Saturday, December 24, 2011

Is the Conservatives 3%+ limit on annual health care spending reasonable?

On the eve of federal-provincial healthcare negotiations the federal government has unilaterally announced that after 2014, federal health transfers to the provinces will be capped at 3% or the rate of growth in the economy, whichever is higher. According to  Finance Minister Jim Flaherty, anything more would be "unsustainable".

Taxpaying citizens may well consider this to be a reasonable limit. After all, simply feeding an endless provincial appetite for healthcare money may discourage provincial health care systems from making needed reforms. The federal government cannot be expected to go into permanent deficit just to help provincial governments to avoid change.

Nevertheless, there are at least three considerations that make me question the government's claim of reasonableness. They  concern the constitution, the historical context, and the question of the government's ideological agenda.

First,  it is a matter of constitutional fact that the provinces are weighed down with 90% of the responsibility for health care and its attendant costs, but only get 50-60% of the revenue. Even if a global cap on growth in spending of the magnitude that Flaherty envisions were necessary,  it might be reasonable for the federal government's share of that spending to be higher.

Second, historically we need to ask whether the demographic bulge that occurred after the Second World War would have been cared for nearly as well had the federal government restricted itself to 3% spending growth. Would there have been as many hospitals, schools, teachers, doctors and nurses caring for our children? If not, why should we apply that restriction when the same demographic bulge is again in need of more extensive health care?

Third, we should be aware that this  government is a little too comfortable with the idea of squeezing the provinces fiscally, and then not strictly enforcing the Canada Health Act (all  in the name of respecting provincial autonomy, of course). The effect will to be encourage the privatization and profit orientation of health care, the consequences of which are not likely to be less expensive for Canadians overall (even if it is less expensive for them qua taxpayers).

In sum, we can defend the interests of both the single taxpayer and our single payer system for essential medical services. We need not be as fiscally hamstrung as the Finance minister avers.

Monday, December 05, 2011

Therapy or Surgery? Don Drummond's new CD Howe Report on Health Care Reform

Normally, whenever a new report on health care reform comes out of a place like the CD Howe Institute, I brace myself  to do battle with yet another  wrong-headed prescription for privatized medicine. Yet Don Drummond's new report for the CD Howe Institute, "Therapy or Surgery: A Prescription for Canada's Health System," is an exception: a measured response that respects the potential that the single-payer system has for achieving value-for-money and sustainability.

First, let me summarize where I am coming from:  A decade ago, I began my full-time academic teaching career at the University of Victoria, where I taught Federalism and Public Policy a couple of times. Coincidentally, three major reports--those of t the federal Romanow Commission, and the Senate Kirby Report  he Alberta Mazankowski Report,--had recently come out and described the main parameters of future health care reform. Romanow concluded that our system is "as sustainable as we want it to be";  this was valid, but begged the question of whether Canadians should compromise the quality of other services to preserve the health system. The Kirby Report exemplified the New Public Management of the 1990s ( single payer plus competitive market delivery of health services).These conclusions were  good but over-drawn: competitive , for-profit hospitals were shown by a huge meta-study  to have poorer health outcomes than non-profits; in addition more competitive delivery would risk greater exposure to international trade obligations and potentially compromise governments' ability to reverse policy mistakes.  Meanwhile, Mazankowski  in Alberta contemplated greater private funding of health services.  I took the position that  the Mazankowski approach risked throwing out the baby  of the single payer system (equity with efficiency) with the bath water.  The way forward, I concluded, lay 'somewhere between Romanow and Kirby,' but where exactly?

Drummond's answer is divided into three parts, which he conveniently labels as diagnosis, prognosis and treatment.

THE DIAGNOSIS: Canada currently has the seventh most expensive system in the OECD--spending $192 billion on healthcare in 2010, or 11.7 percent of GDP. This looks good next to the US at 16%, but when one considers that many of the other countries in question actually have older populations, that figure is worrying. Canada shows several symptoms of a country that is not getting value for money, such as:
1) Health costs are rising approximately twice  as fast as the economy.
2) Canada emphasizes treating symptoms of bad health rather than prevention; it is too reactive
3) Comparatively little adoption of cost-effective treatments--e.g. way more hospital admissions for diabetes    than other countries, more caesarean sections and hysterectomies than are medically advisable.
4) 13% of all hospital days go to non-acute patients. This contributes to clogged emergencies and ambulance services, classic symptoms of a system built for acute care when the needs have shifted to chronic care.
5) The OECD noted in 2010 that Canadian generic drug prices were the highest in the OECD (why?). While some provinces are taking steps to reduce these costs, the Canada-EU trade agreement could limit Canada's room to manoeuvre in this regard.
6) A study by the Commonwealth Fund in 2010 of 7 advanced industrial countries ranked Canada second-to-last on efficiency and overall quality, and dead last on timeliness of care.
7) Canada has 19 physicians per 10,000 population, whereas the United States has 27 and European G7 countries have over 30.
8) According to the OECD, Canada has a relatively narrow scope of public coverage: essentially, medicare pays for physicians, hospitals and little else. While that may sound like a cost-saving, that encourages over-use of more expensive services and facilities.

