Soaring costs force Canada to reassess health model

TORONTO Mon May 31, 2010 2:38pm EDT

A girl reacts while getting her H1N1 influenza vaccination in Vancouver, British Columbia October 26, 2009. REUTERS/Andy Clark

A girl reacts while getting her H1N1 influenza vaccination in Vancouver, British Columbia October 26, 2009.

Credit: Reuters/Andy Clark


TORONTO (Reuters) - Pressured by an aging population and the need to rein in budget deficits, Canada's provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.

Ontario, Canada's most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate "incentive fees" to generic drug manufacturers.

British Columbia is replacing block grants to hospitals with fee-for-procedure payments and Quebec has a new flat health tax and a proposal for payments on each medical visit -- an idea that critics say is an illegal user fee.

And a few provinces are also experimenting with private funding for procedures such as hip, knee and cataract surgery.

It's likely just a start as the provinces, responsible for delivering healthcare, cope with the demands of a retiring baby-boom generation. Official figures show that senior citizens will make up 25 percent of the population by 2036.

"There's got to be some change to the status quo whether it happens in three years or 10 years," said Derek Burleton, senior economist at Toronto-Dominion Bank.

"We can't continually see health spending growing above and beyond the growth rate in the economy because, at some point, it means crowding out of all the other government services.

"At some stage we're going to hit a breaking point."


In some ways the Canadian debate is the mirror image of discussions going on in the United States.

Canada, fretting over budget strains, wants to prune its system, while the United States, worrying about an army of uninsured, aims to create a state-backed safety net.

Healthcare in Canada is delivered through a publicly funded system, which covers all "medically necessary" hospital and physician care and curbs the role of private medicine. It ate up about 40 percent of provincial budgets, or some C$183 billion ($174 billion) last year.

Spending has been rising 6 percent a year under a deal that added C$41.3 billion of federal funding over 10 years.

But that deal ends in 2013, and the federal government is unlikely to be as generous in future, especially for one-off projects.

"As Ottawa looks to repair its budget balance ... one could see these one-time allocations to specific health projects might be curtailed," said Mary Webb, senior economist at Scotia Capital.

Brian Golden, a professor at University of Toronto's Rotman School of Business, said provinces are weighing new sources of funding, including "means-testing" and moving toward evidence-based and pay-for-performance models.

"Why are we paying more or the same for cataract surgery when it costs substantially less today than it did 10 years ago? There's going to be a finer look at what we're paying for and, more importantly, what we're getting for it," he said.

Other problems include trying to control independently set salaries for top hospital executives and doctors and rein in spiraling costs for new medical technologies and drugs.

Ontario says healthcare could eat up 70 percent of its budget in 12 years, if all these costs are left unchecked.

"Our objective is to preserve the quality healthcare system we have and indeed to enhance it. But there are difficult decisions ahead and we will continue to make them," Ontario Finance Minister Dwight Duncan told Reuters.

The province has introduced legislation that ties hospital chief executive pay with the quality of patient care and says it wants to put more physicians on salary to save money.

In a report released last week, TD Bank said Ontario should consider other proposals to help cut costs, including scaling back drug coverage for affluent seniors and paying doctors according to quality and efficiency of care.


The losers could be drug companies and pharmacies, both of which are getting increasingly nervous.

"Many of the advances in healthcare and life expectancy are due to the pharmaceutical industry so we should never demonize them," said U of T's Golden. "We need to ensure that they maintain a profitable business but our ability to make it very very profitable is constrained right now."

Scotia Capital's Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. "(The public) will use the services more wisely if they know how much it's costing," she said.

"If it's absolutely free with no information on the cost and the information of an alternative that would be have been more practical, then how can we expect the public to wisely use the service?"

But change may come slowly. Universal healthcare is central to Canada's national identity, and decisions are made as much on politics as economics.

"It's an area that Canadians don't want to see touched," said TD's Burleton. "Essentially it boils down the wishes of the population. But I think, from an economist's standpoint, we point to the fact that sometimes Canadians in the short term may not realize the cost."

