Why privatizing drug coverage is bad for Ontario

Seniors should pay attention to the privatization of OHIP+. Their benefits could be next

The Ford government’s decision to privatize much of OHIP+, the universal public drug plan for children and youth, will not save Ontarians money or provide better coverage. Here are four reasons why.

First, there is no such thing as a free lunch.

Private insurance companies do not pay for your prescription drugs. You do. So, as OHIP+ is eliminated for children and youth eligible for private insurance, hundreds of millions of dollars in new expenses will fall on Ontario business owners and workers. Privatizing pharmacare is a tax by any other name.

For workers, this will disproportionately affect the middle class: those doing well enough to have jobs with extended health coverage but for whom the increased premiums will represent a sizable share of take-home income. The consequences for small and medium-sized businesses are also significant because the government is handing them costs they cannot control and may not be able to afford.

Second, private insurance for necessary medicines reduces cost control.

Effective pharmaceutical cost control requires careful consideration of often complex clinical and economic data and effective negotiating power with multinational pharmaceutical manufacturers. These factors in countries with singlepayer pharmacare systems result in prescription drug prices that are about 40% lower than Canadians pay through private/public system of financing.

Because of this, Ontarians would be better off continuing to have OHIP+ run as a single-payer, publicly accountable system that concentrates purchasing power and uses evidence to decide which medicines will be covered for all.

Of course, a universal, public OHIP+ program would never cover every drug on the market. Nor should it. Not every medication is safe enough, effective enough or priced competitively enough to justify universal coverage. But a singlepayer system for medicines that pass the tests of safety, efficacy and value would ensure universal access to those medicines at the best possible prices.

Third, private administration is astonishingly costly.

When prescriptions are paid for through private insurance, those footing the bill must pay for the drugs and for the private insurers’ costs of administration, marketing and profits. Those costs are far greater than the cost of public health insurance plans.

For some perspective of administration costs, the deputy minister of health for Ontario made over $400,000 in 2016 — not a bad paycheque. But the CEOs of three private health insurance companies each made over 15 times as much (yes, over $6 million each).

Consistent with executive compensation, the overall administration cost of health care paid for through private insurance in Canada is over 10 times greater than the administration cost of health care paid for by provincial health plans: 11.7 per cent versus one per cent. Thus, privatizing much of OHIP+ will require that Ontario businesses and families pay millions of additional dollars in administration costs on top of millions of dollars for the high cost of the prescriptions themselves.

Fourth, eliminating universality will create barriers to coverage and access.

Privatizing much of OHIP+ will reduce access to medicines by more than gaps in the public formulary have done. Because the public formulary already covers drugs that account for the vast majority of prescriptions Ontarians need, very few people will benefit from accessing private formularies when OHIP+ is largely privatized.

Yet, because the OHIP+ program will require a new system of registration and annual proof of entitlement, many families will fall through the cracks. Such registration processes will predictably prevent many deserving families from accessing public benefits they would otherwise be entitled to. When such obstacles limit access to routine but essential treatments — such as insulin for diabetes or maintenance drugs for asthma — the negative consequences can be significant.

Given all of the above, Ontarians should oppose the privatization of OHIP+. The decision to privatize much of the OHIP+ program reflects a vision of pharmacare — possibly of the whole health-care system — that is neither progressive nor fiscally responsible. It benefits narrow interest at the expense of the majority of Ontario businesses and households.

Being new, OHIP+ was an obvious choice for the first public drug benefit to be privatized by the Ford government in this inefficient and inequitable way. But it may not be the last. Seniors, in particular, should take note: their benefits might be next.

Steve Morgan is a professor in the UBC School of Population and Public Health and founder of Pharmacare 2020, a campaign to promote evidence-informed dialogue about the future of drug coverage in Canada. @SteveUBC