Well, Canada’s premiers and territorial leaders are gathering in Halifax this week engaged in their version of the Game of Thrones with hurt feelings and fiscal uncertainty rather than beheadings, swordplay and pillaging the most likely dire consequences. Among the issues planned for discussion are energy and health care. Not on the official agenda will be the fact that a number of provincial elections loom. Health care is expected to be at the front of the agenda at the summit in Halifax this week but it may surprise even the premiers to learn that after adjusting for inflation and population, growth rates of real per capita public health spending in Canada have recently declined. Data from the Canadian Institute for Health Information shows over the period 2000 to 2011, real per capita public health spending grew at an average annual rate of 2.8 percent. However, recent annual growth rates have declined – from 3.6 percent in 2008, to 2.3 percent on 2009, and to estimates of 1.9 and – 0.7 percent in 2010 and 2011 respectively.
Does this mean that the health care cost curve is finally being bent and health spending is under control? The answer is no for two reasons. First, the current slowdown may simply be the lagged effects of the recession on government budgets. Second, when examined on a provincial level, this trend is not consistent. For 2011-2012, six provinces are projected to see declines in real per capita spending with the largest declines in Ontario and Alberta. Newfoundland & Labrador, Manitoba, Saskatchewan and Quebec are projected to increase. The health expenditure curve continues to rise for some provinces even while the national one is showing some signs of slowing. While some of these differences are rooted in differences in demographics and region specific health needs, the fact remains that inevitably there will be a need for restraint.
The interesting question is what form it might take - the sword or the scalpel? The sword approach involves across the board budget cuts with health care providers and institutions left to absorb the blow and deal with the shortfalls as best they can. The scalpel approach combines targeted reductions with reforms in service delivery and financing such as shifting more physicians from fee for service to salaries, providing hospitals with payments tied to bundles of services and outcomes rather than global budgets, and shifting care to team based approaches and home care. In an ideal world, the scalpel approach is what we want. Indeed, the holy grail of fiscal sustainability for public health care would be reforms that bend the cost curve down and improve both the quantity and quality of health care via transformative change.
However, there are obstacles. First, there is the inertia and established ways of doing things in the current system along with the entrenched interests of both current health providers and health care recipients. Change is often uncomfortable, even if it is for the better. Second, there are the transactions and coordination costs of reform. For example, implementing electronic information systems and establishing team practices take both time and money. Despite the inherent optimism of advocates of transformative change, broad based transformative change of the entire health care system may simply bite off more than you can chew.
Third, to implement change, persistence and discipline are needed on the part of governments and those qualities are not necessarily compatible with the politics of governing. In the wake of the Romanow Report, health funding was increased in an effort to buy health system change and yet the same sustainability issues persist. It was in some respects a wasted opportunity. In the wake of the economic slowdown and deficit situation, successful bending of the health expenditure curve now requires spending less to buy change. Witness the case of Ontario where a large deficit is finally forcing the province to tackle its health sector costs more directly. Some of the savings from the spending reductions can be applied to selective initiatives for transformative change with incentives for implementation – but the transformation will be at the margins and incremental rather than broad based.
Provincial governments must make evidence based decisions on what reforms to implement, set well defined goals and then monitor the process closely.They will have to make choices. Governments must decide whether to promote healthy lifestyles or implement tele-health. Adopt new information management technologies or modify physician compensation approaches. Move hospitals to bundled outcome payments or provide team based approaches to primary care or reform drug plans. Tackling all these changes at once will be a case of too many targets and not enough instruments. The result will be another failure that weakens the faith of Canadians in the ability of their governments to solve problems.