National Association of State Budget Officers (NASBO)
2006 Fall Meeting
Grand Hyatt Hotel
Latrobe Room
1000 H Street NW
Washington, D.C.

THE CANADIAN EXPERIENCE: HEALTHCARE AND OTHER ISSUES

Notes for Luncheon Remarks
Saturday, October 21, 2006
12:00 pm - 1:15 pm
Hon. Roy Cullen, P.C., M.P.
House of Commons
Ottawa, Canada

 

  • Good afternoon
  • Thank you to National Association of State Budget Officers (NASBO) for the invitation to your annual fall meeting (Scott Pattison, Executive Director - met at Microsoft Government Leaders Forum in Washington DC March 2006)
  • Great to meet many of you last night over dinner. Enjoyed our conversations.
  • Circle du Soleil across the street Oct. 26th……….
  • Not here in Washington on the softwood lumber dispute! Tell US, Scot, Canadian at the lake joke.
  • Speak on healthcare and conclude with some brief remarks on other issues - productivity, cross-border issues and the war on terror.



    • HEALTHCARE

  • No matter what jurisdiction, healthcare, given an ageing population, advances in health technology, environmental and other lifestyle impacts on our health, poses significant challenges. Pressures on budgets are a common theme.
  • In Canada, we pride ourselves on our publicly funded healthcare system - known as Medicare - but our system has some strains on it also - the key issue is the need for the federal and provincial governments to fully fund the public healthcare system - otherwise people turn to private healthcare to get the care and attention they need. In Canada, because of these pressures, there has been growth in private healthcare delivery - a very contentious development in Canada.
  • I make no bones about it - I am a keen supporter of our publicly funded healthcare system in Canada and our commitment to a one-tiered healthcare system, but Canada (and the USA) in recent years have seen a massive increase in private expenditures on medical goods, especially on pharmaceutical goods. This trend is expected to continue as the cost and utilization of drug treatments in major therapeutic classes such as cardiovascular medicines grow exponentially.
  • Increases in private expenditures on long term nursing care, curative and rehabilitation programs and therapeutical appliances also explain the growth in private healthcare expenditure in Canada and the USA.
  • Not a healthcare economist, medical specialist, or constitutional lawyer!
  • In 2002, almost 2X spent in USA per capita on healthcare in comparison with Canada (US - $5,267/Canada $2,932. USA well ahead of all OECD countries in terms of total healthcare spending per capita
  • Growth of 57% from 1993-2002 (and 46% in Canada for same period) in per capita total healthcare expenditure.
  • US seems to be more focused on increasing accessibility (some 40 million Americans have no medical coverage at all?)/Canada focused on reducing wait times and overcrowding.
  • Americans spent a total (public and private spending) in 2002 close to 15% of your GDP on healthcare, a substantially larger share than in Canada (10.3%) and other OECD countries (8% on average).
  • You may know as state budget officers that the role of state and local government levels in the funding of healthcare in the USA is less than the levels of funding for healthcare provided by provincial governments in Canada. (In 2002 US states and local administrations contributed 13.4% of total healthcare costs in the USA, whereas Canadian provinces/territories/municipalities contributed 64% of total healthcare expenditures).
  • In 2002, public spending on healthcare totalled 7.3% of Canada's GDP, compared to 6.8% of the US GDP. Private spending, however, totalled 3% of Canada's GDP in 2002 and 8% of US GDP for the same period.
  • Question is - does the additional spending deliver better quality healthcare and superior health outcomes?
  • The results are probably mixed. No data, but anecdotal evidence would suggest that wait times in the USA are less than they are in Canada. This is an advantage of a privately run healthcare system. If the services are in demand and the economics work, patients will find the services and treatments they need.
  • For companies considering manufacturing facilities in Canada or the USA, our publicly funded healthcare system offers a competitive advantage to Canada.
