How Privatization Infects the Canadian Health Care System

2023-10-05 Pat Armstrong and Hugh Armstrong

By Pat Armstrong and Hugh Armstrong

It has been called privatization by stealth. For-profit companies are taking over more and more of Canada’s health care system, often with the support of governments in Canada’s provinces and territories. The complexity of Canada’s federal system that leaves much of the responsibility for health care to the provinces and territories has helped to hide these developments while also creating considerable variation across the country. And such subterfuge has been necessary because health care has long been Canada’s most popular social program. This steady privatization has had serious consequences for access to and support for the public health care system while embedding profit and for-profit managerial techniques in health care services.

Health services in Canada are highly unionized, in part, as a result of public health insurance that itself reflects union efforts to expand public care.

In the Canadian health system (informally referred to as Medicare), the federal government funds specific health care services on the condition that the provincial/territorial governments follow certain principles. It is often therefore labeled a single-payer system because the federal and provincial governments primarily set standards and pay for services while delivering very few of them. Most doctors are paid on a fee-for-service basis.[1] Each jurisdiction has a doctors’ association that negotiates fees with the governments. Hospitals are a mix of public (state-owned) and non-profit (privately owned), with the funding formulas and standards set by each province or territory. Federal conditions attached to funding have helped create a common system, but, as we shall see, this model does not apply to services outside hospitals and doctors, resulting in varying health care standards and opportunities for profit-making.

Health services in Canada are highly unionized, in part as a result of public health insurance that itself reflects union efforts to expand public care. Women account for more than four out of five workers in the sector, so these unions have been critical in the relatively successful struggle for pay equity in the sector. All the major unions—Canadian Federation of Nurses Unions (CFNU), Canadian Union of Public Employees (CUPE), Unifor (formerly Canadian Auto Workers), the Service Employees International Union (SEIU), and the United Food and Commercial Workers Union (UFCW)—have national organizations, but, as in the United States, bargaining happens most commonly at the establishment level with each union negotiating separately.

Post-War Growth of Federal Funding for Health Care
The first major federal investment in health care came in the 1950s. Faith in government was relatively high after World War II; the economy and unions were growing along with a demand for hospital care. Almost all hospitals were non-profit and struggling financially. Both the doctors’ associations and the organizations representing insurance companies supported some form of government insurance in order to help ensure that bills were paid. In 1947, the socialist government in the province of Saskatchewan introduced a plan for public hospital insurance, which not only helped struggling hospitals but also increased access to care, especially for pregnant women and the elderly. By the mid-1950s, the plan was so successful that other jurisdictions copied it and pressured the federal government to support the plans financially. By the late 1950s, the federal government introduced legislation that offered to pay half the provincial government costs if they covered all the hospital services provided by salaried employees, under uniform terms and conditions, to ensure equity in access and treatment. Most physicians were not salaried, so the funding conditions did not cover them.

. . . [U]nlike . . . in the United States, [the Canada Health Act] covers hospital and doctor services rather than groups of individuals, eliminating disparity in access . . .

A decade later, Saskatchewan, in an example followed by the federal government again, extended the insurance plan to cover doctors. This time there was more opposition, primarily from doctors and insurance companies, both of which were doing much better financially in the postwar economy. However, because hospital insurance fundamentally increased access to care, this opposition was outweighed by popular support. Hospital insurance also made it easier to unionize the hospital sector. Following the same approach as it did with hospital insurance, by the end of the 1960s, the federal government passed legislation covering medical care and committed to paying half the costs.

The 1979 Canadian Labour Congress conference founded the Canadian Health Coalition, bringing unions and community groups together to push for a more integrated approach from the federal government. They had an impact. In 1984, the hospital and medical insurance programs were combined under the Canada Health Act (CHA). Under the act, the federal government offered financial support to provincial/territorial governments if they adhered to five principles: coverage must be universal (everyone in), accessible (without financial or other barriers), comprehensive (covering all medically necessary hospital and doctor services), portable from jurisdiction to jurisdiction (inside and outside Canada), and the insurance plan must be publicly administered by a non-profit organization. Charging extra for medically necessary services was prohibited, including virtually all services provided in hospitals. What was defined as medically necessary was left to each jurisdiction, with doctors playing a central role in the definition. The Canada Health Act contributed to unionization by expanding and consolidating services, bringing workers together and easing negotiations.

