Cost-sharing could improve patient accountability in Canada

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Appeared in the Victoria Times Colonist, March 27, 2023
Cost-sharing could improve patient accountability in Canada

Where’s the accountability for patients who misuse their health-care system? This, in essence, is the question recently posed in an op-ed by an emergency physician on Vancouver Island. That the physician who penned the article withheld their name from publication speaks volumes about the contentious nature of health policy debates in Canada. And while the physician does not offer any potential solutions, evidence from around the world does—namely cost-sharing mechanisms (with generous safety nets for vulnerable populations).

Currently, patients in Canada are fully covered for the costs of insured medical services—that is, they are not directly billed for any portion of their care. However, it’s important to remember that Canada is one of at least 28 high-income countries that provide universal health care for core services, and many of these countries do universal health care very differently than us. Notably, and in contrast to the majority (22) of these countries, Canada is part of a group of just six countries that entirely eschew, or do not generally expect, patients to share in the cost of treatment. By contrast, eight of the top 10 performing countries in this group—including Australia, France, the Netherlands and Switzerland—do.

Cost-sharing frequently includes the use of deductibles (an amount individuals must pay before insurance coverage kicks in), co-insurance payments (the patient pays a certain percentage of treatment cost) and copayments (the patient pays a fixed amount per treatment). While the use of these tools is widespread, the way they are deployed vary by country.

For example, in the Netherlands, adults are generally required to pay a deductible before insurance kicks in. In Sweden, flat copayments are the norm, with patients usually paying a nominal fee for family doctor appointments and most outpatient and inpatient care. Switzerland uses a blend of tools, where patients are subject to a deductible and 10 per cent of the cost, with insurance covering the rest.

To better understand why these tools are employed, it’s best to revisit the work of economists Kenneth Arrow and Mark Pauly. In 1963, Arrow made a convincing case for expanded medical insurance coverage. However, he also expressed concern about what happens when widespread medical insurance increases the demand for medical care. These concerns were further developed by Pauly who showed that “first-dollar” coverage (i.e. no cost-sharing) can lead to excess demand and an overall loss of social welfare.

And since Pauly’s work, a wealth of empirical evidence has confirmed that cost-sharing can help reduce the use of outpatient (ambulatory) care without necessarily resulting in adverse health consequences for the population.

Of course, this tempering effect on demand can extend to essential and nonessential care, with some payments adversely impacting some vulnerable groups. It’s therefore also imperative to combine cost-sharing policies with safety net protections. This is why countries such as Australia, the Netherlands, Sweden and Switzerland employ safety nets alongside their cost-sharing requirements. In general, these protections often include annual caps on out-of-pocket spending and exemptions for specific populations (low-income families, people with chronic conditions, children, etc.).

Despite the potential benefits of cost-sharing, the Canada Health Act (CHA) explicitly prohibits the practise for core health-care services. As a result, provinces are effectively prohibited from experimenting with policies that could potentially help reduce excess demand for care. So, while our anonymous physician may want to take note of these widely-used tools for incentivizing the responsible use of health-care resources, they are unfortunately one amendment outside of our reach for now.

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