US embassy cable - 05OTTAWA2042

UNCLAS SECTION 01 OF 03 OTTAWA 002042 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA (DAS JEWELL), WHA/CAN (HOLST) AND INR (SALCEDO) 
 
USDOC FOR 4310/MAC/ONA 
 
DEPT PASS USTR FOR MELLE AND CHANDLER 
 
E.O. 12958: N/A 
TAGS: ECON, SOCI, EFIN, PGOV, CA, Health 
SUBJECT:  CANADIAN HEALTH CARE: 
SUPREME COURT RULING ADVANCES THE REFORM DEBATE 
 
REF:  04 OTTAWA 2394 
 
SUMMARY/INTRODUCTION 
-------------------- 
 
1. (U) THIS MESSAGE IS SENSITIVE, BUT UNCLASSIFIED.  NOT FOR 
DISTRIBUTION OUTSIDE USG CHANNELS. 
 
2. (SBU) A Supreme Court of Canada ruling on June 9 has 
opened up and accelerated Canada's national debate on 
health care reform.  The court struck down a Quebec 
provincial prohibition on private health insurance, 
because the resulting public monopoly denied citizens 
timely access to medical treatment.  In practical terms, 
the ruling should significantly open Canada's health 
care insurance market to U.S. firms, though provincial 
and federal leaders - most of whom claim to support the 
preservation of the public system - may take steps to 
resist the ruling's impact. 
 
3. (SBU) Advocates for more private health care, who are 
often branded "un-Canadian," have at last won a 
legitimate, mainstream place in Canada's health care 
reform debate.  Indeed, the ruling could well benefit 
the public health insurance system, by advancing this 
debate to a more constructive stage, and by relieving 
some of the cost pressures on public insurance.  END 
SUMMARY/INTRODUCTION. 
 
 
BACKGROUND:  THE SYSTEM 
----------------------- 
 
4. (U) Reftel provides a primer on Canada's health care 
system.  Most of Canada's hospitals and medical 
practices are privately operated, and patients choose 
where they go for service.  Each of the ten provincial 
governments has its own health care legislation and 
operates a universal health insurance plan that pays for 
most medical services.  Physicians, clinics and 
hospitals bill these insurers plans at rates determined 
by provincial ministries of health.  The ministries also 
determine the bulk of hospitals' annual operating and 
capital budgets. 
 
5. (U) Since the 1970's, the provinces have complied 
with federal standards in return for major federal 
contributions to their health care budgets.  The so- 
called "five principles" of the GOC's Canada Health Act 
require that provincial insurance plans must: 
 
-- provide ACCESS to service without financial or other 
barriers; 
 
-- be PORTABLE between provinces; 
 
-- be COMPREHENSIVE (covering all "medically necessary" 
services); 
 
-- be UNIVERSAL (insuring all of a province's residents 
on uniform terms); and 
 
-- be under PUBLIC ADMINISTRATION (the insurance plan 
must be operated by an accountable public agency on a 
non-profit basis). 
 
 
LIMITS ON PRIVATE CARE AND INSURANCE 
------------------------------------ 
 
6. (U) Private health insurance is restricted, not by 
the Canada Health Act, but by the provincial laws which 
established the public insurance plans.  Private 
provision of health care (private hospitals, clinics, 
etc.) is mainly restricted by the need to pay for these 
services outside the public health insurance plan.  As 
waiting lists have become long, particularly for certain 
diagnostic services, increasing numbers of Canadians 
have chosen to foot their own bills at private clinics 
or across the border in the United States. 
 
7. (U) Many advocates of health care reform have 
suggested that waiting times and costs could be trimmed 
by allowing more private, for-profit service provision 
to be covered by public insurance.  They argue that the 
basic character of the system is public insurance, not 
public provision, and that the system would benefit if 
it were opened up to the most efficient suppliers. 
 
8. (SBU) Advocates for the status quo (including 
nationalists and health care unions) have tended to view 
the profit motive as a threat to the entire system.  At 
worst, these groups set up a false dichotomy between 
supposedly excellent, all-public Canadian health care 
and a supposedly disastrous, all-private U.S. 
alternative - and then demonize reformers as being 
purveyors of the latter.  "Two-tier" health care - a mix 
of public and private systems - is portrayed as a 
dangerous slippery slope which would drain the public 
system of resources, perhaps eventually destroy it, and 
leave less affluent Canadians with poorer care than they 
have today. 
 
