Healthcare in Ontario: How does it Work and How is it Funded?

May 30, 2018

The healthcare system in Ontario can be confusing, and most people don’t quite understand how it works and how it’s funded. We pay our taxes, but then what happens? Where does that money go, and how does it impact our healthcare system? This guide will help answer those questions in a simple, easy-to-understand way.

The following flow chart provides a summary of the major Operating Expenses for the MOHLTC along with their sub-category expenses. Don’t worry, this will all be explained below! For a more in-depth flow chart, click here.

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Canada Health Act

In order to understand how our healthcare system operates in Ontario, we first need to look at the Canada Health Act. The Canada Health Act might not be the most exciting thing to talk about, but it’s needed to set the backdrop for the rest of the information below.

This piece of government legislation was adopted in 1984 and provides the conditions and criteria that each province must follow in order to receive federal transfer payments. The key conditions within the act include: public administration, comprehensiveness, universality, portability, and accessibility. To learn more about the Canada Health Act and each of these conditions, click here.

It’s important to mention that the Canada Health Act doesn’t state how healthcare services should be delivered, rather it deals with how the system is financed. The Act sets the overall guidelines, but each province within Canada independently determines the service delivery model for their geography. We’ll be focusing specifically on Ontario’s healthcare system, how it works, and how it’s funded.

Follow the Tax Dollars

It all starts with tax dollars. Here we are, good tax paying citizens of Ontario. We’re going to pretend that all of our taxes goes to the Ontario government. Some goes to the municipality, the federal government, etc., but for simplicity we’ll pretend it all goes to the Ontario government.

For every dollar that the government collects, what percentage do you think goes towards our healthcare system in Ontario? The correct answer is right around 38.7%. Yes, 38.7% of every tax dollar that we give to the Ontario government goes towards our healthcare system^[1]. Based on what you know about healthcare, is this funding enough to sustain our healthcare system in Ontario?

When we say 38.7% of tax dollars goes towards the Ontario government, where does it actually go? It goes towards a governing body called the MOHLTC. If you’ve never seen this acronym before, don’t worry, you’re not alone. It stands for Ministry of Health and Long-Term Care. This is the ministry that takes the 38.7% of tax dollars and decides what to do with it.

Ontario Taxpayer Graphic

But the MOHLTC’s role is not actual service delivery – their role is to create the legislative landscape for Ontario’s healthcare system to operate. They collect the money, and then disperse the money appropriately. The Ministry of Health takes the money and divides it up into 8 main segments of operating expenses^[2]:

Ontario Health Insurance Program
Population and Public Health
Provincial Programs and Stewardship
Local Health Integration Networks (LHIN)
Ministry Administration
Health Policy and Research
eHealth and Information Management
Information Systems

We’re going to focus on the first four of these segments, since these are the largest expenses for the MOHLTC. Each one of these segments accounts for more than 1 billion in annual spending!

MOHLTC Funding Pie Chart View Larger

Ontario Health Insurance Program

The three main areas of the Ontario Health Insurance Program include Ontario Health Insurance, Drug Programs, and Assistive Devices. These three categories can be broken down further into several smaller segments, but we’re going to keep things simple and focus on our provinces Physicians / Practitioners and our OHIP Clinics, which are part of the Ontario Health Insurance category. These two segments combined represent more than 14 billion dollars from the 19 billion dollars allocated to the Ontario Health Insurance Program, and more than 26% of the MOHLTC’s overall operating expenses!^[2]

OHIP health card graphic

Physicians / Practitioners

Everyone knows physicians – you probably don’t like seeing them because it often means something is wrong, but you know who they are. There are pediatricians, surgeons, family practitioners, dermatologists, and more. What most people don’t know however, is that most of the time, physicians are independent contractors that run their own business. Unless you’re on staff at a hospital, like a Chief Medical Office or the Head of Cardiology, you’re just a contractor for the hospital.

That’s something that hospitals often struggle with, the fact that most doctors aren’t actually employees of the hospital. Their billings don’t even come out of the hospitals budget because they bill directly to the Ministry of Health. Remember all those tax dollars we give the Ministry? Well this is where a portion of those tax dollars go.

Group of Ontario physicians graphic image

OHIP Clinics

When people think of OHIP Clinics, they often think about Physiotherapy clinics, but OHIP clinics include so much more than that. Have you ever gone for an x-ray, ultrasound, MRI or other type of medical imaging? What about blood work? Almost everyone has gotten blood work done at least once in their life, and sometimes even annually. These diagnostic clinics are also OHIP funded, and get directly funded through the Ministry of Health.

