Category Archives: Healthcare

In Health Care Cost Cutting Will Not Be Enough

Published in the Telegraph-Journal 30th October 2012

Healthcare spending in Canada, which annually consumes in excess of $200 billion, has emerged as this country’s biggest source of anxiety over public spending.

Canadians generally are committed to continuing our current system of government-funded healthcare that is free to all Canadians. The cost of healthcare has risen but the simple solution of adding more money without first making fundamental changes has not been successful. The $41-billion increase in federal transfer payments to the provinces initiated in 2004 by then-Prime Minister Paul Martin was intended to end healthcare funding problems for a generation. Instead, it has become one in a series of healthcare public policy miscalculations.

In December 2011, Finance Minister Jim Flaherty outlined Ottawa’s newest healthcare funding plan. Federal transfers for healthcare would continue at six per cent until 2016-17. After that, the federal government plan will have transfers move to a system that ties increases to the growth in real GDP plus inflation. Mr. Flaherty called the plan, which was not open to negotiation, an effort to move toward responsible spending.

“Our public health care system is a source of pride to all Canadians,” Mr. Flaherty said. “We all want to see a strong, sustainable system that is there when we need it for today and for our children and our grandchildren tomorrow.”

In New Brunswick, where the cost of healthcare is $2.8 billion a year or approximately 40 per cent of the total provincial budget, Health Minister Ted Flemming is promising to put a full-court press on healthcare spending.

“We are going to create a target to bring our healthcare spending in line with at least the national average, if not better than,” said Mr. Flemming.

Premier David Alward recently referred to measures government is undertaking to achieve reductions in healthcare costs. The New Brunswick government plans to eliminate the duplication of services in addition to reviewing administrative, supervisory and management functions for savings. He added that alternative service delivery – potentially leading to the integration of FacilicorpNB operations with the Department of Government Services – could also achieve cost reductions.

“Are there areas for shared services where the system can work more efficiently and ultimately more effectively?” Mr. Alward asked. “We have seen some of the success that has taken place with the renewal within general government”.

The initial priorities identified through the government healthcare reform process are focused on achieving management efficiencies within the healthcare system. The New Brunswick government also plans to implement health innovations and best practices, although it has not yet selected an innovation strategy.

New Brunswick “has started to put a curb on (healthcare) spending, but we cannot get there alone,” Mr. Alward said. For this reason, government has indicated that system-wide changes will be fueled through collaboration with established boards, agencies, organizations and health-service providers.

But will cost cutting measures be enough?

There is no doubt that healthcare costs need to be comprehensively understood and more effectively managed. For example, a sustainable public health system information infrastructure is urgently needed. Despite the recent eHealth Ontario debacle, the deployment of an effective e-health, mobile health and tele-health infrastructure may become essential to provide services while managing cost in remote areas.

But simply reducing costs will not fix healthcare. The real issues lay below the surface, which include the challenges associated with end-of-life decisions, the increasing demands for seniors care, the pressures of emerging technologies and dramatic demographic changes. These issues will provide the foundation of sources of contention among Canadians. And in the background, the principles of our healthcare model will come under close scrutiny as Canadians review the limits of their entitlement and even entertain a two-tier service provision model. In New Brunswick, two official languages add complexity.

Healthcare reform will not stem from reviewing and implementing those initiatives that have proven successful in other jurisdictions. Healthcare reform in Canada will not be a simple matter of cost management. Instead, the philosophy, concept and practice of healthcare goes to the heart of what it is to be Canadian.

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Filed under Fiscal Policy, Healthcare, New Brunswick, Social contract

How Much Health Care is Appropriate?

By Peter Lindfield, published in the Telegraph-Journal 21st August 2012

There is widespread agreement that Canada’s health-care system cannot continue. With costs of approximately $200 billion annually in public and private money, this system is ill-suited to an aging population, with public costs outstripping government revenues and prevailing rates of inflation.

Many point to demographics for the steady increases in health-care cost, but blaming an aging population for health-care costs spiralling out of control reflects an inaccurate perception of the challenge. A more correct reading reveals that we are missing opportunities to manage and contain costs. A profound challenge facing health care has less to do with demographics and more with the intersection of health-care technology and public expectations about access to these technologies.