($1=$1.05 Canadian)

(Reporting by Claire Sibonney; editing by Janet Guttsman and Peter Galloway)

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Comments (6)
Deefender wrote:
To be clear, it must be said that health care in Canada is the purview of the provinces, not the federal government, so each province is taking its own measures.
That said, health activists across Canada have been screaming for years that the reliance on pharmaceutical health has been a disaster overall, with health declining, rather than improving. Certainly health service is in a state of disrepair. New systems such as LIHNs (Local Integrated Health Networks) are proving to be more costly than ever, with no relief in sight for the patient.
The bottom line is that natural, preventive health care is the key to lowering health care costs, and education of the public as to how diet and supplementation provide the best defense against disease is the means to achieving reasonable costs. Despite proof of this abounding, Pharmacare is still the rule, and while it remains supreme, costs cannot but continue to rise, because it is a PROFIT-BASED SYSTEM with no incentive to cure anything, because a patient cures is a customer lost.
Until MONEY stops being the motivator behind health care, until health care itself stops being a business first and a service to humanity second, there IS no other solution.
I just hope people wise up before they find themselves the victims of something akin to the nefarious Obamacare!

Jun 01, 2010 2:20pm EDT  --  Report as abuse
beliha wrote:
Deefender: “the nefarious Obamacare”?

I don’t get it, are you Pro-Government Health care or not?

You do realize that before what you so ignorantly called “Obamacare”, there was no adequate government health care coverage at all in the US (excluding medicare, medicaid)? And that this american Health Care bill is a step towards providing healthcare for all? So that, just like you stated, it becomes a service to humanity first, and a business second?

You complain that Canada’s system is PROFIT based (which, when compared to the US, it isn’t!), so then what was the system in place before “Obamacare”? I believe its called “only people who can afford it get to live”..

So what is your point exactly? You seem to be contradicting yourself!

Jun 01, 2010 3:24pm EDT  --  Report as abuse
vanisl wrote:
I don’t have the time today to properly research the matter of health care in Canada so lack particular facts etc. However, this I know. Canada has unlimited money for war, weapons, jets, our very own military complex etc., unlimited money for the Olympics, unlimited money to give away all budget surpluses to Corporations, big business and the very wealthy, all kinds of money for CIDA to build infrastructure for Canadian businesses in 3rd world countries such as Haiti where people work for slave wages and the rest of the populations starve, all kinds of money for a wasteful security system for the G20 meeting in Toronto but Canada is short of money to provide a decent infrastructure or clean water for Northern Native communities or for health care for an aging population…which they have known was coming since the 50’s. Give me a break. I don’t buy this for one moment. As to the opinion of those who work for one of our chartered banks….there was also $70+ Billion bail out money given to our Chartered Banks but it was not called this. This money was found within days.

Our Governments are doing their best to increase the death rates of Canadians from toxic chemicals which they deregulated, and also by allowing GMO products in our foods. Our Governments ensure hospital bed shortages, & shortages of doctors all of which are causing deaths or serious health problems which will result in death. The poorest of the poor receive no health care because most Canadian doctors refuse these people as patients…especially the mentally ill. These people die on our streets rather quickly which I suspect is what is wanted. GMO products will ensure most Canadians are sterile within 3 generations…except for those who can afford to eat organically. By then only the affluent will be reproducing which is no doubt what is wanted.
Has anybody heard one Government Leader or Parliamentarian express concerns about the incredible increase in Cancer or brain tumors in a huge number of young Canadians not to mention middle-aged or senior Canadians. Have the people who are supposed to care about Canadians asked the question “WHY”?
These are crocodile tears from those who pretend they care. They do not. I would say that every political leader in Canada right now is a schill. They were bought off a very long time ago. Perhaps Duceppe isn’t. I can’t tell. Certainly the Quebecois do better than the rest of us by far. Time to wake up Canadians. We are being had.

Jun 01, 2010 5:20pm EDT  --  Report as abuse
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