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Delivery and funding are provincial matters in Canada.

The Canadian health care system, although unique in design and operation, shares common features with elements of the health care system of the United States. Essentially, it is a private system paid for by public funds under disparate control of 10 provincial and 2 territorial ministries. The delivery and funding of each province in the Canadian health care system is different. The system has been stable for about 20 years, with some minor changes.



Ill health of service personnel recruits during World War I led to a national health insurance program. Universal coverage was first introduced in the

province of Saskatchewan in the early 1960s. This was soon followed by the Medical Care Act of 1968, which enshrined a federally mandated, provincially administered medical insurance program ("medicare"), with costs to be shared between the federal and the individual provincial governments.

Population Covered

There is no charge to the patient for any care, and he or she can use any hospital or physician.


Political decisions made for the good of the community hold down costs and result in limited availability of some services. Waiting lists for primary care are nonexistent. Long queues exist for many procedures (18 months for hip or knee replacement, 3-6 months for coronary bypass surgery, etc). These waiting lists are maintained not by order of appearance but by order of need.

Buildings (Hospitals)


Hospitals were initially financed and built by the municipal government, voluntary payments, patient payments, or the major industry in a town dominated by that industry. This was especially true in the northern areas. Religious orders established many of the hospitals, especially in Quebec. There was particularly rapid expansion in the 1960s once federal funding was provided under the Hospital and Insurance Diagnostic Services Act of 1961.

Present System

There are 1,000 hospitals in Canada, of which 18 are for convalescent care and 132 are for chronic care. General hospitals are private not-for-profit corporations administered by professional managers who report to boards of public trustees. Clinical personnel decide what is medically necessary. Hospitalized patients undergo fewer diagnostic and therapeutic procedures per day, require fewer nurses and fewer drugs, and use less complex technology that results in less health expenditures than in the United States. Integration among acute care hospitals, nursing homes, and other facilities is poor.

Hospital Beds

There are 164,000 beds in Canadian hospitals, of which 3,300 are private, 3,300 are federal, 10,000 are psychiatric, and the rest are public. In 1988, there were 6.9 inpatient beds per 1,000 inhabitants.

Length of Stay

The higher occupancy rates and lengths of stay in Canada compared to those in the United States are due to long stays by patients over age 65, whose stays exceed 60 days. This type of care can result in lower per capita hospital costs, as these domiciliary cases are less costly than acute care cases. In 1988, there were 2.0 inpatient days per capita, 14.5 percent admissions as a percentage of total population, 13.2 days average length of stay, and an 82.7 percent inpatient occupancy rate.



Total expenditures for health care in 1985 were $38.5 billion (Canadian), with hospital care consuming 75 percent of the provincial dollar. The government has recently reduced the amount it pays for medical expenses incurred abroad. In 1988, of the 8.36 percent of GNP spent on health care, 1.03 percent was for long-term care, .48 percent for dental care, .33 percent for medical aids and appliances, and .55 percent for other services. The government spends only 1 percent of its health care budget on research.


Although administration costs are low (3 percent of health care spending) because of a single payer, they do not include administrative costs for buildings, equipment, fringe benefits, and personal services. Hospital administrative costs average 9-11 percent.


The Ministry of Health decides on hospitals' annual global budget. Employee salaries (including physicians), drugs, and diagnostic services are in this budget. New equipment, facilities, major renovations, and large ticket items are funded separately. Wages compose 70 percent of a hospital's operating budget. Operating budgets are based on approved patient days, which are calculated from the previous years' utilization with a race and age adjustment. Total utilization rates applied to a hospital's utilization rate gives the approved patient days. Hospitals are paid one twenty-fourth of the budget every two weeks. Variable costs are adjusted in relation to the target budget. Increased capacity and its funding are also negotiated by health care providers. In 1988, of the 8.36 percent of GNP spent, 4.05 percent was for hospitals. By 1993, 48.2 percent of total health care expenditures were spent on hospitals.


Although all citizens are charged an insurance premium for care, it is unrelated to the amount of care consumed. It therefore is more like a tax than an insurance premium. Failure to pay the premium does not prevent access to care. Residents over age 65 receive care on a premium-free basis. The system does not allow for separate financial arrangements between providers and patients for services covered under the public plans. The insurance plans account for 75 percent of national health care expenditures ($50.4 billion, Canadian) in 1988.


