The crisis no leader is talking about

NationalPost.com – FinancialPost/FPComment
Apr 6, 2011.    Terence Corcoran

Into the vacuous open pit of policy trivialities that has become this election, David Dodge, former governor of the Bank of Canada, has just dropped a ticking time bomb. The Canadian universal health care model, with governments as the major funders of service, is fiscally unsustainable.

If the election platforms of the major parties are an indication, no Liberal or Conservative bomb squads will be available to neutralize Mr. Dodge’s device — a tidy bit of forecasting titled Chronic Healthcare Spending Disease.

Mr. Dodge reports that health-care spending in Canada could rise to take up almost 19% of the national economy within 20 years, up from about 12% today.

In dollar terms, that works out to an increase from about $5,000 today to $10,700 by 2031 in constant dollars for every person in Canada. If Election 2011 is being fought over family values, how’s this for dinner-table political chat: Health-care costs for a family of four will jump 50% to $42,800 within 20 years.

The political question from Mr. Dodge is: How are Canadian families going to pay for these rising costs? He said Canadians cannot “sleepwalk” into the looming policy crisis on the assumption that no changes will be needed to the health-care model they hold so dear — a model that our electioneering politicians refuse to talk about beyond empty platitudes. “We’ll strengthen universally accessible health care,” says Liberal leader Michael Ignatieff in a platform that contains nothing on how that might be done. Same for Stephen Harper’s Conservatives.

In Mr. Dodge’s analysis, such evasions mask what is an impossible and unsustainable funding regime.

Speaking at a Toronto luncheon for the C.D. Howe Institute, which published the report — coauthored with former Bank of Canada economist Richard Dion as a part of a new health care initiative — Mr. Dodge said the politicians elected on May 2 “are going to have to face this issue.”

Mr. Dodge makes it easy to understand what the politicians are avoiding. Universal care as Canadians now experience it cannot be maintained at current levels without major increases in taxes or cuts in service — or dramatic cuts in other government services.

More controversially, in his comments at the C.D. Howe luncheon attended by institute members and key figures in Canada’s health-care community, Mr. Dodge also mentioned the unmentionables of health care. These options include imposing some form of co-payment by individuals for the health- care services that are currently paid by the provinces. Another would de-list services that would then have to be paid by consumers or private insurance suppliers.

A final option would be “development of a privately funded system to provide better quality care for those willing to pay for it.” Such a two-tier system, he said, should be part of the policy debate. During a question-and-answer session, Mr. Dodge was asked about issues of equity in any universal care system. “We have met the equity test be denying people the right to superior services.”

Mr. Dodge — a lifetime Canadian bureaucrat and deputy minister of health who has rarely shied from expanding the role of government — did not endorsed any particular option. “None of these options is appealing,” he said, a claim that would certainly be contested by Canadians who would welcome moves to greater private choice and funding of health care. More private delivery of services, new private funding options, including medical savings accounts as exist in Singapore, have great appeal both to improve service and bring some individual choice and discipline to health-care costs.

One key element of the Dodge analysis is that the looming cost increases for health care are not insurmountable. The emphasis — rightly — is on the idea that increasing total Canadian spending on health care from 12% to as much as 18.5% of GDP, or $42,000 per family, is “not undesirable or unsustainable.”

Maybe 18.5% of GDP or $42,000 per family is the right level of spending, especially in a growing and wealthier economy. A more optimistic assessment of health-care spending by 2031 is about 16% of GDP. Whatever the number, the point of Chronic Healthcare Spending Disease is that the spending projections cannot be met under current health care laws and funding arrangements. Something has to give in the hearts and minds of Canadians about how health care is paid for and provided.

One thing we do know, said Mr. Dodge, is the old way of controlling health-care spending — raw cutbacks in spending and service — will not work. “The Canadian public will not live with denial of service. We cannot do that again.”

But are Canadian voters ready to take up Mr. Dodge’s call for an open debate over possible radical reform of the health-care payment system? A recent Ipsos-Read poll showed that 40% of Atlantic Canadians put health care ahead of the economy and jobs as election issues. This campaign is also likely the last chance to debate health-care funding before the federal-provincial health-care accord expires in 2014.

The last chance is being met with silence. Is it too much to ask that the major party leaders make health care an election issue? Probably.

At the luncheon where Mr. Dodge reviewed the options, the health-care players in the audience seemed powerfully resistant to radical options. They asked about other options to curb spending, including health prevention and promotion. “Why don’t we tax Tim Hortons?” asked one. The dean of a university health faculty also wanted to focus on ways to improve the health of Canadians. Somebody else wanted to go after Big Pharma’s drug costs.

If some of the leading figures in health-care services don’t seem ready to tackle the funding reforms raised by Mr. Dodge and the C.D. Howe Institute, and since the electioneering politicians will continue to dodge the issue until the crisis lands, that means the leadership role on health care will have to be taken up by others. Voters, maybe.

< http://opinion.financialpost.com/2011/04/06/terence-corcoran-on-the-election-the-crisis-no-leader-is-talking-about/ >

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