Trouble ahead for health costs: Doctors working less, making more

Posted on July 31, 2013 in Health Delivery System – commentary
Jul. 30 2013.   Livio Di Matteo

Physicians are the second largest component of provincial government health spending in Canada, averaging about 20 per cent of overall health care budgets – and constituting one of the fastest growing public health sector costs of recent years. This is despite the fact that Canada has relatively few physicians compared to many other developed countries.

According to 2013 OECD health statistics, at 2.4 practicing doctors per 1,000 people, Canada ranks 28th out of 34 countries in the Organization for Economic Cooperation and Development. These countries range from a high of Greece, with 6.1 practicing doctors per 1,000 people, to Chile’s low of 1.6. Canada is just behind the United States at 2.5 and ahead of Japan, Mexico and Poland – all tied at 2.2.

Recent Canadian growth in physician ranks has some pundits alarmed. However, in a new study for Health Policy, I demonstrate that it is not growing physician numbers that we need to worry so much about. The greater strain on our health budgets will come not from more doctors, but from more doctors earning more while working less.

Estimated determinants of provincial government health spending show physician numbers alone are indeed a positive driver of health care spending after controlling for other factors. From 1975 to 2009, the increases in physician numbers accounted for a range of about 3 to 13 per cent of the increase in average real per capita total provincial government health expenditures, ranging from a low of 2 to 8 per cent for Manitoba to a high of 5 to 18 per cent for Quebec.

These results support the conventional wisdom that expansion in the number of billing physicians is itself a driver of health system spending. Yet, physician numbers contribute less to spending increases than do increasing fees and service volumes. Indeed, a Canadian Institute for Health Information (CIHI) study on health cost drivers found new technology, utilization and price inflation to be at the top of the list, along with population growth and aging.

We also need to recognize that many of our doctors are working fewer hours than generations past. One study found that 27.7 per cent of Canadian family doctors (FP/GPs) reduced their work hours between 2005 and 2007, and that 33.9 per cent of them planned further reductions in their weekly work hours between 2007 and 2009. Only 8.1 per cent planned to increase their weekly working hours. Another study found that younger and middle-aged family physicians carried smaller workloads than their same age peers a decade earlier. Older physicians – many who are approaching retirement – are carrying a heavier workload relative to younger physicians.

This, while according to CIHI, payments to physicians for their services continue to grow – rising 6 per cent in 2010-11, after increases of 9.7 per cent in 2008-09 and 7.9 per cent in 2009-10. While total physician numbers are growing, for many physicians, their individual workloads appear to have declined but their compensation has not.

Doctors do work long hours and it is understandable they may desire a better work-life balance. However, in an era of tight public budgets, having more physicians doing less and costing more may be seen as a luxury. This sentiment was undoubtedly a driver behind Ontario’s recent decision to tackle physician fees, especially given that physicians in Ontario account for about one-quarter of the government’s health spending – the highest share in the country.

The recent increases in physician numbers from ramped up medical school enrollment may not be the biggest cause for concern when it comes to future health care spending. Rather, the drivers of public health care spending are a complex interaction between physician numbers, physician decision-making, physician work-load, diagnostic and drug technologies, population growth, aging, the cost and deployment of human resources, provincial health system institutions and the role of demand side economic variables such as incomes and patient preferences.

So what can be done?

Future cost control in health spending will either need to restrain growth in service volumes and utilization – an unpopular move with the public – or it will need to tackle fees much more directly – an unpopular move with health care providers.

One thing is certain: the recent trend toward doing less for more is not a sustainable option.

Livio Di Matteo is an expert advisor with and Professor of Economics at Lakehead University. His recent study, “Physician Numbers As a Driver of Provincial Government Health Spending in Canadian Health Policy” appeared in Health Policy.

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