Ontario hospital payrolls for high earners- those
making at least $100,000- rose more than 18 percent last year,
Buying Health Change? The 2005 Survey of High Earner Pay in
, released today by The Fraser Institute.
At the same time, hospital deficits grew to $600 million, staff
positions have been eliminated, and waiting times between
specialist appointment and hospital treatment increased by 15
percent. The study finds no statistical relationship between pay
increases and nine measures of hospital performance. It appears
that the extra pay did not buy better health care.
This job market distortion-higher pay without better
outcomes-reflects a public sector health system that lacks
competition and rations patient care to control costs. The study
argues that it is impossible for the public sector health system,
as it is currently structured, to solve these access and cost
control issues at the same time.
"The average salary for high earners rose 6.6 percent last year,"
said Mark Mullins, the Institute's Director of Ontario Policy
Studies. "That compares to inflation under two percent and an
average wage gain in the overall economy of 1.2 percent. The
number of high earners has more than tripled since 1996, with
average pay rising by two-thirds. These are signs of misallocated
The study also finds that although SARS may have impacted
payrolls in 2003, there were no savings in 2004 under the "new
normal" situation. And as more and more public money was given to
hospitals, high earner pay actually rose faster. Thus, greater
health transfers are seemingly driving wage inflation.
The study outlines market-based policy reforms that can deal with
the twin problems of misallocated spending and inadequate patient
access to care. The hospital funding model can be changed so that
funding follows patients and their needs, rather than being
allocated in a lump sum by the health ministry.
Patients can take on a portion of payment responsibility through
co-payments, allowing their demands to direct a better allocation
of care. Delivery and financing of hospital services can be
opened to provider competition, thus encouraging efficiency and
better service quality.
"Our public sector health system produces higher pay without
better performance, the exact opposite of what taxpayers and
patients demand," said Mullins. "The experience of other
countries proves that hospitals can better allocate funds and
increase access and quality of care if we break up the state
health care monopoly."