The CHA deals only with how the system is financed. Because of the constitutional division of powers among levels of government, adherence to CHA conditions is voluntary. However, the fiscal levers have helped to ensure a relatively consistent level of coverage across the country. Although there are disputes as to the details, the CHA remains highly popular.
Another cause for debate is the scope of what should be included as "insured services". For historical reasons, the CHA's definition of insured services is largely restricted to care delivered in hospitals or by physicians. As care has moved from hospitals to home and community, it increasingly has been moving beyond the terms of the CHA. International data shows that approximately 70% of Canadian health expenditures are paid from public sources, placing Canada below the OECD average.
The key battles around the CHA, however, concerned the question of charges to insured persons for insured services. These were termed 'extra billing' when they referred to physician care, and 'user charges' when they referred to hospitals. The policy debate was a long-standing one. Health care differs from many consumer goods to the extent that it is allocated on the basis of need. If someone who needs care is not to be denied it on the basis of ability to pay, providers often find themselves providing charity care. A guaranteed payer can thus benefit both patients and providers, to the extent that there are no longer bad debts. But a single payer has monopsony buying power and can enforce cost control on providers should it care to do so. Should this power be abused, providers may be under-paid for their activities, face restrictions on their clinical judgement, and so on. The optimal situation for providers is thus the ability to rely upon the guaranteed payer for those unable to pay, while retaining clinical autonomy and the ability to charge more to others. For patients and payers, however, this may present issues around access, equity, and cost control. The debate about the extent to which payers could control providers has been a constant theme in the Canadian health care debate, with extra billing and user fees being a frequent topic.
Over time, the mismatch between fiscal resources and fiscal capacity became increasingly problematic. If Canadians were to have similar levels of service, it would be necessary for the national government to somehow equalize the ability to pay for it. Yet attempts by the national government to implement programs directly encountered resistance from the provinces, and legal battles. In a few cases, where there was agreement that the federal government should take the lead, adverse court decisions were handled by amending the constitution (e.g., in 1940, in response to a court decision that federal unemployment insurance was unconstitutional, the Constitution Act, 1867 was amended to give the national Parliament jurisdiction over unemployment insurance). More commonly, however, other approaches have been used. Canadian health policy has accordingly been strongly related to Fiscal federalism and questions as to how best to address Fiscal imbalance. In consequence, Canada does not have - and arguably cannot have - a national health care system.
The Constitution Act does give potential powers over elements of health care to the federal government through various clauses (e.g., quarantine), but the role of the federal government has been highly debated. As summarized by a Senate Committee led by Michael Kirby, the federal government has a number of roles to play, including assisting the provinces in paying for health services. Although this has not been tested in court, the federal government has assumed that it is entitled to use its spending powers to set national standards. However, the extent to which 'strings' can be (and are) attached to federal transfers has remained contentious, and most federal governments have been unwilling to antagonize the provinces.
Accordingly, following the collapse of the conference proposals in 1946, in 1947, the social democratic premier of Saskatchewan, Tommy Douglas of the Co-operative Commonwealth Federation (CCF), decided to go it alone, and established Canada's first publicly-funded hospital insurance plan. Other provinces - including British Columbia, Alberta, and Ontario, introduced their own insurance plans, with varying degrees of coverage, and varying degrees of success. When Newfoundland joined Canada, it brought along its system of cottage hospitals. These policy initiatives increased pressure on the federal government to get involved, both to assist those provinces which had introduced programs, and to deal with the perceived inequity in those provinces whose citizens did not yet have coverage for hospital care.
The federal government had also acted by using its spending power; in 1948, it introduced a series of National Health Grants to directly provide funds to the provinces/territories for such purposes as hospital construction, professional training, and public health. This increased the number of hospital beds, but did not address the issue of how their operating costs would be covered. The result was that the Progressive Conservative government of John Diefenbaker, who also happened to represent Saskatchewan, introduced and passed (with all-party approval) the Hospital Insurance and Diagnostic Services Act of 1957. This shared the costs of covering hospital services. By the start date (July 1, 1958) five provinces -- Newfoundland, Manitoba, Saskatchewan, Alberta, and British Columbia - had programs in place which could receive the federal funds. By January 1, 1961, when Quebec finally joined, all provinces had universal coverage for hospital care.
Saskatchewan decided to take the money released by the federal contributions to pioneer again, and following lengthy consultations with the provincial medical association, introduced a plan to insure physician costs (The Saskatchewan Medical Care Insurance Plan). By this time, Douglas had moved to national politics, as leader of the federal New Democratic Party (NDP), The provincial plan precipitated a strike by the province's physicians (1962). It was eventually settled, but the CCF lost the 1964 election to Liberal Ross Thatcher. The plan, however, remained popular, and encouraged other provinces to examine similar programs. A policy debate ensued, with some arguing for universal coverage, and others (particularly the Canadian Medical Association) arguing for an emphasis on voluntary coverage, with the government assisting only those who could not afford the premiums. Three provinces - BC, Alberta, and Ontario - introduced such programs.
The federal reaction was to appoint a Royal Commission on Health Services. First announced by Prime Minister Diefenbaker in December 1960, it was activated in the following June. Its chair was Justice Emmett Hall, the chief justice of Saskatchewan, and a life-long friend of Mr. Diefenbaker. Three years later, following extensive hearings and deliberations, it released an influential report, which recommended that Canada establish agreements with all provinces to assist them in setting up comprehensive, universal programs for insuring medical services, on the Saskatchewan model, but also recommended adding coverage for prescription drugs, prosthetic services, home care services, as well as optical and dental services for children and those on public assistance. (None of these have yet been added to the formal national conditions, although most provinces do have some sort of coverage for these services.)