Depending on the service, your coverage, and eligibility for OHIP, these services can be free or provided at a minimal cost, just like when you see a primary care physician. But behind the scenes, these clinics are billing directly to the Ministry of Health.

Set of OHIP clinic graphic icons

Population and Public Health

The Population and Public Health segment is responsible for exactly what it sounds like… the health of the public. For example, Toronto Public Health is responsible for Toronto’s general health. They’re responsible for things like making sure emission levels are being monitored and maintained.

When there are disease outbreaks, they make sure that there are announcements being made and protocols put in place to stop the spread of disease.

When you go into a restaurant, you hope to see a big green checkmark at the door that says “Approved by Toronto Public Health”, which means they don’t have a rat infestation. Be cautious when you see a red or yellow sign!

When there’s risk of cold weather and a Cold Alert is announced, guess what they’re doing? Opening up warming centres, making sure homeless people have access to areas of warmth, and advocating for more shelter beds.

From disease outbreaks to infection prevention, healthy eating programs to managing Smoke-Free Ontario, the Population and Public Health section of the MOHLTC’s budget is responsible for all of these issues that affect the health of the general public.

Public health No Smoking graphic

Provincial Programs and Stewardship

The funding allocated to Provincial Programs and Stewardship includes Provincial Programs, Emergency Health Services, and Stewardship.

Provincial Programs includes transfer payment accountability along with operational policy development for a wide range of special programs, like Cancer Care Ontario, HIV/AIDS and Hepatitis C programs, contributing Ontario’s share of funding to Canadian Blood Services, and more. Things like “transfer payment accountability” and “operational policy development” may not sound exciting, but they’re important aspects of our healthcare system.

Beyond that, this section of funding also goes towards emergency health services, such as ambulances and ambulance communications. Most land ambulance services are municipally operated/contracted, and the not-for-profit air ambulance Ornge is also included within this funding. These services are a vital part of Ontario’s healthcare system by providing safe and timely care and transportation for sick or ill individuals, so they can access the healthcare services that they need.

A lot of people take for granted the fact that these emergency transportation services are essentially free of charge for Canadian citizens – but the funding has to come from somewhere, and yes, it comes from a small percentage of your tax dollars!

Ambulance and healthcare graphic

Local Health Integration Networks (LHIN)

Local Health Integration Networks are the “infrastructure” for lots of Ontario’s healthcare system. There are 14 LHINs in total, and they’re all geographically aligned based on the population within Ontario. Since the LHIN’s are geographically aligned with the population, the larger and denser areas within Ontario have more LHINs.

In short, the LHINs are responsible for the local planning of health services. They examine the specific needs of their community, and then design programs to deliver the appropriate care for that community’s needs. We can look at some of each LHINs main responsibilities by breaking it down into four sections: Long-Term Care Homes, Community Support Agencies, Hospitals, and Home and Community Care.

LHIN Flowchart

Long-Term Care Homes

It’s important to make a distinction between Long-Term Care Homes vs. Retirement Homes. Let’s look at this in two ways: from a clinical perspective, and a financial perspective.

Clinically, in a long-term care home you don’t necessarily need to be able to direct your own care, whereas in a retirement home, you do need to be able to direct your own care. There are exceptions, but that’s the general rule. In some retirement homes you can get special licenses to do dementia care and things like that, but generally speaking, if you can direct your own care, you belong in a retirement home.

Financially, long-term care homes are usually government funded, and retirement homes are privately funded. But sometimes, when people can’t afford a retirement home, they end up in a long-term care home, even if they’re fully capable and high-functioning human beings.

When living in a long-term care home, there is a co-payment required to help contribute to the costs of the facilities. These co-payment amounts are set by the government, and are to be paid directly to the long-term care facility. If you don’t have the economic means to afford the co-payments, you can apply for a subsidy, which will be decided based on an income means test.

Long term care homes

Community Support Agencies

Another thing that the LHINs are responsible for are community support agencies. These community services are free for people that don’t have a lot of money, or don’t speak English, or are elderly, etc. (depending on the service). For example, there are addiction services that are publicly funded, where you can go in for free and receive treatment.

There are also services that most people don’t even realize fall under this category. A lot of seniors are lonely and isolated, and can’t get to a grocery store. They don’t have the proper nourishment to stay healthy. Well guess what, as part of our publicly funded system, we have support services like Meals on Wheels to deliver food to seniors’ home for a small fee.

