Program Design and Long-Run Costs of a National Catastrophic Drug Insurance Plan

Abstract

There are strong arguments that national catastrophic drug insurance should be established in Canada with assistance from the federal government. The author of this paper projects the long-run program costs for two proposals for such a program: that of the Kirby Committee and that of the Romanow Commission. He concludes that both the annual program costs to the federal government and the share of the federal government on total prescription drug expenditures in Canada would increase dramatically under either program. Although the Kirby-style program requires less initial expenditure by the federal government than does the Romanow-style program, because of their different designs, over time the Kirby-style program would become more expensive. Moreover, the Kirby-style program would be more sensitive to the growth rate of prescription drug expenditure. The choices relating to the program threshold and federal cost-sharing rate have far-reaching influences on the long-run costs to the federal government.