  • The high level of administrative costs in the US healthcare system would appear to be a problem. A study published in 2003 indicated that the administrative costs paid by insurers, employers and healthcare providers in the USA totalled at least US$294 billion in 1999, almost 24% of all healthcare expenditures. Administrative costs, according to this study, totalled US$1,059 per capita in the United States, as compared with US$307 per capita in Canada. (reasons: strong presence of private insurers (underwriting, marketing, claims administration, earnings of for-profit)
  • In Canada administrative costs are low because patients just produce their health insurance ID card and doctor or hospital simply charges the province with the fee tariff set by the province (e.g. so much for a visit to a doctor's office and various hospital stays/procedures/surgeries etc.).
  • Is there abuse of this system? Yes there is some. How much? Hard to say. There is a peer review of utilization by the provincial health plans which is coordinated with the professional bodies (e.g. medical doctors`association/hospital association) to detect fraudulent charges or over utilization patterns. Disciplinary action can be taken against negligent or fraudulent practitioners or institutions. This not always totally effective as it might be.
  • Healthcare costs consuming increasing portion of provincial budgets (Ontario provincial government spends 46? of every program $1 on health - Province of BC indicating that healthcare costs will account for more than 2/3 of the province's budget by 2017).
  • Large portion of provincial healthcare costs is labour costs (e.g. hospitals other healthcare institutions)
  • When I worked for the British Columbia provincial Treasury Board (equivalent I believe to your Office of Management & Budget) I almost caused a management crisis in the BC Ministry of Health when I asked to meet with the provincial hospital labour contract negotiators - an agency set up to negotiate contracts on behalf of the province! (undue interference by a central agency in the affairs of a line Department even though labour costs comprised about 80% of hospital costs which the BC Treasury had to absorb!).
  • What about health outcomes and results when we compare Canada with the U.S.A.?
  • Some broad indicators -
  • Life expectancy at birth (United States 2002: 77.2 years ; Canada 79.7 Source OECD)
  • Infant mortality (United States 6.9/1000 live births in 2003 ; Canada 5.3)
  • Acute care beds per 1,000 population [USA 2.8 in 2003 Canada 3.0 (source OECD) More on this later (i.e. lower cost alternatives/day surgery etc)]
  • Physicians per capita (US - 2.4 per 1,000 population in 2004/ Canada 2.1 per 1,000) OECD average is 2.9.
  • In Canada we are over doctored in urban areas (in 2002 there were 2.24 per 1,000 in urban areas/and .98 per 1,000 in rural areas.) Difficult to deal with this because of doctor mobility rights - focus is on incentives to attract doctors to rural/remote areas with increased compensation).
  • Provinces trying to focus on outcomes/results (e.g. Joint Hospital Funding Project in B.C. some years ago focused on equivalent output measures and attempted to fund hospitals on this basis). By way of example 2 hip replacement operations might be equated to 1 detached retina operation; or 4 outpatient appointments. These are totally hypothetical examples and probably wildly off but are illustrative in nature. The intent here was to fund hospitals on outputs rather than inputs. Then, and I suspect today, provincially funded hospitals are funded on a line-by-line budget input basis although some progress on outputs may have been achieved.
  • Jurisdiction for healthcare in Canada
    The provinces of Canada are constitutionally responsible for the administration and delivery of health care services. They decide where their hospitals will be located, how many physicians they will need, and how much money they will spend on their health care systems. The Canada Health Act establishes the criteria and conditions related to insured health care services-the national standards-which the provinces and territories must meet in order to receive the full federal cash transfer contribution under the transfer mechanism, that is, the Canada Health and Social Transfer (CHST).
  • The Canada Health Act (federal health insurance legislation) sets certain national standards in healthcare.