There are transportation services that bring seniors to appointments; companies like TransCare receive government money just to make sure seniors can get to and from appointments safely.

These community support agencies aren’t really medical, but they deal with the social and psychosocial aspect of our healthcare system.

Senior transportation graphic

Hospitals

Let’s think about the local communities within Ontario for a second. What would be the difference between, let’s say, the Toronto Central LHIN (Toronto), and the Northeast LHIN (Timiskaming, North Bay, etc.)? There are population age differences, lifestyle differences, population density differences, and much more.

For example, think about Kirkland Lake, where the closest hospital is in New Liskeard and is a 2hr drive away. Remember the Canada Health Act requires that we provide equal and universal access to healthcare. When you start looking at the different geographies within our own province, there are very unique needs. Therefore, since the LHINs are responsible for the local planning of healthcare services, hospitals fall within their umbrella.

Home and Community Care

This Home and Community Care category used to be called the Community Care Access Centres (CCACs), which up until May 2017, worked separately (but aligned) with the LHINs. For each of the 14 LHINs, there was a respective CCAC. In relation to the Patients First Act, 2016, the government did some restructuring and decided that it’s actually better for taxpayer’s money to get rid of that extra level and instead have the money flow directly from the LHINs into Home and Community Care.

From a clinical and medical context, there are several services that the government will fund for home and community care. These services include:

Understanding Alternate Level of Care (ALC), ie. ‘Bed Blockers’

One of the biggest problems that Ontario hospitals are facing is that there are simply too many people coming! As hospitals continue to accept and admit patients, there’s a physical, finite resource that gets used. That resource is beds.

More than 14% of the people in Ontario’s hospitals right now don’t actually belong in the hospital^[3]. Have you heard of the term Alternate Level of Care (ALC), or ‘bed blockers’? These 14% of hospital beds are being ‘blocked’ by people that don’t require acute care and are stable enough to be discharged back into the community, to their home, or someplace else like a long-term care home or retirement home.

But lots of these people can’t be discharged. They might not have supportive housing, or their family might not want to take care of them. Maybe they think government services won’t be enough to support them, or maybe there’s too long of a waitlist at long-term care homes and they can’t afford a retirement home.

This creates an interesting paradigm that the hospitals and LHINs are faced with. How do we as a province reduce the amount of ALC patients to free up beds for people requiring acute care?

Hospital beds

Hospitals vs. Home Care – Which is More Expensive?

What do you think it costs to be in a hospital per day, on average? For your bed, your food, all of your care, the hospitals overhead costs, etc. The numbers can vary greatly depending on the patient’s needs, but estimates range from $450 on the low end, to $842, and upwards to over $1,530^[4],[5],[6].

Now what do you think it costs for that same person to be on a homecare program, a program that requires public taxpaying dollars only for service delivery and not for food or overhead costs. It’s about $42 – $45^[4],[5], but can be upwards to $150 or more if the patient is palliative or requires more specialized care.

Taking the midrange of these estimates, it costs the public on average 8 times more in taxpayer dollars for someone to be in the hospital versus the comfort of their own home. Isn’t that crazy to think about!?

You don’t have to be an economics major to make the decision, where would you rather have your money flow? Would you invest your money at $1,530 per day in the hospital, or at $150 in the home and community care sector? Looking at it from a personal lens as well, do you think people would rather recover at home, or would they rather be in the hospital? Probably at home.

What’s happening now is the MOHLTC is increasing the amount of money that they’re giving to the home and community care sector, providing an additional $100 million in 2017-2018 on top of the existing 5% budget increase since 2013^[7]. Hospitals on the other hand had a rate freeze for 4 years starting in 2012, but since the rate freeze ended they have seen annual budget increases of approximately 3.2%, with promises of future increases up to 4.6%^[8].

Image of unsure man making a decision

Putting the Pieces Together

We have an aging population and a large number of seniors that are going to be entering our healthcare system soon, so it’s important to find ways to make our healthcare system sustainable.

The theory is, if we can reduce the amount of ALC patients by moving them into home and community care, we can give them better access to services while also increasing the amount of funding available for long-term care homes, creating a downstream capacity.

It’s an interesting problem that our province’s healthcare system faces. Where are we going to continue to invest to get better outcomes?

We’re focusing on preventative medicine, proactive care, looking at the social determinants of health and psychosocial aspect of health by providing non-clinical services, and trying to figure out how to move people from hospitals into a cheaper setting. Therefore, this in turn should reduce the cost of our healthcare system and help create a sustainable future for healthcare within Ontario.

Image of man with an idea