefore most services provided in hospital or by
physicians are not cost-shared.
Cost-sharing is prevalent for supplementary health benefits. For example, visits to chiropractors
and other allied health providers typically involve a certain amount of public and private costsharing, as well as direct out-of-pocket payments. Generally, provinces use co-insurance, copayment and premiums or deductibles in order to limit costs and, to some extent, to control
utilization.
Health care finance and expenditure 19
Voluntary health insurance
Voluntary health insurance is provided by private insurance firms and by employers as an
employment benefit. Essentially, private insurance may offer coverage for any service that is not
publicly provided. In recent years, private insurers have implemented cost-containment measures
including increased deductibles and co-payments, reduced coverage, pharmacare formularies and
ceilings on benefit levels.
A recent study of supplementary health plans in Canada suggested that 25.6 million people or
about 88% of the population had some form of supplementary coverage. Of these, 5.6 million had
coverage under special government plans only, 18 million had coverage under private plans only,
and 2 million had coverage under both. Of the 3.6 million people (about 12% of the population)
without supplementary coverage, 2 million were in workplaces that did not currently hold
supplementary insurance, 1.1 million were self-employed and 0.6 million had little or no
attachment to employment or did not qualify for government or private programmes