Twenty-five percent of national health care expenditures goes to outpatient prescriptions, dental care, cosmetic surgery , optometry, and physiotherapy. In 1988, of the 8.36 percent of GNP that was spent on health care, 1.02 percent was for drugs. Pharmaceutical expenditures per capita in 1988 were $187. The government is trying to curb the increasing amount of the health care dollar spent on medications, which in 1993 reached 15.1 percent. This represents an increase of 8.25 percent in 1993, 8.6 percent in 1992, and 10.9 percent in 1991.


There is no charge to the patient for any basic care. Some provinces offer nursing home and home health services, with a daily charge of $8-14.


Physicians are paid by an agency of the provincial ministry of health, according to a uniform schedule of fees negotiated annually by the provincial ministry of health and the provincial medical association. After a quarterly gross billing ceiling is reached, the health care provider is reimbursed on a declining sliding scale of the scheduled fee, thereby limiting individual physician utilization. Physicians have to accept government reimbursement as full payment. Extra billing and balanced billing were eliminated with the Canada Health Act of 1984. Negotiation is between provincial governments and the medical associations. In 1988, of the 8.36 percent of GNP spent on health care, .89 percent was for physicians. The average family practice physician salary, which is 75 percent of a specialist's pay, is $85,000. Physician incomes are 35 percent lower than for their U.S. counterparts. A physician makes on average five times the earnings of the average industrial wage earner. From 1975 to 1987, the actual fee increases compared to the consumer price index rose 2.7 percent. Practice profiles are screened for outliers by peer groups, and the provinces are beginning to limit what physicians can bill for care. By 1993, the proportion of the health care dollar spent on physician services had risen to 15.1 percent.


In 1988, of the 8.36 percent of GNP spent on health care, 1.02 percent was for drugs. Pharmaceutical expenditures per capita in 1988 were $187. Drugs (Medications)

Drug (Medications)


There are 80 pharmacists per 100,000 population. In 1980, there were 20,001 pharmacists practicing in the nation.

Equipment (Technology)

Approval Process

A Canadian Coordinating Office for Health Technology and Assessment has recently been created. New technology is linked to central or regional referral hospitals. The level of equipment approved by the council is less than in other comparable Western nations, e.g., there are 42 CT scanners in place, with another 5 approved. This is a ratio of 1 per 192,000 population; in the United States, the ratio is 1 per 100,000 and in Japan, it is 1 per 50,000.


Equipment must receive funding from the general taxation pool and thus competes with current operating expenses for funding. Canada limits the diffusion of six major forms of technology (units available in the country in 1989): open heart surgery (32), cardiac catheterization (39), organ transplantation (28), radiation therapy (14), extracorporeal shock wave lithotripsy (4), and magnetic resonance imaging (12). To prevent free enterprise from flooding the market with technology, the government will not pay the operating costs on equipment it has not authorized and will pay radiologists only for readings done on authorized equipment.

Finance (Funding)

Private Financing

The private portion of out-of-pocket financing amounts to only about 5 percent of total funding. Hospital equipment may be funded from local private sources, but expenditures still must be approved by the ministry of health, and operating expenses to support them are from the operating budget. Dental care, nonprescription drugs, and some prescription drugs are not funded and are paid by private insurance or directly by the patient. With the attempted shift of spending to the private sector by government, the private portion of health care expenditures rose in 1993 to 28.1 percent of the total.

Government Financing

General taxation and federal grants fund 75 percent of the provincial ministers of health. Hospitals are funded on a yearly global budget. The provincial government decides what to pay for and when and where. It acts on the communities' behalf. Provincial ministers have made cash infusions in the past to cover hospital overruns. The Ministry of Health, which used to fund all expenditures, is attempting to run some of the hospitals on a business basis with its program of Business Oriented New Development (BOND). This program allows hospitals that develop inner efficiencies to keep all monies that accrue to their bottom lines. This will allow efficient hospitals to have equipment at an earlier date than inefficient ones. Because hospitals are responsible for all their costs, there is no incentive to expand programs within a fixed budget. The Ontario Health Insurance Schedule of Benefits is another way to return money to hospitals for more efficient use of outpatient services over inpatient services. Hospitals may use these savings to help fund equipment. The federal portion, as directed by the Federal-provincial Fiscal Arrangements and Established Programs Act of 1977, has been linked to the growth of the GNP, with provincial governments at risk for any cost increases above that level. The federal government has thus been reducing its contribution to the health care system. It started at 50 percent and now is averaging about 35 percent of total provincial financing. Federal grants average $20 per capita and are indexed to the GDP. Some provinces (Alberta and British Columbia) have legislated monthly premiums to help defray costs. Hospitals are funded yearly on a global budget. Physicians will be on an RBRVS-type schedule. Canada's debt service is 6 times that of the United States, relative to GDP. This drains needed funds to finance health care. Despite all these measures, the government still represented 71.9 percent of expenditures for health care in 1993.

