The Fairness of Fair Pharmacare

The newspapers and airwaves are filled with people fuming about Fair Pharmacare. There are three major complaints (other than the challenge of getting through to Pharmacare to register). Firstly, that Fair Pharmacare forces patients to pay more of their own money for prescriptions. Secondly, that the requirement to report your income is a violation of privacy. Thirdly, that it is inappropriate to use income from 2001 to determine benefits in 2003.

Firstly, Pharmacare cannot work without patients paying some of the cost. For other health services, government controls the supply, cutting off access while still pretending to provide universal health care. Shortages of health professionals and high technology equipment, such as MRI machines, result in growing waiting lists for diagnosis and surgery. Unfortunately for governments, there is not much they could do to ration pills if they simply gave them away without demanding any payment.

Pharmacare definitely needs a new approach to managing rapidly increasing costs given the failure of its previous attempt, the Reference Drug Program (RDP). 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. From then until the end of 2001, Pharmacare’s per capita prescription costs rose 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 in BC.

Patients had to spend more of their own money on the more expensive drugs. For the cardiovascular classes, private spending doubled or quadrupled. However, the RDP biased patients against more expensive drugs, and did nothing to manage overuse of less expensive ones.

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 RDP has not examined this shift from pharmaceutical to other costs.

Unfortunately, the RDP is still with us. However, at the same time as BC rolled out that program, Manitoba Pharmacare adjusted its benefits through a means test of 2 or 3 percent of income, similar to British Columbia’s new policy.

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. Manitoba’s success relative to British Columbia derives from the fact that its subsidy was allocated according to patients’ needs (as determined by their incomes), rather than interfering in patients’ and doctors’ decisions about which medicines are right.

Secondly, you are not required to report your income to the Ministry of Health Services. Pharmacare benefits come from other taxpayers’ pockets. If you think that reporting your net income to the Ministry is to great a sacrifice to get your maximum subsidy, I’m sure the rest of the provinces’ taxpayers will be happy that you keep your privacy! Indeed, the fact that the Health Services Ministry cannot rummage in our tax returns without our permission provides some solace in the face of an intrusive welfare state.

Thirdly, 2001 is the last year for which the taxman has measured our incomes. We’ve just submitted our 2002 returns, and it will be a year before 2003 is reckoned. For those who will earn much less this year, this may pose a big financial problem. The solution is for the government to allow us to establish tax-free medical savings accounts, similar to RRSPs, which allow us to save money in fat years from which we can pay our prescription deductibles in lean years.

Fair Pharmacare does not reduce government interference in our medicine cabinets by a lot, but it is a fair first step.