Growth in private payments for health care by Canadian households

Abstract

Introduction

Despite first-dollar public coverage for hospital and physician services, Canadians spend more privately on health care than citizens of most other developed countries. We quantified recent growth in private payments by Canadian households for health care.

Methods

Using data from 163,081 respondents to Statistics Canada's annual Survey of Household Spending from 1998 to 2009, we calculated inflation-adjusted per-household spending on private health insurance premiums and out-of-pocket payments on six types of health care services. Further, we estimated the prevalence and some socio-economic determinants of households spending over 10% of after-tax income on health care using logistic regression.

Results

We found that Canadian households spent $19.8 billion on private payments for health care in 2009. This represents an average of $1523 per household—a 37% increase over 1998. The top three spending categories in 2009 were private health insurance premiums ($5.9 billion), dental ($4.9 billion) and prescription drugs ($4.2 billion). Even after adjusting for inflation, expenditure on every category of health care spending increased between 1998 and 2009. The proportion of households spending more than 10% of after-tax income on health care increased by 56% (from 3.3% to 5.2%). Households including a senior, with a low income, and in British Columbia or the Atlantic Provinces were significantly more likely to reach this threshold.

Interpretation

Over the period studied, the burden of private health care expenditures increased substantially for Canadian households. As direct charges reduce the use of necessary health care services, investigation into the health consequences of these increases is warranted.

Introduction

Despite the perception that Canada has a “public health care system,” the country actually relies on private financing of health care more than most comparable countries. Private expenditures on health care in Canada totalled $1569 per capita in 2010, the third highest level in the OECD—trailing only the predominantly private-insurance systems of the United States and Switzerland [1]. This is because Canada's first-dollar public insurance system covers only medically necessary physician and hospital services. Other important components of modern health care, including home care, prescription drugs, dental care, and vision care, are largely privately financed [2].

There are two major sources of private financing in Canada: employers and individuals. Employers make payments toward private health insurance costs when offered to their employees. When paid by the employer these contributions are not taxable (except provincially in Quebec); these exemptions reduced taxes by $3.2 billion in 2011 [3]. Individuals can also make payments toward private insurance premiums if required by their employer or if they purchase their own individual insurance policy. In addition, individuals can be required to make direct out-of-pocket payments at the point of care. This includes user-charges under both private and public insurance programs (e.g., deductibles and co-insurance for pharmaceuticals and dental care [4]) as well as all payments by the uninsured.

The reduction of financial barriers to care and protection of households against catastrophic out-of-pocket health costs are recognized goals for health financing systems [5]. Direct user charges may cause individuals to forgo needed care with negative (and potentially costly) health consequences. They can also have implications for equity in health care financing [6], [7]. Significant out-of-pocket costs for care as a proportion of income can threaten the economic well-being of households, and result in sacrifices in other necessity spending, particularly for those with lower incomes [8]. Despite the importance of private spending, we have very limited knowledge regarding the types, trends and burden of private health care expenditures by Canadian households. Therefore, we studied the trends and distributions of household spending on private health benefits premiums and out-of-pocket charges for six types of health care services in Canada.