Moving to income-based drug coverage is the wrong prescription

By Steve Morgan

A version of this commentary appeared in the Calgary Herald, Edmonton Journal and the Huffington Post

The Alberta government has announced major pharmacare reforms: the province is planning to move from a system where public drug coverage is available mainly for seniors to a system where coverage will be restricted based upon income. Experience from other provinces suggests that income-based pharmacare will not pan out well for Albertans.

In an upcoming paper with the C.D. Howe Institute, my colleagues and I review evidence on pharmacare options available in Canada and abroad. One of the options we review is income-based pharmacare, which the government of British Columbia adopted a decade ago. That system, while successful in reducing public drug costs, has produced unforeseen consequences that call into question the overall success of such reforms.

All good drug plans must ensure access to necessary medicines. At a recent national symposium, experts from the pharmaceutical industry, government, patient groups, health professions and academia ranked this as the number one goal for pharmacare in Canada.

The trouble with income-based pharmacare is that it doesn’t deliver on this essential goal because individuals must spend considerable sums on medicines before public benefits kick in. Evidence shows that out-of-pocket charges prevent people from filling medicines that can improve their health, which would keep people out of doctor’s offices and hospitals – saving money to the overall public healthcare system.

Studies of British Columbia’s move to an income-based drug program found that seniors’ access to essential medicines fell and their use of other health care services increased. And contrary to claims, no studies have shown income-based pharmacare improved non-seniors’ access to medicines in British Columbia.

Just like medicare policy more generally, pharmacare policy should also aim to protect citizens against the financial consequences of an unforeseeable illness. This is where income-based pharmacare falls short – ironically so given that these programs are pitched as a “fair” way to provide drug benefits.

Income-based pharmacare is an “insurance” solution that is suitable for protecting people against random, one-time losses, such as having ones’ home burn down. But drugs are different than most one-time healthcare interventions – most drug prescriptions are for repeated, long-time use, where an ill patient requires ongoing treatment.

Data from British Columbia show that prescription drugs required by the sickest 20 percent of the population account for 80 percent of all drug costs. Whether young or old, these people typically require significant pharmaceutical treatments year after year, often until death. Asking chronically ill people to pay a given percentage of their incomes toward their medicine needs year after year is tantamount to taxing them for their poor health.

Because health generally deteriorates with age, most seniors live with chronic needs for medicines. They can therefore expect to bear the financial burden of deductibles under an income-based pharmacare program. Given that fewer employers are offering retirement health benefits – because doing so with an aging workforce will put individual employers and their workers under significant financial strain – retirees can’t rely on employment-related insurance to help defray drug costs.

The Alberta government has announced that an income-based universal plan will save $180 million annually by 2015. But is that really cost savings to Albertans or cost-shifting, meaning that sick Albertans will still need to pay for those costs but instead do so privately?

While British Columbia’s income-based pharmacare program dramatically reduced government spending on prescription drugs, total prescription drug costs didn’t fall. Instead, they grew more rapidly than before. Patients, particularly the elderly, and the employers and workers who fund private insurance plans had to pick up a larger and faster growing share of drug costs as a result.

Income-based pharmacare will not improve access to medicines. It will effectively tax the sick. And it will take away incentive and opportunities to better manage this critically important component of the healthcare system.

Albertans would be far better off if government expanded, and not contracted, public drug benefits. Virtually every health care system that is comparable to Canada’s shows that doing so would not only improve access and financial protection but would also reduce system-level expenditures dramatically.

But other countries’ governments have arguably done better in making the case to the electorate that they would be better off by expanding public health drug coverage. A very small increase in income taxes today could fund a broader drug program that would improve access, which would help reduce hospital visits from unfilled prescriptions. It would protect Albertans from the unforeseen private costs should they fall ill. And, most importantly, it would result in lower overall costs and especially lower costs to employers – and hence, higher wages – in the future.

For these reasons, Albertans should demand that pharmacare be expanded and made better rather than be contracted and made worse.

Steve Morgan is an expert advisor with EvidenceNetwork.ca and Associate Professor and Associate Director at the UBC Centre for Health Services and Policy Research.

March 2013

This Commentary is from Commentaries, Pharmaceutical Policy.

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