A version of this commentary appeared in the New Brunswick Telegraph Journal, the Huffington Post and the Halifax Chronicle Herald
The New Brunswick Drug Plan bears little resemblance to catastrophic drug plans in other provinces. That is a good thing.
All models of “catastrophic” drug coverage found across the country involve high deductibles — amounts of money that patients must pay themselves for the prescriptions they need before public subsidies kicks in to cover further prescription costs. These deductibles are set at a percentage of household income, ranging from 3% of income in some provinces to a staggering 10% in others.
Drug plans with such high deductibles fail to achieve three of the most important goals for public drug coverage policy.
First, they do little to promote access to necessary medicines.
Only patients with extreme needs for medications receive coverage under catastrophic drug programs. And those that do, must wait until they’ve filled many prescriptions before the system assists them. Research has shown that many patients faced with this option will choose not to fill their prescriptions because of cost.
The New Brunswick Drug Plan avoids this problem by providing coverage without deductibles. This means more people will be able to afford the drugs they need which will save the health care system money. It’s simple logic: when more patients can afford to fill (appropriately prescribed) prescriptions designed to keep them out of hospitals, more patients stay out of hospitals.
Second, high-deductible catastrophic drug plans provide little protection against the high cost of medicines. In fact, annual deductibles are tantamount to taxes on poor health. The chronically ill pay their deductibles every year, whether they want to or not. Healthy people don’t face such costs at all.
New Brunswick is tackling this too by essentially forcing everyone to participate in the drug plan. However, although it will be universal, the New Brunswick Drug Plan is supposed to be financed just like “insurance” — with premiums. This is a problem.
The government has yet to announce how premiums will vary with income once mandatory participation in the plan begins in 2015, but any student of economics can tell you that collecting premiums is administratively costly and regressive. In comparison to tax financed health care — like Medicare — premium financed drug benefits will essentially be a hand-out to the rich because the premiums force lower income people to pay a much higher share of income toward the system.
The third major shortcoming of traditional catastrophic drug plans is that they limit the capacity to control pharmaceutical costs. High-deductible programs make the public plan the “payer of last resort,” which reduces government’s purchasing power and subsidizes inefficient private drug benefit plans.
Unfortunately, the New Brunswick Drug Plan does not change this. Instead, it requires employers and unions to use high-cost private drug plans rather than brining everyone in the province together into a much more efficient public plan.
Quebec’s experience with a system similar to the New Brunswick Drug Plan shows private drug plans will attract employment groups comprised of relatively wealthy, healthy, and therefore, low-cost clients. Even worse, systems that make private drug coverage mandatory create little incentive or capacity to control the cost of drugs prescribed. Instead, private plans simply pass annual fee increases onto employers and unions.
The inefficiency of a multi-payer system costs citizens of Quebec hundreds of millions of dollars every year. Such a system will cost New Brunswick millions every year as well.
It is not too late to change this because the new law gives employers and unions a year to opt out of private coverage. Unions and employers across New Brunswick could therefore agree to dismantle all private drug plans in exchange for slight salary increases sufficient to cover the costs of participating in the public plan starting in 2015.
This would benefit employers by dramatically reducing the current and future cost of extended health benefits that they are not well positioned to manage in the first place. It could even create a labour market advantage by reducing the cost of employing people in New Brunswick as opposed to Quebec or elsewhere in Canada.
The only strong opponents to a universal public plan are companies that sell insurance or prescription drugs. Their opposition to universal public drug coverage should tell you something. They stand to make millions more in New Brunswick if the province goes ahead with a private-public mix of insurance coverage.
Steve Morgan is an expert advisor with EvidenceNetwork.ca, Professor in the School of Population and Public Health and incoming Director of the Centre for Health Services and Policy Research, University of British Columbia.