How much money does Canada’s health system really need?

Michael Wolfson

As usual, Canada’s provincial premiers have been demanding the federal government give them tens of billions more per year than they’ve just been offered for health care, while at the same time claiming (incorrectly) that health care is solely their jurisdiction. 

But if health care is solely a provincial responsibility, with taxing powers of their own, why do they demand massive federal cash transfers with no strings attached?  There are several possible reasons.

One is that health care costs are increasing too rapidly.  This is not a new argument.  In 1977, the federal government cut federal income taxes, giving “tax room” for the provinces to raise theirs by equal amounts, leaving overall taxes for Canadians the same, while shifting billions of dollars of revenue from federal to provincial treasuries – the infamous “tax point transfer.”  The provinces could thereby fund more of their health care from revenues growing in line with the economy.

But the provinces conveniently ignore this major reform and count only federal transfers in cash – then blame the federal government for being stingy, while avoiding raising their own taxes.

Of course, the federal government does have a national role in health care and needs to be accountable to Canadians — so why shouldn’t they attach strings to any additional cash transfers to the provinces, ensuring the funds are being used to improve health care and Canadians’ health?

Another reason provinces say they need more money is that health care is so expensive.  However, Canadians do not know whether the provinces are managing health care cost-effectively.  Indeed, evidence suggests not.

Internationally, Canada spends more per capita on health care than many other OECD countries, but performs poorly.

There are also worries about an aging population.  But many OECD countries both spend less on health care per capita than Canada, and already have more elderly populations.

So, the real solution is not throwing more federal money to the provinces.  Rather, it is overcoming decades-long blockages preventing meaningful health care reforms to contain costs and improve outcomes. 

Broadly speaking, there are four main areas of health care: hospitals, drugs, doctors and long-term care.  Long-term care has been seriously underfunded for decades, so the federal proposal to increase pay for personal support workers is most welcome. 

But within long-term care, there is a huge imbalance between home care and nursing homes. 

Provinces seem keen to build new nursing homes, while continuing to starve home care of funding.  This is not what Canadians want or need, nor is it cost effective.

Other than for long term care, there is no need for health care costs to rise dramatically over the coming decades – if there are appropriate structural reforms and better more integrated management. 

Of course, “you cannot manage what you can’t measure.”  Canada generally lacks data to understand one of the most important signals of inefficiency – “postal code medicine,” the often large variations across regions in numbers of surgeries and other kinds of health care, but these are inputs, not outcomes. 

Data to provide explanations why c-section rates and stenting after heart attacks can vary threefold across health regions are generally lacking.  In the rare cases where we have the data, there are health regions with no obvious benefit in terms of health outcomes – hence wasting money. 

So why do provinces continue to fund health care that has no benefits in terms of peoples’ health? This may take the form of inappropriate diagnostic imaging, unnecessary lab tests, repetitive doctor visits, overly expensive “me too” prescription drugs, excessive invasive surgeries, and doctors providing services more than adequately provided by less costly nurse practitioners in primary care teams. 

And why do hospitals have so many beds occupied by patients who could be more appropriately and less expensively cared for by long-term care? 

One reason is that too many Canadians are overly wowed by new drugs and diagnostics.  Putting public monies into home care and collecting and analyzing the data needed for cost-effective management of health care is not as sexy.

Let’s also “follow the money.”

Overall doctors may see their own incomes fall if funding were to be redirected to primary care teams. Hospital budgets would fall if some of their funding were reallocated to long-terms care.  Pharmaceutical firms would see declining profits if a national pharmacare program were implemented. 

Before more is spent on health care, Canadians need to insist on evidence that they are getting better value for the existing expenditures, and demand their politicians exercise the leadership to implement needed structural reforms. 

Michael Wolfson, PhD, is a former Assistant Chief Statistician at Statistics Canada and an adjunct professor in the faculties of medicine and law at the University of Ottawa.