Unlike the Affordable Care Act in the United States that runs hundreds of pages, the Canada Health Act is less than ten pages long and simple enough that everyone can understand it. And unlike Medicare and Medicaid in the United States, it covers hospital and doctor services rather than groups of individuals, eliminating disparity in access to health services and promoting the politics of solidarity. It is cheaper than U.S. publicly funded services as it saves on administrative costs; it saves employers money because they do not need to provide basic insurance coverage; workers do not have to worry about losing insurance between jobs; and unions can focus on other protections for workers. Government-funded services remain enormously popular as they provide access to high-quality hospital and medical services, even as governments in recent years have been undermining this system through financial cutbacks and for-profit tactics.

A Window for Privatization in the Canada Health Act
Some basic flaws in the Canadian plan have contributed to the undermining of public health care and growing “profitization.” First, the Canada Health Act does not prohibit for-profit delivery of services. Rather, it says patients cannot be charged for medically necessary hospital and doctor services. Some jurisdictions have legislation preventing public funding going to for-profit hospitals, and most jurisdictions prohibit private insurance for health care covered by the public plan. As a result, there are virtually no for-profit hospitals. But the possibilities for profit remain in various ways. For instance, for doctors, the Canada Health Act mainly means public payment for private practice, with most doctors simply sending a bill to the relevant provincial/territorial government for each specified service deemed medically necessary, with few questions asked. Because this fee-for-service system pays for each person seen and each issue addressed, it can encourage doctors to see as many patients as possible and to provide them with the more highly paid complex services. Most jurisdictions prohibit doctors from billing both government and individual patients as well as prohibit private insurance from covering publicly funded services, and most doctors have chosen to stay with the public payment. Although public payment significantly reduces paperwork, doctors still have to manage their practices, and neoliberal approaches to accountability have increased their administrative work. Beginning in the 2000s, doctors began responding to corporations offering to operate their private practices. This is particularly the case for walk-in clinics, which provide less continuity of care and end up sending more patients to hospital emergency departments at increased cost to the public purse.

This brings us to a second flaw in the Canada Health Act. The federal government failed to heed a 1964 Royal Commission on Health Services recommendation that the Canada Health Act cover the entire range of health care necessary to support a healthy population. The Commissioner argued, “The only thing more expensive than good health care is no health care”[2] and that covering all services would support efficiency. Instead, the federal government left out nursing homes, home care, ambulatory services, dental care, and pharmaceuticals administered outside hospitals. In these areas, coverage is similar to that in the United States, with some union-negotiated insurance, some private insurance, and some government support for the most vulnerable groups. This leaves a broad area for for-profit insurance and services.

The third flaw in the Canada Health Act is its dependency on federal funding and the government’s willingness to enforce the principles set out in the act. Starting in the 1970s, the federal government began to embrace austerity measures under the pressures of rising neoliberalism and to cut back direct funding for health care. Part of the lost money was to be made up by allowing provinces and territories to use what had formerly been a federal tax area, making it harder to see the federal contribution and harder to use funding cuts to ensure the enforcement of the act’s principles. Following the money was made even harder when the federal funds were folded into its contributions for education and social services. Governments began to apply for-profit managerial strategies to public and publicly funded services: wage controls and layoffs were introduced and the loss of federal oversight on funding allowed governments to spend the money on tax cuts or on subsidies for businesses.

Starting in the 1970s, the federal government began to embrace austerity measures under the pressures of rising neoliberalism and to cut back direct funding for health care.

Governments started moving away from providing hospitals with global budgets toward compensating them based on how many patients they look after, the services they deliver, the quality of those services, and the diagnosis of the patients served. Instead of knowing how much funding they would have, hospital funding now depended on patient type and volume. Administrative work has increased, as governments adopt accountability practices based on the for-profit sector practices that assume dishonesty. Hospitals lose a major benefit of a public system, namely, low administrative costs. At the same time, such accounting increases the focus on counted tasks and specific parts of the body at the expense of treating whole patients,[3] with the potential for making individuals pay, contrary to the Canada Health Act, and workers spend more time documenting. Strenuous debates and negotiations between the federal and provincial/territorial governments have since become a mainstay of the Canadian political arena.

