High Cost of Healing

Despite how it may seem some days as the public tunes into the debate over health-care funding, governments in Canada have not turned off the tap. Canadians spent an estimated $76.6 billion on health care in 1997, up from $75.

This article was originally published in Maclean's Magazine on June 15, 1998

Despite how it may seem some days as the public tunes into the debate over health-care funding, governments in Canada have not turned off the tap. Canadians spent an estimated $76.6 billion on health care in 1997, up from $75.This article was originally published in Maclean's Magazine on June 15, 1998

High Cost of Healing

Despite how it may seem some days as the public tunes into the debate over health-care funding, governments in Canada have not turned off the tap. Canadians spent an estimated $76.6 billion on health care in 1997, up from $75.5 billion a year earlier, and, says Toronto health-care consultant Michael Decter, chairman of the Canadian Institute for Health Information: "I don't think there's a case that the overall system is underfunded." What has happened is that, in the name of fiscal prudence, the controls on the funding tap have become much tighter. What was once an annual flood of new money has been reduced to a yearly trickle of extra dollars. The once-rampant growth in health-care spending has ended. In the dry language of a 1997 report from CIHI: "Health expenditure growth remains virtually flat."

Beyond the question of how much money overall is being spent, the three key issues in the debate are the amount that the federal government contributes, the diminished size of the annual budget increases, and, critically, how the money is spent. These are the areas where the revolution in Canadian health care is taking place.

The amount of federal money in the system is at the heart of an often bitter federal-provincial war of words. Even the experts at the Canadian Institute for Health Information, the independent agency charged with gathering and distributing health data, find that figure difficult to determine. In 1996, the federal government changed the way it finances health care, combining contributions for health, welfare and postsecondary education into a single fund, the Canadian Health and Social Transfer. As a result, comparisons between the CHST and earlier levels of federal contributions are perilous and inexact.

But by the federal government's own accounting, the cash flowing to the provinces from the new program was to fall from $14.9 billion in 1996-1997 to $12.5 billion in the current fiscal year. Ottawa now covers just 21.5 per cent of provincial government health expenditures, compared with 24.1 per cent in 1990 and 30.6 per cent in 1980. "There has been a major shift in the way in which health care has been funded," Saskatchewan Health Minister Clay Serby told Maclean's. Serby, who this year chairs the national conference of health ministers, said as Ottawa has reduced its share, the provinces have been left to pick up the slack, particularly for new programs such as home care and for the costs of drugs, a rapidly increasing area of health spending. CIHI figures indicate provincial and territorial government spending rose from $42.1 billion in 1990 to $48.6 billion last year. Only in Alberta did spending actually drop - by a shade - to $4.01 billion from $4.08 billion. Among the provinces, spending in British Columbia rose the most dramatically over the seven years, an increase of $2.1 billion or 43.2 per cent. In addition, the provinces as a rule have been devoting a slightly larger share of their total budgets to health care - 32.5 per cent in 1996, up from 32.3 per cent in 1990. Ontario had the highest ratio among the provinces in 1996, spending 36.7 per cent of its total budget on health, while Quebec had the lowest at 29 per cent.

But provinces, too, have been wrestling with budget deficits, which has generally meant much less generous increases than were once the case. In fact, much of the rise in provincial spending came early in this decade with increases of more than eight per cent in both 1990 and 1991. From 1994 to 1997, spending by the provinces crept up on average by only 0.02 per cent annually. That is a big downshift from the 1980s, when health administrators could look forward to average annual increases of 10.6 per cent.

Paradoxically, says Richard Plain, a University of Alberta health-care economist, tighter budget control may have saved medicare by making it more affordable. As the '90s began, many observers were wondering how long the country could maintain a system that was gobbling up an ever-larger share of resources. By 1992, health spending had reached 10.2 per cent of total economic output - second only to the Americans, and few of them were ready to hold their system up as a model. By 1995, Canada's health spending had slipped to 9.6 per cent of gross domestic product - trailing not only the Americans but the Germans and French as well.

The widespread public perception that health budgets have been slashed substantially may have grown out of the publicity surrounding hospital closures. One vivid symbol of the change: the Bow Valley Centre in Calgary, formerly Calgary General, a venerable 600-bed facility shut down last year. It now sits empty, awaiting demolition. The public, Decter says, has defined health care by the hospitals in their community. "Closing a hospital is about the toughest thing anyone can do politically," he says, "because it is such a symbol."

Nationally, funding for hospitals as a proportion of total health spending dropped from 40.6 per cent in 1987 to an estimated 33.6 per cent in 1997. In Alberta over three years, says Plain, "we wiped out 40 per cent of the acute-care hospital beds." And although the primary drive to close beds may often have come from finance ministers rather than their colleagues in health, many hospitals and wards were sitting targets. "In Canada," says Serby, "we had too many hospitals and too many hospital beds." In 1994, Canada was spending a greater percentage of its health budget on inpatient hospital care than any other Group of Seven nation except Italy.

The bandwagon for balanced budgets was joined by governments of all stripes and with health costs spiralling, there was already widespread agreement that some form of health-care reform was overdue. "Everyone knew that they had to make some changes to the system," says Decter, "but that really didn't happen until there was the financial issue to compel them."

When reform came, many people found the revolution too abrupt - and frequently it was, says Decter. Too often, he believes, "we did it backwards," closing hospital beds before alternatives were available in the community. There is agreement among the experts that some money has to be put back into the system to fill in some of the cracks left by a relatively abrupt change. The public, too, after generally endorsing cuts made in the name of deficit reduction, seems to support the idea of spending more money on health care. In Ontario, the Conservative government has started moving in that direction, giving extra money to hospitals to relieve the pressure on emergency services, and increasing spending on nursing homes, homes for the aged and home care. Health care was an issue in the Nova Scotia election, where the Liberals were returned with a scant minority, and in the New Brunswick Liberal leadership contest in which Camille Thériault became premier. At the federal level, the Liberals have raised the floor for cash transfers to the provinces to $12.5 billion from $11 billion, making good on a promise from last year's election.

Even so, many experts insist that the amount of funding for health care is adequate. And the changes do not pose a threat to the health of Canadians. "I don't think there's any evidence to show that the health status of Canadians has been diminished as a result of the cuts," says Plain. Dr. John Millar, who as provincial health officer advises the B.C. government on health matters, agrees. "There's enough money in the health-care system," says Millar. "What's needed is to better manage it." But perception, as always, depends on your point of view. "If you're Mr. Jones and you're lying in a stretcher in a hallway at a hospital," says Decter, "then it is a crisis for you." The final verdict on Canada's unfolding revolution in health care may not be on whether change was needed, but how well it has been managed.

Maclean's June 15, 1998