A Healthy Alternative: Opting Out of Federal Health-care Funding Could Save Money and Lead to Better Access

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Appeared in the Calgary Herald, 26 February 2004

Last week, Premier Klein suggested that Alberta might reform the health care system in ways that would conflict with the myriad rules and regulations enshrined in the Canada Health Act. The planned reforms--charging facility fees and fees for doctors’ services, and delisting procedures--were proposed as ways to control the spiraling costs of health services in Alberta. Though there is no question that the first two of those changes would result in a loss of federal health care funding, would they mean the end of universal access health care in Alberta?

First and foremost, a cost-sharing program for patients in Alberta would not mean abandoning the “compassionate approach” to health service delivery. Of the 28 OECD countries that share Canada’s goal of providing care on the basis of need and not ability to pay, 23 have some form of cost sharing program for patients covering hospital and physician services, and in many cases emergency room visits. All of these countries have realized what economic experiments and international evidence have shown for years: making patients responsible for some of the cost of their care leads to more informed decisions about when and where the health care system is accessed.

Two nations have, in fact, expanded their cost sharing programs over the last year in order to take better advantage of the benefits generated by such reforms. Beginning just last month, the German cost sharing program has been expanded to include physician services in addition to hospital services. The Slovak Republic has taken an even larger step and gone from no cost sharing for hospital and physician services, to a full range of co-payments. The Slovak reforms have been remarkably successful at controlling costs: just six months after the new Slovak program, the government witnessed a 30 percent reduction in the number of visits to general practitioners and a 25 percent reduction in the number of hospital stays.

Put another way, implementing a cost sharing policy as is done in France, Sweden, Japan, and Australia -- all of whom do better on health care outcomes than Canada while spending less than we do -- would have profound effects on the efficiency and cost of health care in Alberta. First, access to family physicians and clinics would be improved for those in need as some patients (25 to 30 percent in the case of Slovakia) will opt to save the charge and not seek medical attention. Second, remarkably long waiting times for emergency care would fall as patients requiring attention for non-critical conditions would seek care in more cost-effective settings. Third, resources freed up as a result of the first two effects could be used to treat the real health care problems that reside on the province’s waiting lists or allow for tax relief that would benefit the economy as a whole.

Of course, there will always be detractors who claim that these fees will only lead to increased health expenditures in the long run since patients will avoid accessing the health care system early on in the progression of their illness and will ultimately cost more to treat. These detractors would be wrong. The evidence on cost sharing has shown that only those with low incomes and particular pre-existing conditions experience worse outcomes without free access to care, suggesting that an appropriately designed program should allow these patients to access care without the necessary fees

It is relatively obvious that fewer patients using the system would lead to a cost savings for the system as a whole. But what would the cost of such a program be in Alberta, where over 16 percent of provincial health care spending comes in the form of transfers from Ottawa? It turns out that, after accounting for the savings that would accrue from a cost-sharing program, Albertans would actually save money while experiencing better access to health services.

For 2004/05, the Alberta government plans to spend $7.8 billion, of which roughly $1.3 billion will come from the Canada Health Transfer, the Canada Health and Social Transfer supplement, and the Health Reform Fund. These transfers are the potential penalty that the federal government could impose if Alberta were to implement a cost-sharing program. On the other hand, research has shown that the savings from making patients responsible for 25 percent of health expenditures (up to reasonable annual limits) work out to about 19 percent of total expenditures, or roughly $1.5 billion. In other words, a cost sharing program for health services would actually save Albertan’s about $200 million, even after accounting for the lost transfers from Ottawa.

Violating the rules and regulations of the Canada Health Act (but not the five principles it is based upon) through using a cost-sharing program might actually end up saving Albertans’ money. More importantly, a cost-sharing program would give patients in Alberta better access to care. Further, all of the evidence on cost sharing shows that no one would be hurt by such a policy if certain sensitive populations were exempted from the program (though that would erode somewhat the $200 million in savings calculated above).

Alberta is uniquely positioned to take advantage of this win-win situation, as the benefits to be obtained from reform outweigh the penalties for contravening the federal health act. What Premier Klein needs to do now is ensure that this week’s summit in Vancouver does not result in more calls for increased federal funding – sourced from taxes that will be disproportionately borne by Alberta taxpayers. If such calls are made, and heard, patients in Alberta will not see the benefits of better access and Alberta’s taxpayers will still be stuck with the big bill.