Neoliberalism in Action: The Profitization of Health Care
During the North American Free Trade Agreement (NAFTA) discussions that took place at the peak of neoliberalism’s global spread in the 1990s, Canadian health care was described as an unopened oyster ready for profit-making, just as other opportunities for investment were declining for international corporations. There was strong opposition to free trade within Canada, especially in relation to health care. While some protections for health care were built into NAFTA, the stronger corporate lobbies on both sides of the border won much of the day and Canada was largely opened to foreign investment.

Until very recently, subsequent Canadian governments have failed to protect public health care: not by directly attacking public care but by cutting back on funding for hospital and doctor services.[4] The province of Ontario, which accounts for almost 40 percent of the Canadian population, closed thirty-one public, six private “hospitals, as well as provincially-owned psychiatric hospitals in the 1990s.”[5] Hospitals across the country began relying more on part-time, short-term labor and on contracting services to the corporate sector, increasing numbers of which were controlled by private equity. Both processes usually meant a shift to non-union labor. Although doctors have been largely excluded from these strategies as most are still in private practice, the government reduced enrollment in medical schools and the number of residency placements, which are required to gain a provincial license. At the same time, new technologies and methods allowed a major shift to day surgeries. Moving care out of hospitals has thus moved much of it out from under the protections of the CHA and collective bargaining agreements.

Public-private partnerships have become a common way to build new hospitals, with corporations building and maintaining hospitals and often providing many of the support services. As of 2017, there were 220 of them in Canada, almost all in the large provinces.[6] In some provinces, competitive bidding processes for services such as home care and nursing homes that received significant public funding favored large, for-profit corporations that have greater access to private funds and more bidding experience.

Hospitals . . . began relying more on part-time, short-term labor and on contracting services to the corporate sector . . . Both processes usually meant a shift to non-union labor.

Nursing homes provide a stark example from the 1990s. In Ontario, the bidding processes left nearly 60 percent of publicly funded nursing homes mainly in corporate, and increasingly private equity, hands. Services like those for food, laundry, and housekeeping began to be contracted out. All this occurred along with reduced government funding, depressing wages, even in these mostly unionized homes. Quality of care dropped; illness and injury rates among workers rose. The pandemic brutally exposed this crisis in care. The military was called in primarily to deal with the high resident death rates in several for-profit homes. A publicly released military report revealed horrific conditions, leading to a public demand to close these homes.[7] Some for-profit homes began selling their valuable land and abandoning the sector, leaving it to the workers and residents to find employment and care elsewhere. Meanwhile, the province’s government continued to grant new licenses for nursing home beds to some of these same corporations running homes that required military assistance. Similar strategies were applied to publicly funded homecare services.

The decline in public funding since the 1990s led to widely publicized wait lists for some hospital, diagnostic, and medical services, and for-profit companies were quick to fill the resulting gaps. Private clinics emerged for testing services, and cataract and other surgeries that could be done quickly on healthy patients. Some of these services were paid for by public funds, although the clinics often charged extra fees or engaged in upselling, offering patients additional, expensive, and private-pay services. These clinics offered regular daytime hours and higher pay compared with hospitals and nursing homes, but no union protections and benefits.

The pandemic has accelerated profitization. Building on the panic created by shortages, 2023 Ontario legislation began offering free services in private clinics, with the government paying more for these services than it pays for them in hospitals, hiding the fact that tax dollars pay for profit and that the clinics face less accountability to the public while increasing the fragmentation in care. Many for-profit companies have also taken advantage of the pandemic to move aggressively into virtual care. While some of this is paid for by public funds, these companies are increasingly offering services outside the public system and even outside the principles of the Canada Health Act.

