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Parkland Institute • November 2004 1

Public Remedies,Not Private Payments:Quality Health Care in Alberta

Parkland Institute

A study prepared for the Parkland Institute by Tammy Horne and Susan Abells

2 Public Remedies, Not Private Payments: Quality Health Care in Alberta


A study prepared for theParkland Institute by

Tammy Horne andSusan Abells

This report was published by the ParklandInstitute, November 2004. © All rights reserved.

To obtain additional copies of the reportor rights to copy it, please contact:Parkland InstituteUniversity of Alberta11045 Saskatchewan DriveEdmonton, Alberta T6G 2E1Phone: (780) 492-8558 Fax: (780) 492-8738Web site: www.ualberta.ca/parklandE-mail: [email protected]

ISBN 1-894949-0506

Public Remedies,Not Private Payments:Quality Health Care in Alberta


Tammy Horne is an independent community-based researcher and consultant in Edmonton,and an Adjunct Associate Professor in theCentre for Health Promotion Studies atUniversity of Alberta. She was a co-author ofthe Parkland Institute’s 2002 report ReclaimingMedicare: A Response to the MazankowskiMisdiagnosis. Tammy also co-authored TheDifferential Impact of Health Care Privatization onWomen in Alberta in 2000 for the PrairieWomen’s Health Centre of Excellence. She hasa Ph.D. in Kinesiology from the University ofWaterloo, and a lifelong interest in healthissues.

Susan Abells is a consultant who works as aresearcher, writer and communicationsprofessional in the fields of health care, landuse and sustainability. She has a Masters degreein Political Science from the University ofAlberta, specializing in the political economyof development.

Author Biographies

The authors would first like to thank theParkland Institute for funding the researchand writing of this report, and for providingdirection and feedback through both theResearch Committee and the CommunicationsCommittee. Research Director Diana Gibsonand Executive Director Ricardo Acuñaprovided many helpful comments on thecontent and style of the report, and Diana wasinstrumental in the overall editing process andn developing the Executive Summary.

We also wish to thank a number of externalreviewers. Economists James Smyth ofUniversity of Alberta (Department ofEconomics) and Greg Flanagan of Universityof Lethbridge (Faculty of Management)provided valuable suggestions and clarity onthe economic issues discussed in Chapter 1and 2. For Chapter 3, John Church ofUniversity of Alberta (Centre for HealthPromotion Studies) and Cynthia Smith(Alberta Healthy Living Network) providedconstructive advice and additional informationfor the primary health care andhealthpromotion sections, respectively.

Armine Yalnizyan of the Canadian Centre forPolicy Alternatives provided fiscal tablesfrom Finance Canada as well as instructions fortheir use. Allan Cassels of University ofVictoria was generous with information onpharmacare in Canada.

Finally, we wish to thank Flavio Rojas for thedesign and production of the report,and Keith Wiley of United Nurses of Albertafor additional assistance with graphics.

Acknowledgements


Endnotes are the complete references forsources used in the report. They are referredto in numeric superscript throughout the text,and appear in a list at the end of each chapter.To avoid duplicate citations, we cite our firstreference to a source as an endnote. If we referto the same source again, we explain in thetext which previously-cited document we arediscussing.

Footnotes are explanatory notes or referencesto specific tables or pages of sourcedocuments. They use alphabetic superscriptsand appear at the bottom of specific pages.Footnotes are for readers who desire moreinformation - for example, about tables in asource document that we use in ourcalculations.

A note on the referencing system used in this report

Contents

Executive Summary 6

Introduction 13

CHAPTER ONEThe Health Care Sustainability Crisis: Fact or Fiction? 15

Interpreting the Numbers: Inflation, Population Growth and Spending Trends 15Deficit and Debt Payments Have Freed Up More Money for Health Care 19Is Health Care Crowding Out Other Government Programs? 20Is Health Care Spending Growing Faster than Government Revenue? 23Lots of Money, Little Political Will 26Can the Economy Afford the Public Health Care System? 28

Which Health Care Costs Need to Be Controlled? 32Areas with Extensive Private Involvement are Escalating 32The Myth that Aging Will Bankrupt Health Care 35Does Health Care Spending Make Any Difference to Health 37

Why is the Government Telling Us Health Care is Not Sustainable? 40Investing in Social Programs Contradicts Market Ideology 40

