The health-care spending law of Wildavsky and Harper

Posted on November 3, 2012 in Health Delivery System

Source: — Authors: – commentary/editorials
Oct. 31 2012.

Many said it couldn’t be done. But the growth in public health-care spending is falling at last.

After 10 years of average annual growth in public health spending of 7 per cent, the increase levelled off in 2011 to 3.3 per cent, and to 2.9 per cent this year, according to the Canadian Institute for Health Information. (The 2011 and 2012 figures are projections; the final tallies aren’t in.) And, unlike in the early 1990s, when a virtual freeze on new spending led to bed closures, layoffs and a general stasis in the system, cost control didn’t depend on program or employment cuts. It depended on greater attention to efficient use of hospital services, better control of generic drug prices and keeping a tighter rein on compensation to doctors and nurses, CIHI says.

There are two diverging paths. In years of rapid economic growth, Canada chose the one with billions of additional federal dollars pumped in each year. Prime minister Paul Martin gave 6 per cent extra each year to the provinces (the path had an escalator), and promised to “buy change.” When economic growth slowed, Prime Minister Stephen Harper reduced the increases to the provinces over time, and said the provinces should be left on their own to innovate. This was the laissez-faire path – use at your own risk.

Call it the effect of Wildavsky’s Law. Aaron Wildavsky, a U.S. political scientist, once said that all health-care systems expand in proportion to the money available. (It’s not known whether he ever met Paul Martin.) Buying change with financial incentives to innovate – new ways to pay doctors, for instance – may produce a costlier system (and not very much change). The changes need to be within a fixed cost structure.

Quebec and British Columbia seem to be a model, not of Wildavsky’s Law but of Stephen Harper’s. They have the lowest per-capita public spending on health care. (Quebec’s is $5,469 and B.C.’s is $5,700. The two biggest spenders are Newfoundland and Labrador, at $7,057, and Alberta, at $6,754.) B.C. has made day treatment easy, and hospital beds hard to find, says Robert Evans, a professor emeritus in economics at the University of British Columbia. “There’s really nothing very magical about this,” he says. The provinces may never have admitted it in the days when the federal treasury was reasonably flush, but they can get a handle on health spending.

Other reports will look at how quality is advancing (or not). But for now, Canada, having ceased to buy change, has bought itself some financial breathing room.

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