REGINA — Canada will slip into a two-tiered, health-care system if the Canada Health Act is not modernized, a new report prepared for the Romanow royal commission on health care warned Wednesday.

"The values underlying it don't need to be updated, but the way that we get there needs to be updated," said Colleen Flood, a University of Toronto law professor and co-author of the report.

"What people say at the moment is we have a process of passive privatization where, simply by doing nothing, the system is increasingly being privatized because we are shifting away from hospital and physician care into other areas."

The act needs to be expanded specifically into diagnostic services and separate legislation needs to be introduced for universal coverage for prescription drugs and home care, the report suggests.

The report also said the federal government needs to acknowledge the act - which is the basis for Canada's public health-care system - does not preclude for-profit firms from delivering services if they are 100 per cent publicly funded.

Former Saskatchewan premier Roy Romanow has commissioned 40 research and discussion papers to help him in formulating his report scheduled to be released later this year.

Two other reports commissioned for Romanow were also released Wednesday.

One dealt with the role of technological change and innovation in health care and the other examined government financing of health care.

There are five key principles in the Canada Health Act: universality, portability, public administration, comprehensiveness and accessibility.

Flood, who co-wrote her paper with fellow University of Toronto law professor Sujit Choudhry, said it was important to make clear the difference between the funding and delivery of health care.

Private, for-profit firms have a role in the delivery of health care if the funding is entirely public, she said.

A firestorm of controversy was created over Alberta's Bill 11 which allows private, for-profit clinics to do surgeries such as hip and knee replacements and keep patients overnight while billing the cost to medicare. Critics argued that giving private clinics such an expanded role was the thin edge of the wedge that would lead to private hospitals and queue-jumping by patients able to pay.

"There was a sense that there was going to be a real risk of more private funding coming in as opposed to private delivery. It ended not being the case but it certainly opened up a hornet's nest of debate," Flood said.

"We think what is actually essential is that care is fully publicly funded."

Romanow has said his commission is open to all ideas for reform, but ruled out abandoning the Canada Health Act.

In his interim report released earlier this year, he made no recommendations. Instead he outlined the basic options for reform, including more funding, user fees, private-sector participation and increases in efficiency.