Billions more for health care with poor results

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Appeared in the National Post

The Conservative’s 2007 budget contained substantial increases in cash transfers to the provinces through equalization, the Canada Social Transfer, and the Canada Health Transfer. According to the government, the intention is to address the fiscal imbalance between Ottawa and the provinces and to improve Canadians’ access to government services such as health care.

But an examination of the history of federal transfers for health care suggests that Monday’s announcement is likely to produce little benefit while costing a great deal.

The decision to allocate billions more to the provinces in increased transfers follows several past decisions to increase cash transfers in the hopes of improving Canadians’ access to health care. In trying to understand the benefits that are likely to result from the new policy direction, Canadians should evaluate how the existing system is performing. Specifically, we should examine how the large increases in health transfers to the provinces over the last decade or so have affected health care provision.

The results indicate that throwing yet more money at the provinces will do little, if anything, to improve the programs and will instead impede more serious and productive reforms.

Since 1997/98, the year in which the federal government finally began balancing its financial affairs, health transfers to the provinces from the federal government have increased at an accelerated rate. Between 1988/89 and 1997/98, health cash transfers from Ottawa to the provinces increased at an average rate of 1.4%. Between 1997/98 and 2005/06, those same cash transfers increased at an average rate of 12.9%. For comparison, the rate required to keep up with population growth and inflation over this time period was just 3.1%. Put differently, since 1997/98, the federal government has transferred $36 billion to the provinces for health care above and beyond what was required to compensate for population increases and inflation.

It is important to recognize that the increased health transfers were not accompanied by more flexibility in providing services. Rather, the federal government maintained its restrictions and regulations on health care delivery and simply provided the provinces more money. This is in stark contrast to the way in which the federal government approached welfare. In 1996/97, the federal government limited its exposure to welfare-related spending by the provinces by limiting its transfers. However, it also afforded the provinces significantly more autonomy and flexibility in designing and providing social services to meet local needs.

The results have been stunning. The provinces had incentives to customize their approaches to social services to deal with differing needs. Dependency rates declined in tandem with improved labour market participation. In other words, the provinces by and large have been able to curtail social service use by getting people back to work while focusing more resources on serious problems.

A vastly different approach has been maintained in health care. Rather than pursue even moderate reforms that allow the provinces more flexibility, Ottawa has maintained its heavy hand in health care and opted to simply transfer more money to the provincial capitals. The result has been more money and poorer performance.

In 1997, the average Canadian could expect to wait 11.9 weeks for the delivery of care after referral to a specialist by a general practitioner. By 2006, the wait time had grown nearly 50% to 17.8 weeks.

Canadians are also waiting longer for access to diagnostic technology. The wait time for a CT scan increased to 4.3 weeks in 2006 from 4.1 in 1997 and for MRI tests to 10.3 weeks in 2006 from 9.6 weeks in 1997. These increased wait times occurred despite increases in the number of CT scanners and MRI equipment by 41.5% and 233.3% respectively. During the same period, wait times for ultrasound increased to 3.8 weeks in 2006 from 2.6 weeks in 1997.

The results for access to doctors and nurses are also poor. Despite large increases in spending, between 1997 and 2004/5 (the latest years for which data are available) the number of physicians per 1,000 Canadians increased only slightly (4.1%) and the number of nurses per 1,000 Canadians actually decreased by 4.8%.

Given the experience with health care, it seems to make little sense to increase federal cash transfers in the hopes of improving access to services in provincially delivered programs. First, this is not the way to solve the fiscal imbalance – will anyone be surprised if the provinces are demanding more cash from Ottawa in six months? But more importantly for Canadians (both those paying the taxes to support social programs and those who use them), the experience with health care shows that the problems with government services (such as health care, post-secondary education, and childcare) will not be resolved by more money when it is not accompanied by meaningful reforms, particularly flexibility and autonomy for the provinces who actually provide these services.

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