Cost Containment

Cost containment and the declining size of the federal transfers have dominated the recent debate over the future of medicare.

GNP versus GDP


In 1990, 9.0 percent of GDP was spent on health care. In the decades 1960-1970, 1970-1980, and 1980-1990, annual GDP growth was 2.8, 0.5, and 2.5 percent, respectively. Although GDP growth was kept low in the 80s, it is starting to creep. In 1993, Canada spent 10.1 percent of its GDP on health care, with total spending of $72 billion (Canadian). GDP seems to be holding steady at about 10 percent through the early |90s.

Per Capita Income/Spending

Per capita spending in 1990 in U.S. dollars was $1,730. Annual growth in health spending per capita was 1960-1990 (4.7 percent), 1960-1970 (6.1 percent), 1970-1980 (3.7 percent), 1980-1990 (4.3 percent). It is difficult to predict what the 90s will bring.

The average for the first three years is greater than 5 percent. But this was mainly due to a high of 7.5 percent in 1991, with decreases since then to a low of 3.2 percent in 1993. By 1993, per capita spending had risen to $2,507 (Canadian).

Health Care Providers (Physicians)

System of Care

Medicare offers a system of first-dollar coverage, with no limits on patient choice of physician or on the number of visits or number of physicians consulted. Physicians also have freedom of choice in their patients. A small number of physicians, mainly from British Columbia, have opted out of the provincial system and elected to bill their patients directly. The private billing issue has been taken by the federal department of health as a violation of the Canada Health Act of 1986. Unlike in the United Kingdom, physicians cannot bill both patients and the ministry of health.

Primary Care Physicians

Fifty-two percent of the 52,275+ physicians in 1987 were primary care. Medical manpower studies over the past 20 years have established what the government feels are population specialty needs based on a 40 hour workweek. This is approximately one family physician per 2,300 population.


Almost all specialists are in private practice and are usually affiliated with one hospital. The manpower needs studies established one internist per 8,200 population, one neurologist per 90,000 population, etc. Supply has been adjusted to reflect these needs and geographic considerations. The province of British Columbia attempted to limit the supply of new billing numbers and only pay health care providers who have valid numbers. This measure was overturned by the courts. Recent changes to the portability of medical licenses have seen restrictions on the ability of physicians to freely move from one province to another and obtain a license and a billing number. Quebec provides a differential fee schedule for rural and urban areas in an attempt to redistribute physician numbers. Immigration of foreign physicians has been halted in some provinces. There are 220 doctors per 100,000 population. Canada has more nurses and licensed practical nurses than most countries.

Other Health Care Providers

Physician assistants and nurse midwives were not approved in Canada until recent amendments to the legislation opened the way for them to assume more responsibility in the provision of care. Canada has more nurses and licensed practical nurses than most countries.



Universal health insurance was first proposed in 1919 as a result of the widespread screening of large numbers of service personnel and the extent of ill health discovered. Following World War II, a conference was held in 1945 that produced a draft bill, partly modeled on the National Health System of the United Kingdom. The bill never became law because of the fear of federal incursion into an area of provincial responsibility. It was only much later (1968) that enabling legislation was enacted. One of the provinces, British Columbia, has made physicians and patients accountable for their health care. New service guidelines will be implemented over the next three years, and physicians who chose not to follow the guidelines will pay the excess costs. Patients who request tests that are not covered in the guidelines will have to pay for them. The guidelines were a compromise between the government, the physicians in the province, and the service commission that administers the insurance program.

Health Benefits Package

There is first-dollar coverage, although optometry, outpatient medications, dental care, and nursing homes are not covered. Some provinces offer nursing home and home health services, with a daily charge of $8-14. Private insurance, which is covered by the employer under a Blue Cross or commercial plan, covers the extra cost of a private or semiprivate room.

