Category Archives: Health Care

Health Care Has Become a Signal Issue of Our Time

Published in the Telegraph-Journal 19th October 2012

Canada’s publicly-funded health care system is poised to undergo its greatest reform since the signing of the Canada Health Act in 1984. The reasons for this pending transformation have much to do with health care’s financial unsustainability. A number of factors will drive changes in the total health care spending-to-GDP ratio over time. In New Brunswick, these factors include changes in the age demographics of the population because per capita health care spending increases rapidly beyond a mid-40s age threshold.

An additional challenge involves GDP growth that has effectively stalled while health care costs continue to rise by significantly greater than inflation. While New Brunswick’s fiscal deficit has been brought largely under control, government’s debt remains high. Historically low interest rates have helped to keep the government’s debt service costs low as well, but this is a temporary phenomenon. To compound the problem, global population aging is set to place upward pressure on long-term interest rates and therefore intensify debt service costs over the next fifty years.

Health care technology is one of the cornerstones of the cost challenge. Technology has increased efficiencies and dramatically improved the quality of medical services. Changes in medical technology and practices have had a material impact on health care spending. The introduction of more sophisticated tools has been shown to increase demand for health care services and raise costs. Pharmaceutical technologies have increased costs even more dramatically. In Canada, technology changes accounted for as much as 25 per cent of the growth in real per capita health care spending from 1996 to 2009.

Even with substantial health care reforms, a combination of initiatives will be necessary to cover rising health care costs. Individuals and employers may be faced with increased spending for government services in the form of fees or surcharges. However, the public may still see a reduction in government services. Increased taxes to finance the public share of health care spending may become necessary. Budgetary restrictions may lead to some form of co-payment spending by individuals on health care services that currently are provincially insured.

This could lead to the development of a privately funded health care system to provide better-quality care for those willing and able to pay for it. The UK and many European countries have this “two-tier” system, and New Brunswick already has elements of this system in place in the form of private clinics. The partial privatization of health care would have little impact on the rate of growth of total spending although it does alter the public-private split and has distributional implications. There is a greater risk that a weakening of the health care system will lead to a major degradation of publicly-insured health care standards such as longer queues, lower quality service provision and delisted products and services.

At the same time, technology will be one of the cornerstones of the transformation needed to realign health care with our fiscal reality. Over the course of more than 15 years, numerous attempts have been made to wield technology to introduce greater productivity into the health care system, but so far there has been little progress. Significant potential clinical and financial benefits would be achieved with the implementation and networking of health information technology (HIT), primarily through the widespread adoption of electronic medical records (EMR). By improving health care efficiency and safety, HIT-enabled prevention and management of chronic disease could significantly increase benefits.

However, in New Brunswick, these benefits are unlikely to be realized without related changes to the health care system. These changes amount to a full-scale transformation of health care, our fundamental assumptions about how it is provided and how we plan to pay for it.

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Filed under Economics, Finance, Fiscal Policy, Government transformation, Health Care, Innovation, New Brunswick

Health-care Reform Faces Significant Challenges

Published in the Telegraph-Journal 16th October 2012

Health care is a sleeping dragon slowly wakening to a public that is wholly unprepared to battle it. Canadians have a short time frame in which to recognize the magnitude of the challenges that health care presents, in which financing is the most prominent.

In April 2011, the C.D. Howe Institute published “Chronic Healthcare Spending Disease: A Macro Diagnosis and Prognosis”, co-authored by David Dodge, a former Governor of the Bank of Canada and Richard Dion, formerly an economist with the Bank. Both are now senior advisors at Bennett Jones LLP, a Canadian business law firm.

They argue that even if policy reforms are “incredibly successful” in improving the efficiency and effectiveness of the health care system, Canadians will still face rising health care costs and necessary difficult choices about how governments and citizens will finance these costs.

In their analysis, the annual increase in nominal health care spending per capita is set to rise from about $250 in the last decade to $675 in the 2020s, bringing total annual spending per capita after inflation to approximately $7,400 in 2021 and $10,700 in 2031, up from nearly $4,900 in 2009. The implication of their analysis is that in the 2020s, “Canadians will be spending 31 cents of every dollar of increase in their nominal incomes on health care, thus bringing the average share of health care spending in GDP up to nearly 17 per cent”.