In sum, Canada , does not deliver great value for money compared to many other countries, BUT--if you read  Drummond's list of symptoms carefully--you will notice that the single payer system per se is not to blame, but rather the collective failure to understand its pitfalls (such as reactive inefficient fee for service) and to realize its potentials (broader coverage in a cost-effective fashion).

THE PROGNOSIS: Healthcare Costs will continue to rise faster than the economy

The aging of the population is not as big a factor as is commonly assumed. Drummond breaks down the 6.5% annual increase in Ontario's  health costs this way:

1. 1 percentage point from population growth;
2. 1 percentage point from ageing (up from 0.5 over the past decade);
3. 2 percentage points from general inflation (current Bank of Canada target);
4. 0.5 percentage point from extra inflation in the health sector (consistent with
recent patterns);
5. 2 percentage points from an increase in intensity (down from 3 percentage
points over the past decade when one percentage point reflected catch-up after
the cutbacks of the 1990s), reflecting the greater per-person use of the system
from adopting new technologies and information systems, which allow new
opportunities for treatment.

It is difficult to escape the conclusion that healthcare costs will continue to rise considerably faster than economic or productivity growth. Nevertheless, the fact that aging per se  is only 15% of the problem encourages one to think that something can actually be done about the other factors--and it can.

THE TREATMENT: " The proposed treatments can be accommodated within the parameters of the Canada Health Act... we must keep in mind it is the total cost that is important for efficiency, not some arbitrary split between public and private costs."--Drummond, 2011 p. 15.

1. Better integration of the system around the patient
2. Chronic care should be shifted closer to the patient, i.e. home care (Denmark is a good role model for investment in community supports rather than acute care beds)
3. To the extent that competitive private suppliers such as special diagnostic clinics or specialized surgeries are allowed they should be compensated based on quality-adjusted price rather than award contrast to the lowest cost providers. [ I would add that sensitivity to trade obligations ought to inform private delivery decisions as well, as for-profit clinics and hospitals from outside the country cannot be discriminated against.]
4. Research and develop strategies concerning the heaviest users of the system: 1% of Ontario's population accounts for almost half of total combined hospital and home-care costs (and 5% of the population accounts for 85% of the costs).
5. Better information to improve lifestyles and prevention
6. Better use of evidence-based analysis--i.e. health quality councils should be further encouraged
7. Better use of health  information records--from bottom up rather than top down e-health strategies
8. Better information available to patients concerning their use of the system.
9. Incentives should be changed to move healthcare into a team environment.
10. Fee for service gives an incentive to over-serve, but strict capitation gives an incentive to under-supply. Drummond suggests a mix of about 70% salary and 30% fee for service--along with a greater emphasis on outcomes rather than interventions
11. Fees need to be adjusted downward when cost is reduced--e.g. cataract surgery is now a routine procedure, so the fee schedule should pay less.
12. Use technology and teamwork to shift some of the functions now performed by physicians and practical nurses to nurse practitioners and physician assistants.
13. Establish a single purchaser  of drugs, and consider pre-funding for large drug expenditures; and allowing therapeutic substitutions for drug treatment wherever possible.
14. Re-think end-of life care. It should not become an excuse for every specialist in sight to bill the government.


1. The system must shift from Acute to Chronic Care and Health Promotion
2.  Canadians should be given more appropriate and equal access to pharmacare and home care. That probably means expanding the public health system. It bears repeating: what matters for efficiency is total cost, not just the cost to the taxpayer.
3. "Best to leave the Public Payer Model in Place, for Now---And at any rate, surely the incentive systems should be corrected first  before the system is opened to a two -tier approach." (Drummond, 19-20). 

 To this I would add: "surely the incentive systems should be corrected first  before raising billions more in taxes".  And if we exploit the single payer system's full potential to achieve efficiency with equity, we may not be tempted to go down the other path. The statistic that strikes me the most in this report is that Canada has lagged behind other countries in producing physicians, but has not moved at the same time to download more health care to non-physicians and out-of hospital clinics. No wonder we suffer from long wait times and clogged emergency wards! But as Bob Evans has noted in his most recent editorial in Healthcare Policy , simply moving to train more doctors, without first realizing how much we can do without them, simply shows that we have not really learned our lesson yet.  Evans's rueful conclusion (p.21):

           " Even if the growth in expenditures per physician can be reined in, the coming increases in numbers have, once again, foreclosed for decades the possibilities for exploiting the full competence of complementary and substitute health personnel, expanding interprofessional team practice and in general, shifting the mix. It will also be difficult, and expensive, for ministries of health to reallocate resources away from "doctors, drugs and hospitals" to long-term and home care, and the care of complex chronic conditions. While others talked, Canada's medical schools have acted. The money is pre-committed."