In Too Much Health Care, a 2009 article in the Literary Review of Canada, Dr. Charles Wright, former Scientific Officer of the Canadian Health Services Research Foundation, pointed to four areas that challenge future health care: “new surgical techniques, such as knee and hip replacements, that have grown far beyond the rate that would arise from population growth or aging alone; new diagnostic techniques, such as MRIs and PET scans; pharmaceutical drugs; and end-of-life care that has become highly reliant on expensive technologies.”

According to the Canadian Institute for Health Information, Canada spent almost $30 billion on prescription drugs in 2009. Canadians pay 30 per cent more for medication than the average in OECD countries. Drugs now represent the second-largest expenditure in health care, second only to those for hospitals.

Dr. Wright provides an example of the questionable benefits wrought by new pharmaceutical products. He cites the drug Avastin, marketed for patients with colorectal cancer and now on most provincial drug lists. Research provides evidence that Avastin can indeed prolong life. Dr. Wright states that the questions about the drug’s appropriateness revolve around “how much more life, at what cost and causing how much harm? The answers are an average of four months, $50,000 per patient and a stunningly wide range of adverse effects from high blood pressure to gastrointestinal problems to severe hemorrhage. Half of the patients receiving the drug get no benefit whatsoever.”

These are difficult questions certain to initiate heated debate. But the public may not be able to continue to fund services that offer limited benefit but place great financial strain on the health-care system. The public can do more to place limits on inappropriate medical care. To do this successfully, the public needs to be more informed about the balance of potential benefit and risk that is inherent in any medical intervention.

These limits still operate within the principle of equitable access to medically necessary care regardless of financial means. That is the most desirable characteristic of Canadian health care. The future of this equitable access requires that we recognize the paradox that health-care interventions can cause more harm and more cost than warranted by the benefit. Dr. Wright asks, “How many would decline treatment if they were made fully aware of the extent of the benefit and the probability of complications?”

There is growing recognition that without major changes in our thinking, our health-care system is unsustainable. There are two critical issues that need to be faced squarely. The first issue deals with the limits of financing this system and has been the subject of continuous discussion especially in recent years. The second issue focuses on the appropriateness of products and services delivered within the system. Attention to this issue has been conspicuously absent.

Modern technology has led us to the point where even unequivocal supporters of universal health care now recognize that there is a limit and that we have reached it.

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And Now the Heavy Lifting Begins

Published in the Telegraph-Journal 3rd April 2012

The dust is beginning to settle on pronouncements over last week’s provincial budget. While it appears to have set the correct course to extricate New Brunswick from fiscal disaster, does it have the necessary impetus to drag New Brunswick not only into solvency but to prosperity in coming years? The debt and deficit crunch is merely the symptom, and we have yet to address the cause. Government has no time to be complacent since it must steel itself against the impact of four critical and profound challenges: health care, education, pension plans and the fiscal debt.

Many governments around the world have found that attempts to contain health care costs are resisted by almost intractable positions. In New Brunswick, as in other jurisdictions, the demographics of an aging population and steady technological advances are conspiring to expand expenditures. In jurisdictions where some proposed programs of reform have been attempted, they have tended to introduce unintended consequences, such as reduced access, rationing or adverse localized effects on service delivery.  Preventing chronic illness would offer hope of a reduction in demand but innovation throughout the health care delivery cycle is clearly the answer. No clear formula has yet been found. Until it is, increasing health care cost will remain a daunting political and social challenge.

Education costs similarly have resisted conventional solutions, although in New Brunswick there is widespread recognition that we have an oversupply of schools in regions where their existence can no longer be financially justified. This raised the curtain on the question of entitlements in a most crude way where the obstacles will be inescapably linked to the proposition that any reductions in the number of schools should not be tolerated. Administrative cost-control solutions will be inadequate to the task in part because these measures have been shown to ration productive and nonproductive activities alike.

On the issue of public sector pension entitlements, even a statement of intent rather than a specification will bring out torches and pitchforks, where a bunker mentality has taken hold on both sides of the equation. To place pension costs on a sustainable footing – moving from a purely benefits-based model to one that accepts that a contribution-based scheme will be necessary – will require addressing the concerns of civil service employees that they will have to pay more, work longer and earn less. If we accept the government’s proposition that public sector pensions must be reformed to make them sustainable in the long term, these reforms will need to be designed in a progressive way.