Their analysis points to the need for governments to make very difficult decisions. Governments will not only be held responsible for providing most of these services, but will inevitably turn their attention to how they can offload some of these costs onto individuals or employers.

Dodge and Dion reach conclusions that underscore the scope and scale of the health care system challenge in Canada and state grimly that the numbers don’t add up. “In addition to increased spending by individuals and employers for health services currently uninsured by provinces, some combination of increased taxes, reduced public services other than healthcare, increased individual spending on current publicly insured services, or a degradation of publicly insured health care standards – longer queues, services of poorer quality – is necessary to manage the growth in health care spending. None of these options is appealing; Canadians have no easy way to manage the chronic healthcare spending rise.”

Journalist and author Jeffrey Simpson characterizes health care as “the third rail of Canadian politics.” “Touch it and you die,” says Simpson in his recently published book “Chronic Condition: Why Canada’s Health Care System Needs to be Dragged Into the 21st Century”. He claims that Canadians urgently need a debate on how to ensure the future of the health care system. Simpson claims that people are unaware or unwilling to review the trade-offs, alternatives and sacrifices that may be necessary to keep the Canadian health care system from collapsing under its own weight. His argument is that politicians and bureaucrats fear honesty, having “hoodwinked people into believing future costs can somehow be paid for without affecting other government services or tax increases.”

Because there is no easy way to manage the chronic health care spending rise, none of the alternatives are politically attractive, as Dodge and Dion elaborate in their C.D. Howe study. In itself, the prospect that there are so many pitfalls with no identifiable winning political proposition places pressure on politicians and bureaucrats to delay the forces of reform, transformation and innovation that will be needed to address the challenge. But even if the prognosis is not good, health care’s financial challenges must be managed. Dodge, Dion and Simpson are in full agreement that it is now up to Canadians to have an “adult discussion” about how to manage it.

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Filed under Finance, Fiscal Policy, Health Care, New Brunswick

Health Care System Might Not Outlive Us

Published in the Telegraph-Journal 12th October 2012

When Canadians hold up their health care system as the world’s finest, our implicit assumption is that no country could do better. Or at least the U.S. cannot do better, unless the American patient pays a significant premium for the privilege. Canadians think generally that their model needs only fine tuning to achieve the highest productivity in health care. But the Canadian health care model is not a paragon of efficiency. Canadians are making increasingly larger expenditures on health care but are receiving relatively less in return.

And there are limits to available funding. We are becoming more aware of the impending crisis in health care financing, especially in the wake of the federal government’s unilateral funding formula that provides hard financial limits to the provinces. We need to find ways to improve the potential for innovation to enhance the overall delivery of health care over the next decade. We need to make critical financial decisions based on key demographics, the role of prevention and treatment in health care systems, and on important industry trends in emerging markets for the health care sector. Expensive pharmaceuticals are emerging in markets that are already straining health care budgets.  We will need to make decisions over what can be covered under our current model.

That our health care system is in crisis may seem a surprising conclusion given the efforts of dedicated health care professionals and the promise of genomics, regenerative medicine and information-based medicine.  The baby-boom generation is going to have high expectations not only of health care quality but of its longevity. Expensive new technologies and treatments will soon create an exponentially larger cost burden.

With our health care system shouldering more pressure, the benefits of disease prevention are becoming more obvious. To help ease this burden and to give New Brunswickers better access to health care, elements within the current system will need to change. A number of organizations have undertaken research to better understand how to help drive the transition to customized care including developing incentives for improved health outcomes, reforming health care’s regulatory structures to enable competition and innovation, undertaking better patient communication to support shared decision making and developing workforce models that allow greater flexibility, collaboration and customization through electronic medical records.

We need to make realistic, rational decisions regarding lifestyle expectations and acceptable behaviors. We need a focused discussion on how much health care is a societal right against what will be delivered as a market service. This discussion needs to extend beyond the limited and often staged arguments that currently characterize discussions of health care responsibilities.  A radical rethinking of the health care accountability structure including appropriate authorities and responsibilities is long overdue.

These challenges, combined with the emergence of a new environment driven by the dictates of economic uncertainty and demographic shifts are already forcing fundamental changes in health care practices. Health care systems that fail to address this new environment run the risk of reaching a fiscal limiting point where immediate and major forced restructuring will be necessary. These realities will complicate our health care options. Innovative technologies will create the prospect that some treatments that currently are at the leading edge may become standard approaches but while there exists a temptation to rely on technological innovation to solve the problems of health care, they cannot be a panacea.

