Jun 3, 2016

3 problems with the Fraser Institute’s alarmist report on health care spending

Very panicked chicken running. Photo by Alvesgaspar, via Wikimedia Commons

A new report from the Fraser Institute declares: “Health care spending by British Columbia’s government is unsustainable.” But watchers of Canadian politics know to take that declaration with generous heap of salt, since we hear cries of “out-of-control health care spending” like clockwork from certain quarters (followed by calls for privatized, for-profit care).

In fact, health spending has been quite steady in BC. It’s even expected to fall slightly compared to the size of our overall economy (or GDP) by 2018, according to the government’s own estimates.

It’s actually the ripple effects of a lack of public investment in areas like home and community care for seniors that should worry us most, since this increases wait times for hospital emergency and surgical services, adding unnecessary costs to the system. I’ll come back to this below.

For the record, here are three problems with the Fraser Institute’s report.

1. In an era of austerity, how you measure spending matters a lot.

A common scare tactic in the so-called health care sustainability debate is to point out that health care takes up a growing share of the overall provincial budget. The Fraser Institute claims that health could take up more than half of BC’s total program spending by 2030, up from 43% today.

Health care funding does indeed represent a larger share of the budget pie – but that pie has been purposefully and unnecessarily shrunk by our politicians, in part to hand tax cuts to corporations and the wealthiest few.

Now, we should be clear that health care is our largest public program – and one that British Colombians and Canadians share a deep commitment to protecting. That’s no surprise – health care is the largest single public program in most developed countries.

But in an era of austerity, the Fraser Institute’s focus on a “share of the budget” measure is misleading. That’s because over the past 15 years, spending in other areas has been cut, or grown much more slowly. We’ve seen a major dismantling of BC’s public overall level of spending, which fell from 21.7% of GDP in 2000 to an estimated 18.6% in 2016.

As a result, health care funding does indeed represent a larger share of the budget pie – but that pie has been purposefully and unnecessarily shrunk by our politicians (in part to hand tax cuts to corporations and the wealthiest few). We’ve also seen underfunding in program areas like education, housing, welfare and disability rates, and environmental regulation.

So, health care’s larger share is driven largely by the BC government’s choice to put the pinch on other important public services. As Einstein says, “everything is relative.”

2. Health spending is sustainable as a share of the economy.

The much more sensible way to think about health funding is as a share of the total economic pie (as a percentage of GDP). That’s a clear reflection of our collective ability to pay, rather than focusing on dollar figures or proportions of a shrunken public sector.

Health spending in BC has been steady as a share of the economy in recent years and is expected to fall somewhat from 7.8% of GDP in 2009 to 7.5% by 2018. This projection – which comes from the BC Budget – is consistent with the Canadian Institute for Health Information’s (CIHI) assessment of the current trajectory of health spending in Canada.

In fact, the Fraser Institute clearly knows that we should pay attention to health spending as a share of the economic pie. In the more plausible of the two scenarios in its report, the Fraser Institute projects a rise in provincial health spending (averaged Canada-wide) from 7.3% of GDP in 2015 to 8.3% in 2030. This is a relatively modest increase and is certainly not “unsustainable.”

The Fraser Institute’s favoured policy response – increased privatization – would actually drive up costs, both socially and economically.

Yet, for reasons that aren’t entirely clear, the report calls this the “Alternative Scenario.” It includes estimates of cost drivers like population growth, demographic aging and health care-specific inflation rates. (It’s also worth keeping in mind that, to the extent that increases are driven by aging, the share of the population over 65 years old is expected to stabilize starting in the 2030s.)

The report’s “Standard Scenario,” on the other hand, drives the report’s more alarmist headlines and infographics. This scenario takes the same cost drivers as the “Alternative Scenario,” but then adds more cost increases attributed to “Other Factors” that are left largely unspecified. “We do not know precisely what these factors are,” the report reads at one point.

This handy manoeuvre allows the authors to project a much larger health spending increase, which would take BC to 10.8% of GDP in 2030. Needless to say, this finding is far out of step with the trends found by CIHI and in the BC government’s own budget data. It’s also out of step with CCPA’s own research on the costs of BC’s health care system.

3. Public health care solutions are at our fingertips.

Now, to be clear, improving public health care does mean dealing with problems. For example, substantial cuts to BC’s home and community care system have forced seniors to rely more heavily on emergency room visits and increased the need for inpatient beds. These pressures in turn lead to overcrowded hospitals and longer wait times for surgeries.

But there are many solutions already at our fingertips – solutions that don’t involve more contracting-out and privatization. We can and should:

  • Help seniors stay healthy and independent by reinvesting in home and community care (such as home support services like help with cooking and bathing, home nursing, long-term residential care, and end-of-life palliative care);
  • Improve patient care by developing interdisciplinary teams of healthcare professionals who work closely together (such as physicians working with dieticians, physiotherapists and nurse practitioners); and,
  • Reduce surgery wait times by actively managing wait lists and adopting best practices in surgical procedures and patient care (such as those already developed by local surgical teams here in BC, and by public health systems in other provinces and countries).

These types of policies both increase quality of care and help contain costs.

In contrast, the Fraser Institute’s favoured policy response – increased privatization – would actually drive up costs, both socially and economically.

A large body of international research, summarized in a recent CCPA report, shows the serious negative effects of privatization. Private, for-profit care tends to be lower quality and less safe, destabilizing to the public system, and ultimately more expensive (due to higher administrative costs, the introduction of profits, and even increases in unnecessary surgeries).

As I noted in a recent post, the continued failure to make proper long-term investments in the public health system means we actually end up spending more to get less.

Bottom line? The Fraser Institute’s claim of “unsustainable” health spending doesn’t hold water.

But that doesn’t mean we can’t make our public health care system better. There are many straightforward steps we can take to increase access, quality and efficiency in health care – low-hanging fruit that’s waiting to be picked by a government with the commitment and political will.

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