Health care needs a checkup
TheStar.com – Opinion
Published On Thu May 27 2010. Don Drummond and Derek Burleton TD Economics
Ontario’s health-care system has a problem.
Let’s begin with a review of the symptoms. The primary complaint is runaway costs that threaten the system’s sustainability and the quality of care. This past decade Ontario’s health-care costs have grown at an average annual pace of 8 per cent, in part reflecting recovery from the cutbacks in the 1990s. These costs have been a major contributor to the current fiscal deficit.
In a medical examination, the physician would determine if the patient’s problem will clear up on its own. No such luck with the health-care system. TD Economics has done a careful examination of the spending record and future pressures that the system will face, such as an aging public. The results are in: without fundamental changes to the system, costs will rise at an annual pace of at least 6.5 per cent over the next 20 years.
At the same time, without further tax increases, Ontario’s revenues are unlikely to grow faster than 4 per cent per annum. To eliminate Ontario’s deficit, the province’s total spending on programs must grow considerably slower than the revenue intake. Once balance is restored, overall program spending must be in line with the projected 4 per cent pace of revenue increases.
In this context, health care will continue to be the Pac-Man of budgets, eating everything else in sight. It already represents 46 per cent of Ontario program spending. Under the status quo, it would comprise 80 per cent of total program spending in 20 years. Put differently, everything else would have to be crammed into the remaining 20 per cent.
Can the patient tolerate the symptoms? Ontarians say health care is their No. 1 priority. So we might tolerate some further upward drift in the health-care portion of overall spending. We might even put up with some tax increases to allow revenues and hence program spending to grow faster than the 4 per cent speed limit. But Ontarians also want an array of other public services. The status quo wouldn’t just dictate a one-time tax increase. Tax rates would have to be increased perennially. Ontarians don’t seem keen on that prospect either.
So a medical intervention is necessary. It’s now up to the physician to ensure the patient understands the problem and why action is required. Unfortunately, in the case of this malaise, the problem is not well understood or appreciated by the public in Ontario or anywhere else in Canada. That makes it hard for the government to float ideas for change, never mind take action.
Nevertheless, the government has three options. First, do nothing. If a medical crisis ensues, try to address the damage. We got a taste of that in the mid-1990s when the federal and provincial governments hit a fiscal wall and yanked money out of health care. The result was a sharp deterioration in the quality of care that requires years of reinvestment to stabilize. Second, change the patient’s lifestyle to reduce risks. And third, begin some remedial actions immediately that contribute to the solution without turning the patient’s life upside down.
Our proposals focus on the latter two options. Indeed, it is the only way to ensure we avoid a repeat of the 1990s experience.
The current health-care system is focused on patching up people once a problem has occurred, with few incentives to do so efficiently and with cost minimization. These very underpinnings of the system need to be changed to focus on preventing health problems and, once they occur, treating them in a cost-effective manner. The one constant must be an emphasis on quality of care. A broad approach needs to be taken to prevent health problems. Measures to improve education and alleviate poverty may indeed be the most effective.
Past efforts have no doubt left a certain cynicism about promoting healthier lifestyles. But the evidence is clear. Many of the current and prospective health problems that are driving up costs are a result of behaviour patterns, such as poor nutrition and insufficient exercise. And it’s perturbing how these behaviours have become ingrained in many of the province’s youth. In the longer run, the shift from treatment to prevention is the main hope for containing costs and ensuring a higher quality of life. There is no reason why Ontarians can’t be the healthiest people in the world.
In the meantime, many things can be done to sharpen the incentives for cost effectiveness. We recommend changing the way physicians are compensated and how hospital budgets are determined. Subsidization of drug costs for all seniors, regardless of income, can no longer be afforded. Ontario and indeed all provinces can use their buying power to obtain lower cost drugs. The health-care system is not even close to tapping the efficiency and quality gains available from exploiting information possibilities. This includes our recommendation of an agency that would provide physicians with the latest information on effective treatment and, where there is a better alternative, have the teeth to deny access to public funding for treatments with low probabilities of success. And yes, despite the controversies, the province must get back to the digitization of records.
Notably absent from our recommendations is a call for private financing. That is not to be confused with greater use of the private sector in delivering health care — but with the OHIP card when it comes time to pay. There is simply little credible evidence that private financing cuts overall costs as opposed to simply shifting them from the public purse to the individual’s wallet. At any rate, whether the system is public or private, it needs to be cost efficient. Better to put that in place first.
Any patient faced with strong recommended action would want a second opinion. And the health-care system needs that, too. Our recommendations have been drawn from a study of theory and experiences in Ontario, Canada and internationally. But we make no claim to having all the answers. Health is the most important thing in life. And the system is huge and complex. The situation warrants lively debate before treatment begins. A key aim of our report was to help set the stage for this public dialogue. We all have much to gain from it.
Don Drummond is economics adviser and Derek Burleton is associate vice-president and director of economic analysis for TD Economics
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