From the Fraser Institute

By Nadeem Esmail, Mackenzie Moir and Lauren Asaad

In October, Alberta’s provincial government announced forthcoming legislative changes that will allow patients to pay out-of-pocket for any diagnostic test they want, and without a physician referral. The policy, according to the Smith government, is designed to help improve the availability of preventative care and increase testing capacity by attracting additional private sector investment in diagnostic technology and facilities.

Unsurprisingly, the policy has attracted Ottawa’s attention, with discussions now taking place around the details of the proposed changes and whether this proposal is deemed to be in line with the Canada Health Act (CHA) and the federal government’s interpretations. A determination that it is not, will have both political consequences by being labeled “non-compliant” and financial consequences for the province through reductions to its Canada Health Transfer (CHT) in coming years.

This raises an interesting question: While the ultimate decision rests with Ottawa, does the Smith government’s new policy comply with the literal text of the CHA and the revised rules released in written federal interpretations?

According to the CHA, when a patient pays out of pocket for a medically necessary and insured physician or hospital (including diagnostic procedures) service, the federal health minister shall reduce the CHT on a dollar-for-dollar basis matching the amount charged to patients. In 2018, Ottawa introduced the Diagnostic Services Policy (DSP), which clarified that the insured status of a diagnostic service does not change when it’s offered inside a private clinic as opposed to a hospital. As a result, any levying of patient charges for medically necessary diagnostic tests are considered a violation of the CHA.

Ottawa has been no slouch in wielding this new policy, deducting some $76.5 million from transfers to seven provinces in 2023 and another $72.4 million in 2024. Deductions for Alberta, based on Health Canada’s estimates of patient charges, totaled some $34 million over those two years.

Alberta has been paid back some of those dollars under the new Reimbursement Program introduced in 2018, which created a pathway for provinces to be paid back some or all of the transfers previously withheld on a dollar-for-dollar basis by Ottawa for CHA infractions. The Reimbursement Program requires provinces to resolve the circumstances which led to patient charges for medically necessary services, including filing a Reimbursement Action Plan for doing so developed in concert with Health Canada. In total, Alberta was reimbursed $20.5 million after Health Canada determined the provincial government had “successfully” implemented elements of its approved plan.

Perhaps in response to the risk of further deductions, or taking a lesson from the Reimbursement Action Plan accepted by Health Canada, the province has gone out of its way to make clear that these new privately funded scans will be self-referred, that any patient paying for tests privately will be reimbursed if that test reveals a serious or life-threatening condition, and that physician referred tests will continue to be provided within the public system and be given priority in both public and private facilities.

Indeed, the provincial government has stated they do not expect to lose additional federal health care transfers under this new policy, based on their success in arguing back previous deductions.

This is where language matters: Health Canada in their latest CHA annual report specifically states the “medical necessity” of any diagnostic test is “determined when a patient receives a referral or requisition from a medical practitioner.” According to the logic of Ottawa’s own stated policy, an unreferred test should, in theory, be no longer considered one that is medically necessary or needs to be insured and thus could be paid for privately.

It would appear then that allowing private purchase of services not referred by physicians does pass the written standard for CHA compliance, including compliance with the latest federal interpretation for diagnostic services.

But of course, there is no actual certainty here. The federal government of the day maintains sole and final authority for interpretation of the CHA and is free to revise and adjust interpretations at any time it sees fit in response to provincial health policy innovations. So while the letter of the CHA appears to have been met, there is still a very real possibility that Alberta will be found to have violated the Act and its interpretations regardless.

In the end, no one really knows with any certainty if a policy change will be deemed by Ottawa to run afoul of the CHA. On the one hand, the provincial government seems to have set the rules around private purchase deliberately and narrowly to avoid a clear violation of federal requirements as they are currently written. On the other hand, Health Canada’s attention has been aroused and they are now “engaging” with officials from Alberta to “better understand” the new policy, leaving open the possibility that the rules of the game may change once again. And even then, a decision that the policy is permissible today is not permanent and can be reversed by the federal government tomorrow if its interpretive whims shift again.

The sad reality of the provincial-federal health-care relationship in Canada is that it has no fixed rules. Indeed, it may be pointless to ask whether a policy will be CHA compliant before Ottawa decides whether or not it is. But it can be said, at least for now, that the Smith government’s new privately paid diagnostic testing policy appears to have met the currently written standard for CHA compliance.

Nadeem Esmail

Director, Health Policy, Fraser Institute

Mackenzie Moir

Senior Policy Analyst, Fraser Institute

Lauren Asaad

Policy Analyst, Fraser Institute