Costs, including for hospitals, are crowding out other needed spending while creating inter-generational unfairness. Solutions include more provincial-led reforms such as use of efficient private clinics and indirect user fees.
OTTAWA, January 31, 2013 – “As the oldest of the baby boomers turn 67 this year, the ‘fiscal squeeze’ looms larger and it’s time for a fundamental restructuring of the delivery and funding of Canadian health care,” says former Saskatchewan NDP Finance Minister Janice MacKinnon.
In a study commissioned by the Macdonald-Laurier Institute, the former minister argues that providing health care for all Canadians while encouraging a robust economy will require a more efficient system with better methods of funding in future years.
Health care costs are rising at a pace faster than all government revenues and are crowding out spending on education, poverty reduction, and the environment. For example, Ontario is currently using 46% of its revenue for health care and is expected to need a whopping 80% by 2030 unless things change.
Aging baby boomers will require more health care services as they continue to age. They will also be retiring from the workforce in growing numbers, leaving fewer wage earners to pay for a system of open-ended demand.
“If medicare is funded exclusively from general tax revenues, a significant share of the health care costs of baby boomers will be paid for by their children and grandchildren,” says Ms. MacKinnon.
As a result, the time has come for a co-payment system to be introduced to replace open-ended demand, she says. Users of the health care system would pay for part of the services they receive instead of governments continuing to fund all costs exclusively with general tax revenues.
MacKinnon rejects user fees at point of service, which would discourage those with modest incomes from seeking health care, she says. The best way to levy those costs would be to use the income tax system with a ceiling at 3% of income.
Taxpayers would receive an annual statement of the cost of health care services they received, which would be classed as income up to the 3% ceiling. This way fees could be graduated according to income and those at the bottom of the income scale could be exempted.
As well as linking use of the system to its costs, this new funding model would increase the revenue available to governments, limit the crowding out of funding for other services, and provide more inter-generational equity.
A better system also requires changing the traditional 1960s hospital model by funding hospitals differently, diverting patients to alternative facilities, and focusing more on a holistic, integrated approach to health, she says.
“An emphasis on prevention and health promotion would save lives and money in the future.”
More use of private clinics, homecare, as well as long-term and chronic care facilities would produce more appropriate and affordable care than hospitals, she adds. Hospital care on average costs $842 a day. Homecare costs $42 a day.
Ms. MacKinnon cites the use of private clinics in Saskatchewan, the birth place of Canadian medicare. The Saskatchewan Surgical Initiative reduced costs and waiting times for 34 procedures despite initial fears it would increase costs. Concerns by public sector unions also did not materialize.
Opportunities to reduce costs have also come from the recent federal decision to recognize the jurisdiction of the provinces to reform health care. Rather than looking to the federal government to lead reforms, the provinces have now taken up the mantle to make health care more affordable. The provinces (with the exception of Quebec) have already reduced the cost of prescription drugs and there are opportunities to limit increases in salaries of doctors and others in the health care sector.
“An overhaul of the Canadian health care system can make it sustainable for future generations and pave the way to better fund programs like education and poverty reduction, which are critical to ensuring a healthy population.”
Janice MacKinnon is a professor of fiscal policy at the University of Saskatchewan, a Fellow of the Royal Society of Canada, and a former Saskatchewan NDP Finance Minister. She is author of Health Care Reform From the Cradle of Medicare, published by the Macdonald-Laurier Institute.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
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