Foregone Tax and Resource Revenue: Turning Down the Money Tap 42Why the Obsession with Tax Cuts? 45But Don’t We Need Low Taxes to Have a Strong, Competitive Economy? 46Is the Public Clamouring for Tax Cuts? 48Do We Need Higher Health Care Premiums? 49

The Bottom Line 51

References 52

CHAPTER TWOPrivate Finance, Public Access and Social Costs 57

Making Patients Pay 57Do User Fees Reduce Patient Demand and System Costs Without

Compromising Access to Health Care? 59Sweden: The Poster-Country for Successful User Fees? 62User-Fee Ideology: Better Care for the Better-Off 64

User Fees by Different Names 66• Medical Savings Accounts and Variable Premium Accounts 66• Taxing the Sick: Health Care Deductibles and Income Taxes 67• A Made-In-Alberta Approach: The Health Care Deductible 70• When a Tax is Not a Tax 71• A Trojan Horse for Expanding Private Health Insurance? 72• What’s Wrong with More Private Health Insurance? 75

The Bottom Line on User Payments 78

Jumping the Queue 79Three Tales of Buying Faster Access to Health Care 79The Myth of Private Finance as a Pressure Valve for Wait Times 82Why Does Private Finance Not Solve Wait Time Problems? 85The Bottom Line on Private Finance and Wait Times 86

Conclusion 87

References 88

CHAPTER THREEBetter Management and Broader Thinking 93

Tackling Wait Times 93• Albertans Are Waiting 93• What to Do About Wait Times? 93• Taming the Queue 96• What Is Happening in Alberta? 101

Renewing Primary Health Care 104• What Is Primary Health Care? 104• Early Community-Centred Primary Health Care Models 105• Recent Models of Primary Health Care 107• How Should Doctors Be Paid? 109• What Is Happening in Alberta? 111

Controlling Spiralling Drug Costs: Pharmacare 115• Growing Drug Costs and Limited Public Drug Coverage 116• The Need for Pharmacare 117• How Does Alberta’s Drug Coverage Compare to Other Provinces? 118• How Would Pharmacare Save Money? 120• What Is Happening in Alberta? 122

Contents

Preventing Disease, Promoting Health, Enhancing Equity 125• Healthy Living in a Social Context 126• Why Is Lifestyle Promotion Not Enough? 129• Why the Imbalance Between Lifestyle Promotion and Social Justice? 131• How Do We Tip the Balance? 132• What Is Happening in Alberta? 135

Conclusion 140

References 142

OVERALL CONCLUSIONS 150

Contents

Public Remedies,Not Private Payments:

Quality Health Care in Alberta

A study prepared for theParkland Institute by

Tammy Horne andSusan Abells

November 2004


The government of Alberta desperately wantsus to believe our health system is on the brinkof fiscal collapse. Premier Ralph Klein knowsAlbertans are worried about the future ofhealth care, yet he continues to muse abouttaking on the Canada Health Act, taxingAlbertans for our use of health care, andallowing well-off Albertans to pay privately forquicker access to Medicare-insured procedures.At the same time, the Premier warns his MLAsto brace themselves for a “firestorm” of protestfrom their constituents, because he knowsthese solutions are not supported by mostAlbertans.

Why does the government keep telling us ourhealth care system is unsustainable and moreprivate health care will save it from collapse? Inthis report we identify the underlying reasonsto be ideological, not fiscal. This report arguesthat the government is misleading us - bothabout the fiscal problems facing our healthcare system and the solutions needed to fix it.It shows that the current system is sustainable,explains why private solutions are not theanswer, and explores options for improving thepublic system - through better management ofwait lists and drug costs, and a stronger focuson primary health care, health promotion andthe social determinants of health.

The Health CareSustainability Crisis:Fact or Fiction?Alberta’s health care system is not facing fiscalcollapse. Costs are not rising out of control.Instead of the 10 per cent annual increases theGraydon report claims, health care spendingincreases in real dollars since Premier Kleintook power in 1992 have been modest -averaging 1.6 per cent a year from 1992 to2004. The government uses misleadingnumbers - not controlled for populationgrowth or inflation - from a few high growthyears that followed deep cuts, to make itsspending figures artificially high.

Is health care spending crowding outother program spending?

The government claims that health care iscrowding out other program spending. This isa deceptive argument. Health care is notcrowding out other programs; it has simply notexperienced as many cutbacks over the last 10years. Rather, it is debt elimination and tax cutsthat have crowded out new program initiatives.Even with the impact of those cuts, the amountof total program spending taken by health in2001-02 was only 3 percentage points higherthan it was nine years earlier.