Backlash: A Growing Response to the Health Care Crisis
But there is also some good news. In response to the pandemic and to pressure from unions and from organizations such as heavily union-supported health coalitions, some regional governments have started to respond more progressively to the crisis in care. The federal government has significantly increased health care funding and is finally taking action to enforce the Canada Health Act prohibition against fees for medically necessary care, demanding provinces and territories pay back the equivalent of any extra fees charged. Various governments have moved to increase wages in health services, especially for those at the bottom of the care hierarchy. Unfortunately, some of this money has come in the form of bonuses rather than from union-negotiated increases in overall wages and conditions. Strong education and recruitment strategies, especially for nurses and care aides, are underway. However, the focus on bringing in health care workers from other countries could mean exposing them to the same conditions driving Canadian workers out, while also depending on their home countries to pay education costs. Some provinces such as Ontario are lowering the qualifications required in ways that mimic old deskilling practices (e.g., reducing qualifications for food service workers in health care).

In response to the pandemic and to pressure from unions and from organizations such as heavily union-supported health coalitions, some regional governments have started to respond more progressively to the crisis in care.

Recognizing the need for higher staffing levels, British Columbia is in the process of requiring, and funding, minimum staffing levels for hospital nurses, which will significantly increase the number of nurses in unionized workplaces. Ontario has set a target for minimum staffing levels in nursing homes while also significantly expanding the number of nursing homes and providing funding for the expansion. Other provinces are considering similar moves.

There is also some promising news on limits to the expansion of private insurance and for-profit services. Cambie, a for-profit company offering private-pay surgeries for medically necessary care, claimed that the prohibition against private insurance covering private care should be declared to contravene the Canadian Charter of Rights and Freedoms.[8] In 2022, the Canadian Supreme Court rejected Cambie’s appeal from the lower court decisions that made it clear that the rights of those who can pay for health services do not take precedence over the rights of those who depend on public care.

Unions have a long history of opposition to profitization, working on their own and with the Canadian Health Coalition and its provincial/territorial equivalents. Since the 1980s, unions have also been central to the Canadian Centre for Policy Alternatives and its local branches, an organization that provides evidence for progressive change and offers alternative budgets for governments at the national and provincial/territorial levels. Unions have also been actively involved in court challenges such as the Cambie case and in multiple current cases against government profitization strategies, with some success in getting new funding, and in prohibiting both extra charges by for-profit entities and private insurance for services covered by the Canada Health Act.

Furthermore, the downgrading of work within hospitals and contracting out of services have created space for unions not traditionally in health services. For example, the union previously known as the Canadian Auto Workers, now called Unifor, has a huge health sector membership that includes housekeeping, laundry, and dietary staff, as well as workers who provide direct care.

. . . [T]he downgrading of work within hospitals and contracting out of services have created space for unions not traditionally in health services.

The nursing home sector in British Columbia is a particularly strong example.[9] In the wake of recommendations from a 1990s Royal Commission on Health Care and Costs, the left-leaning New Democratic Party government in British Columbia adopted sectoral bargaining processes that established stable conditions of work and equitable pay across the province’s public health care sector. This was particularly important for workers in nursing homes, where wages and benefits were lowest and where women accounted for nine out of ten workers, a significant number of whom were women of color and/or newcomers.

Through a master agreement, the Hospital Employees Union (HEU, a CUPE affiliate) used its growing power to negotiate some protections against the contracting out of services and for job security, including the right to retraining and relocation to other jobs in the sector when services were reduced. But all this came to an abrupt end with the re-election in 2001 of a government in British Columbia with a strong neoliberal agenda. The government passed Bill 29 that removed the negotiated job security and contracted out protections for nonclinical staff along with union successorship rights. Combined with significant cutbacks in hospital staff and the move to competitive bidding for services within the public sector, the result was major layoffs, significant wage reductions, and loss of union membership. At the same time, for-profit ownership of primarily publicly funded nursing homes and services in them expanded, and inequities in pay and conditions increased across the sector.

