In Canada’s health-care debate, private care is often cast as a threat to universal health care. But the reality is more complex: private providers already deliver much of Canada’s publicly funded care.
Doctors run private practices, many clinics are privately operated, and about 30 per cent of health spending is through private insurance or out-of-pocket payments.
Canada is not unique in this respect. In universal health-care systems around the world, the private sector plays a substantial role — including in Australia, home to one of the world’s top-ranked health systems.
“We have a very strong private system, and in primary care, most of the health care that is funded through the Medicare arrangement is delivered by private businesses,” said Mark Cormack, a professor and health‑system policy expert at the Australian National University.
“Virtually all [of Australia’s] pharmaceutical program is delivered by private businesses. And we have a private hospital system and the government underwrites that.”
Sources say that integration helps explain why Australia consistently ranks at or near the top of the Commonwealth Fund’s widely-cited report on global health systems. Canada, by contrast, placed seventh in its most recent report.
In this second article in our health-care series, we examine the role of the private sector in Canada and Australia. And we explore the reforms that moved Australia’s system from one that looked a lot like Canada’s into the world-leading model it is today.
Canada’s private structure
In Canada, federal and provincial governments cover about 70 per cent of health-care spending, with the remainder coming from private insurance or out-of-pocket payments.
The Canada Health Act, which underpins universal care, allows private providers to deliver services, but forbids them from charging patients directly for medically necessary care.
In addition to mostly private physician practices, many specialist clinics, labs and imaging centres are private. Private providers also dominate prescription drugs, mental health care, and dental and vision services.
Hospitals are typically publicly funded and either owned by the provinces or non-profit organizations.
Despite its sizable role, private care is a political third rail in Canada, often generating fears it will lead to a two-tier system that threatens universality.
“I think it’s just a simple misunderstanding of how health policy actually works in some of these other countries,” said Nadeem Esmail, director of health policy at the Fraser Institute think tank.
Critics frequently point to the U.S. — with its largely market-based system with fragmented insurance — as a cautionary example. The U.S. consistently ranks lowest in the Commonwealth Fund report.
But Esmail notes that other top-ranked countries successfully combine public coverage with a robust private sector.
“More and more countries are moving towards the Australian model, towards the Swiss, German, Dutch models, and away from the predominated-by-government, monopolistic Canadian model,” he said.
“[They recognize] this is how you shorten wait times and achieve higher performance and a more reasonable cost,” he said, noting Canada’s approach to funding doctors and hospitals provides little incentive to improve performance or expand patient choice.
Australia’s private sector
In the Commonwealth Fund report, Australia ranked first overall, excelling in health outcomes, equity and administrative efficiency.
“The two countries with the highest overall rankings, Australia and the Netherlands, also have the lowest health care spending as a share of GDP,” the report notes. Australia spends the least of any ranked country, at 9.8 per cent of GDP.
Like Canada, Australia’s universal health-care program, Medicare, guarantees free access to medically necessary services, including hospital care and subsidized doctor visits.
But unlike Canada, Australia relies on private providers to deliver more primary care, and incentivizes individuals to purchase private insurance for faster access and greater choice.
“[Australia] really perceives the private sector as a partner and as part of the system, as opposed to something to be regulated out of existence, like we do here in Canada,” said Esmail.
Don Nutbeam, a board member of Western Sydney Local Health District, says that partnership extends to hospitals.
“When the public system [is] under pressure, as my organization has been, we can, from time to time, enter into a contractual arrangement with the private sector to help us reduce waiting times and waiting lists,” said Nutbeam.
“That brings a bit of flexibility into the system — at cost, of course.”
Cormack, of Australian National University, says that flexibility is by design.
“If you’ve got the public and the private systems working together, the private system can take the pressure off the public system, which is for everybody,” he said.
Australia was not always structured this way. Until the 1990s, its system resembled Canada’s model today: predominantly publicly funded, with private providers playing a limited role.
That changed in the late 1990s, when governments introduced policies to actively integrate private insurance and providers into universal care.
Nutbeam, who is also executive director of the research collaborative Sydney Health Partners and a professor at the University of Sydney, says those reforms helped normalize private care in Australia.
