Understanding the Political Economy of the Evolution and Future of Single-Payer Public Health Insurance in Canada

Surprisingly little attention has been paid to how we pay for health care affects how much we spend on health care. In this paper, I discuss how noncontributory finance and effective subsidization of public health care spending with federal cost sharing crowded out demand for private insurance as voters opted for high levels of public health spending. From this perspective, the Romanow Report’s call for increases in federal cash transfers to provinces for health care spending would result in an increase in provincial health spending and a diminution of the demand for private health insurance. It is not clear, however, that federal subsidization of health spending is either sustainable or socially desirable. Indeed, as Canada’s population ages, the current financing of health care represents enormous unfunded liabilities for the provinces. To sustain current levels and growth rates of health spending without tying current revenues to that objective means asking the next generation of working Canadians to pay far more for their health care than do working Canadians today. Although the effect of population aging on health care expenditures is projected to be modest, it could trigger a serious political crisis for Canadian medicare as taxes rise.