John Ivison: National pharmacare report bullish on universal program, but offers few ideas on how to pay for it

John Ivison: National pharmacare report bullish on universal program, but offers few ideas on how to pay for it
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On Wednesday the advisory council on the implementation of national pharmacare issued its report, which reads like the secret to the philosopher’s stone — a legendary recipe for turning lead into gold.

The council, chaired by former Ontario Liberal health minister Dr. Eric Hoskins, has recommended the federal government implement a universal, single-payer, public pharmacare system for prescription drugs.

It suggested the federal government work with the provinces and territories to create a formulary of covered drugs, starting in 2022, with the goal of putting a comprehensive system in place by 2027.

Coverage would include not only the estimated one in five Canadians who are either uninsured or under-insured, but also those currently covered by private or public drug plans.

Hoskins said a universal plan would result in cost savings of around $5 billion when fully implemented, as the government negotiates bulk-buying deals with drug companies. Canadian families would save an average of $350 a year on out-of-pocket expenses, while businesses would save an average of $750 per employee on prescription drug insurance. The health care system would benefit to the tune of $1.2 billion in savings from 220,000 fewer emergency room visits and 90,000 few hospital stays every year, the report suggested.

The only losers would be private insurers, drug companies and pharmacists — and who cares about them?

Hoskins said Canada can’t afford not to adopt the council’s plan, given the $34 billion (and rising) the country spends on prescription medicines every year.

You might think those paying out of pocket are the problem, rather than those who already have coverage

Ginette Petitpas Taylor, the federal health minister, let slip her bias when she said: “I think Dr. Hoskins is right — the cost of doing nothing is astronomical.”

But this is not a binary decision, to adopt the council’s report or do nothing.

The modern alchemy of universal drug coverage that would actually save taxpayers’ money comes with a catch that is first mentioned on page 90 of the 170 page report — by 2027, the cost to the federal government would be $15.3 billion higher every year than it otherwise would have been.

Prescription drug spending in Canada was $29.8 billion in 2017, of which $13.4 billion was paid by public plans, $11.5 billion from private plans and $5 billion out of pocket, mostly by people without insurance coverage.

You might think those paying out of pocket are the problem, rather than those who already have coverage. In fact, that’s what Finance Minister Bill Morneau suggested when he talked about pharmacare last year. “We need a strategy to deal with the fact that not everyone has access — we need to do it in a way that’s responsible, that deals with the gaps but doesn’t throw out the system we currently have,” he said.

Bill Morneau, Canada’s finance minister, listens during a Bloomberg Television interview on the sidelines of the Group of 20 (G-20) finance ministers and central bank governors meeting in Fukuoka, Japan, on Sunday, June 9, 2019. Kiyoshi Ota/Bloomberg

That “fill the gaps” strategy was explicitly rejected by Hoskins and the other council members, who said it would result in an “American-style health care system.”

That model was also turned down by the council in favour of the “longer-term efficiency and sustainability” of the single-payer system.

The problem is the massive incremental cost of national pharmacare — a 65-per-cent increase in public-plan spending.

Hoskins and his colleagues were voluble about the advantages of a universal system but were considerably more subdued about how to pay for it.

The problem is the massive incremental cost of national pharmacare — a 65-per-cent increase in public-plan spending

The report said the council heard views on increasing specific taxes like the GST, introducing a new tax or premium, or even attempting to recapture costs saved by business no longer providing private drug insurance. Frankly, that seems a reasonable solution, given the report suggests businesses will see their prescription drug costs fall by $16.6 billion a year.

Yet in the end, the council dodged the issue, advocating the massive new incremental cost be paid from “general government revenue.” This at a time when federal deficits are forecast by the finance department to endure until at least 2040.

To dispute the conclusion of the council’s report is not to make light of the problem. When in 2015 the Angus Reid Institute , 91 per cent supported the idea of universal coverage based on need and not ability to pay, even if there was no consensus over how to pay for the program.

Another massive dilemma is that drug-cost inflation is running at around 6.5 per cent a year.

The council’s financial model suggests that by 2027, prescription drug costs will rise from around $30 billion to more than $50 billion by 2027. Part of that increase is inherent in a national pharmacare plan — if you remove financial barriers to access, you increase drug accessibility and, therefore, spending.

Hoskins said the council heard from employers who were concerned they would no longer be able to offer drug plans, leaving employees to pick up the costs. These are real problems that governments can no longer afford to ignore.

But there is a reason why Canada is the only country with a universal health care system that does not offer universal coverage for prescription drugs: it is horrendously expensive. The report forecasts that pharmacare would cost the federal government $38.5 billion a year when fully implemented. (For comparison, the defence budget for 2026/27 is budgeted at $24.5 billion)

The Royal Commission that ushered in medicare in 1964 advocated drugs be covered, and though the Liberal government of Jean Chrétien promised to introduce a universal system in 1997, it has remained tantalizingly out of reach for more than 50 years.

But we have never before had a federal election where two competing left-of-centre parties are trying to outbid each other in voters’ affections when it comes to prescription medicines.

The NDP has advocated drug coverage since its founding convention in 1961 — which speaks volumes about the party’s impotence — and on Wednesday leader Jagmeet Singh called on the Liberals to implement the Hoskins council’s recommendations immediately.

It is certain to be a central campaign issue in the coming election — the status quo does look unsustainable.

But citizens should cover their wallets whenever a politician, or in this case a former politician, says “we can’t afford not to.”

The bottom line is, of course Canada can afford a national pharmacare plan — it just has to cut spending elsewhere or increase taxes.

It is a truism that when you get something for nothing, you just haven’t been invoiced yet.

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