Government & policy
TD Bank economists urge rapid
healthcare change in Ontario
TORONTO – Ontario will be forced to
radically re-engineer the way healthcare is delivered if it hopes to
maintain quality and the range of services delivered in the future,
concludes a report by TD Economics (www.td.com/economics).
As the bank economists note, the province has a serious fiscal crisis:
each year, government spending on healthcare increases more than
revenues. As a result, the amount available for other government
spending decreases. If current trends prevail, healthcare expenditures
would make up 80 percent of total program spending by 2030, up from 46
All other programs, such as education, would be funded out of the
remaining 20 percent. Time is of the essence, particularly as the
province’s aging population places even greater demand on the system.
The report’s authors, Don Drummond and Derek Burleton, state: “If
policymakers do not act quickly to address the mounting fiscal
pressures, we fear the government will be forced to make deep cuts that
would jeopardize the quality and access of care.
“Ontarians experienced this first hand, when severe cutbacks in the
1990s drove down the quality of the healthcare system. We should learn
from history, not repeat it.”
The province has taken some steps to make the system more sustainable.
However, the pace of reform must accelerate and, in some cases, break
new ground according to the report’s authors.
The report’s 10 recommendations, which were submitted to Ontario’s
Ministry of Health, represent significant change from the current
system. Combined, they should help keep healthcare spending in line with
the projected provincial growth rate of 4 percent. (The growth rate of
healthcare expenditures currently hovers around 6.5 percent annually.)
Eight proposals are targeted at improving efficiency within the system,
or value of care per dollar spent. This will largely be accomplished by
using information more effectively and redesigning incentives that alter
certain behaviours of caregivers and consumers alike.
TD Economics calls on the government to:
• Take bolder action to promote healthy lifestyles. Better health
outcomes reduce healthcare needs and costs. The province must redouble
its current efforts, including bold goals to become the healthiest
Canadian province, as well as increase its investment in improving
healthy behaviours, and focus on groups with greater need.
• Expand information technology use in the system. Enhanced IT
structures are an essential tool to properly monitor and reward
performance in the healthcare system. Ontario is behind many
jurisdictions around the world, and must pick up the pace.
• Establish a commission on quality and value in healthcare. Merge three
existing bodies and provide the new entity with the ability to make
binding decisions on the continuing quality and value of existing goods
and services as well as new procedures, technologies and drugs.
• Alter the way doctors are compensated so they are better able to
consider the cost-effectiveness of their treatment decisions.
• Change the approach of funding hospitals from a global budget system
to one based on episode of care.
• Re-allocate functions among healthcare providers. Shifting functions
from physicians to non-physician health professionals, and notably nurse
practitioners, can accomplish the double aim of improving access to
healthcare and increasing patient satisfaction.
• Scale back Ontario Drug Benefit (ODB) for higher income seniors. Focus
the ODB to help seniors in need and higher income seniors who pay more
for their drug costs.
• Increase bulk purchases of drugs to lower costs. Purchasing of
in-hospital drugs remains decentralized to the level of the individual
hospitals. More broadly, each province is home to its own public drug
plan and formulary.
• Establish pre-funding of drug coverage to spread the growing costs of
healthcare. Build a program similar to how Canadians currently save for
their retirement under the Canada Pension Plan (CPP) system. This
approach would help to spread the growing cost of health more evenly
among generations and diversify healthcare funding sources.
• Incorporate a healthcare benefit tax into the income tax structure to
improve public awareness of the cost of healthcare services. Simply
informing people of the total cost of the healthcare provided may have
some impacts such that the actual levy might not need to be that large.
However a number of issues would need to be tackled before such a
proposal could become reality. For instance this proposal might deter
some legitimate use of the system and possibly drive later health
interventions that are more expensive. Further, there is a legitimate
concern that those who might avoid or postpone a visit to a healthcare
practitioner will disproportionately be in lower-income groups. A better
understanding of the implications would be a critical first step.
Preserving the publicly funded system
Notably absent from the recommendations is a move to a private funding
model of health services. The economists expressed caution about
increasing options for consumers to purchase healthcare outside the
publicly funded system. “A shift to private financing could certainly
reduce government spending on healthcare, but lessons abroad show that
negative effects could arise,” note Drummond and Burleton. “For this
reason, this is not a centerpiece of our reform package. Yet, as we
point out in the report, there is merit in carrying out limited
experimentation under certain restrictions that would minimize risks to
access and quality of care.”
Private sector has a key role to play
However the report does challenge the province to open the door more
widely for private-sector involvement. The private sector already plays
an important role in the healthcare system through the supply of
pharmaceuticals, home and long-term facilities, diagnostic equipment,
and various contract services. The key to building a significant
healthcare cluster will require a concerted strategy that brings various
pieces together, such as competitive business tax environment and
investments in research and commercialization.
The authors state: “As long as the public can use their OHIP card, we
believe they would probably support the underlying services being
provided in whatever manner is most efficient. We challenge the
government to open the door more widely for private sector involvement,
not only to improve efficiencies, but also to capitalize on the huge
economic potential in building a vibrant healthcare sector in Ontario.”
Looking at healthcare through a wider lens
The report also calls on the provincial government and residents to
think more broadly about healthcare reform, and its potential
contributions to Ontario’s social and economic fabric. The goal should
be maximizing the “quality of life” of the residents. Such an approach
would broaden the focus of public policy.
Preventing illness and promoting healthy living would almost certainly
form a cornerstone of a holistic strategy, but also important are areas
complementary to improving health and quality of life, such as better
early childhood and K-12 education and alleviation of poverty.
Earmarking government funding towards the more vulnerable people in
society would be an effective way to achieve the quality-of-life
objectives, since enormous returns on investment would be realized.
“The ultimate aim of the recommendations extends well beyond dollars and
cents or balancing two sides of a government budget ledger,” write
Drummond and Burleton. “Successful reform would benefit Ontarians in the
form of a higher quality of life. And given the importance of health to
all our day-to-day lives, it is imperative that discussions on the
future of healthcare be looked at through this wider lens.”
Posted June 3, 2010