# Monday, February 10, 2014
Author's note: this article was updated March, 2018.
Canadian Healthcare System 101
The Canadian healthcare system is often misunderstood and misquoted. How many times have we heard that Canada has "free healthcare" for all its citizens?

The Affordable Care Act in the U.S.A. is, once again, getting quite a bit of attention right now, and as a result the Canadian healthcare system is also receiving some extra scrutiny.

But how does the Canadian healthcare system really work? Read on to find out.

Overview of the Canadian Healthcare System

  • The system is not free; it is publicly funded by Canadian tax payers.
  • It is a "universal healthcare" system, meaning it is available to all Canadian citizens.
  • Healthcare is administered by the provinces (e.g. Canadian equivalent of states).
  • The federal government gives money to each province/territory for healthcare costs (known as federal transfer payments).
  • The Canada Health Act outlines how provinces must spend their federal government healthcare transfer payments.

Canada Health Act

At the basis of the Canadian healthcare system is the "Canada Health Act", adopted in 1984.

The stated objective of this Act is "to protect, promote and restore the physical and mental well-being of residents of Canada and to facilitate reasonable access to health services without financial or other barriers."

The Canada Health Act ensures a minimum quality of care via standards that all provinces must meet to qualify for federal healthcare transfer payments.

The Canada Health Act also:
  • Distinguishes between insured services (that are “medically necessary”) and extended healthcare services (e.g. not necessary).
  • Governs how provinces can spend their transfer payments.
  • Prevents provinces from using federal transfer payments to subsidize two-tier coverage using private insurance companies (Canada has a "single payer" system as opposed to a 2-tier system where people who can afford it pay extra for faster and/or better service).

If a province does not implement their healthcare plan in accordance with this act then the federal government can reduce their transfer payments accordingly. However, as noted in the Problems section below, rarely does the Canadian federal government step in and protect residents from problems such as extra billing.

How Canadian Healthcare is Funded

The Canadian healthcare system is funded by federal and provincial taxes on Canadian citizens and businesses.

Provincial taxes are used (in part) by the provinces for their healthcare programs as they see fit. In other words, the amount of provincial tax revenue that gets spent on healthcare for that province is solely up to the province. Note that some provinces such as British Columbia charge their residents a "healthcare premium" as opposed to a provincial tax.

Federal healthcare transfer payments are accomplished via the "Canada Health Transfer". For a province to receive this transfer the province must adhere to the policies set forth by the Canada Health Act.

The idea that Canadian healthcare is free stems from the fact that Canadians do not pay for healthcare (if medically necessary) at the time when they need it. Canadians just go to the hospital or clinic and get treated without paying a cent. They can do this, however, since their taxes have already paid for those services!  

According to a study done by the Fraser Institute (in 2014) a Canadian family with two parents and two children pays on average $11,320 in taxes that go towards healthcare. Certainly not free!

Canadian Healthcare System Problems

The biggest problem with the Canadian healthcare system seems to be the long wait times for medical procedures.

How long a Canadian has to wait for treatment depends on the province of residence and the nature of the treatment that is required.

Hospital emergency room wait times can be lengthy and are the most common type of wait time that Canadians complain about.

Another problem is that the demographics of Canadians receiving healthcare is changing. There are many baby boomers (born between 1945 and 1955) in Canada. These baby boomers are now entering their elderly years when things stop working and medical issues that require treatment occur more frequently. This will put further strain on the Canadian healthcare system since overall costs will increase while funding remains steady, resulting in a government healthcare deficit.

Some maritime (eastern Canada) provinces have lobbied the federal government to take into account the age of the province's residents, but so far the Canadian federal government has ignored these requests and will only take into account population numbers when allotting healthcare funds to the provinces.

Finally, there are more and more examples of medical facilities (doctors, hospitals, etc.) getting away with activities that are in direct violation of the Canada Health Act. A great example of this is extra billing, whereby doctors and hospitals bill residents for costs that are actually covered by the federal transfer payments (a form of double billing). See http://www.ontariohealthcoalition.ca/wp-content/uploads/March-25-2014-Private-Health-Clinics-Full-Report.pdf for more information.

What Does Canadian Healthcare Cover?

What Canadian healthcare covers depends on a person's province of residence. Generally speaking all medically necessary costs are covered by provincial healthcare, although what is "medically necessary" is constantly being redefined (and narrowed down).

Things that are usually not covered are:
  • Basic dental (exams, fillings, extractions, etc.)
  • Major dental (crowns, inlays, etc.)
  • Prescription drugs that are not administered in a hospital.
  • Specialists like physiotherapists, naturopaths, massage therapists, psychologists, etc.
  • Vision care (eye glasses, eye exams, prscrioption lenses, etc.)
  • Medical expenses while traveling out of province.
If you would like coverage for the expenses mentioned above you might want to consider getting an individual health insurance plan if you do not have employee benefits. Click here for an unlimited number of free quotes.

For a summary of a provincial healthcare plan please use the links below:


The single payer Canadian universal healthcare system is not free; it is paid for by Canadian federal and provincial government taxes on individuals and businesses.

It is a single tier system where everybody gets the same type of treatment regardless of their financial situation. This differs from two-tier systems where there is a basic level of coverage that everyone gets (first tier) along with a second level of better coverage for those who can afford it.

Will Canada ever go to a 2-tier healthcare system? It is a possibility and only time will tell if this single payer system is sustainable!

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