Executive Summary


Can the Alberta economy afford our healthcare system?

Percentage of GDP offers the most accuratepicture of health care spending. Healthspending in Alberta in 2003-04 as a percentageof GDP is about the same as it was 10 years ago- just over 5 per cent. In other words, relative tothe size of our economy, we are spending thesame on health care today as a decade ago.

Is the government taking in enough revenues topay for health care?

Provincial revenues have expanded at the samepace as health care costs. In fact, healthspending uses roughly the same share ofprovincial revenue now as it did in 1980-81.And this is after draconian tax cuts. Foregonerevenue from personal and corporate incometaxes combined was over $8 billion between1996-97 and 2003-04. For the years 2001-02 to2003-04, the value of income tax cuts rangedfrom a quarter to a third of provincialgovernment health spending.

The province also reaps less revenue fromroyalties and taxes on oil and gas than otherjurisdictions. With Alberta debt-free, awash inoil and gas revenues, and posting several yearsof budget surpluses, the issue is not ourgovernment’s ability to afford public healthcare, but its willingness.

While this government is ideologically marriedto tax cuts, our report shows that tax cuts arenot a precondition for a strong economy. Infact, tax cuts can actually suppress economicgrowth. And Albertans are not clamouring fortax cuts. Reputable public opinion surveys

show that roughly twice as many Albertanswant the government to prioritize health careand other social program investments thanwant tax cuts.

Alberta is one of only three provinces to collecthealth care premiums - which are a form ofregressive taxation. Seven of 10 Canadianprovinces do not collect health care premiumsat all. These provinces fund health carethrough income taxes. Surely Alberta, withballooning resource royalties and annualsurpluses, can afford to eliminate premiumsfor all Albertans, as it did recently for seniors.

To be sustainable, must our health care systembecome increasingly privatized?

The Alberta government would have us believethat allowing more private health care willcontrol costs. In reality, some of the fastest-growing costs are in areas with extensiveprivate sector involvement - prescription drugs,administration of private insurance plans, andpayment for services not covered underMedicare, such as dental and eye care. InAlberta, private funding for health care grewfrom 26 per cent of total health spending in1992 to 29 per cent in 2001.

Executive Summary


Private Finance, PublicAccess and Social Costs

In the second section of the report, we addressthe Klein government’s stated intention toexpand private financing within the publichealth care system. Here we examine user-payment proposals that would make sickpeople pay more for their public health carethan healthy people, and queue-jumpingschemes that would allow people with moneyto buy faster access to procedures alreadycovered by Medicare.

User Payment Schemes: Punishing the Sick

User-pay proponents, such as the Albertagovernment and right-wing think tanks, couchtheir proposals in the language of incentives,choice, individual responsibility andconsumerism.

However, this report shows that user fees donot reduce health care costs. They keep thepoor, the elderly, the chronically ill and thedisabled from making timely, necessary visits tothe doctor. This means higher acute care costsdown the road that could have been avoidedwith early medical attention. Without promptcare, patients and their families experience lossof income and quality of life, employers loseemployees to sick time, and the governmentloses federal and provincial income tax. Familymembers, most often women, end up spendingmore time caring for sick family members. Addthe cost of administration, and we can see thatuser payments are penny-wise and pound-foolish.

Taxing Health Care:User Fees by Another Name

Taxing the sick is the user-pay option of choicein the Graydon report. Its authors propose aHealth Care Deductible, which would makehealth care a taxable benefit. This is a user feeby another name, but less visible to Albertansbecause it would not be collected until taxtime. Because the deductible is tied to income,some view it as a more equitable way to chargethe sick for health care. The bottom line,however, is that a person in poor health wouldpay higher taxes than a person with the sameincome who is in better health.

The Alberta government boasts of our lowincome tax rate, but proposes to tax us threetimes for health care - once through incometax, a second time through health carepremiums, and a third time through healthcare deductibles when we use the system. Howdoes this fit with the Alberta Advantage sooften touted by the Klein government?

Jumping the Queue

Premier Klein has told reporters he would liketo give Albertans the option of paying privatelyfor knee and hip replacements covered byMedicare. Political heat has so far forced thegovernment to retreat from this proposal,which contravenes the Canada Health Act.Queue jumping already happens throughdiagnostic tests. Albertans can buy a privatemagnetic resonance imaging (MRI) test ratherthan wait for one in the public system. Theycan then jump the public queue for treatment,using their private test results. Another avenue

Executive Summary


to queue jumping is through “bundling.” Forinstance, some eye surgeons bundle Medicare-insured cataract surgery with uninsured lasersurgery so that patients buy the uninsuredservice and get the Medicare procedure as partof the deal.

