Reality check on health-care costs

Posted on April 4, 2010 in Health Debates

Source: — Authors: – Opinion – Despite the rhetoric about unsustainability, privatization and user fees are not the answer
Published On Sun Apr 04 2010.  Michael Rachlis

Medicare is as sustainable as we want it to be

The headlines scream health-care costs are out of control. Last week’s Quebec budget floated the notion of user fees. At the Montreal Liberal policy conference, David Dodge, former governor of the Bank of Canada, spoke for many when he claimed that the only options were higher taxes, user fees or poorer services.

However, noted UBC economist Robert Evans reminds us to be wary of the rhetoric of unsustainability setting up limited choices. In fact, a closer examination reveals that medicare’s expenses have been relatively stable and the best cost-control option focuses on enhanced quality.

During the depths of Canada’s last serious recession in 1992, Canada spent 10 per cent of its economy on health care. Canadians were concerned and governments froze budgets. Then the economy boomed. Five years later, we spent less than 9 per cent of GDP on health. In a few years, we became concerned about underfunding. Governments had lots of money and we deliberately ramped up spending.

By 2009, another recession year, health care took 12 per cent of our GDP. Provinces started turning off the taps. But last week’s numbers indicate the economy is on fire. In a few years, health care’s share of GDP will fall again.

There’s even less sign of cost pressures if we look at public spending. Only about two-thirds of Canadian health care is directly funded by the provinces and their costs barely increased over those 17 years from 6.9 per cent to 7.7 per cent of GDP. Furthermore, the Canada Health Act covers only hospitals and doctors. The costs of those programs have actually decreased from 5.3 per cent to 5 per cent of GDP.

It’s the non-medicare costs that are out of control. Drug spending increased from 1.2 per cent to 2 per cent of GDP and there have been steep increases also for dental and optical services. Not coincidently, these sectors mirror the U.S. multi-payer health system. Government covers a minority of costs. There are high administrative expenses. Prices are inevitably higher without a single payer. And many Canadians suffer grievously because they can’t afford needed care.

More important, there are many choices available besides additional spending or less service. In 2003, the Ontario Drug Benefit plan spent $65 million for Vioxx, an anti-arthritic drug. The next year, it was withdrawn from the market because it was linked to heart attacks. Not only was Vioxx more dangerous than alternatives like ibuprofen, it was 50 times more expensive. While we were telling seniors there was no money for home care, we poured $60 million down the drain and hundreds of Ontarians died premature deaths.

Health care is replete with waste. Fifteen per cent to 20 per cent of patients with heart failure are readmitted to hospital within one month of discharge. Simply ensuring home-care nursing follow-up would eliminate half the readmissions, save hundreds of lives and avert costs of $2,500 per patient.

These problems are not due to incompetent or uncaring doctors or nurses. Rather, as we’ve been told for decades, the structure of our health system puts patients in persistent peril.

Transitions from the community to hospital to nursing home rival the complexity of getting a visa to visit North Korea. Our computerization of health records lags every other wealthy country. Nearly 40 years after a landmark Burlington-based study of nurse practitioners, less than 10 per cent of Ontarians have access to these cost-effective providers.

Health policy experts conclude that improving quality is the key to sustainability. High performing organizations like the U.S. veterans health system have demonstrated it is possible to simultaneously improve quality, enhance services and control costs.

Barack Obama will shortly nominate Boston pediatrician Dr. Donald Berwick as administrator of the Centers for Medicare and Medicaid Services. Berwick is currently president of the Institute of Health Care Improvement. IHI’s principles guided the veterans system’s journey to excellence as well as influencing other organizations around the world, including many in Ontario.

CMS funds the U.S. medicare and medicaid programs, one-third of U.S. health-care spending and four times all Canadian health-care expenditures. Obama and Berwick may be about to restructure the U.S. system around quality principles.

Canadians should be somewhat concerned about our health system’s costs. But the road to sustainability runs through improved quality, not user charges or privatization.

Dr. Michael Rachlis is a health policy analyst and an associate professor at the University of Toronto.

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