Governments will need to address the challenges of the current system by providing leadership and political will to remove obstacles, encourage innovation and guide society to sustainable solutions. Citizens will still expect their elected officials to be accountable for the most difficult decisions.

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Filed under Fiscal Policy, Health Care, New Brunswick

The Past Is Not A Reliable Guide To The Future

By Peter Lindfield, published in the Telegraph-Journal 11th September 2012

The financial crisis marked the end of an economic era. For more than twenty years, the New Brunswick economy rode on the coat-tails of the expansionary impact of falling inflation, including lower interest rates, greater debt and higher personal wealth but we are now suffering its side effects.

New Brunswickers have always placed great store in opportunity. But we are faced with a new economic era that may frustrate this confidence. This new era is not only the consequence of the 2007-2009 financial crisis and its appalling side effects but coincides with other challenges. The combination of an aging population, rising health care spending and unprecedented government debt jeopardizes our prospects for economic growth.

Premier David Alward took office facing the most daunting economic conditions in decades. There is a strong argument that the New Brunswick economy is at a historic inflection point when the past is no longer a reliable guide to the future. That is the central concern confronting Mr. Alward and his government.

New Brunswick will eventually pull out of the economy doldrums, but the recovery will not necessarily ensure a return to previous rates of economic growth. Gathering over the horizon is the looming threat of an aging population.

As baby boomers retire, the workforce will contract, potentially taking growth with it. If productivity levels in New Brunswick continue to falter, as they have for years, the economy could stagnate in the face of growing claims on New Brunswickers’ incomes. Because of low levels of immigrant attraction and retention and the outmigration of young workers to the more prosperous Western provinces, Newfoundland and the U.S., New Brunswick threatens to age more rapidly over the next twenty years. These factors virtually ensure a shortfall in the workers necessary to fuel a buoyant economy.

A dilemma for the New Brunswick government is how to restore public confidence in the economy. The Keynesian solution is to supercharge demand and spending while putting the unemployed back to work and increasing the production of underutilized firms. But the province’s debt has made that stimulus option an unworkable one. Its borrowing capacity has been strained past its limits and government has taken the wise measure of reducing the cost of government until that capacity has been restored.  This measure will continue to be profoundly unpopular with those whose hold that the role of government is not only to stimulate the economy but to sustain it. The principle that government’s commitments should be balanced with what can be sensibly afforded will continue to meet with opposition.

Nowhere is this principle more in jeopardy than in health care. As a society, we have been patently unable – and unwilling – to control health care spending. Many New Brunswickers are firmly of the view that people are entitled to receive all the health care options that are available, regardless of the ultimate cost. The implication of this view is that health care spending increasingly is placing upward pressure on taxes and downward pressure on other government programs.

It is possible that the demands for government spending will overcome the will of politicians to resist them. But some outcomes clearly are superior to others. If we are unable to reduce projected health care spending, we may face unprecedented tax burdens that will depress economic growth, leading to a vicious cycle of increasingly unaffordable spending. If we are not able to come to grips with a public debt that threatens the future of government to act, we may face the deterioration of the province’s infrastructure that is critical to economic growth. Other outcomes, such as Draconian cuts in government programs, are equally undesirable.

There is no doubt that New Brunswick is at a crucial juncture and not only because the world in the aftermath of the financial crisis appears so unfamiliar and forbidding. We all sit at the eye of this storm where weathering it will involve something approaching economic diplomacy as much as political doctrine.

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Filed under Fiscal Policy, Health Care, Labor force management, New Brunswick

Does Health Care Innovation Matter to Canadians?

By Peter Lindfield, published in the Telegraph-Journal 29th June 2012

Canadians are facing a time of increasing fiscal constraint in health care. The escalating costs of technology hardware and pharmaceutical products, demographic shifts and rising expectations for medical outcomes will conspire to keep a focus on long-term health care solutions. Two interlinked terms have become ubiquitous in discussions about health care’s future: transformation and innovation. There is increasing agreement that the current health care system is not sustainable in the long term.

