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February 11, 2002

A Brief History on BC Health Insurance

The following brief history demonstrates that the government news release on the 50% increase in the MSP premium tax and claims by Finance Minister Gary Collins during the February 7th staged cabinet meeting are inaccurate. The history of BC's Medical Services Plan demonstrates that there has been no connection between hospital costs and MSP premium taxes other than the relation that exists between any tax in general and any expenditure in general. For the first time in BC's history, the Campbell government has established a link between the MSP premium tax and hospital costs by promising to fund wages increases with the revenue raised by the increase.

Revenue from the regressive MSP premium tax may at least offset some of the consequences of the reckless high income tax cuts announced the first full day the Campbell government was in office. Think of it as paying a flat tax to thaw part of the health freeze that followed from taking 5 points off of the top income tax bracket (while only 2 points came off the bottom bracket).

Historically, interest in public health insurance was demonstrated long before many health services were safe, let alone effective. In British Columbia, a Royal Commission to report on health insurance was appointed in 1919. In 1922 the B.C. legislature passed a motion urging "the Government of Canada to give early consideration to legislation for an adequate system of insurance against illness." In 1929, another B.C. Royal Commission was appointed to report on health insurance. A medical insurance plan was almost put into place but it was stopped just days before in was to go into effect in 1937. In its place a non-profit society, Medical Services Association (MSA), was created in 1938 with the support of the province's physicians. That society had nothing to do with government but it was frequently confused with the Medical Services Plan (MSP) that became responsible for public medical insurance in B.C. in 1968 (thirty years later).

Early in the development of health insurance the term medical insurance was used to mean insurance that paid doctors as opposed to hospital insurance which, you guessed it, paid hospitals. In 1948, British Columbia introduced provincial hospital insurance. The plan was originally financed with premiums. Financial difficulties were quick to appear as premiums were not paid. In 1954 the premium system was eliminated for provincial hospital insurance and replaced with a 2% increase in the sales tax.

Public medical insurance for those not covered by private insurance was first introduced for British Columbia in 1965 in the form of the B.C. Medical Plan. Most people were covered through one of two non-profit societies (MSA and CU&C) but like for profit insurers the societies were unable to provide insurance for those who needed it the most - the poor and elderly. This is a case of what insurers call adverse selection. That is a fancy way of saying that setting a premium high enough to pay the costs for the people who need the coverage the most results in them not being able to afford the coverage. The government's B.C. Medical Plan solved that problem by being an insurer of last resort (kind of makes you think of what the Campbell government might do to ICBC).

In 1968 universal public medical insurance was introduced in B.C. partially financed by a premium system. The Medical Services Commission (MSC) was established to oversee the plan. Initially the Commission oversaw both B.C. Medical which had been established three years earlier and the new Medical Services Plan (MSP) which took over coverage from all private medical insurers. Eventually the different organizations were merged into just one plan. MSA and CU&C (the two non-profit societies) continued to exist by marketing dental insurance. In 1996 MSA and CU&C merged to form Pacific Blue Cross.

In 2002, B.C. and Alberta remain the only provinces that use premiums. Manitoba and Ontario both replaced their premium systems with payroll taxes. B.C.'s MSP premium has become a tax.

If one does not pay an insurance premium, then the coverage is lost. If the uninsured person later wants to resume coverage, premium payments start from that point forward. That is NOT the way MSP premiums work. If you do not pay your MSP premiums government goes after you with a collection agency.

The Canada Health Act requires that 100% of a province's population be covered. That burden falls unfairly on emergency room physicians and on some physicians in lower income neighbourhoods because doctors are not paid by government when premiums are not paid. Some physicians may refer patients who haven't paid their premiums to clinics set up to deal with people in poverty or to emergency rooms. Theoretically coverage is continued when the premium isn't paid although it can become a problem to find a provider before paperwork is completed on an application for temporary premium assistance.

The Campbell government has said that it is not satisfied with the collection record for unpaid MSP premiums. Responsibility for collecting the premiums is being transferred to the Ministry of Revenue - yet another indication that the premium has become a tax.

The Campbell government has tried to claim that the 50% increase in the MSP premium tax effective April 1, 2002, is the result of wage settlements with hospital workers (HEU, BCNU and HSA). As the above history shows, until the February 7th, 2002, announcement the MSP premium was NEVER associated with hospital costs. It does determine whether physicians get paid but it is not supposed to determine whether service gets denied. Collection tactics are now being used that treat the MSP payment the same as an overdue tax.

Note: I managed CU&C Health Services Society from 1979-1988. Part of this column is based on a draft I submitted in 1998 to the Encyclopedia of BC for its section on the history of Medicare.


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