Workers' Compensation

Workers' compensation began in Ontario in 1912 with lifetime benefits to keep people off the welfare roles. It is administered by a board, without insurance company or court interference, composed of a physician, a former employee, and a former labor union leader who are appointed by the provincial government. Over time, comprehensive medical care, rehabilitation, and quality control have been added to the workers' compensation package.

Jurisprudence (Tort)

Health Care Laws

The British North America Act gave the federal government most of the power, with the provinces having defined limited powers. In 1961, the Hospital Insurance and Diagnostic Services Act funded rapid expansion for hospital growth. In 1968, the Medical Care Act established a federally mandated, provincially administered medical insurance program called "Medicare." In 1977, the Federal-Provincial Fiscal Arrangements and Established Programs Act linked the growth of the GNP with federal expenditures to the provinces for health, with the provincial governments at risk for any increases above that level. In 1986, the Canada Health Act eliminated extra billing by physicians.


Recently, the growth rate in frequency of claims and the increase in the size of awards are rapidly approaching those of the United States. This growth began in the 1960s and has increased sevenfold since then. After adjustment for inflation, the size of the average award grew approximately 10 percent per year from 1971 to 1989. The physician malpractice premium over that time grew to accommodate this but is still only 10-15 percent of United States physician's. Canadian physicians are sued one-fifth as often as their U.S. counterparts. Most of the provinces have only a 1-2 year statue of limitations. Cases are usually decided by a judge alone. Judges tend to be more conservative and award lesser payments. Punitive damages are rarely awarded, and pain and suffering is usually capped at $200,000. The Canadian Medical Protective Association (CMPA) insures more than 90 percent of Canadian physicians and tries more than 95 percent of the cases dealing with medical malpractice. This body is less willing to settle cases than is the case in the United States. Knowledge (Patient information)

Knowledge (Patient Information)


In 1990, 56 percent of Canadians thought minor changes were needed, 38 percent felt a fundamental change was necessary, and 5 percent wanted the system totally rebuilt.

Physician Visits

There are, on average, 6.6 doctor visits per year per Canadian.

Life Expectancy

In 1990, life expectancy was 73 for men and 79.7 for women. The difference in life expectancy in 1986, from the lowest earners to the highest earners, was 5.6 years for men and 1.9 years for women. If the lowest to highest quintal is compared, the difference increases to 14.3 years for men.


Infant Mortality

Perinatal mortality rate in 1986 was 8.4 per 1,000. Infant mortality in 1990 was 7.2 deaths per 100,000 live births.

Leading Causes of Death

The three leading causes of death in males are ischemic heart disease, lung cancer, and cerebrovascular disease. In females, the three leading causes of death are ischemic heart disease, breast cancer, and cerebrovascular disease. Lung cancer is gaining on the other three. In 1990, the death rate from cardiovascular disease was 329.6 per 100,000.


Certain provinces do not emphasize preventive health care, and thus certain treatable diseases with high morbidity, such as measles, remain a problem there.

National Health Care Structure

General National Structure

Canada has parliamentary system at both the national and the provincial levels. The British North America Act gives the federal government most of the power, with the province having defined, limited powers. The ruling party stays in office until vote out, without term limits. Although there is more popular opinion in government's decisions, there are fewer checks and balances than in the United States.

National Medical Structure

The Provincial Minister of Health is elected and sits in the Provincial Lower House of Parliament. The Deputy Minister, who is a usually a hospital administrator, is a civil servant. This type of system leads to a more authoritative form of government that is less responsive to private interests. Public health is the responsibility of the Department of National Health and Welfare.

Provincial Medical Structure

The provincial medical societies are more powerful than the Canadian Medical Association. The provincial governments assumed health responsibility when the federal government lacked public health or medical care services. The Provincial Minister of Health appoints the Medical Officer of Health.

