A prominent feature of Canada’s health care system is the absence of any charge for publicly insured health care services at the point of consumption. This feature is mandated by the Canada Health Act along with a prohibition on extra-billing by health care providers.
A strong argument can be made that “first-dollar” coverage leads to an inefficient overconsumption of health care services. Specifically, it encourages the consumption of health care services whose costs exceed the associated benefits of those services.
Most developed countries with universal coverage for health care services do not mandate first-dollar coverage. Rather, insurers (whether public or private) typically impose some type of cost sharing for the health care services they cover, including services that are similar to those that are covered by provincial health care plans in Canada. Exemptions from cost-sharing, or subsidies to help pay for cost sharing, are typically provided to low-income insurance subscribers, the chronically ill, and children. There are also usually caps or limits on the total out-of-pocket expenses that different groups of subscribers can incur as a result of cost sharing.
A prominent argument against cost sharing is that it will discourage the consumption of “necessary” medical services with the potential consequence of much larger future costs being imposed on the insurance system to remediate the discouraged earlier consumption.
Empirical evidence generally suggests that cost sharing at the point of consumption does lead to a reduced use of health care services at the margin; however, the evidence does not consistently establish that cost sharing results in adverse long-term health outcomes. This latter result might reflect the fact that exemptions and subsidies that are granted for specific services and for low-income and other “vulnerable” patient groups mitigate risks that cost sharing will discourage the consumption of necessary medical treatments and procedures.