    •  

    Principles of the Canada Health Act

    The Five Criteria - Public Administration, Comprehensiveness, Universality, Portability, & Accessibility.

    1. Public Administration: This criterion applies to the health insurance plans of the provinces and territories. The health care insurance plans are to be administered and operated on a non-profit basis by a public authority, responsible to the provincial/territorial governments and subject to audits of their accounts and financial transactions
    2. Comprehensiveness: The health insurance plans of the provinces and territories must insure all insured health services* (hospital, physician, surgical-dental) and, where permitted, services rendered by other health care practitioners.
    3. Universality: One hundred percent of the insured residents of a province or territory must be entitled to the insured health services provided by the plans on uniform terms and conditions.
    4. Portability: Residents moving from one province or territory to another must continue to be covered for insured health care services by the "home" province during any minimum waiting period, not to exceed three months, imposed by the new province of residence. After the waiting period, the new province or territory of residence assumes health care coverage.
    5. Accessibility: The health insurance plans of the provinces and territories must provide reasonable access to insured health care services on uniform terms and conditions, unprecluded, unimpeded, either directly or indirectly, by charges (user charges or extra-billing) or other means (age, health status or financial circumstances);

  • The aim of Canada's health care system is to ensure that all residents of Canada have reasonable access to medically necessary insured services without direct charges.
  • The Canada Health & Social Transfer (CHST) - is the primary contribution of the federal government to provinces/territories to help offset the costs associated with their healthcare delivery responsibilities. The Canada Health Transfer (CHT) comes in the form of cash and tax points [tax points - 1977 agreement federal government ceded 13.5 corporate and personal income tax points to the provinces/territories. This change made to allow provinces/territories the room to raise their provincial taxes (transparently to the taxpayers) and direct the revenues to healthcare. - Provinces and territories tend over time to forget the tax points as a federal contribution and focus only on the cash!].
  • In 2004/2005 the federal government transferred $15.8 billion in CHT cash to the provinces. The tax points are equivalent to $10.9 billion. The total CHT is distributed to the provinces on an equal-per-capita basis. We also have the Equalization Program which transfers funds to the `poorer` Canadian provinces and territories in an attempt to achieve uniformity in the delivery and accessibility of social programs like healthcare and education.
  • On September 16, 2004, Canada's Prime Minister and provincial and territorial Premiers (First Ministers) reached a ten-year agreement for improving the nation's ailing health care system. The First Ministers through the Health Accord agreed that in return for $41.2 billion in long-term federal funding, the provinces and territories will report to taxpayers on the performance of health-care services. Through the report process, taxpayers then will be able to see how their money is spent to improve delivery of health-care services.
  • Prominent among the Accord's many provisions is the Wait Times Reduction Fund.
  • Beginning in 2004/05 and over the following six years, $4.5 billion in designated funds will be invested in the Wait Times Reduction Fund for such priorities as training and hiring health-professionals, clearing patient backlogs and expanding community-care programs. Meaningful reductions in wait times are expected in five clinical areas including items, for example, like hip- and knee-replacement surgery. Provinces and territories are committed to develop national benchmarks in these areas by the end of 2005 (deadline not met). Progress can be accurately measured and compared in most provinces and territories by The Canadian Institute for Health Information.
  • The First Ministers have also agreed to cover specific home-care services including short-term acute home-care. Provinces and territories are to develop plans for phased implementation of these services by the end of 2006.
  • In 2004/5 total public healthcare expenditures in Canada were $85 billion. The federal health transfer ($26.7) comprised 31.4% of all public health expenditures in Canada. This percentage has hovered around 30% for many years (e.g. 1993/94 share was 31.1%; in 1999/2000 federal share was 29.6%.
  • When I worked in the late 1970`s in British Columbia, a province in Canada, on healthcare cost containment options, we began to think and speak of healthcare as a continuum of care - the continuum being the range of patient care options. We saw the continuum starting with interventions like homemakers services, meals-on-wheels progressing to home care and into institutional facilities in long term care, extended care, rehab, and finally into acute care hospitals and intensive care/coronary care units. This continuum reflects the lowest cost to the highest cost intervention considering the intensity of care needed by the patient.
  • In a perfect world, patients should be at the optimal level of care - the level of care needed for the best patient care, and at the same time the most economical care. For example it doesn't make sense for seniors to be occupying acute care hospital beds when they should be and could be receiving care in their homes - but this is still happening in Canada 30 years after this was identified as a problem in British Columbia!
  • The problem emerges when program resources are not adequately assigned to the lower cost healthcare alternatives - for example, investing in homecare programs.
  • There is a trap here, though, that we discovered in British Columbia. If you free up acute care beds and allocate these patients to a lower level and cost of care one needs to be careful that the acute care beds are filled up with other patients - then the program becomes an add-on rather than cost containing. Closing acute care hospital beds may be the only option - and this is not very palatable politically.
  • In the area in Toronto that I represent, I am told that 20% or more of acute care hospital beds are being occupied by people who should be receiving care at home or in a long term care facility!
  • Health Maintenance Organizations (HMO`s) - some experimentation in Canada with limited or no success.
  • The Canadian health care system evolved into its present form over five decades. Province of Saskatchewan, in 1947, was the first province to establish public, universal hospital insurance, and 10 years later, the Government of Canada passed legislation to share in the cost of these services. By 1961, all 10 provinces and two territories had public insurance plans that provided universal access to hospital services.
  • Saskatchewan again pioneered in providing insurance for physicians' services beginning in 1962. In 1968, the federal government began cost-sharing of physician services and by 1972, all provincial and territorial plans had been extended to include these services.
    A health services review was undertaken in 1979 which concluded that health care services in Canada ranked among the best in the world, but warned that extra-billing by doctors and user fees levied by hospitals were creating a two-tiered system that threatened the accessibility of care.
    In response to Canadian's needs and wishes, The Canada Health Act was passed in 1984, receiving the unanimous consent of the House of Commons and the Senate. The Act replaced the two preceding acts, but retained and entrenched the criteria, or basic principles, underlying the national health insurance program that had been contained in the earlier legislation, the Hospital Insurance and Diagnostic Services Act (1957) and the Medical Care Act (1968).
  • The most striking difference between the old acts and the new Canada Health Act was the addition of provisions aimed at eliminating direct charges to patients in the form of extra-billing and user charges, with respect to insured health care services. These charges are discouraged under the Act by being subject to mandatory dollar-for-dollar deductions from federal transfer payments to the provinces and territories.
  • I will just mention briefly Canada's Patented Medicine Prices Review Board (PMPRB) which was created in 1987 as an independent quasi-judicial tribunal. The PMPRB limits the prices set by manufacturers for all patented medicines, new and existing, sold in Canada, under prescription or over the counter, to ensure they are 'not excessive'. The Board is also expected to contribute to informed decisions and policy making by reporting on pharmaceutical trends and on the R&D spending by pharmaceutical patentees.
  • The result is lower prices generally for pharmaceutical products in Canada (and a thriving internet pharmacy trade which some US states have welcomed - others not). There is some concern in my country that shortages might be created in Canada for popular drugs and vaccines however this does not appear to be a problem at this time.