Innovation, then, should be at the center of the lexicon of Canadians’ discussions about how health care will change. But University of Toronto academics Neil Seeman and Carlos Rizo draw a different conclusion. In a 2009 research study, “Communicating the Health Care Innovation Agenda to Canadians”, Seeman and Rizo examined how effectively Canadian governments are communicating the rationale for an innovation agenda in health care and how intensely Canadians express interest in health system innovation. Using web tools such as Google Insight and Trends, the researchers investigated health information trends from 2004 to 2008 tracking press releases as “a proxy for how governments signal priorities to the public and to the media.”

The results of their inquiry are surprising. Seeman and Rizo’s analysis highlights that governments are not effectively communicating to Canadians about why innovation matters. Although politicians and health care experts place significant emphasis on innovation, the concept is rarely defined, in part because health care innovation can refer a bewilderingly wide array of terms. They include such esoterica as process transformation, electronic health records, breakthrough strategies or new management models. Each is intended to ensure improved health and greater return on investment and in fact achievements are being made in each area.  But Seeman and Rizo ask, “When our politicians talk about “investing” in electronic health records and other e-Health innovations, why do the public’s eyes glaze over?”

When reviewing the public’s interest in health care innovation, Seeman and Rizo found lessons that governments in Canada should heed when communicating the innovation agenda. The public does not share governments’ enthusiasm for health care innovation as the term has been developed in Canada.

Seeman and Rizo’s findings point to the fact that the terms innovation and e-Health, as currently used by governments, “do not signal the types of health topics in which Canadians have a keen interest.” They state that, “Health innovation communications in Canada needs to be recast to focus on solutions that enable citizens to experience more personalized care … that speaks directly to patients’ key interests.”

Their analysis also underscores the fact that Canadians are most interested in seeking out information that provides them with a better understanding of their illness and their personal relationship with their health care providers. More Canadians will be supportive of an innovation agenda if governments and health care provider organizations can demonstrate that technology or other process innovations in health care serve the future of personalized medicine.

Innovation is at the core of the transformation goals and objectives that underpin what governments and politicians think are necessary to meet the challenges associated with health care, education, social programs and economic development. If governments have achieved only limited buy-in to its innovation agenda from the Canadian public, the implications for the future of public policy are profound. Ultimately, governments need to make improvements in more directly translating the practical return on investment on innovation if they want an innovation agenda to matter to Canadians.

Governments need to better demonstrate the future financial benefit from such investments. This means throwing a spotlight on how investments in innovation will translate into a higher quality of care for individuals, their families and their communities. This will generate greater support for a model of health care delivery where Canadians are accountable for increasingly better outcomes, not only for themselves, but for the health system as a whole.

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Filed under Government transformation, Health Care, Innovation

Euro Crises put Contemporary Capitalism at a Crossroads

By Peter Lindfield, published in the Telegraph-Journal 12th June 2012

Contemporary European capitalism has had a relatively short run. It combines generous health and social benefits with shorter working hours than in North America and an emphasis on long vacations and early retirement. With high levels of productivity and income distributions that avoid excessive inequality, the European model of capitalism would appear to be the ideal balance of competitiveness and social stability.

In a post-financial crisis world, the possibility of fiscal meltdown in Greece, Spain, Portugal and Italy has become frighteningly real. We have come to question the sustainability of the European model. But the failure of these economies in conjunction with an extended global recession has cast a long shadow on the future of capitalism itself.

Successive versions of capitalism have been extraordinarily successful for more than two hundred years since the beginning of the Industrial Revolution. The dismal poverty that is still prominent in some parts of the world has been all but banished in much of the West. This is in stark contrast to the catastrophic experience of Marxist and socialist states, especially in the twentieth century. Today there is no agreement on what a viable replacement for the contemporary Anglo-American paradigm would look like.

A more state-centric variant of capitalism exists in China, where industrialization and massive investments in technology have transformed that country in less than thirty years. The Chinese capitalist model features ferocious competition among export firms, and government intervention is widespread and pervasive. Its social safety net is substantially weaker than the typical Anglo-American model.

But rather than viewing China’s model as superior to the Anglo-American paradigm, it is important to remember that Chinese political, economic, and financial institutions are still evolving.

In fact, it is the long global successes of capitalism that have thrown a spotlight on the looming structural flaws of the current economic system.