Looming over each of these discussions is the issue of how New Brunswick will manage its fiscal debt. Expected to reach more than $10 billion before the end of this fiscal year, debt service payments increasingly are playing a major role in its expansion. Clearly, New Brunswick needs to find additional sources of revenue to offset the debt. Finance Minister Blaine Higgs has stated that government is disinclined to raise the HST because the deficit is structural in nature. While he is technically correct, it remains to be seen where government will find sources of revenue equivalent to the amount it would recognize if the HST was brought into the equation. Interestingly, the government has placed a number of its properties up for sale, ostensibly to raise revenue from them. Conceivably, this real estate sale is a trial balloon, testing the public for its acceptance of the sale of government assets. If successful, both in concept and in practice, the door could be opened to additional divestment of government assets, such as NB Liquor.

Each of these challenges will demand responses outside our comfort zone. Our dialogues about government and societal transformation frequently betray a secret desire to be living in normal times once more; times that will restore the authority of solutions past. In fact, this traditional era is now moribund and it should not be mourned.

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Filed under Economics, Healthcare, New Brunswick, Uncategorized

The Widening Gulf Between Economic Aspiration and Reality

Published in the Telegraph-Journal 6th March 2012

In Europe, tensions over the euro zone debt crisis are beginning to recede and newspaper headlines reflect that the calamity has averted disaster. Even though the arrangements necessary to bail out Greece have not yet been finalized, the European Central Bank has made two rounds of low cost loans available to European banks. That appears to be sufficient assurance to many analysts that the euro zone financial system will rest on a sound foundation for at least another year. Even though Greece has staggered through the rough and tumble bailout talks without being knocked out, its economy is still on the ropes and a number of other European economies are still weaker than at any period since the Second World War. It will take years before the European Union once again possesses the strength it demonstrated until about 2007.

Meanwhile, the U.S. economy been surprisingly strong since last fall and almost every economic report has exceeded consensus forecasts. It does seem that some semblance of a recovery is gaining a foothold south of the border. In the U.S. stock market, the S&P 500 has enjoyed gains of more than 25% since its low last October 3 when the outlook seemed to be at its worst. The economy had stumbled badly in the first two quarters of 2011.

American households have been trying to pay off record debt since the financial collapse but the percentage of household debt to GDP is only down only to 88 per cent. This is critical since consumer spending accounts for 65 per cent of GDP. In conjunction with the still very high levels of unemployment, that does not auger well for consumer spending to pick up in any sustainable way in the near term. In Canada, we can’t expect the U.S. economy to pull us along for some time.

In New Brunswick, the soon-to-be-released provincial government budget will provide additional pressures on growth and prosperity. Faced with large deficits and fiscal debt, Finance Minister Blaine Higgs’ focus will be on reducing those debt obligations and setting the foundation for future growth. With relatively little room in which to maneuver, Mr. Higgs has approached the fiscal situation cautiously, who has been under pressure for not reducing the debt more quickly.

A question that emerges quickly when discussing the challenges that the provincial government is facing is how much we should decrease its cost. There is no doubt that we can continue to cut discretionary spending, but at some point the discussion needs to turn to how much we spend on health care and education. Together, those portfolios represent the most substantial provincial spending obligations with everything else far behind. However, even though we may be inching towards the recognition that government spending needs to decrease, there is no consensus about how to achieve this.

Government cuts will have a cost. That cost will likely have an impact on New Brunswick’s least privileged. The harsh reality is that almost three out of every five government dollars is allocated to those who require medical treatment. A disproportionately high percentage of those who are sick are elderly and poor. Barring some radical transformation of health care, if we cut government, the poor, sick and elderly will be the ones paying the greatest costs.

There have been calls for deep reductions in the size, scope and scale of government and for income tax reductions, both for corporations and for individuals. The task we have ahead of us is already diabolically difficult and will require all our ingenuity, patience and discipline. We will make it that much more difficult if we capitulate to ideological solutions that have never given us anything more than an ever-widening gulf between aspiration and reality.

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Filed under Economics, Healthcare, New Brunswick

Is Ontario’s Drummond Report a Model for New Brunswick?

Published in the Telegraph-Journal 18th February 2012

Released yesterday amid media fanfare more commonly associated with the announcements of NHL draft picks, the Drummond Report is a weighty document. At five hundred and sixty-two pages stretched tightly across twenty chapters and with almost four hundred recommendations, the report may not quite rival Tolstoy’s War and Peace in scope and scale, but Path to Sustainability and Excellence will probably be read the same way. Few will read it in its entirety while many more will begin with good intentions before settling for the executive summary.