Community Medical Structure

There are local public health departments across the country headed by public health physicians

Options of Care

In health care, Canada is a monopsony, with socialized insurance, not socialized medicine. The provinces buy hospital and physician services from the private sector. Patients retain the right of free choice of both hospital and physician, and the provincial ministries undertake minimal proactive utilization management strategies. The standards of the system established by Parliament in 1965 are public administration, comprehensiveness of benefits, portability between provinces, universal coverage on equal terms and conditions, and accessibility. These standards were clarified and reaffirmed in the Canada Health Act of 1984. It allows the provincial government to get federal funding and at the same time have significant provincial autonomy. Managed care does not exist to any degree. Canada is the only country in the world to have established a national program for risk factor reduction. This is implemented under the Department of the National Health and Welfare as the Health Promotion Directorate. There are separate federal health programs, such as immigration medical services and medical care for Indians and Eskimos.


Canada has a population of 27 million, with a majority living within 100 miles of the United States. The culture believes in a balance between individual and community rights. There is a belief that the individual is not responsible for any health care problem (even if self-induced), and so there should be no charge. Canadians believe in peace, order, and good government. Security of the person has been decided by the courts to mean physical security and not constitutional rights.


Health Care Providers

Accepted practice patterns among health care providers are rarely questioned. The College of Family Physicians of Canada has its own Board, but all other specialties are under the Royal College of Physicians and Surgeons. There exist no formal criteria for assessment of medical practice or accepted indications for a host of medical and surgical testing (guidelines or outcomes). The local standard of care has given way to a national standard for performance since the 1970s.

Health Care Facilities

Hospital indicators are collected and compared by Statistics Canada. Hospital standards have been issued by the Department of National Health and Welfare. Canada's medical schools are jointly accredited by the U.S Liaison Committee on Medical Education (LCME) and the Committee on Accreditation of Canadian Medical Schools (CACMS).


World War II and the depression of the |30s led to public assistance and pensions for the aged and blind.


Income Taxes

There is a progressive income tax, but, for equivalent levels of income, the Canadians pay one third more than their American counterparts. The provinces have constitutional authority to tax their citizens and private corporations and use the revenues for health programs.

Social Security Taxes

Social Security deductions for Medicare are taxed only to a set income level.

Value-Added Tax

There is a value-added tax.

Other Taxes

Canadian gasoline taxes are equivalent to 75 cents, more than twice the U.S. average. Cigarettes are taxed $3 per pack. The provinces are fairly autonomous and choose individual mixes of income tax, sales tax, and premiums to finance their health care debt.

University System

(Medical Schools/Training)

Medical Schools

There are 16 medical schools, five of which are in Ontario, with 1,759 first-year positions, each of which had four applicants. There are 8 children's hospitals and 54 adult hospitals associated with the medical schools. These hospitals and medical schools are funded through a Health Resources Fund. There are approximately 7,100 medical students, of which 45-50 percent are female. Medical students are generously subsidized; therefore few begin their medical careers in debt. The average cost per year to each student ranges from $700 at McGill University in Montreal to $3,000 at the University of British Columbia in Vancouver. There are 1,500 physicians involved in medical education.

Postgraduate Training

Postdoctoral training positions have remained stable over the years at about 7,625. All medical schools and teaching hospitals are public institutions. Residency training programs in a teaching hospital must be part of the medical school department. The budgets for training and operating costs of the hospitals are kept separate. Research grants are from the Medical Research Council, are similar to NIH grants, and do not contain monies for the researcher or facility overhead, so they are smaller than in the United States. Research is often supplemented by programs that sponsoring corporations provide to supplement their commercial sales. The programs do not necessarily link with commercial products.

X-Ray, Laboratory, and Ancillaries


Canada's first private MRI clinic opened in Calgary, Alberta, in 1993 and was immediately opposed as a violation of the Canada Health Act by the federal department of health. Proposed countermeasures include reductions in the amount of federal transfer payments to Alberta. As noted above, technology diffusion is limited by the requirements for provincial financing and approval of new ventures.


Four of the 10 provinces have private laboratory systems that operate on a fee-for-service basis, principally in the provision of outpatient services. The remaining provinces allow laboratory work to be performed only in hospitals or physicians' offices. Each province operates its own proficiency testing program.


There are 33 open heart centers and 49 cardiac cath labs that perform 63 open heart procedures and 236 cardiac caths per 100,000 population, with a waiting time of 22.6 weeks for open heart surgery and 8.5 weeks for a cardiac cath.
COPYRIGHT 1994 American College of Physician Executives
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Author:Mendoza, Edward M.
Publication:Physician Executive
Date:Oct 1, 1994
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