Private payment shortens waits only for thosewho can afford to pay. Research in Manitobaand Alberta, as well as in other countries,shows that private for-profit involvementcreates longer wait times for surgery in thepublic sector. Private payment also drawsdoctors from the public to the private system,provides an incentive for maintaining lengthywaits in the public system to increase demandon the private side, and increases overalldemand for care due to complications orfollow-up care provided by the public sector.

Positive Alternatives:Better Management andBroader ThinkingThe third section of our report focuses onpositive alternatives for health reform withinthe public system. Alberta is already takingsome positive steps in areas such as wait listmanagement, primary health care reform,pharmacare, and health promotion. Thisreport looks at those successes, as well as areasfor improvement. These are solutions that willmake the public system work.

Tackling Wait Times

In a University of Alberta survey, 40 per cent ofAlbertans said they have had difficultyaccessing health care; two-thirds named longwait times as the problem. The solution to waittimes lies in better management and increasedpublic capacity. More specifically, we needstrategies such as co-ordinating wait liststhrough central booking, prioritizing patientsaccording to urgency of their condition,agreeing on wait time standards based onclinical evidence, referring patients to doctorswith shorter lists, better integrating hospitalcare with other services like home care, anddeveloping strategies to recruit and retainhealth professionals. Alberta Health andWellness is implementing several wait listmanagement strategies and is expandingpublic capacity. And wait times for someprocedures are decreasing. The government’sproposal to allow people with money to pay forhip and knee replacements would clearly be astep in the wrong direction. This preferencefor market ideology over evidence-basedresearch risks reversing the progress already

Executive Summary


made in reducing wait times, instead ofbuilding on it.

Renewing Primary Health Care

Primary health care is our first point of contactwith the health system, encompassing healthpromotion, disease prevention, treatment andrehabilitation. It involves teams of healthprofessionals who encourage our participationin decisions about our care, and recognizes theindividual, social and environmental factorsaffecting our health. Improving access toprimary health care will contribute to asustainable health care system - by reducingunnecessary Emergency visits, saving lives andcosts through early diagnosis, managingchronic care to avoid hospitalization, andpreventing illness.

Alberta has a number of existing primaryhealth care models - such as community healthcentres, which have operated for many years -as well as newer experimental models. Theseinvolve unique approaches to care, includingteam approaches to delivery, non fee-for-service compensation methods for doctors,focus on health promotion and prevention,and the integration of other communityservices. These approaches illustrate howinnovation can take place within the publichealth care system. Reform is still in the earlystages and there is much more work to do.

Controlling Spiralling Drug Costs:The Need for Pharmacare

Public sector drug costs in Canada have beenthe second-fastest growing expense over thelast 10 years, second only to capital costs.Governments spend more on drugs than ondoctors. Albertans pay almost two-thirds oftheir drug costs privately. Prescription drugsare medically necessary and should be coveredby Medicare. A national pharmacare programcould replace the patchwork of plans acrossthe provinces and save up to 10 per cent indrug costs through opportunities for bulkbuying and lower administrative expenses. Inthe absence of a national plan, Albertansshould receive the same protection from drugcosts as other western Canadians - the provinceshould at least abolish drug plan premiumsand establish maximum annual co-paymentsbased on income.

The Alberta government has already takenaction to control costs. The provinceparticipates in the national Common DrugReview to determine which drugs merit publiccoverage. And Alberta favours generic overbrand name prescribing. The Alberta DrugUtilization Plan provides doctors with objectiveinformation about drugs and follow-up visitsfrom pharmacists to improve prescribinghabits and reduce doctors’ dependency onpromotional information from drugcompanies. Alberta needs to continue movingforward on a drug plan regardless of whathappens at the national level; continued actioncan only help to further reduce costs forAlbertans.

Executive Summary


Executive Summary

Preventing Disease, Promoting Health,Enhancing Equity

The Alberta government makes health mostlyan individual responsibility, stronglyemphasizing lifestyle behaviours such as eatinga healthy diet, engaging in regular physicalactivity, and avoiding tobacco. This focus onpersonal responsibility recognizes positiveactions, but ignores people’s economiccircumstances and environmental factors.In other words, life chances determine lifechoices. Experts say that social factors,particularly income, influence populationhealth more than behaviours do. Lifestyleprograms alone have limited benefits fordisadvantaged segments of the population.

