Social Policy in Ontario

Affluent seniors being billed for their drugs. Doctors being paid according to the quality and cost-effectiveness of their care. Those are just two of the provocative prescriptions for a crisis in public health costs.

Without such profound changes, suggests a report released Thursday by TD Economics, public health care as Canadians know it is unsustainable. Left unchecked, health spending is set to rise to 80 per cent of total program spending in Ontario by 2030, up from its current 46 per cent today.

Other provinces face a similarly bleak fiscal future, with health care projected to rise to about 70 per cent of relatively discretionary spending, exclusive of debt charges.

“It’s not going to be easy and there’s probably not a magic single bullet,” said Don Drummond, Toronto-Dominion Bank economist and one of the report’s authors. “You probably need several different proposals.”

The report is the latest foray into public policy by TD Bank, arguably Canada’s most influential corporate adviser to governments.

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Mr. Drummond provided a blueprint for Ontario’s last provincial budget when his policy paper last year bluntly stated Ontario’s days as an economic powerhouse were over and called for bold action, including harmonizing the provincial sales tax with the federal GST.

This time around, it was Ontario Health Minister Deb Matthews who asked Ed Clark, chief executive of TD Bank, for ideas on rising health-care costs. The resulting report stirs debate on a politically dicey issue: With a public largely unconcerned about increased spending, health care reform may be seen as a solution looking for a problem.

Even Mr. Drummond noted it is a “dangerous area” for politicians to wade into.

Today’s report by, Mr. Drummond and another TD economist, Derek Burleton, analyzes the situation and proposes 10 recommendations to make Ontario’s $46-billion system more efficient while maintaining quality.

While the report focuses solely on Ontario, it has lessons for other provinces. It comes against the backdrop of a looming deadline – the April 1, 2013, expiration of agreements governing three major transfers to the provinces that cover social programs, equalization and health care, costing Ottawa about $54-billion annually.

“You just can’t get your spending down if quality is diminishing over time,” Mr. Drummond told The Globe and Mail’s editorial board yesterday. “And you’ve got a problem with sustainability.”

By 2036, the number of senior citizens is projected to more than double, outnumbering children for the first time.

Other provinces have been acting as well. British Columbia has tested patient-focused funding by fostering competition within the public system, rewarding institutions that do a better job. Metro Vancouver hospitals, for example, are paid when they reduce wait times for patients moving through emergency, either into a hospital bed or back to the community.

In the TD report, areas seen as ripe for change include the $3.46-billion Ontario Drug Benefit Program, which pays for prescriptions of those aged 65 and older. The report calls for “scaling back” higher income seniors so only those in need have their drugs subsidized. Currently, millionaire seniors have their drugs paid for, just as a senior on a meagre fixed income does. However, the suggestion could raise alarms about its implications for universality of access.

Another proposal is to overhaul the way doctors are compensated by paying them, not only for treatment, but care that is cost-effective. Ontario has already introduced pay-for-performance legislation this month that would tie compensation of hospital chief executives to how effectively they improve the quality of patient care.

Overall, the report offers a growth-rate goal: bringing the annual increase in government health-care spending to four per cent, instead of the current 6.5 per cent. But even reducing growth to five per cent annually would spell a significant savings.

Mr. Drummond said that only one of the report’s ideas – incorporating a health-care benefit tax into an income-tax structure – was rejected outright by government.

That Ontario’s Liberal government would find the prospect of introducing a tax unpalatable is not a surprise. It has faced steady criticism for the harmonized sales tax , while Premier Dalton McGuinty was attacked by the opposition for pledging he would not raise taxes during the 2003 election campaign, then imposing the $2.4-billion annual Ontario Health Premium shortly after he was elected.

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