Cablegate: Canadian Health Care:

This record is a partial extract of the original cable. The full text of the original cable is not available.

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
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

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