Is private insurance really at odds with universal health care?

by Leo Almazora29 Jan 2020

Fears that the use of private insurance coverage in Canada will foster inequality are vastly exaggerated, according to a new paper from the Fraser Institute.

In a paper titled Understanding Universal Health Care Reform Options: Private Insurance, author Steven Globerman noted that because provincial governments either prohibit or severely discourage health care providers from operating partly or completely outside the public insurance scheme, there’s little legal scope or economic opportunity for suppliers of private insurance to operate in Canada.

“[T]here is no private insurance coverage or out-of-pocket payment for basic health care services in Canada, which distinguishes Canada’s health care system from those of other high-income countries,” said Globerman, who is a professor emeritus at Western Washington University and a senior fellow at Fraser Institute.

One reason for opposition to private insurance markets in Canada, he said, is that private coverage will result in substantially reduced healthcare access under the public insurance scheme. The argument goes that with growing private insurance options, support for tax-funded public insurance will wane, leading to reduced public coverage for medically necessary services.

“In fact, the experience of other high-income countries that allow private insurance markets does not support this argument,” Globerman said, noting that citizens in other high-income countries with universal health coverage are free to take on private insurance in one form or another.

Others against allowing private health insurance in Canada, he said, argue that it would allow wealthier Canadians to obtain “better” health care than other Canadians. But any evaluation of the argument, he said, would depend on the overall social welfare impact that one would consider.

As an example, wealthier Canadians would enjoy faster access to services and possibly more choice of providers and in-patient amenities. But Globerman said that as richer Canadians move into the private insurance market, Canadians exclusively using the public insurance scheme, particularly with respect to outpatient services, would likely face shorter wait times. 

“This substitution phenomenon … has been observed in a number of European countries, especially where private insurance is used to obtain quicker access to health care services than through the public insurance scheme,” he said.

A single-payer system of health care, he added, does not ensure identical access to medical services across income or wealth levels as affluent Canadians can pay out-of-pocket for health care delivered outside the country. He also stressed that wait times for medically necessary services can lead to compromised health, loss of income, reduced quality of life, and increased morbidity and mortality.

“Hence, to the extent that a private insurance market would reduce wait times in Canada for many patients, allowing private insurance is a significant policy instrument to improve the efficiency of Canada’s health care system,” Globerman said.