But the story does not end there. The British Columbia unions took the government to court with a challenge under the federal Charter of Rights and Freedoms that went all the way to the Supreme Court. In 2007, the Court ruled that Bill 29 interfered with the right to collective bargaining “either by disregarding past processes of collective bargaining, by pre-emptively undermining future processes of collective bargaining, or both.”[10] The Hospital Employees’ Union continued to work through the period to build alliances across private, public, and non-profit sectors and to promote narratives of both caring workers and caring communities, arguing that better wages and conditions made for better care and that for-profit care undermined quality care and equity. It also argued that separating non-clinical from clinical staff through contracting out and other polices undermined teamwork in health care institutions. HEU had more government support in these arguments when the left-leaning New Democratic Party won first a minority government in British Columbia’s provincial elections in 2017 and then a majority government in 2020.

When Covid hit, HEU built on this history and the widespread public support for care workers to gain increased wages and rules that restricted workers to single workplaces, which meant significantly more full-time employment. Applied across the nursing home sector, these initiatives helped unite workers in homes with different owners while also gaining further public support for their strategies to protect residents and staff. Union membership increased in British Columbia in the wake of these developments and more of the contracted services moved back into the public sector.

Canadian governments at multiple levels have manufactured a crisis in care by adopting neoliberal strategies, and the expansion of for-profit delivery and managerial practices continues. It is hard to say what the future holds. For example, in 2022, Ontario unions won an important court case against legislation that restricted broader public sector wage increases to 1 percent annually for three years, but the government has appealed the decision. Each such victory is critical, but there is a real risk that Canadians are following the United States in a move to the right.

Notes
1. There are a few other models such as salaries or capitation payments in clinics.
2. Stephen Skyvington, “The Hall Commission and the Introduction of Medicare National Newswatch,” July 20, 2021, available at https://www.nationalnewswatch.com/2021/07/20/the-hall-commission-and-the-introduction-ofmedicare/#.ZCrznXbMKUk.
3. The Diagnostic Related Groups (DRG) is a system that groups patients by diagnosis and controls costs while determining the payment for each group.
4. “Nelson J. Dr Rockefeller will see you now: The hidden players privatizing Canada’s health care system,” Canadian Forum 1995 (January–February): 7–11.
5. Duncan Sinclair, Mark Rochon and Peggy Leatt, “Riding the Third Rail. The Story of Ontario’s Health Services Restructuring Commission, 1996–2000,” Institute for Research on Public Policy, August 15, 2005, available at https://irpp.org/research-studies/riding-the-third-rail/.
6. “PPP Canada,” June 2023, available at www.p3canada.ca.
7. Public Safety Canada Reports On Long Term Care Facilities In Ontario & Quebec May 27, 2020, available at https://www.publicsafety.gc.ca/cnt/trnsprnc/brfng-mtrls/prlmntrybndrs/20200831/069/index-en.aspx Military personnel serving in long-term care homes. Toronto Star, May 26, 2020, available at https://www.thestar.com/politics/federal/.
8. Zena Olijnyk, “B.C. Court Dismisses Appeal of Lower Court Decision Limiting Private Healthcare,” Canadian Lawyers Magazine, July 15, 2022, available at https://www.canadianlawyermag.
com/practice-areas/litigation/bc-court-dismisses-appeal-of-lower-court-decision-limiting-private-healthcare/368269.
9. This section relies heavily on two pieces. Andrew Longhurst, Sage Ponder and Margaret McGregor, “Labour Restructuring and Nursing Home Privatization in British Columbia, Canada,” in The Privatization of Care: The Case of Nursing Homes, ed. Pat Armstrong and Hugh Armstrong (New York: Routledge, 2020); Donna Baines, “Interwoven, Cross-Sector, Situational and Enduring Solidarities: Crisis, Resistance and De-Privatisation in Care Work,” Work in the Global Economy (published online ahead of print 2023). https://doi.org/10.1332/273241721X16793134787483.
10. CBC Big win for unions as ruling says bargaining protected, June 8, 2007, available at https://www.cbc.ca/news/canada/big-win-forunions-as-ruling-says-bargaining-protected-1.632216#:~:text=B.C.%20health%20unions%20welcome%20victory%20at%20Supreme%20Court%20of%20Canada&text=In%20a%20case%20that%20pitted,Charter%20of%20Rights%20and%20Freedoms.