THE BLOG

So, is Public Health Spending Sustainable Yet?

09/28/2012 05:35 EDT | Updated 11/28/2012 05:12 EST
Alamy

You've probably heard that our health care system is in crisis as our health spending costs continue to rise at unsustainable rates: it's a pretty popular mantra with pundits and politicians alike. But it's not true -- at least, it's not the full story.

An examination of data from the Canadian Institute for Health Information (CIHI) shows that over the period from 2000 to 2011, real per capita provincial government health spending in Canada grew at an average annual rate of 2.8 per cent. However, the most recent annual growth rates have declined -- from 3.6 per cent in 2008, to 2.3 per cent in 2009, and to estimates of 2.2 and -0.5 percent in 2010 and 2011 respectively.

This is a dramatic drop from the previous decade-long trend of health spending increases.

These reversals demonstrate the cyclical nature of health spending growth, countering the prediction that health spending will inexorably gobble up all of our public resources as has been argued by some commentators.

But does this mean that the public health care cost curve is finally being bent and we no longer have to worry about health spending? Can we conclude that public health care spending is now sustainable for the long-term? Unfortunately, the answer is no.

Fiscal sustainability is not just about the expenditure side of the equation, but also about the revenue side.

Most provincial governments (as well as the federal government) in this country are currently running deficits. These deficits stem from the economic crash of 2008 and weakening government revenues. As a result, the recent deceleration in health spending may simply be a short-term effect of the recession slowing all government spending, including health.

Moreover, while the Canadian-wide trend shows a deceleration in real per capita health spending growth, some provinces -- Quebec, British Columbia, Manitoba, Saskatchewan, and Newfoundland and Labrador -- are still projected to increase spending in this year. Demographics and region-specific health needs may account for this, but the growth in health costs continues to outstrip the growth in tax revenues in these provinces.

So, the question remains. Should we use the sword or the scalpel on health budgets?

The sword option involves across-the-board budget cuts with health care providers and institutions absorbing the shortfalls as best they can. We tried that approach in the early to mid-1990s, and while it reduced budgets in the short run, it also resulted in rising costs in the long-run as we tried to fix new problems created, including wait times for non-urgent surgery, overcrowded emergency rooms and a shortage of some health professionals.

The scalpel approach combines targeted reductions with structural reforms in payments to providers and service delivery. Depending on the province, this might mean shifting more family physicians from fee-for-service to blended forms of remuneration or providing hospitals and health care organizations with payments tied to bundles of services and outcomes. It could also mean shifting primary care to team-based approaches or nurse-based clinics, and some institutional long-term care to home-based care.

It is the scalpel approach we should strive for.

In contrast to simple budget cutting, we need reforms that bend the cost curve down while gradually improving both the quantity and quality of health care via transformative change. It can be done.

However, there are obstacles. There is the inertia and established ways of doing things in the current system along with the entrenched interests of both health providers and health care recipients. There are also the inevitable costs of reform itself, which are often underestimated. For example, implementing electronic information systems and establishing team practices take both time and money. Implementing change also requires persistence and discipline on the part of governments -- qualities not always in sync with short-term political realities.

Since there is little money to buy this change, we really do need to bend the cost curve to free up the resources needed to implement these health reforms. As citizens, we need to encourage our provincial governments to set well-defined reform goals and then monitor the results closely.

It will not be easy and our governments cannot do everything at once. They will need to pursue reform in stages. We did this when we established universal medicare -- we can do it again, to ensure that access continues to be based on need rather than ability to pay.

Greg Marchildon is an expert advisor with EvidenceNetwork.ca and Canada Research Chair in Economic History Policy at the Johnson-Shoyama School at University of Regina. Livio Di Matteo is Professor of Economics at Lakehead University. They have organized a conference in Saskatoon titled "Bending the Cost Curve in Health Care" September 27-28.