Ontario established the Commission on the Reform of Ontario’s Public Services in 2011 to advise the government on how to return to a balanced budget no later than 2017-18. Its other mandate was to determine how government could get more value for taxpayers’ money in every area of its expenditures, from health care and education to back-office management to intergovernmental relations. The Commission concluded early in its mandate that the deficit was on track to rise to more than $30-billion by 2017-18 from $14-billion in 2010-11.

The report recommends a degree of spending restraint that is “almost certainly unprecedented in Canadian post-war history.” Annual growth in program spending would be held to only 0.8 per cent over a seven-year period. The report additionally recommends limiting health care to increases of 2.5 per cent a year, post-secondary education to 1.5 per cent, education to 1 per cent and social services to 0.5 per cent; everything else would be reduced by 2.4 per cent a year.

Two assumptions underpin the report. First, in Ontario, economic growth cannot provide the usual revenue leverage this time, either in the next few years or further down the road. The report concluded that, while everything needed to be done to boost the economy, Ontario could not depend on the type of growth to which it had become accustomed. Second, the government needed to focus on reforming and transforming programs, rather than relying on simple cost-cutting measures.

The report adamantly opposes the indiscriminate slashing of the public service. Don Drummond, the Commission’s chair sets a reformist tone in the report when stating that, “affordability and excellence of public services are not incompatible; they can be reconciled by delivering all programs more efficiently. The silos of the health system can be better integrated to save money and ensure people don’t fall between the cracks. Universities and colleges could deliver better value for the money through greater differentiation and reducing their high, internal rates of cost escalation. Impressive results have been achieved in recent years in Ontario’s education system, but non-core costs have risen sharply and must be reined in.”

Perhaps surprisingly, the Commission does not examine some remedies to the fiscal challenge to the same extent. While the question of tax increases is quickly dismissed, the potential for revenue generation and government transformation through key asset sales is underplayed.

If the Drummond Report has accurately framed one important problem of government, can it be used as a model for other provinces that are similarly being squeezed between fiscal realities and flagging growth?  As in Ontario, New Brunswick cannot simply adjust its fiscal parameters in the short term to eliminate a deficit caused by the recession and a growth shortfall. Although restraint measures that have already been undertaken represent a beginning, New Brunswick’s provincial deficit will continue to rise in an environment of modest economic growth. Although in New Brunswick the fiscal challenges exist on a smaller scale than in Ontario, its economic growth problems arguably are even more severe. The Drummond Report’s conclusion is that Ontario’s fiscal response must not only be strong and sustained over a much longer period, ultimately it must reform the way government delivers virtually every service. Surely this conclusion could be applied in equal measure in this province.

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Filed under Government transformation, Healthcare, Social contract

The Challenges of Health Care

Published in the Telegraph-Journal 10th February 2012

A heated discussion is emerging on what the future of healthcare will look like. In Canada, healthcare systems, which were created during a period of prosperity, are now facing severe economic challenges. Even though we are faced with a global financial crisis that jeopardizes our financial stability, the early 21st century is a marvel of achievement in scientific advancement and technological progress. However, the financial foundations of healthcare are crumbling and could weaken further unless policies are quickly revised. The fundamental problem of healthcare is its spiraling cost, and there is no end in sight. Governments are beginning to review how to slow this upward spiral, but there is little agreement on how best to achieve this.

Perhaps the most critical question is how healthcare systems can be redesigned without damaging the foundation upon which they were originally developed. Founded on the principle of universality, Canada’s healthcare system is paid for by the public, with the risks of medical expenditures essentially shared. There is substantial evidence that most Canadians agree with this shared-risk principle even if they are uncertain about how rising costs are to be met. Most would resist any efforts to change the current system. Many think radical change would jeopardize the principle of universal healthcare coverage. However, the financial contributions required for healthcare have risen steadily, to the point where people are beginning to realize that further increases may no longer be possible. Governments, for their part, are beginning to recognize that continually rising costs will not be politically acceptable. Even so, the increase in the cost of healthcare continues to outdistance economic growth and shows no sign of slowing down.

