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Winnipeg Free Press - PRINT EDITION

No health-care funding remedy in sight

Proposals by Flaherty, premiers doomed to failure

By: Dan Lett

Posted: 01/21/2012 1:00 AM | Comments: 0 (including replies)

Federal Finance Minister Jim Flaherty wants to tie health-care transfer payments to the economic growth rate, starting in 2017. It won't solve the problem of escalating health-care costs. ADRIAN WYLD / THE CANADIAN PRESS ARCHIVES

The health-care system is simply not as bad as some would have you think.

To be sure, the demands of an aging population, along with increasing costs of technology and drugs, mean this is a problem that will consume almost all the money you throw at it and still be hungry for more.

And yet this remains one of the best places in the world to get sick. Although we don't always get the care we want when we want it, there is plenty of evidence to suggest the majority of Canadians get the medical treatment they need when they need it. And when you look at the state of health care in places such as the United States, that's a pretty good thing.

If there is cause for concern, it is the increasingly dysfunctional debate about how to sustain our system. After a disastrous experiment cutting health funding in the early 1990s, the federal and provincial governments have pumped billions of dollars into medicare in the last 15 years to offer Canadians a wider array of medical services and drug therapies without compromising accessibility.

It appears, however, that the days of unbridled spending are coming to an end. Federal Finance Minister Jim Flaherty will start paring back annual increases in transfer payments to the provinces, starting in 2017. Those federal funds have grown at more than six per cent annually in recent years. Starting in 2017, annual increases will be tied to economic growth. The premiers have howled at Flaherty's prescription. And with good reason.

Tying future increases in health-care funding to economic growth might be considered a fiscally sustainable policy, but it is hardly a successful strategy for sustaining the health-care system. Health-care inflation runs much higher than the rate of economic growth, and not because the system is broken. Rather, as funding has increased, so too has demand for medical services. That ratcheting demand will not ease in 2017, meaning Flaherty has tied funding for apples to the market cost of oranges. It is doomed to fail.

The premiers are livid, in large part because they know Prime Minister Stephen Harper's insistence on cutting sales and income taxes, while handing back billions of dollars through boutique tax credits, has handcuffed Ottawa's capacity to fund health care.

Apart from being livid, the premiers haven't been very effective at combating Flaherty's tough love. At a provincial gathering earlier this week in Victoria, the premiers protested the unilateral change in health funding while proposing that Ottawa pony up for a new innovation fund above and beyond the 10-year transfer-payment plan.

The innovation fund will be discussed at an upcoming meeting of provincial and territorial finance ministers to be chaired by Manitoba Premier Greg Selinger. Although innovation is a noble cause, especially in health care, the proposal for a separate fund is a thinly veiled, desperate bid to get Flaherty to go beyond his funding formula. It is doomed to fail, and the more effort the provinces and territories put into it, the more likely they will take much-needed attention away from innovating to deal with Flaherty's decree. The premiers would be much better advised to hammer Ottawa to fund a national drug plan, given that pharmaceuticals are perhaps the greatest driving force in health-care inflation.

To be fair, health care has undergone more innovative change than almost any other area of public service. Health care is delivered in many different forms from many different sources, with generally better outcomes. Procedures that previously resulted in days or weeks in hospital are now performed on an outpatient basis. More palliative care is delivered at home. Drug therapies allow people to live longer outside a hospital setting with a better quality of life.

However, this has not made the system sustainable. The greatest irony of health-care economics is that even though we have dramatically increased elective surgeries, diagnostic tests and hours of home care, demand has outstripped the addition of new resources and the waiting lists grow longer and longer. Innovation alone will not ease the system's insatiable appetite for more money.

The fact is no one is entirely sure what to do. We certainly cannot keep funding health above the rate of economic growth, especially without increases in taxes or user fees. Yet we cannot allow health-care funding to be tied to an inappropriate formula. The system will collapse under both scenarios.

If you are worried about the future of health care, worry that Canada's first ministers are not only bereft of answers, but unable to engage in the right debate to find a solution.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 21, 2012 A5

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