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December 19, 2011 Last updated December 21, 2011

Flaherty-Falcon Health-Cut Accord

Federal Finance Minister Jim Flaherty has laid out his plans for reducing the federal contribution to health care by 2024 and the best BC's Kevin Falcon could do is say "thanks for the certainty". The only thing that is certain is the Flaherty-Falcon cut will see services reduced as demographic and technological changes work their way through the health system over the next thirteen years.

As Minister of Finance from 1993 to 2002, Paul Martin balanced the budget on the backs of the provinces by cutting federal funding for health, education and social services. As Prime Minister in 2004 he signed a 10 year health accord with the provinces that was designed to repair some of the damage his cuts inflicted. The Harper government is following in the steps of Martin as Finance Minister and putting a lid on the growth in federal health funding.

Discussion about renewal of the federal-provincial health accord shouldn't be reduced to simplistic slogans as witnessed when the Vancouver Sun reported: "Immigration minister Jason Kenney says the renewal of the Health Accord with the provinces beyond 2016 would be fiscally unsustainable and mean less money for other programs." That makes it sound like the Harper cabinet has its talking points.

Recall that Premier Clark said during her leadership campaign that increases in health funding should be limited to the rate of increase in the GDP. Some federal and provincial politicians are also saying that now, so it is time to ask what that means.

Gross domestic product (GDP) is a measure of everything that the economy produces. Since everyone's cost is someone else's income, GDP can also be measured as the total of what everyone is paid. It can be criticized for overlooking externalities and unpaid work, but GDP is useful for purposes of measuring the relative size of the health care sector.

Saying what we spend on health care should not increase faster than the rate of growth of nominal (current dollar) GDP really means that health care spending should not increase as a percentage of the GDP. With a larger proportion of the population living past age 80, we should expect to spend more on a variety of health services. Why is that a bad thing compared to spending more on other things? When politicians talk about limiting the growth of health care they say if we donít limit the growth of health care we won't have enough money for education, the judicial system or social services. A more honest way of framing the trade-offs might be to say that if health spending increases more rapidly than everything else government finances, while other things are not cut, then government must raise more revenue. That's where the trade-offs between health and things not directly financed by government comes in. If you pay more taxes, then you have less for those other things. If governments pay for corporate taxes cuts by cutting health funding, it is a transfer from those who are sick to corporate bottom-lines.

Throughout the world private health insurers face many of the same cost pressures as our single-payer government health plan (actually Canada has multiple payers but that's another discussion). When private insurers in the United States get hit with rising costs, they increase premiums. That results in health spending rising as a percentage of GDP, although the increase comes from higher private insurance premiums or greater out-of-pocket payments. In the US, health spending rose from 13.4% of GDP in 1998 to 17.4% in 2009. In Canada it rose from 9.0% in 1998 to 11.4% in 2009. A paper from the Kaiser Family Foundation contains a table that shows health costs as a percentage of GDP increasing in all OECD countries since 1970 (see table 7A).

If politicians want to limit health spending as a percentage of the GDP, then they must show equal concern whether the health spending is public or private: whether dollars first flow through taxes and then to health providers, through private insurers and then to providers, or directly from patients to providers. Accusations that the debate is not about controlling health spending but about whether spending should be shifted to private insurance have credibility when politicians fail to show equal concern for both publicly and privately financed health care. Much has been written about the negative consequences of a shift back to private insurance, from barriers to accessing needed care to loss of cost control, but rather than reviewing those debates, let us assume that in the federal-provincial funding debate, politicians are sincere about wanting to limit the growth in health costs regardless of how the dollars flow to pay those costs.

The Canadian Institute for Health Information (CIHI) was established in 1994; its board of directors includes deputy ministers of health from across the country. It is the key source of health statistics in Canada and federal and provincial ministers will look to it for advice in their deliberations over health spending. On November 3, 2011, CIHI released its report titled "Health Care Cost Drivers: The Facts". It showed that between 1998 and 2008 Canada had one of the highest inflation adjusted growth rates for health spending among G7 countries, 3.4% compared to 2.3% for Germany and 1.8% for France. It also argued that population growth and aging of the population account for less than a quarter of the growth in public sector health spending. More than a third of the growth in health spending is "other", meaning unexplained.

A rational approach to controlling health costs requires learning from examples that show how to provide more service for less cost. BC has had some success in reducing surgical wait times while also reducing costs; work on efficiencies like that needs to continue.

There is a growing problem with physicians who ask their patients to pay an annual fee, nominally for "uninsured services", but in the perception of some patients it is for access to a physician. The Copeman clinic may have gotten the most attention with its "life plus program", costing patients over $3,000 per year (in addition to their MSP premiums), but many other practices are asking patients to pay $500 or more in annual fees. It is unlikely that anyone knows how much is spent in BC each year on that type of fee, but those fees are part of rising health care costs and part of the deterioration of Medicare. It is understandable that many physicians are unhappy with fee-for-service medicine, but the alternative should not be to supplement their incomes with annual fees. The health authorities should look at more multidisciplinary group health centres as an alternative form of primary care delivery. Savings that might be achieved through that type of reform will only be had if the government works co-operatively with the BC Medical Association on payment schedules that make health centres economically viable.

As in any operation, one way to reduce costs is to reduce errors. Exposure to the health system can be dangerous to your health. In the United States, the Agency for Healthcare Research and Quality reports that 48,000-98,000 patients die from medical errors each year and preventable health care-related errors cost the economy from $17 to $29 billion each year. The situation is no better in Canada where the Canadian Public Safety Institute (CPSI) attempts to reduce medical errors. Reducing medical errors can lower costs and save lives; funding cuts could put more patients at risk.

Whatever "fiscally sustainable" means to the politicians who are negotiating a new federal-provincial health accord, they should be reminded that those who put them in power are most interested in making their own lives sustainable.