The Changing Political and Economic Environment of Health Care in Canada
Commission on the Future of Health Care in Canada
Discussion Paper No. 1 July 2002
By Gerard W. Boychuck, University of Waterloo
Executive Summary
In the post-deficit political context, the political sustainability of public health care seems precarious. While the tension between health care as a large public expenditure program and a broader political context oriented towards balanced budgets, debt retirement and tax reduction seems relatively obvious, the political fragility of public health care in Canada is neither the automatic nor necessary result of this broader context. Rather, the linkage between health care and fiscal issues has been politically and institutionally constructed. As a result, the sustainability of public health care in Canada at the current time is, fundamentally, a political - rather than simply a fiscal - issue. The existence of a fiscal crisis of health care in Canada is not evident in current expenditure patterns; however, public beliefs that there is a funding crisis in health care are, nonetheless, real. The crucial question is how and why this linkage between health care spending and fiscal issues such as deficits, debt and taxes, so clearly captured in current understandings of sustainability, has become so firmly embedded in Canadian policy debates over the past half decade. While the contemporary political orientation towards balanced budgets, deficit/debt reduction and lower taxes does not necessarily undermine the sustainability of the current health care system, more robust political support is required to sustain the current system of public health care in this context and the potential for current institutional arrangements to undermine support of the health care system is magnified.
The fiscal crisis of health care is not merely an ideological construct; rather, it has firm and enduring institutional underpinnings. It is rooted in the paradoxical situation by which the public health care system's institutional framework - especially the nature and dynamics of federal-provincial fiscal relations - are structured such that they fundamentally undermine rather than bolster public support for the system. The current political fragility of the system is the result of political dynamics generated out of nearly a decade of federal-provincial wrangling over funding in a context of fiscal restraint. The incentives created by federal-provincial fiscal arrangements and the resulting patterns of interaction have led to widespread perceptions both among the elite and the broader Canadian public that the public health care system in Canada is of rapidly declining quality, is wracked by a funding crisis, is unable to control costs, and is, ultimately, fiscally unsustainable.
Current expenditure patterns provide slim grounds for arguments that the system is fiscally unsustainable. Provincial health expenditures relative to GDP are the same now as they were a decade ago and recent patterns of expenditure increases are, in part, a response to pent-up demand created by expenditure restraint in the mid-1990s. Arguments that the system is fiscally unsustainable are only plausible if based on assumptions of cost acceleration above and beyond cost increases driven by aging, population growth and moderate cost increases in services now offered or, alternatively, on the claim that current levels of tax effort are unsustainable. The former issue can be plausibly debated; however, arguing that the potential for future cost increases poses a threat to sustainability is fundamentally different than arguing that existing expenditure patterns demonstrate that the current system is unsustainable. The sustainability of current provincial tax efforts in the face of increasing global and continental economic integration is also an open question in the longer term; however, to this point, there is no evidence of downward harmonization in provincial fiscal efforts.
Despite this, there is now a widespread perception of an existing fiscal crisis in public health care. The roots of this perception lie, to some significant degree, in the institutional underpinnings of health care -especially federal-provincial fiscal arrangements. In the context of more generalized restraint, these arrangements began to generate dynamics with serious potential to undermine public support for the system of public health care. First, the illusion of the rapid growth in the overall fiscal burden of health expenditures (relative to the economy) is primarily an artifact of federal-provincial financing arrangements. Secondly, the manipulation of the fiscal system so that the burden of government debts and deficits is borne primarily at the provincial level, whose primary program responsibility is health care, has strongly reinforced the linkage in public debates between health care spending and the issue of debt and deficits. Finally, current fiscal arrangements provide provinces with strong incentives to emphasize the failings of their own health care systems and the broader fiscal unsustainability of public health care in an attempt to maximize leverage for their demands on the federal government to enrich transfers.
These dynamics have had important impacts on public perceptions of health care including the striking decline in public perceptions of the quality of health care that exists despite the prevalence of positive personal health care experiences. In addition, there also are widespread public perceptions that the public health system is experiencing a major funding crisis (despite the fact that the fiscal burden of public health care relative to the economy is no heavier than at the outset of the 1990s) and that increased funding must be a central component of improving the health care system. Finally, public confidence in the handling of health care issues by both levels of government is decreasing and the belief that governments are falling further and further behind in terms of addressing the problems facing health care is becoming more prevalent.
Current expenditure patterns do not suggest that the fiscal sustainability of the public health care system in Canada is in jeopardy in the immediate term. This does not mean that future cost acceleration poses no threat to the sustainability of health care or that there is no need for a concern with fiscal restraint in health management. Nor does it mean that the issue of sustainability should be dismissed as a transitory phenomenon that will fade as the politics of fiscal restraint ease. The conditions resulting in broad perceptions of an existing fiscal crisis of health care have very real and enduring institutional underpinnings that can be expected to continue into the foreseeable future regardless of whether there are objective grounds for it, and regardless of whether solutions to containing future cost pressures are implemented. Under current arrangements, a continuing and not easily reversible decline in public perceptions both of the quality and sustainabilility of the existing system public health care in Canada seems likely. It is here that the real potential for crisis lies.
<http://www.healthcarecommission.ca/Suite247/Common/GetMedia_WO.asp?MediaID=890&Filename=Boychuk_E.pdf>http://www.healthcarecommission.ca/Suite247/Common/GetMedia_WO.asp?MediaID=890&Filename=Boychuk_E.pdf
Kip Sullivan clarifies the message on his response to the Miller-Luft HMO Plan Performance Update:
"Implicitly, HMO quality is as good as it appears only because HMOs use more resources than FFS plans use."
This statement appears in the excerpt from the literature review by Miller and Luft in the latest Health Affairs that Don sent out last week. Miller and Luft name no author, and cite no paper, but given the context, it appears to be directed at me. For the record, I have never made such a statement. Anyone familiar with the literature would not make the blanket statement that "HMOs use more resources than FFS plans."
Kip Sullivan