The hidden health-care hurdle at the heart of Duncan’s budget

Posted on March 25, 2010 in Health Debates

Source: — Authors: – Opinions – Lowering the annual increase in spending on health care will be a herculean task
Published on Thursday, Mar. 25, 2010.   Adam Radwanski

Of all the numbers Finance Minister Dwight Duncan threw at Ontarians Thursday, one figure trumps the rest.

It’s not the $21.3-billion deficit for 2009-10, nor the smaller projected shortfalls for the immediate years to follow. It’s not the $310-million that the province will spend this year to add 20,000 new college and university spaces, nor the $150-million annually to lower energy costs for Northern Ontarians.

It’s not even the $750-million Mr. Duncan says will be saved by freezing pay for non-unionized public employees, and the further savings to come when union contracts expire, although those are surely the flashiest ones.

No, the most important number wasn’t found in Mr. Duncan’s budget speech. Rather, it was buried on page 121 of the budget itself, where the government projected what its health-care costs will look like over the next three years.

In 2010-11, those costs are to go up to $46.1-billion. That’s a 6-per-cent jump, only slightly lower than the increases that have become the standard. But health spending is projected to go up only 4.1 per cent the following year, and 3.1 per cent the year after that.

Although it may not sound like much, lowering those increases will be an absolutely herculean task. With an aging population and perpetually more expensive technologies and treatments, it will be tantamount to aggressively cutting spending in most other departments.

But it’s on flattening that cost curve – and keeping it flat well beyond 2012-13 – that Dalton McGuinty’s Liberals have mostly pinned their hopes for fiscal sustainability.

Their faith (or at least optimism) in their ability to do so has allowed them to forego other dramatic measures aimed at avoiding a long-term structural deficit.

Since the province’s economy crashed, a contingent of senior Liberals has argued that the precipitous plunge into the red represents an opportunity for an overdue refocusing of the government’s priorities.

To protect core services – health and education first among them – it could narrow its focus elsewhere, more actively engaging the private sector and perhaps shrinking the public service. Better Mr. McGuinty should take on those challenges, the argument went, than leave it to a Conservative government under Tim Hudak.

There’s a trace of that mentality in the plan that the Liberals have arrived at. If not significantly shrinking the public service, they appear to be gearing up to fight with unions over compensation – something Mr. McGuinty has mostly avoided during his six-and-a-half years in power. And the odds are that, before this year is out, the government will announce that it will privatize all or part of at least one crown asset.

But those steps – along with restraint on a few other fronts, including a slowdown in transit spending in the Toronto area – are aimed mostly at limiting the debt accumulated in the next few years.

There’s no sign of a dramatic overhaul of how the government is structured five or ten years from now. And that’s partly because health (and to a lesser extent education) so dwarfs all other program spending that there’s limited benefit in creating upheaval in other departments.

With no plan to raise taxes, and education spending extremely dear to Mr. McGuinty’s heart, the government’s long-term focus could scarcely be more clear. But what remains to be seen is what, exactly, that will actually involve.

The battle with pharmacies to lower to price of generic drugs, which Mr. Duncan was keen to emphasize on Thursday, is the first piece of the puzzle. Limiting labour costs will help as well, although it’s likely that after any freeze they’ll spike back up again. And Mr. Duncan announced that hospitals will get only a 1.5 per cent increase to their base funding, which is less than they had hoped.

But the real heavy lifting will come in structural changes to the way hospitals deliver their services, and the way that doctors run their practices.

The budget offers hints of what’s to come on those fronts, including promises of accountability legislation for health executives and “an independent, expert body to provide recommendations on clinical practice guidelines.” But the scope of the reforms probably won’t be clear until after the 2011 election – partly because the Liberals really haven’t yet figured out quite what to do, and also because they’re not eager to have doctors and hospital boards out for blood during a campaign.

Ultimately, though, the government has left itself little choice but to fight those battles. Year-to-year deficit figures, like most projections, will constantly be amended. But if the flattening of the health curve doesn’t take, Mr. Duncan’s eight-year plan to get back to balance will collapse.

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