Two-tier healthcare

Two-tier healthcare is a situation in which a basic government-provided healthcare system provides basic care, and a secondary tier of care exists for those who can pay for additional, better quality or faster access. Most countries have both publicly and privately funded healthcare, but the degree to which it creates a quality differential depends on the way the two systems are managed, funded, and regulated.

Some publicly funded universal healthcare systems deliver excellent service and the private system tends to be small and not highly differentiated. In other, typically poorer countries, the public health system is underfunded and overstretched, offering opportunities for private companies to deliver better-quality, albeit more expensive coverage.Chen, Zhang, & Hua. (2015). Analysis of two-tier public service systems under a government subsidy policy. Computers & Industrial Engineering, 90, 146-157.

In Canada, there are private and public healthcare providers with complete patient freedom of choice between which doctors and facilities to use.

The public financing system, unofficially known as Medicare, consists of several different systems managed by each province or territory. The federal government distributes funds to the provinces for healthcare providing the provinces design their systems to meet certain criteria which they all do. Most people receiving care in Canada do not pay for their care. The medical provider gets paid a fixed fee for the care provided. The law bans the medical provider from charging patients to supplement their income from Medicare. Medical care providers can set their own fees that are higher than the Medicare reimbursement fee, but the patient must pay all the cost of care, not just the excess.

About 70% of Canada's healthcare funding is via the public system. Another 30% comes from private funding, divided approximately equally between out-of-pocket funding and private insurance, which may be complementary (meeting costs not covered by the public system such as the cost of prescription medicines, dental treatments and copayments) or supplementary (adding more choice of provider or providing faster access to care) There are, however, financial disincentives that make private medicine for services that are covered by Medicare less economic.

Six of Canada's ten provinces used to ban private insurance for publicly insured services to inhibit queue jumping and so preserve fairness in the health care system. In a complex legal decision in 2005, the Supreme Court of Canada ruled that in some circumstances, such bans can be illegal if the waiting period was unduly long.

Some private hospitals operating while the national healthcare plan was instituted (for example, the Shouldice Hernia Centre in Thornhill, Ontario) continue to operate, but they may not bill additional charges for medical procedures. (The Shouldice Hospital, however, has mandatory additional room charges not covered by public health insurance. That effectively places it in the "upper tier" of a two-tier system. Welfare recipients, for example, cannot be referred there.)

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