David Schreck on Politics in BC

May 8, 2008

Health Costs

George Abbott may try to be the Bob Hope of the BC Legislature, but he'll never come close trying to be its Paul Samuelson. An economist, he isn't. Speaking in conclusion on second reading debate for Bill 21, Abbott said: "There was a fascinating debate between whether we should view health care costs as a percentage of total gross domestic product or view it, as I would suggest, as a percentage of the provincial budget. This is a fascinating debate. About seven people, in addition to David Schreck, find this a fascinating debate across the province of British Columbia."

My late friend Bruce Erikson always said: "They don't shoot at dead ducks." In other words, thank you, George, for acknowledging that you have a problem with your reasoning.

Try searching Google or Yahoo on the term "health spending". You'll find many references to health spending as a percentage of GDP, but little or nothing with respect to health spending as a percentage of government budgets. There is a good reason for that, and it needs to be understood by everyone, including George Abbott.

According to BC Stats, Gross Domestic Product (GDP) is a measure of value added to the economy. Notwithstanding the philosophical debate on public vs. private health care, much of health spending has always been private, including dentistry, many prescription drugs, medical appliances and home care. According to the Canadian Institute for Health Information (CIHI), whose board includes BC's Deputy Minister of Health : "Public-sector spending is forecast to reach $113.0 billion in 2007, representing 70.6% of total health care spending, while private-sector spending (including privately insured and out-of-pocket expenses) is projected to reach $47.1 billion this year, a 29.4% share of the total."

Keep in mind the 70/30 split between public and private health spending when you consider Abbott's position that what counts is public health spending as a percentage of the provincial budget. According to Abbott's measure of health costs relative to the total government budget, eliminating Pharmacare would shift $1.02 billion in costs from the provincial government to patients who need pharmaceuticals. Assuming that consumption patterns wouldn't change as a result (not likely), government spending on health care would decrease by 7.3% while private spending on health care would increase by about 17%. Total health spending as a percentage of GDP would not change, but instead of paying for drugs through your taxes, you'd pay the full cost when you are sick. You could do the same exercise for any other component of health spending, doctors, hospitals, or public health (restaurant inspections and the like). As long as you assume that use doesn't change, the result is the same: spending as a percentage of GDP doesn't change, but cost shifting decreases government spending.

Of course the assumption that consumption doesn't change whether payment is public or private is nonsense. Many studies support the observation that the lower one's income the higher the likelihood of almost every type of disease and disability, and the shorter one's life. Consequently, shifting health spending from public to private sources is the ultimate in shifting costs and taxes from high incomes to low incomes, something the Campbell government has been doing since its first big tax cut in 2001 and which it continues to do with its carbon tax.

Abbott argued that GDP is an inappropriate measure for heath spending because we wouldn't want health spending to be cut simply because GDP declined. Some well-known political columnists have repeated that line, thereby showing that the government's spin machine has good reach. The reason health spending as a proportion of GDP is an international standard is that it shows the amount of an economy's capacity that is devoted to providing health care, whether public or private. No one has suggested that provincial health spending be tied to GDP, but it is true that if GDP stagnates or falls, then provincial revenue is likely to fall and make decisions regarding spending and taxation more difficult. The Campbell government has shifted the tax burden to make revenues less sensitive to GDP, when the economy slows revenues don't drop as much because of more regressive taxation. The carbon tax will contribute to that regressive tax shift. Nevertheless, the importance of the growth in GDP is illustrated by the space the Ministry of Finance devotes to discussing it in both the annual budget and in quarterly budget updates.

Measuring health spending as a percentage of GDP or of the provincial budget, is not just an exercise in statistics. It demonstrates fundamentals about how the economy works, and how incomes are distributed. When the government cut spending by 30% across all ministries except health and education, including the Ministry of Children and Families, it made health and education spending a larger percentage of total provincial spending. That's an exercise that could be used in a math class; elementary students would understand that the size of the health pie doesn't change just because other services are cut, although its percentage relative to total provincial spending changes.

Abbott's refusal to accept the standard of health spending as a percentage of GDP suggests that he is not being straight with British Columbians.

Any serious student of health economics knows that we need to find strategies to deal with rising health costs. Since everyone's costs are other people incomes, fights over health costs are frequently the same as fights over incomes ; how much doctors and nurses will be paid often gets translated into issues about quality and access to health care. It's not easy to separate the issues, but it is not made any easier when the provincial government speaks in code rather than being open and transparent. Instead of trying to disguise attempts to shift costs from the public to the private sector, the government should accept responsibility for controlling costs, and maximizing value for money, whether spending is publicly or privately incurred. For example, dentists get away with fixing minimum prices because the provincial legislation (the Dentists Act, Section 5(c)) allows their College to provide fee guides. In other words, even when health costs are mostly private, the province has a role to play.

There are many reasons why costs are better controlled, and access to care is more equitable, when health spending is entirely through a single-payer public system, but whether that happens or not, the province has to accept responsibility for the total level of public and private health costs, and the quality of health outcomes, rather than hiding behind cost shifting as if it doesn't matter when spending is private.

