Michael Rachlis MD

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Medicare is as sustainable as we want it to be

4 August 2010, 12:49 PM

The Canadian Medical Association yesterday released a report, “Health Care Transformation in Canada”. The report was to be released at the CMA annual meeting August 22-25th in Niagara Falls but was released this week because the premiers are meeting in Winnipeg to discuss health care, amongst other issues.

The report lacks an overall analysis and a focus. This reflects the fact that it was written by a committee including:

  • Ex-president Dr. Robert Ouellet who owns a network of private clinics in Montreal and favours expanded private financing and delivery
  • Current president Dr. Ann Doig from Saskatoon who is a family doctor and middle of the road on Medicare issues
  • President-elect Dr. Jeffrey Turnbull from Ottawa who won his election last year on a strong pro-public system platform

This morning, I did eleven interviews with CBC morning shows on the CMA report. Because the CMA report lacks focus so did the coverage of its release. The Toronto Star concentrated on prescription drug coverage. The Globe and Mail highlighted the CMA’s call for a patient charter. And, the National Post, not surprisingly, stressed the CMA’s critique of the Canada Health Act. The CBC radio interviews emphasized the recommendations on long term care.

The CMA report is particularly weak in this area. It calls for building a lot of new long term care beds and a mainly undefined mixed public private funding model for institutional care. However, most students of policy for the elderly underscore the need to provide more community-based care. And, to quote my friend Carol Kushner, she has never met an older person who was looking forward to entering a nursing home.

Denmark stopped building new nursing home beds in 1987, has an older population than Canada, has much better community and primary health care, and has lower overall health care costs. Unfortunately, the CMA report does not cite the Danish example or other best practices and policies. But you can read about Denmark and other approaches to continuing care of the elderly in chapter 6 and 7 of Prescription for Excellence.

Also this morning, the Canadian Federation of Nurses’ Unions released its report, “The Sustainability of Medicare” written by Toronto economist Hugh Mackenzie and me. We conclude that aging of the population per se only increased health care costs by about 0.8% per year from 2001 to 2010 and will only increase costs by about 1% per year over the next twenty-five years. Population aging has less impact than population growth which is increasing health care costs by slightly more than 1% per year.

To give Hugh the credit he deserves he did most of the number crunching. We conclude that Medicare is much more sustainable than the current hysteria would indicate. The oft-cited increase in health care spending as a share of total public spending, or as a share of public revenue reflect not an extraordinary increase in health care spending, but rather the extraordinary cuts that governments have introduced in taxes and in public spending in areas other than health care. The cuts in government fiscal capacity, amounting to $90 billion or about 6% of the Gross Domestic product (GDP), dwarf by a sizeable margin even the most pessimistic estimates of health care cost escalation projected over the next 25 years.

Measured against the generally accepted measure of a society’s ability to pay - its GDP - health care costs generally and Medicare costs (hospitals and doctors) in particular have been remarkably stable. And, the proposals typically advanced in response to the “crisis” of sustainability would actually make things worse.

Proposals to shift financial, delivery or management responsibility from the public sector to the private sector do not reduce costs. Indeed, by shifting costs and control from the public sector to the private sector these proposals will reduce our ability to manage costs in the system, and would likely result in higher, not lower, total costs. The system in the United States illustrates clearly what can happen when the institutions in control of the system have no incentive to control costs.

We conclude that the key to controlling costs and improving quality in the health care system is better management of the system in the public interest. We also conclude that the Federal government has a vital role to play, both in ensuring the long-term financial security of Canada’s Medicare system and in leading improvements in the system.


For more on sustainability see two recent op eds of mine:

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