By this time, the Liberals, under Lester B. Pearson were in power. Following intense debate, the Pearson government introduced the Medical Care Act which was passed in 1966 by a vote of 177 to two. These two Acts established a formula whereby the federal government paid approximately 50% of approved expenditures for hospital and physician services. (The actual formula was a complex one, based on a combination of average national expenditures and spending by each province. In practice, this meant that higher-spending provinces received more federal money, but that it represented a lower proportion of their expenditures, and vice versa for lower-spending provinces.) By 1972, all provinces and territories had complying plans. However, the fiscal arrangements were seen as both cumbersome and inflexible. By 1977, a new fiscal regimen was in place.
Under this new arrangement, cost sharing was no more. Provinces/territories now had more flexibility, as long as the federal terms and conditions continued to be met. The federal government had more predictability. Rather than an open-ended commitment, EPF established a per capita entitlement (not adjusted for age-sex or other demographic factors) which would be indexed to inflation. This money would go into provincial general revenues. To simplify a complex formula, the EPF entitlement could be seen as consisting of two components. Part of the funds were in the form of "tax transfers" whereby "the federal government agreed with provincial and territorial governments to reduce its personal and corporate income tax rates, thus allowing them to raise their tax rates by the same amount. As a result, revenue that would have flowed to the federal government began to flow directly to provincial and territorial governments. This transfer could not be reversed by subsequent governments, meaning that the federal government had no fiscal leverage over this component of the transfer. (Indeed, there has been an ongoing controversy as to whether this component should even be considered part of the federal contribution.) The remainder of the entitlement was in the form of cash grants. Although the per capita amount was intended to be escalated to inflation, subsequently, the federal government tried to deal with its fiscal position by unilaterally first reducing and then freezing the inflation escalator. As the cash portion threatened to disappear, in 1996, the federal government combined the EPF transfers with another cost-shared program, the Canada Assistance Plan (CAP), to form the Canada Health and Social Transfer (CHST). This enabled the federal government to both cut the total transfers (by approximately the amount in the CAP) while retaining a 'cash floor' on the total amount. In 2004, these transfers were split into the Canada Health Transfer (CHT) and the Canada Social Transfer. The federal Department of Finance publishes brief guides to these programs. Nonetheless, many argue that there has been no explicit federal transfer for health care since 1977, since these programs are no longer tied to specific spending.
The second component of the federal plan, specification of the terms and conditions which provincial/territorial insurance plans must meet, continued to be those established in HIDS and the Medical Care Act. (Note that there were almost no conditions attached to the CAP or post-secondary education components of the transfers.) The genesis of the CHA was recognition of the extent to which the federal ability to control provincial behaviour had been reduced. One particular problem was the absence of any provision for graduated withholding of the federal contribution. Because there was little desire to withhold the full contribution for minor violations of terms and conditions, provinces increasingly were permitting extra billing for insured services. In response to the resulting political uproar, the federal government again turned to Justice Emmett Hall and asked him to report on the future of medicare. His 1979 report, 'Canada's National-Provincial Health Program for the 1980s' noted some of the areas recommended in his earlier report which had not yet been acted on, and warned that accessibility to health care was being threatened through rising user fees. The federal response was to pass the 1984 Canada Health Act which replaced both HIDS and the Medical Care Act and clarified the federal conditions.
To do so, the act lists a set of criteria and conditions that the provinces must follow in order to receive their federal transfer payments: Public administration, Comprehensiveness, Universality, Portability, and Accessibility. There is also a requirement that the provinces ensure recognition of the federal payments and provide information to the federal government. An overview published by the federal government clarifies the conditions as follows:
The second condition is that the province must "give recognition" to the federal government "in any public documents, or in any advertising or promotional material, relating to insured health services and extended health care services in the province" (Section 13.b). Again, this is controversial.
For non-compliance with the any of the five criteria listed above, the federal government may withhold all or a part of the transfer payment with “regard to the gravity of the default” (Section 15). Thus far all non-compliance issues have been settled through discussion or negotiation. Some argue that the federal government has not actively attempted to enforce these conditions, with particular issues around handling of portability (e.g., the reduction of coverage for residents while traveling abroad) and comprehensiveness (e.g., de-insuring of some medical procedures).
In accordance with section 20, if a province were to violate the prohibition on extra-billing or user charges, the corresponding amount of that collected would be deducted from the transfer payment. Details about these amounts are available from the Canadian government websites.
One aspect of the CHA was provision for reimbursement of funds withheld for extra-billing and user charges if these were eliminated within three years. Although often contentious (e.g., Ontario's physicians went on strike), all provinces complied with the provisions of the Act. Although the amounts withheld were relatively modest - financial penalties totaling $246,732,000 were withheld from the provinces in the first two years—provinces found it difficult to resist the pressure. (They found that many interest groups seeking additional funds would argue that it could be afforded if the province/territory eliminated their extra billing/user fees. Faced with multiple claims on the same pot, most provinces decided that the easiest path was to eliminate these charges.)
In 1993, British Columbia allowed approximately 40 medical practitioners to use extra-billing in their practices. In response, the federal government reduced B.C.’s EPF payments by a total of $2,025,000 over the course of four years.
In 1996, Alberta had their EPF payment reduced by a total of $3,585,000 over the course of a few years due to the use of private clinics that charged user fees. Newfoundland suffered the loss of $323,000 until 1998 and Manitoba lost a total of $2,056,000 until 1999 from user fees being charged at private clinics. Nova Scotia has also forgone EPF payment for their use of user fees in private clinics.