11 February 1997 External T.I. 9635285 - MEDICAL EXPENSES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

		963528
XXXXXXXXXX	M. Eisner

Attention: XXXXXXXXXX

February 11, 1997

Dear Sirs:

Re: Private Health Services Plan (PHSP)

This is in reply to your letter of October 23, 1996 concerning the above-noted subject.

In your letter, you have indicated that many doctors have begun to charge their patients an annual fee to cover the cost of some services which are not covered by the Ontario Hospitalization Insurance Plan. A couple of examples of the items are telephone advice from the doctor and telephone prescription renewals. The items are listed by the doctor in advance and there is uncertainty that any of the items will occur for a particular patient.

One of your concerns is whether the annual fee paid by a patient is a qualifying medical expense under paragraph 118.2(2)(q) of the Income Tax Act (the Act) on the basis that the above arrangement qualifies as a PHSP as defined in subsection 248(1) of the Act. An additional concern is whether an otherwise qualifying PHSP, under which the patient is reimbursed for the annual fee, would continue to qualify as a PHSP.

Our Comments

The Department's general position on PHSPs is set out in Interpretation Bulletin IT-339R2. As indicated in paragraph 3 of that interpretation bulletin, one of the requirements of a PHSP is that it must be in the nature of insurance. In that regard, the PHSP involves (i) an undertaking by one person (ii) to indemnify another person (iii) for an agreed consideration (iv) from a loss or liability in respect of an event, (v) the happening of which is uncertain. In the given circumstances, it is our view that the payment for the availability of ancillary or incidental medical services is not for the type of indemnity coverage envisioned under the PHSP rules in the Act. Further, as indicated in paragraph 4 of IT-339R2, the PHSP coverage must be for hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under subsection 118.2(2) of the Act. It is our view that the payment being made for the availability of medical services would not be for "medical services provided" for the purposes of paragraph 118.2(2)(a) of the Act. Accordingly, the payment by the patient of the annual fee would not be a qualifying medical expense under paragraph 118.2(2)(a) of the Act, nor would it qualify as a "premium, contribution or other consideration" 118.2(2)(q) of the Act.

The above comments are general in nature and do not relate to a specific fact situation.

If a patient were to make a payment to a "medical practitioner" when medical services (such as telephone advice or a prescription renewal) have been rendered by the practitioner, it is our view that the payment would be a qualifying medical expense of the patient under paragraph 118.2(2)(a) of the Act. However, if the patient were reimbursed pursuant to a PHSP, the reimbursed expense would not be a qualifying medical expense for purposes of the medical expense tax credit by virtue of paragraph 118.2(3)(b) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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