By Sean Speer, February 4, 2019
Pharmacare is bound to be an animating issue in the forthcoming federal budget Canada Pension Plan (CPP) and the subsequent election campaign.
It raises the question: are there analogous issues from the past that can help us think about the impending debate about drug coverage and the role of public policy?
The closest comparison may be the protracted debate about retirement income adequacy and whether to expand the Canada Pension Plan (CPP), which started in earnest in 2009 and culminated in five-year increases to CPP premiums last month. This experience shows the limits of being merely oppositional and the need to put forward constructive alternatives to wrong-headed ideas. The lesson should provide guidance for how critics of pharmacare engage in the current debate.
Readers will recall that the retirement income debate ultimately hinged on whether there was widespread savings gap. Proponents for a CPP expansion believed that there was significant problem necessitating a sweeping policy response. Opponents argued that the problem only involved a small cohort and did not justify a broad-based intervention. The debate went back and forth for years in Parliament, at federal-provincial meetings, and on the opinion pages of newspapers such as The Hill Times. CPP proponents ultimately outlasted their opponents and an expansion of premiums and benefits was enacted in 2017.
I still believe that a CPP expansion was unjustified. Research by Jack Mintz, Phillip Cross, and others showed at the time that concerns about the so-called retirement savings “crisis” were overblown. Only a small sub-section of the population—mainly widows with minimal work experience—were facing income adequacy challenges.
But the problem is critics of a CPP expansion focused most of their attention on challenging the premise that there was a broad-based problem and spent little time developing constructive solutions to better support the cohort that is under-saving. The upshot is that one side of the argument put forward solutions and the other side did not. The former predictably won the debate.
Which brings us back to the pharmacare question.
Presently more than 23 million Canadians are receiving drug insurance through their employers. Another roughly 10 million people have coverage through a combination of public plans. There are roughly 3.5 million Canadians who don’t have insurance and are faced with out-of-pocket costs and poorer access to medicines.
The first two groups, which, of course, represent the vast majority of Canadians, are generally well served by the current hybrid of public and private insurance. The third group, by contrast, would benefit from policy reform.
Yet proponents of a single-payer pharmacare scheme (including recently The Globe and Mail’s editorial board) would have Ottawa impose a “comprehensive” solution to solve a narrow problem. Disrupting drug coverage for 90 per cent of the population to better serve the other 10 per cent seems highly counterproductive. It amounts to the public policy equivalent of wielding a sledgehammer instead of a scalpel.
It’s not enough, however, to merely point out the flaws in a pharmacare proposal. The CPP experience demonstrates that such an oppositional poise is a strategic mistake. There’s a good chance that it leads to a poor policy outcome. Pharmcare opponents must therefore develop and put forward an alternative policy that preserves the strengths of the current model and targets those in need.
One such option is to redesign the Medical Expense Tax Credit (METC) to help those without employer-provided insurance to choose their own insurance and defray the premium costs. A new, refundable tax credit could be set, for instance, at $5,000 per household or $2,500 per individual. There would also be room to adjust these amounts based on income or health status. This approach would provide substantial public support for individuals and families to purchase different forms of private insurance ranging from basic plans to more enhanced benefits. And, most importantly, it would be targeted rather than comprehensive.
Pharmacare critics are correct to spotlight the weaknesses of a single-payer model including its exorbitant costs and poorer access to medicines. But these critiques are a necessary yet insufficient response to the growing calls for sweeping pharmacare reforms. The CPP experience shows that we must also put forward constructive alternatives that respond to the needs of those poorly-served by the status quo. It isn’t enough to discourage the use of a sledgehammer. We need to pick up the scalpel.
Sean Speer is a Munk Senior Fellow at the Macdonald-Laurier Institute.