The trouble ahead for health care

Canadians pride themselves on their high-quality public health care, especially as the U.S. grapples with the realities of its bankrupt privatized system. But with rising health care costs and budget cuts, how well is our system performing?

Kingston General Hospital is in the process of planning for stringent budget cuts along with hospitals all over the country as they head into the new year.
Kingston General Hospital is in the process of planning for stringent budget cuts along with hospitals all over the country as they head into the new year.
Credit: 
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According to some U.S. anti-public health care propaganda, the Canadian government draws up lists of who is going to die and who will receive organ donations, and bureaucrats tell people which doctors they can see.

We all know that isn’t true, but how good is Canadian health care? As U.S. President Barack Obama’s quest to adopt a public health care option rages on amidst public backlash (a Gallup poll showed Obama’s approval rating slipped below 50 per cent last week—his lowest yet), Canada’s well-established public system begins to look pretty good by comparison. But at a time of increasing financial pressure and aging boomers, it begs the question of whether there’s work to be done north of the 49th parallel.

Hospitals all over the country are struggling with budget deficits and Kingston General Hospital (KGH) is no exception. In 2008, the hospital announced a $30 million operating deficit. This year, KGH completed the first year of the Performance Improvement Plan, a three-year plan developed in conjunction with the provincial government to review its budget.

KGH Chief Operating Officer Jim Flett said many hospitals in the country are in recovery plans right now and each has different ways of dealing with their performance requirements. The challenge is that the provincial government doesn’t know how much it will be able to fund hospitals in the next fiscal year, so hospitals have been asked to plan based on different estimates of how much government money they’ll receive.

Flett said hospitals obtain about 85 per cent of their revenue from the provincial government so they try to maximize the other 15 per cent as much as they can. He said the uncertainty of what cuts and restructuring will have to occur is a reality most hospitals are facing.

“That’s an economic reality of our times,” he said. “The government is doing its best to make sure that it lives within its means to the best it can. It knows it has to spend money to keep the economy going, it knows the economy may do worse than it’s expected, it may do better than it’s expected. … Chances are it will be the new year before we know.”

The provincial government shortened the Performance Improvement Plan requirements to extend to the 2010-11 fiscal year (the year between April 2010 and March 31, 2011) instead of the 2011-12 fiscal year, which allows hospitals to adjust plans based on how much funding it gets, Flett said. In addition, the provincial government honoured its commitment to the 2009-10 budget despite the outbreak of the worst recession since the 1930s.

“They did an excellent job last year of protecting us. They could have easily told us they couldn’t afford it anymore and they could have rolled it back but they said the priorities in the province included healthcare and education and they honoured the plans that were in place. Therefore, we were spared a fair amount of pain this year,” Flett said.

One of the main areas KGH has been able to offset rising costs is through attritions. As position vacancies come up, the hospital evaluates whether it can change how work is divided or eliminate the position altogether. Last week, KGH announced there were some position eliminations where vacancies occurred, but Flett said reorganizing staff is common for a hospital employing close to 4,000 people. Most of the attritions were in the daily order of business, but he said the pressure to eliminate positions may increase as funding declines.

“As we go forward we’ll be doing even more of that. It gets more and more difficult, though, as pressures get tighter and tighter. That’s when you have to reduce positions beyond the attrition level,” Flett said.

During the 1990s, the Mike Harris government made huge cuts in health-care spending to clean up its balance sheets.

Dr. Duncan Sinclair, Queen’s former Vice-Principal (Health Services) and Dean of Medicine, chaired the Ontario Health Services Restructuring Commission from 1996 to 2000 in the thick of the storm. He said the cuts made to healthcare were necessary at a time of rising inflation and the end of a recession in the early 1990s.

Spending has once again exceeded provincial revenues. And with the Ontario government incurring a $27 billion deficit this year, the province will likely find itself in a similar situation to a decade ago.

Sinclair said health services costs now account for approximately 50 per cent of provincial budgets. Last year, spending increased faster than the rate of inflation.

“The so-called system has caught up to the Harris cuts, and in spades,” Sinclair said. “That is a huge problem so it won’t be long before someone is going to have to do something.”

Sinclair said he doesn’t think cuts will be felt very much by the users of health-care service because there isn’t enough capacity in our system for cuts to be made without seriously damaging the level of care provided. It’s the suppliers of health care who are going to feel the budget crunch.

“I don’t think there really is much room for shrinking the size of the whole thing. The effect is really going to be felt primarily on the incomes of providers,” Sinclair said.

Incomes of health-care providers have been growing at rates exceeding inflation for many years, Sinclair said. If there’s any room for cutting back, provider incomes seems to be the only feasible area.

By and large, Sinclair said health care in Canada fares well compared to other systems and manages to deliver quality care despite financial difficulties. Waiting lists are often cited as a problem in our healthcare services, but Sinclair said every good has to be rationed in some way.

“The access to physician and hospital services I don’t think is really done better anywhere else,” he said. “Notwithstanding wait lists … but those who need things urgently don’t wait very long, and those who need them less urgently wait longer. Seems fair to me. [It’s] a lot better than rationing by ability to pay as is done in the United States.”

One way Canada reduces the pressure on the public system is by having a two-tiered system where those who do not wish to wait can slip across the border and pay top dollar for health care in the States. Sinclair said although very few people go across the border for health care, the presence of private providers close by is good for Canada.

“There is an advantage to that,” he said. “The political heat of wait lists has diminished by increased capacity.”

Ugurhan Berkok, a professor in the Queen’s Economics Department and who teaches ECON 243, The Economics of Healthcare, said the key problem in Canada is the lack of choice. Berkok said Canada’s health-care system is one-size-fits-all.

Other countries, especially in Europe, have experimented with introducing competition from the private sector to address this problem, but Canada has rigidly opposed any degree of privatization. As pressures on the public system begin to mount, though, support for more privatization is rising, Berkok said.

“There is an irony here. Americans are hitting the road to protest against public plans and here, just the opposite,” he said.

Berkok said two-tiered systems have worked in many countries because they reduce wait lists while maintaining coverage for everyone. France, for example, has universal health care coverage and excellent hospitals with virtually no waits because those who demand faster, better care can go to private hospitals.

“If you keep the capacity in the public sector, it’s a win-win situation because if those who want to pay more and get the service can exit the public system ... then you are reducing the pressure on the public system,” Berkok said.

Many shy away from privatization, citing that the U.S. spends a great deal more on health care than we do because of the costs of operating under a multiplicity of insurance companies. Canada spends 11.6 per cent of its gross national product (GNP) on health care, whereas the U.S. spends 16 per cent. On a per person level, the number is three to four per cent in Canada versus more than 13 per cent in the States.

Berkok said high costs aren’t necessarily caused by privatization, though. Most European countries spend about the same amount on health care as we do, yet their systems are either semi-private or completely private, as in Switzerland’s case.

“We have a system that is frozen in time,” Berkok said. “Everybody does something we don’t.”

Berkok said Canada is going to face severe challenges in the near future with recessionary budget cuts. On top of fiscal pressures, however, the cost of care is going up as people live longer, and many health-care providers are retiring with fewer being replaced. As hospitals and clinics struggle to re-group, Berkok said Canada can afford to take a challenge and look at ways to improve efficiency.

“People should have an open mind about policy options.”

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