First, we continue to be faced with a widespread financial crisis on a number of fronts. Ongoing, relentless technological innovation has conspicuously increased economic risks where purely market-based solutions appear to be unable to address the global transformation that is taking place.

Financial systems themselves have inadequate regulations, with too little focus on excessive accumulations of debt. A prominent example is health care, where many countries are struggling with the moral dilemma of how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care. The current pricing of health care does not encourage a more equitable relationship between equality and efficiency.

Second, Western economies have consistently failed to effectively price public goods such as clean air and water. There is little political will to establish a sufficiently high global price for carbon to motivate firms and individuals to internalize the cost of their environmental activities. There is widespread consensus that economics and the environment are inextricably intertwined, but the failure of Western states to conclude global climate change agreements is indicative of this pricing challenge.

Third, capitalism increasingly is producing unacceptable levels of inequality. At sub-national levels, tax systems have failed to provide a greater measure of redistribution of income without creating unnecessary distortions. The growing gap is partly a byproduct of capitalism’s tendency to aggregate at the national level. But it is clear that in many nations, regional disparities are growing, despite some governments’ reliance on equalization systems. We have yet to find the tools to curtail this vicious circle without stunting national growth.

There is no doubt that conventionally measured economic growth with the central implication of higher consumption cannot be sustained as capitalism’s core objective. The challenges of climate change, health care and financial instability are becoming more prominent, while political institutions remain unable to address them. In a few decades, we may look back on this era as the turning point in the history of capitalism.

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Filed under Environment policy, Government transformation, Health Care, Uncategorized

Health Care Innovation Is Difficult

By Peter Lindfield, published in the Telegraph-Journal 15th May 2012

In countries around the world, no public good or government program has undergone as much radical change over the last 100 years as health care. Treatments, pharmaceutical products and medical devices have become dramatically more effective while the scope and scale of knowledge in the field has increased exponentially. In Canada, more than a million people list health care as their occupation. Canada is a recognized world leader in health research accounting for more than $6 billion in research budgets.

From a financial standpoint, health care has become the most intractable social program. In the face of increasing fiscal pressures, provincial governments have placed a spotlight on the need to contain the rising costs of health care. The Canadian public and their governments annually spend more than $180 billion on health care and much of this expenditure is under provincial jurisdiction.

The current fiscal challenges and the price of economic recovery effectively limit the availability of health care dollars. The fiscal crisis provides an opportunity to reshape current health care systems by reducing the growth rate of health care costs, while increasing productivity and improving health outcomes.

Yet even though health care innovation has been a priority on the agendas of every provincial government over the last ten years, little headway has been made. This drive to innovation has occurred under the rubric of alternative service delivery, supply chain re-engineering and process improvement, but change has been largely incremental.

In the face of the mounting challenges, why has more radical and transformative change not taken hold in the health care field? Change is clearly needed. The future demand from an aging population, rising expectations to meet current patient needs and the escalating costs of technology and pharmaceutical products have each conspired to ratchet up budgetary pressures.

One of the reasons that change is so difficult is that the number of stakeholders and players is enormous. The roster of team players includes health education and research institutions, such as universities and research hospitals; health and life sciences companies, including firms in industries such as pharmaceuticals, biotechnology, medical devices and medical informatics; health and health care non-governmental organizations and professionals; and government departments, including those that manage finance, health and innovation portfolios. There is no question that there is sufficient capacity in Canada’s health care system to manage our health care challenges.

Another reason that health care has become resistant to monumental change is that, for more than ten years, health care professionals have been immersed in a work environment where endless change has been the norm. Workshops, seminars, conferences, forums, consultations and town halls have produced a professionally uncertain workplace where everything is top priority. Without the proper alignment and integration of innovation goals to ensure that all members of the health organization work in harmony, productivity inevitably suffers.

There are such a large number of opportunities to reshape health care that strategic collaboration is a critical success factor. Aligning the incentives of the critical stakeholders in the health care orbit would go a long way to improving the prospects for innovation to take hold.

Health care innovation can be a potent enabler of better health and health care. For this innovation to be successful will require new technologies, new skills and capabilities, new ways of working and the establishment of an innovation culture. Since Canada possesses hundreds of thousands of different points of care, transformative progress will require the support of the public, the commitment of clinicians, and the creativity and political will to support this transformation.

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Filed under Health Care, Innovation