Doomsday consensus on health care costs proves false

Nov 06, 2013

Doomsday consensus on health care costs proves false

November 6, 2013

We need to give credit to the reformers who have been making progress to improve our health-care system — and continue to support their efforts.

Health spending in Canada grew by only 2.6 per cent this year, according to the Canada Institute for Health Information (CIHI). That’s a far cry from the 7 per cent annual spending increases between 2000 and 2010.

This is the fifth straight decline in the growth rate and the third year that per capita health spending has dropped in real terms. As a share of GDP, Canada spends 11.2 per cent today, down from a high of 11.6 per cent three years ago. It’s fair to say that health care spending in Canada has essentially flatlined since the economic downturn of 2008-09.

This all happened despite the almost universal belief among opinion leaders that health spending is out of control and will bankrupt provincial governments. Opinion pages were littered with experts convinced that Canada was doomed to crippling increases in health care spending as the population aged.

Depending on the particular political preference of those making the claims, Canada either had to privatize the system, raise taxes to cover ballooning spending or “have an adult conversation with Canadians about facing reality.” Those of us who suggested that sensible, practical reforms were possible within the current model were dismissed as denying reality.

So, now we know the “doomsday consensus” was wrong. What happened?

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Well, looking at the most successful province, Ontario, the numbers are striking. For three years in a row, health care spending has increased by about 2 per cent each year, less than the growth rate of the economy. As a percentage of GDP, Ontario is spending six-tenths of a percentage point less on health care than three years ago.

Quietly and effectively, Ontario policy-makers have tackled each of the major cost areas within the system. For example, spending growth rates for hospitals, physicians and drugs are down dramatically due to structural reforms in the system.

In reality governments were paying more than necessary for health care during much of the past decade and growth was unreasonable. New technology investments produced real improvements in health care, but governments had not recouped the resulting productivity gains. So, while many procedures were now easier and quicker to perform, prices had not come down.

The “true costs” of providing many health care services have been going down for a long time, but only recently did governments apply more disciplined pricing. We’re starting to see spending fall more in line with underlying costs.

Government reforms brought down the cost of generic drugs, the 2012 agreement with the Ontario Medical Association has had a real impact in slowing the growth of physician salaries, and Ontario hospitals have shown real leadership, encouraging the government to invest funds in community care and to introduce pricing reforms..

Most importantly, while spending has come down, Ontario appears to have maintained timely access to care. Surgical wait times declined by about 8 per cent this year and Ontario now has the lowest wait times in the country. CIHI reports that the standardized mortality rate in hospitals has dropped by 11 per cent over the last three reported years in Ontario. There is little evidence that access or quality has suffered over the past four years as we have wrestled real growth in spending close to zero.

But more needs to be done. We need to continue to explore different ways to compensate physicians. We need to continue to move patients more quickly from acute care in hospitals into community care. We need to expand telemedicine and electronic and mobile health technologies. We need to adopt more evidence-based practices known to improve patient outcomes. We need to continue to revisit difficult questions about end of life care. We can do all of this.

The reforms of the past few years are not complete. They are a work in progress. If we continue to drive health care reforms across the system, we’ll realize more savings. We can expect several more years of low or no growth in health care spending which will allow fiscal room for other investments

We were told we’d go broke as spending rose 6-7 per cent every year and baby boomers gobbled up services. Well, data released last week suggest the doomsday consensus was wrong. Let’s give credit to the reformers who have been making progress to improve our system — and continue to support their efforts.

Matthew Mendelsohn is Director of the Mowat Centre at the University of Toronto. Will Falk is an Executive Fellow at the Mowat Centre and an Adjunct Professor at Rotman School of Management. They co-authored the 2011 report: Fiscal Sustainability and the Transformation of Canada’s Healthcare System, available at www.mowatcentre.ca.

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Matthew Mendelsohn

will-falk_BW Will Falk

Release Date

November 6, 2013

When the premiers meet Thursday in Niagara-on-the-Lake, jobs and skills will be at the top of the agenda. All governments should agree that a comprehensive skills agenda to help workers is necessary for Canada to remain competitive and for Canadians to feel economically secure.

And that’s why most of Canada’s premiers are disappointed with the federal government’s announcement that it will unilaterally cut the transfers that provinces use to pay for job-training programs.

The programs that the federal government plans to cut — delivered under the Labour Market Agreements — are those that fund training for Canadians who are not eligible for Employment Insurance. These workers are typically the most vulnerable and hard to serve. Many of the programs that could be cut are those that support the essential literacy and numeracy skills that are critical for unemployed Canadians to re-enter the workforce.

Why the federal government has chosen to pick a fight with the provincial governments that run the programs is a mystery. This very same federal government spearheaded these programs and was touting their success until the day it announced the decision to tear up the agreements. The federal announcement also goes against the government’s frequent promises that it will not cut transfers to provinces and will stay out of areas of provincial jurisdiction.

The federal government is proposing to use the $300 million diverted from the Labour Market Agreements to create a new program called the Canada Job Grant, which would pay employers to train workers through educational institutions. Employers would have to kick in one-third of the funds, and provincial governments would likewise have to come up with an additional third.

This would act as a windfall subsidy to employers who already provide the type of training covered by the program — mostly large employers — who could see their training bill fall by two-thirds. But it would probably be too complex and bureaucratic for many small and medium-sized employers to access.

Given that the maximum grant from the federal government would be $5,000 per trainee for short-duration programs, it is hard to see how this would actually help provide workers with the advanced skills they need to take the high-skill jobs where there really are labour shortages. There is simply no evidence to suggest that these small subsidies to large firms would be more effective than the current programs that provinces and communities have been building over the past decade to help unemployed people get jobs.

If the program goes forward, provincial governments will be on the hook for $300 million for this new program, and will have to come up with another $300 million to fund the training programs they currently offer. The federal government, on the other hand, won’t have to come up with any new money because it would fund its share of the program from the cuts it makes to existing transfers to support job training.

The federal government is changing the rules, sending the provinces a bill for $600 million, and not spending a cent of new money on skills training — all the while running ads touting its great new program for the unemployed. It’s not surprising that provinces are miffed.

But it doesn’t have to be this way. The appointment of a new minister, Jason Kenney, provides the federal government with an opportunity to hit the re-set button on the Canada Job Grant.

The federal and provincial governments all agree that Canada needs more and better skills training for unemployed people. No one suggests that every current program is perfect. Most recognize that the federal government has a role to play to strengthen the Canadian economic union and improve the functioning of the labour market. But a unilateral approach, along with cuts to transfers, will hurt, not help the shared goal of a highly skilled workforce and an efficient national labour market.

Nine years ago the premiers met in Niagara, just as they are doing this week, and agreed that a new era of federal-provincial co-operation was necessary for health care. The result was eventually the Canada Health Accord, which provided a decade of shared commitment to improving health care in Canada. Coming out of this week’s meeting, governments should strive for that same level of common cause on Canada’s skills agenda.

Federal and provincial ministers should come together, identify which programs have delivered the best results, and re-negotiate new Labour Market Agreements. Employers could certainly have a role. Canadians should not have their jobs and training caught in the middle of an intergovernmental dispute.

Matthew Mendelsohn is director of the Mowat Centre at the University of Toronto and a former intergovernmental affairs deputy minister in Ontario. The Mowat Centre/Caledon Institute paper The Training Wheels Are Off: A Closer Look at the Canada Job Grant, was released this spring (mowatcentre.ca).

Nov 06, 2013