Ill bill of health

The OECD says Canadian governments desperately need to clamp down on their health spending, and they should do so by making patients carry some of the costs and by fostering more competition.

OTTAWA — The OECD says Canadian governments desperately need to clamp down on their health spending, and they should do so by making patients carry some of the costs and by fostering more competition.

The influential Paris-based Organization for Economic Co-operation and Development says expanding deficits will explode unless provinces and Ottawa deal with the rising health care costs associated with a quickly aging population.

In a detailed analysis of Canada’s health care system released today, the OECD highlights the long wait times and the shortage of doctors that already undermine patient care.

It warns that the costs and problems will only multiply as a larger share of the population reaches old age.

And unless Canadians want to give up other social services or shoulder heavier taxes, deep reform is required of the way health care is delivered.

“It’s going to blow those budgets right out of the water unless Canadians dig deep in their pockets for major tax increases or cut back in a big way on other services,” said OECD senior economist Peter Jarrett.

The analysis is far more than a list of options from yet another think tank. It was put together with extensive input from the federal government.

It says health spending increases that have averaged eight per cent a year over the past decade need to be ratcheted down to about four per cent in order to be sustainable.

Although Ottawa has no obligation to follow its advice, such OECD reports are often used as a way for governments to get new policy ideas on the table.

The report comes just after the Canadian Medical Association and provincial governments separately recognized that the sustainability of the health care system is shaky. They both have a wary eye on the end of the federal-provincial funding agreement in 2014, and say negotiations for a new funding deal need to be trail-blazing.

Specifically, the OECD says Canada’s public health care system is riddled with inefficiencies because patients don’t realize the costs they incur, and because health care providers don’t face any competition to keep their costs down.

Patients should be paying a small fee or a deductible for their health services, so they’re not tempted to rush to the doctor for every little sneeze, the report urges.

“Canada is very unusual in not requiring any form of patient payment whatsoever for core services. Some form of pricing could be introduced in order to better reveal and ration demand,” the report says.

The OECD recognizes up front that medicare is sacrosanct in Canada, and that talk of patients sharing costs is taboo. But it argues that the taboo needs to be broken if the health care system is to remain properly financed.

“You’ve got to give up on this taboo of no co-payments or deductibles,” said Jarrett in a phone interview from Toronto.

But at the same time the OECD is concerned that the medicare system is too narrow. Governments in the past have sought to control health costs by excluding pharmaceuticals and home care from public funding.

Those two areas are increasingly important in determining health, and they’re costing Canadians dearly, the report shows.

One way to make the introduction of a user-pay system more palatable for Canadians would be to bring more of the pharmaceutical and home care costs under the medicare umbrella at the same time, the OECD suggests.

The report also takes aim at the supply side of the health care business, urging more competition — either by setting published benchmarks that hospitals and doctors need to reach, or by allowing more flexibility for the private sector to get involved.

Doctors’ pay should not just be based on fee-for-service, but also on the number of patients on each doctor’s roster, the OECD says.

Plus, the private sector should be allowed to be more active in service delivery in order to keep costs under control, the report says.

“We think that’s another taboo that needs to be discarded,” Jarrett said.

Several of the recommendations would require a liberal interpretation of the Canada Health Act, or perhaps even outright changes, the OECD recognizes.

As the federal-provincial funding arrangement heads towards its expiry date of 2014, now is the perfect time for governments at both levels to be re-thinking how they handle health care — especially since deficits are too large, the report says.

But the next funding agreement should be based on a formula linked to economic growth, rather than just a promise of cash from Ottawa, the report recommended. And the deal should be based more on a transfer of tax room from Ottawa to the provinces — another controversial idea that many negotiators have balked at in the past.

The analysis is part of a larger assessment of Canada’s fiscal and economic health.

The OECD lauds Canadian governments for their aggressive actions during the global recession. The organization also praises Canadian banks for being efficient, well-supervised and conservative.

The report says Canada’s economic recovery is “well under way” despite recent weakness in the economy. It forecasts growth of 3.5 per cent in 2010 and just over three per cent in 2011.

But it warns that deficits, particularly in Ontario and Quebec, are too large and need immediate attention. Economic growth in the future won’t be as robust as in the past, so governments can’t simply assume that their deficits will melt away with time, the report warns.

The report also chides Ottawa for opting to follow the American lead in fighting climate change, since U.S. climate policy is stuck in political limbo.

“It doesn’t look like anything is going to happen there for years,” said Jarrett. “It’s harder (for Canada) to maintain that position, to just see what the Americans will do.”