The government’s portrayal of health as anindividual issue allows it to appear concernedabout health while instituting regressive socialpolicies, such as cuts to social assistance. Thereis a “business case” for investing in programsand policies that reduce inequities. An Ontariostudy found that when families on socialassistance received comprehensive health andsocial services, more families left the system -and that providing such services across Ontariocould save up to $24 million a year. Universityof Calgary economists estimate that focusingon poverty reduction could save Calgarytaxpayers at least $8.25 million a year in healthand education costs.

Alberta has a number of community coalitionsand provincial networks that include a focuson the social determinants of health. But thegovernment could do better. Healthy lifestylepromotion is not enough. Alberta has thelowest minimum wage in Canada. Social assist-ance rates have declined 30 to 40 per cent inreal terms since 1993. Homelessness and foodbank use continue to rise. Spending on educa-tion has been flat since 1995, and universitytuition rates have increased by 21 per cent. Ahealthy society needs a government that caresfor the larger social, economic and environ-mental conditions within which we all live.


ConclusionsThe government has manufactured a fiscalcrisis in our health care system. In reality, thesystem is not growing out of control - growthrates are sustainable within current and pro-jected revenues. Not only is current revenueadequate, it could easily be increased by insti-tuting a progressive tax system and takingadequate oil and gas royalties. The regressivehealth care premiums are not needed. Thegovernment can afford to adequately fundpublic health care - it is just unwilling to.

The government needs to put as much effortinto trumpeting successful reforms in thepublic system as it does into telling Albertansthe sky is falling and only more private moneywill rescue health care from imminent fiscalcollapse. When the Premier talks to the media,his focus is seldom on the positive efforts of thepeople who work in Alberta Health andWellness, regional health authorities andcommunity organizations. Instead, he musesabout taking on the Canada Health Act, charg-ing user payments and letting wealthyAlbertans buy surgery. The government’sexcessive focus on an imaginary fiscal crisis,aided by sympathetic media, is overshadowinggood work already being done. Meanwhile,playing up negative myths about health caresustainability is diverting Albertans’ attentionfrom making our public health care system asgood as it could be.

Executive Summary


In a speech delivered on September 13, 2004to the Canadian First Ministers’ Meeting onHealth Care, Alberta Premier Ralph Klein saidthe following:

Over the next several months, Alberta will host aninternational health symposium, so that we canlearn from the best practices of other countries.We’ll also embark on a discussion with Albertansabout their ideas for improving and sustaining thesystem.

In these discussions, there will be no ideologicalrules or sacred cows. We’re going to keep our mindsopen and measure all ideas against one simpleyardstick: Will this idea improve health servicesand will it help keep the system sustainable? 1

As a non-partisan public policy institutededicated to encouraging open dialogue anddiscussion on issues affecting Albertans, theParkland Institute fully supports PremierKlein’s assertion that it is time to put aside“ideological rules” and open our minds to thepossibilities for health care. It is in that spiritthat we present this report on the future ofhealth care in Alberta.

The intent of this report is neither to criticizethe current state of the health care system inAlberta nor to dwell on past mistakes anderrors in the financing and delivery of healthcare. Instead, this report highlights some ofthe things that are currently working well, andmakes positive recommendations for buildingon those successes to improve the system as a

whole. It is based on the fundamental premisethat the public health care system in Alberta isworking well - a premise to which both PremierKlein and Health Minister Mar would agree -and that with a little political will and effort,the system could be even better.

Sadly, though, in Alberta it is rarely enough topresent positive alternatives. Public discoursein the province is so rife with the loadedlanguage and ideologically motivated rhetoricput forth by the government that it is alwaysnecessary to tackle the spin before a sincereairing of informed alternatives can take place.This is especially true when it comes to healthcare. Despite the fact that study after study -including several from the Parkland Institute -have shown otherwise, the provincialgovernment has gone out of its way to convinceAlbertans that health spending is out ofcontrol and the public health care system is notsustainable. This is no easy task in a provincethat has recorded 10 consecutive budgetsurpluses, retired its debt years ahead ofschedule, and is swimming in record oil andgas revenues, but the government haspersevered.