    • Other issues - productivity, cross-border issues and the war on terror.

  • Just touch on a few issues and flag them (not sufficient time to review completely).
  • U.S. productivity has outstripped Canada by a wide margin for many years. This is a serious issue given that the USA is our most important trading partner (about 86% of our exports are US bound).
  • In the World Economic Forum's 2006-2007 Global Competitiveness report, Canada slipped from 13th place to 16th place.
  • To address this Canada will need to become more innovative, invest more in research & development, enhance the skills of our workforce, and create a more inviting tax environment.
  • The Canada-US trade relationship is the largest ever to exist between 2 nations.
  • Bilateral trade between Canada and the USA is some $700 billion, or almost $2 billion per day. Exports to Canada comprised roughly 20% of all US exports The Canada-US border was once known as the longest undefended border in the world. 9/11 has changed that and created some challenges. In 2004, 6.9 million trucks crossed the border from Canada into the United States. Security-induced delays cost Canadian exporters an estimated Can $290 million in 2005.
  • While recognizing that security must be the priority, what we are trying to do is create a smarter border by managing risks better. This calls for a high level of cooperation and coordination between Canada and the USA - and this is occurring. More can and will be done.
  • The Western Hemisphere Travel Initiative (requirement for passports at the Canada/US border) will create some problems and economic impacts in both Canada and the USA. Hopefully pragmatic solutions can be found (e.g. passport card/chip).
  • And finally, and perhaps most importantly Canada is a friend and ally of the United States. We are committed to the fight against terror. Although we didn't agree with your decision to invade Iraq, we are very much involved in the fight against the Taliban and Al Qaeda in southern Afghanistan.
  • In Canada we are taking steps to deal with home grown terrorists. When I served as Parliamentary Secretary to the Deputy Prime Minister and Minister responsible for Public Safety and National Security, we began an aggressive and constructive out reach program and dialogue with Canada's Muslim community. I am sure the current government will continue this.
  • The Government of Canada has invested some $9 billion in our national security agenda since 9/11.
  • The NORAD agreement was recently renewed and extended indefinitely. Canada's decision not to be at the table with the USA to examine a missile defence system (a decision I did not support) will create tensions in the NORAD relationship which I hope can be dealt with.
  • As energy critic for our Party I support and understand the desire of the U.S.A. to diversify and stabilize its energy supply, and how Canada could and should play a role here. What I am fighting for this to be accomplished in a sustainable and environmentally friendly way.
  • I will stay away from softwood lumber!
  • I am confident moving forward that Canada and the USA will continue and enhance our strong relationship.
  • I hope this session today, however modest, will contribute to this objective.
  • I thank you for this opportunity.