For more than 50 years the United States and Canada maintained illegal-drug policies that followed the same course: a long period of punitive prohibition followed by moderation and an emphasis on drug abuse as a public health problem. Then in the 1980s, the USA reverted to a punitive model while Canada increased its commitment to a health-based approach. Why this divergence after following the same path for so long? In this paper I argue that one factor was Canada's adoption of national health insurance, which guaranteed universal access to health care, including addiction treatment. As the country's most popular policy it was protected against budget cuts during a period of welfare-state retrenchment in the 1980s. In the USA, on the other hand, public health insurance was limited to the elderly and the poor, and addiction treatment services were isolated and stigmatized. Thus the public health side of drug policy was poorly positioned to resist welfare cutbacks and ascendant criminal-justice interests. The experiences of the USA and Canada have implications for policy reformers and for the study of how institutional interests cross policy domains.