In fact, healthcare costs are rising far more quickly than levels of available funding. These rising costs cannot be met with current levels of public funding and these costs cannot be met by raising taxes either, in part because the costs have become far greater than conventional taxes could generate. In New Brunswick, the main drivers of rising healthcare costs point squarely to the impact of aging populations and the related rise in chronic disease, as well as costly technological and pharmaceutical advances. And in today’s Internet culture, patient demand increasingly is being driven by a greater knowledge of options. Underlying all of this is the effect of less healthy lifestyles that has led to increasing incidence of obesity-related conditions such as heart disease and diabetes.

In the face of these challenges, governments and healthcare agencies are encumbered by legacy priorities and financing structures that are ill-suited to today’s requirements. But a consensus is beginning to emerge that the future of healthcare will be shaped by a number of separate, but interconnected, trends. A key trend is that healthcare spending will continue to rise, not only because of inflationary drivers, but because of a growing recognition by policymakers that improved health is strongly linked with greater national wealth. It is a paradox that without financial constraint, maintaining the universal healthcare model may require the rationing of services and consolidation of healthcare facilities, as public resources no longer are able to meet demand.

These trends have significant implications for governments and the public? Ultimately, patients may need to take more responsibility for their own health, treatment and care. More effective preventive measures and fundamental lifestyle changes should be promoted to encourage healthy behavior. Governments will need to wrestle with bureaucracy and liberalize rules that restrict the roles of healthcare professionals and that artificially increase the cost of healthcare research.  In the future debate about the details of healthcare reform in New Brunswick, what will be needed most is adaptability to focus on the best ways to maximize the health and well-being of New Brunswick’s population.

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Running Government as a Business

Published in the Telegraph-Journal 3rd February 2012

In the drive to find efficiencies and cost savings in government, there has been an increasing call for government to operate like a business. On the face of it, there is a visceral appeal associated with circumventing the convoluted organization design and decision-making of government bureaucracy and substituting this with a flat organizational structure and simplified decision making approach that typifies corporations. Presumably, government would be subject to the same methods to enhance productivity, such as business process engineering, outsourcing and lean six sigma. These approaches have not been universally successful, but winning corporations have used management and organization efficiency programs to boost profitability, market share and competitiveness in an increasingly tough global marketplace. University departments of public policy have borrowed liberally from the private sector to show how downsized government operations are the way of the future. The federal government’s own Treasury Board Secretariat houses a library of publications that document these new approaches. So, are there advantages to running government like a business?

Well, yes and no.

It’s true that the line between public and private sector operations has blurred significantly in planning, organizing, controlling and in the provision of leadership. The rationalization of services across federal government departments is a project that is now more than twenty years old in Canada and there are still additional efficiencies to be found. Andy MacDonald, the federal government’s first CIO, was responsible for initiating the fundamental reorganization of the government’s many IT shops into a more coherent and cost effective group, and the savings have been in the billions of dollars. Private sector methods, processes, practices and procedures were in many cases seamlessly integrated into public sector operations. Internal service provision, not only in IT but in real property management, procurement and many other services, has been radically overhauled over that twenty year period. And business process engineering, outsourcing and lean six sigma have been part of that overhaul all along.

Integrating business principles and methods would be a welcome approach to many of New Brunswick’s challenges. The management, design and direction of utilities and service provision agencies would respond to greater entrepreneurship and independence.

But there are limits. Perhaps the best example of where we need the business and public sectors working together is health care. We are becoming more fully aware of the impending crisis in health care funding, especially in the wake of the federal government’s unilateral funding formula that provides hard limits to the provinces.   It is clear we need a plan to work with this new funding model at precisely the time that spending is facing the greatest stress.

In response, we need to find ways we can improve not only the predictability but also the potential success for health care innovation in order to enhance the overall delivery of health care over the next decade. We will also need to make critical decisions based on key demographic statistics, the role of prevention and treatment in health care systems, and on important industry trends in emerging markets for the health care sector. New, expensive pharmaceuticals will come onto the market that will strain health care budgets and require decisions over what will be paid for as a public good.

All of this will complicate health care policy in the face of rapidly transforming approaches that technologies will deliver. Once esoteric, some treatments that today are at the leading edge of innovation will become standard approaches, but critically not for everyone everywhere. Under this pressure of judgements about what will constitute the public good rather than determinations of efficiencies, health care cannot be run like a business. The mutual benefits and responsibilities that are embodied most visibly in public institutions are not merely predicated on efficiency and cost. Citizens will expect elected politicians and departmental officials to be accountable for those decisions.

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Filed under Government transformation, Healthcare