THE SUPREME COURT DECISION 
-------------------------- 
 
9. (U) In a case known as Chaoulli v. Quebec (Attorney 
General), an elderly patient and his physician argued 
that the patient's constitutional rights were violated 
because he was deprived of access to health care within 
a reasonable waiting period under the public insurance 
plan.  The Supreme Court agreed in a judgement rendered 
on June 9.  While the judgement strictly applies only in 
Quebec, the Canadian federal government and three other 
provinces intervened in the case and few doubt that the 
ruling's impact would apply to other provinces' health 
laws, given current waiting times. 
 
REACTION AND ANALYSIS 
--------------------- 
 
10. (SBU) Immediate public/political reaction was strong 
on both sides and reflected the simplistic character of 
the health reform debate in Canada.  Reformers commend 
the court for recognizing an obvious problem and 
clearing the way to its solution, while left- 
nationalists see the ruling as the beginning of the end 
of Canada's health care model.  Prime Minister Paul 
Martin declared reflexively that there would be "no two- 
tier health care" in Canada, and his officials - 
evidently hoping that the issue will be re-tested in 
other provinces - stressed that it strictly applies only 
in Quebec. 
 
11.  (U) Two eminent Senators -- Michael Kirby, who 
chaired a lengthy Parliamentary study of the health 
system in 2001-02, and Wilbert Keon, a world-renowned 
heart researcher - wrote a public comment: 
 
 
"The brilliance of the court's decision is that it did 
not prescribe a solution to the problem.  It said only 
that an individual's Section 7 rights must not be 
violated. . . . Those on the political left need to 
confront reality:  Do they continue to cling to the myth 
that all health services in Canada must be delivered by 
a public service provider, or will they finally accept 
that the only way to reduce wait times and save our 
public funded single-payer health-care system is to 
allow the contracting out of certain services to 
specialized clinics, regardless of what their ownership 
structure is. . . . Without the court ruling, 
governments might well have continued to talk about 
reducing waiting times without doing anything." 
 
12. (U) While the Senators, like most other political 
players, want to sustain the public system, they welcome 
"the spectre of a parallel, privately funded system" 
because it puts pressure on governments to reform the 
public system and make it efficient. 
 
 
13. (U) The Conservative provincial government in 
Alberta has been more advanced than most in seeking to 
trim health care costs by allowing public insurance to 
pay for some services performed in private clinics.   A 
provincial official emphasized that, while his 
government approves of the Supreme Court decision, even 
within the government there is a strong constituency for 
public health care, so the public-versus-private debate 
will continue to be vigorous.  He said the ruling has 
simply "made the conversation easier" by breaking the 
"false dichotomy" between all-public and all-private 
systems, and by stating definitively that waiting-list 
rationing infringes on constitutional rights. 
 
ROBUSTNESS OF THE COURT'S DECISION 
---------------------------------- 
 
14. (U) Observers who read the dissenting views noted 
that the Supreme Court's decision took many months to 
reach, and was made by a close 4-3 split with two seats 
vacant.  This suggests that a future bench might take a 
different view of the legal issues, and that public- 
health advocates (perhaps including the federal 
government) will be tempted to test the question again. 
 
IMPACT ON U.S. INTERESTS 
------------------------ 
 
15. (U) Health care expenditures account for over 10 
percent of Canada's GDP - a lower proportion than in the 
United States, but still a substantial share of economic 
activity.  U.S.-based firms have long supplied some 
goods (pharmaceuticals, other consumables, capital 
equipment, etc.) and services to both public and private 
consumers here, and the market has grown marginally in 
recent years as the number of private services has grown 
(e.g. eye surgery, knee replacement, dialysis clinics). 
Also, major insurance firms, including those based in 
the U.S., have been allowed to insure Canadians for 
"supplemental" health coverage (dental care, eye care, 
and health services beyond those covered by public 
insurers). 
 
16. (SBU) Further inroads by private health services 
providers in Canada, perhaps encouraged by the Supreme 
Court decision, should create more opportunities for 
U.S. firms, which have valuable experience in this area. 
As for the insurance business, while the court decision 
should directly expand the market for U.S. health 
insurers here, the extent of this opportunity may depend 
on further tests of Canadian provincial law.  It also 
depends on whether Canadian governments present new 
barriers which discriminate against non-Canadian firms - 
particularly since services are not subject to NAFTA 
discipline, and provincial government measures can be 
difficult to discipline under either NAFTA or the WTO. 
 
WILKINS