“The cultural shift that led to our government introducing incentives to bring people into private care has left us with a situation where there’s less stigma [around private care],” he said.
“People prioritize spending [their own money] on health.”
Incentives
A typical private health insurance policy in Australia costs around C$3,000 a year for a single, middle‑aged adult and around $6,000 for a family.
These policies mainly cover elective treatments such as joint replacements, as well as “extras” like dental, vision and physiotherapy.
Insurance is not mandatory, and it does not generally cover primary care, which refers to routine visits to family doctors that are funded by Medicare.
The government provides three incentives for people to buy private insurance.
The first is an income-tested rebate that subsidizes premiums.
“The government, for most people, will subsidize between 25 and 35 per cent of the cost of the private health insurance premiums,” said Cormack.
Lower-income Australians receive the largest rebates, but still pay part of the premium.
Second, the government nudges higher-income earners into the private system through the Medicare Levy Surcharge, which is a tax on those who do not hold insurance.
“Because I’m a high‑income earner, if I don’t take out private health insurance, they will hit me with a 1.25 per cent tax levy,” Cormack said.
Third, Australia penalizes later in life insurance purchases. Anyone who first buys coverage after age 30 is charged a higher premium by insurers, and that premium rises over time.
With these incentives, about 55 per cent of Australians carry some form of private health insurance. But nearly all Australians still rely on the public health system, particularly for hospital and primary care.
“The public hospital system is used by the rich and the poor alike,” said Cormack. “Access to care is solely based on the urgency of … your clinical need, and there is zero co-payments right across the country.”
Cormack says many Australians choose to buy insurance because it speeds up access to non-urgent care.
“I can get in pretty much for any procedure, anywhere in Australia, within a week or two, if it’s not urgent,” Cormack said.
Patients also have more choice over their doctor and hospital in the private system.
“I choose my physician or surgeon — I don’t have it assigned for me by a hospital,” said Cormack. “Whereas in the public hospital system, you don’t necessarily get a choice of medical practitioner.”
Not perfect
Despite ranking first overall in the Commonwealth Fund report, Australia’s system is not without its limitations.
It ranked ninth out of 10 for access to care, which measures affordability and availability.
“Roughly half of Australian patients who do not choose to purchase voluntary health insurance may have to wait longer to receive services,” the report says. “Affordability [for patients] is also a noted problem.”
Nutbeam says wealthier patients are often able to move through the system more quickly.
“It does entrench inequity,” he said. “Some people have access to … more immediate care — not necessarily better, but more immediate care — than others. Some people have choices that others don’t.”
Patients can also face costs at the point-of-service, exacerbating affordability issues, particularly in primary care.
“In the kind of area where I live, it’s almost impossible to find a general practitioner who will provide you a service without a supplementary fee,” said Nutbeam.
Even for Medicare-funded visits, patients may have to pay a gap fee if providers charge more than the government reimbursement. Private insurance does not typically cover these costs.
“More often than not, people find it hard to find a provider in the private system who will actually deliver at the level that’s set by the insurer, and they end up not only paying private insurance but also covering a gap payment when they have a procedure,” he said.
Finally, the way care is paid for risks shaping how it is delivered.
“Our fee-for-service payment system … absolutely incentivizes medical practitioners to become very efficient at delivering high volumes of care,” said Cormack. “The downside of that is we may not be necessarily incentivizing the best treatment.”
Even in a top-ranked system, trade-offs persist.
“We sometimes feel a bit surprised when we’re ranked so highly, because there are certainly many aspects of the system that work really well, but there are certainly some challenging areas,” said Cormack.
At the same time, experts emphasize the strengths of Australia’s system.
“We have a pretty impressive system in Australia … [we have] a strong system of governance and a very strong commitment to clinical safety and quality in our publicly funded system — very proud of that,” said Nutbeam.
Cormack agrees.
“[Strong health care] is part of our culture … our right to be able to access services across those domains is pretty much bipartisan. It’s really resilient, and anybody who tries to tamper with it will get kicked out of office.”
