How Mean is a Pharmacare Means Test?

Faced with a crowd of 2,000 seniors protesting in front of the provincial legislature last Tuesday, the provincial government reneged on its commitment to a means test for Pharmacare benefits. This is a bad sign. Seniors currently pay a maximum 75 cents a day ($275 per year) for prescription drugs that are listed by Pharmacare, and taxpayers pick up the rest. If the government is afraid to take the baby step of means testing for Pharmacare, it is unlikely to make more significant reforms that are necessary to improve health care in British Columbia.

Pharmacare definitely needs a new approach to managing rapidly increasing costs, given the failure of its previous attempt at central planning, the Reference Drug Program. Starting in 1995, Pharmacare stopped fully subsidizing many new, more expensive drugs in favour of older, less expensive ones in five categories that covered cardiovascular diseases, arthritis, and heartburn. Except for cases where Pharmacare gave special permission for more expensive drugs, patients had to pay the full difference between the higher and lower priced drugs. Since then, per capita prescription costs in BC Pharmacare have risen 30 percent more than in provincial and territorial drug benefit plans in the rest of the country. As well, private pharmaceutical spending increased 18 percent faster here.

Patients had to spend more of their own money on the more expensive drugs. For the cardiovascular classes, private spending doubled or quadrupled. It is perfectly reasonable to expect patients to pay a share of their drug costs if they can afford it. However, the Reference Drug Program biased patients against more expensive drugs, and did nothing to manage overuse of less expensive ones. Until the beginning of this year, seniors only paid the dispensing fee (about $7) for prescriptions that were not restricted by the Reference Drug Program.

Nor were the negative consequences only felt on the budget. Because some patients chose to switch to cheaper drugs, there was likely an increase in operations such as angioplasty and coronary artery bypass grafts. To date, research on the effects of the policy has not examined this shift from pharmaceutical to other costs.

It is time to explore alternatives. At the same time as BC rolled out the Reference Drug Program, Manitoba and Quebec reformed their drug benefit programs to ration subsidies based on patients’ needs, not by favouring medicines chosen by a government appointed committee. Both provinces have had superior results than BC.

For Manitobans whose total income was over $15,000, the annual deductible (the amount patients or their private insurers have to pay directly) became 3 percent of their income. For those with total incomes less than $15,000 but not receiving income assistance, the rate was 2 percent. Those who received income assistance were exempted.

Manitoba’s reform has worked. Even when Manitoba’s results are adjusted downward for the fact that it had relatively slower growth in the population of seniors, Manitoba Pharmacare’s costs increased 12 percent less than BC’s, in inflation adjusted terms, from 1996 through 2001, and private pharmaceutical spending 20 percent less. There may have been some shifting of costs to physicians and hospitals that partially nullified these benefits. However, this speaks to the need to adopt user fees for those services, too.

Quebec increased the amount patients paid individually, but still capped even the richest seniors’ out-of-pocket expenses at $750 annually, whereas welfare recipients paid up to $250. In Quebec, there were likely negative health effects on some welfare recipients who reduced their use of medication. This supports previous findings on such payments: poor people suffer when faced with monetary costs, whereas the vast majority is capable of spending appropriately on health care. On the other hand, Quebec’s plan had not previously covered everybody, and reforms included broadening the plan to include everyone without private insurance. Because of this increased coverage, provincial government prescription spending grew 19 percent more in Quebec than BC from 1996 through 2001. However, when private spending is added, Quebec’s prescription spending grew by 5 percent less than BC’s, and total health spending 10 percent less.

Pharmacare takes less than 7 percent of the provincial government’s health spending, but it is one area where the province is independent of the Canada Health Act, so it should be the easiest to reform by abandoning central planning and introducing a means test. From $8.2 billion in the last year of the NDP government, the provincial budget now estimates health spending of $10.2 billion this year: an increase of almost a quarter with precious little structural change. Well into the second year of its term, this provincial government is running out of time to come to grips with Pharmacare and medicare reform.