May 7, 2008

Campbell's Gag-Law

On November 28, 2007, when speaking about the Electoral Boundaries Commission and the government's attempt to modify its terms of reference, Campbell's House Leader, Mike de Jong, had some interesting thoughts on the concept of closure. He said:

Hon. M. de Jong: "I want to say this clearly for all members. The government will not impose closure on this bill."

"Bill 39, to my mind, is a unique kind of bill. I thought, actually, with the limited time available in this sitting, the members might have some interest…."

"It is unique, I believe, because it is a bill that provides - or purports to provide - authority to an independent commission to assist with the task of reconfiguring the electoral map. It goes to the heart of the electoral process in British Columbia."

"I believe, and the government believes, that the commission we ask to do that work deserves to know that the will of parliament has been freely expressed. It would be improper to impose closure knowing that the mandate that derives out of that is one that the commission would be moving forward with in pursuit of the fulfilment of its duties."

"I actually do draw a distinction between that type of bill, which goes to the heart of our electoral process, and a bill that has been on the order paper for seven months and that other considerations seem to be at play. I do make that distinction." (emphasis added)

On May 6, 2008, de Jong advised the Legislature that the government would invoke closure on Bills 20, 21, 24, 29, 32, 37, 42 and 43. In addition to controversial gag legislation during election campaigns (Bill 42), those Bills include the carbon tax and electronic health records. None of those Bills have been on the Order paper for seven months, or anything close to it. The carbon tax has been on the order paper since April 28th, amendments to the Election Act since April 30th, just a week prior to government announcing that closure would be used to force it into law. What's different between amending the Election Act with a week's notice and then applying closure, compared to backing off on closure for electoral boundaries?

All of the controversial legislation deserves attention, but none illustrates the hypocrisy of the Campbell government as much as its gag-law. In Opposition, the Campbell Liberals railed against the NDP over the issue of restricting so called "third-party" advertising during election campaigns. They promised to end restrictions, and did so for the 2005 campaign through Bill 59 (2002).

In 2004, two years after BC's elimination of restrictions on third party advertising, a case Stephen Harper started against Elections Canada reached a decision in the Supreme Court of Canada, which ruled against his claim that restricting third party advertising during election campaigns is unconstitutional. While Harper lost that challenge, in discussing its reasoning ( 2004 SCC 33) the court said:

"Third party advertising is unrestricted prior to the commencement of the election period, and third parties may freely spend money or advertise to make their views known or to persuade others. Further, the definition of "election advertising" in s. 319 only applies to advertising that is associated with a candidate or party."

The Campbell government has taken election gag provisions beyond the 28 day period of the election writ and beyond advertising that is associated with a candidate or party.

Bill 42 redefines "election advertising" as meaning: " the transmission to the public by any means, during the period beginning 120 days before a campaign period and ending at the end of the campaign period, of an advertising message that promotes or opposes, directly or indirectly, a registered political party or the election of a candidate, including an advertising message that takes a position on an issue with which a registered political party or candidate is associated".

Under the Campbell government's restrictions on free speech, it would be illegal to run an advertisement reacting to the February 2009 Throne Speech or Budget Speech, since those are associated with a political party, even though the election won't be held until May 12, 2009. The formal campaign period beings 28 days prior to May 12 (April 15), and 120 days prior to that is December 15th. So it would be illegal to run a radio ad over the Christmas holidays in 2008 calling on the Campbell government to do something about poverty by raising the minimum wage, because his government is associated with opposing a higher minimum wage.

The Campbell government may try to defend itself by arguing that its amendments permit third party election advertising, but subject to a maximum of $3,000 per constituency or $150,000 overall. For most individuals those limits exceed what they'd spend, but for organizations such as the Canadian Taxpayers Association or the BC Teachers Federation, that doesn't buy squat by way of a media campaign. Imagine what would happen if the Campbell government increased taxes in its February 2009 budget speech and the Canadian Taxpayers Association wanted to fight back! Such freedom of speech would be illegal according to the Campbell government.

It is inconceivable that Bill 42 will withstand a constitutional challenge, but as it did with its contract breaking Bill 29 (2002), the Campbell government appears willing to ignore the Charter of Rights and Freedoms until someone goes to the time and expense of taking them all the way to the Supreme Court of Canada. This time the government might be stopped by an injunction long before that final day in the highest court.

One unintended consequence of the Bill 42 amendments may be its affect on websites like mine. For the past several elections I've received nasty letters from the Chief Electoral Officer saying that I need to register as a third party, even though I publish my site 365 days a year, election or no election. I respectfully tell them to bug-off, and never hear from them again. According to Bill 42, the penalty for violating the Act and engaging in election advertising (Section 235.2) is "a penalty of 10 times the amount by which the value of the election advertising sponsored by the sponsor exceeds the limit". Since most blogs cost far less than a dollar a day, the penalty for free speech over the Internet would be less than the cost of a cappuccino. That won't stop the bureaucrats from insisting that anyone who uses the Internet needs to register with them from December 15, 2008, through May 12, 2009 in order to express their opinions over the Net. The Campbell government may generate enough outrage to make an interesting court case.