Ontario's New Health Spending: Threat to Patients or to the Province's Fiscal Health?

Last week’s Ontario budget announced a $2.4 billion increase in health-related funding, an increase that is supposed to create a better health care system for the province.

In fact, the increase is mostly in new areas of expenditure, while existing health programs are seeing binding caps placed on their allowable growth. Put more simply, the new budget actually means more mid-year health spending increases or less access to the health services consumed by the majority of patients in Ontario. With a sharp rise in tax rates, the government also stands to deliver a sharp drop in health care value-for-money.

Consider the case of hospital spending. According to the Canadian Institute for Health Information, provincial spending on hospitals in Ontario grew at an average rate of 6.9 percent annually between 1998 and 2003. The new budget only provides for a 4.3 percent increase this year -- a shortfall of 2.6 percentage points. Either hospital spending growth must be cut by this amount or else the projected provincial deficit will rise by almost $300 million (the government has calculated that a “one per cent change in hospital funding” is worth $113 million).

One reason why this lower growth is unlikely to develop is that hospitals habitually require mid-year cash injections. The budget itself showed $310 million of such funds for last year. And funding difficulties will only get worse in later years. The government’s projections out to 2008 allow only 3.1 percent annual growth in hospital transfers, even lower than the budgeted growth cap for this year and less than half of the trend increase.

The case for other major health programs is no different. The overall budget for physicians increased at an average annual rate of 4.7 percent between 1998 and 2003 and provincial spending on drugs rose 12.7 percent. The government assumes an unlikely growth rate of 8 percent this year for drug programs. Looking ahead, these two areas (plus miscellaneous health spending) are being capped at 1.9 percent annual growth until 2008. This places more than $1 billion in cost pressures on either the deficit or health expenditures, or places patients in the rather unattractive position of getting fewer services for a very large overall spending increase.

While trumpeting purportedly dramatic increases in spending on health care, and slapping on a tax increase that rises to $2.4 billion next year, the Ontario government has underestimated the real cost drivers of spending on drugs, doctors, and hospitals, areas that together comprise over 70 percent of total provincial health expenditures. Though the cost will not be felt today, there is no question that Ontario’s patients and the taxpayers who fund their care will be footing the bill at some point in the future.

How can we save them from these costs? While it is already too late for this year, there may still be hope for the future. Salvation from this spiral of tax increases and service cuts can be found in those countries that are delivering access to health care on the basis of need - and not ability to pay - with better outcomes and at lower cost. Though these solutions would mean a drastic change from the status quo, they would serve the interests of both patients and the taxpayers who fund their care.

Each of Sweden, France, Australia, and Japan requires patients to be responsible for some of the cost of their care, which encourages patients to be more informed about their healthcare decisions. This is distinctly different from the new Ontario Health Premium, which is really an income surtax that has no link to actual use of the health care system. According to research and international evidence, when patients are responsible for some of the cost of their care, they use fewer resources (making more available for other patients and saving money overall) and end up no worse off in terms of health outcomes.

Each of these four countries also offers choice in the delivery of healthcare services by allowing, and in some cases encouraging, the provision of competitive private health insurance. They understand that shackling patients to a government monopoly with no alternative choices results in a more expensive and lower standard of care than would be available otherwise.

Finally, none of these countries is mired in a fear of for-profit care delivery, as we are in Canada. Patients in each of these countries can go to a private for-profit care provider and receive care financed through the public insurance system. Most importantly, each of these countries spends far less than we do on health care. In fact, on an age-adjusted basis, no developed country spends more to deliver universal access health care than Canada, with Ontario ranking third amongst the provinces within this country.

The Ontario government is right to attempt to control burgeoning health costs, but their approach using rationing and increases in taxation is dead wrong. What we need is a reinvention of health care delivery and financing in this province, not more financial controls that raise costs to the taxpayer and lower service delivery to patients. The government proclaimed a desire to “budget for results” last week. Sweden, France, Australia, Japan, and many others, show the way ahead to achieve real health care reform.