This report, therefore, begins by providing adetailed breakdown of the numbers todemonstrate once again that the myth ofunsustainability is just that, a mythmanufactured by the government for its ownpolitical purposes. Although the numbers,figures and terminology in this section makefor a heavy read, it is done out of necessity anddemonstrates thoroughly and undeniably thevalue and sustainability of Alberta’s publichealth care system.

Introduction

1 Klein, Ralph (2004). Alberta’s Introductory Remarks - First Ministers’Meeting on Health Care, Ottawa, Ontario, September 13, 2004:Government of Alberta. www.gov.ab.ca/premier/dsp_speech.cfm?content=145 (Accessed October 26, 2004)


Having demonstrated that public health care issustainable in the long term, the report goeson to look at some of the key alternatives thegovernment has put forth through the 2002report A Sustainable Health Care System forAlberta, better known as the Graydon report,and through the various public musings of thePremier himself. These suggestions by thegovernment have included various user-payschemes, deductibles, and queue jumping inprivate for-profit clinics - the general themebeing more private financing of andparticipation in the system. In January 2004,for example, the Premier said:

I don’t want to get into user-pay or I don’t want toget into additional charges for services...I don’twant to get into what services might be de-listed, Idon’t want to get into funding only those thingsthat are absolutely necessary under the CanadaHealth Act...But we might have to look at all thosethings...The Graydon report is coming back. Thatreport is going to be revisited because we’ve got todo something.2

The analysis in this report is based on theexperiences of other jurisdictions that haveexperimented with similar schemes, and onresearch conducted by some of NorthAmerica’s leading health economists. Theevidence is overwhelming that adding newtypes of private payment will not make thehealth care system more sustainable. Privatefinancing is more likely to increase health carecosts as well as costs to individuals andbusinesses.

The report ends on a positive note. Asmentioned above, the ultimate goal of thisreport is to highlight some of the positiveaspects of the public health care system inAlberta, and to make constructive suggestionson how to build on those successes in thepublic system. Although this part of thediscussion tends to get lost in the posturingabout costs and sustainability, it is the mostcrucial element if we are to move forward withthe task of turning Alberta’s already successfulpublic health care system into a truly worldclass system. The recommendations provide aprescription for progress that is feasible,affordable, and in the best interest of Albertansand our health care system.

Albertans have been presented with atremendous opportunity. As we enter oursecond century as a province ostensibly free offiscal debt and with record oil and gasrevenues, we are in the enviable position ofbeing able to creatively envision what we wantour health care system to look like in thefuture, and to access the necessary resources tomake it so. Premier Klein has yet to effectivelyarticulate any long-term vision for health care,but he has expressed a desire to consult onoptions and discuss alternatives with Albertans.Our hope is that you will read this reportcarefully, consider its findings and suggestions,and choose to become an active participant inthat discussion. It may be the only opportunitywe get to have a say in what the future of ourhealth care system looks like. Let’s use it wisely.

Ricardo AcuñaExecutive DirectorParkland Institute

2 Thompson, G. (2004). Klein turns up political heat: Premier keen togenerate some friction in Ottawa on Friday. Edmonton Journal, January29, A18.

Introduction


CHAPTER 1

The Health CareSustainability Crisis:Fact or Fiction?

Interpreting the Numbers: Inflation,Population Growth and Spending Trends

HIGHLIGHTS

The Mazankowski report claims that without changes inhow we pay for health services, the current health systemis not sustainable and that spending in health is crowdingout other important areas like education, infrastructure,social services or security. The subsequent Graydon reportreinforces this.

The government claims that health spending is growingbetween seven and eight per cent annually.

However, the government figures do not adjust for eitherinflation or population growth - two factors that healtheconomists consider when assessing government spend-ing trends.

Also, between 1993 and 1996, there was a cumulativespending cut of almost 24 per cent. By discussing healthspending since 1997, the Graydon report includes theyears of catch-up spending without considering the yearsof cutbacks that made those large infusions of cashnecessary.

Once adjusted for inflation and population growth andaveraged over a reasonable timeframe, spending in-creases on health have, in fact, been modest. The averageyearly increase from 1992-93 to 2003-04 was 1.6 per centper year in inflation-adjusted dollars per Albertan.


During his January 2004 discussion of the Graydon report,Health and Wellness Minister Gary Mar told reporters “it’s notsustainable to have health care costs rising by seven and eightpercent a year and government revenues at half that rate.”(A6)Is this an accurate assumption?

According to the Canadian Institute of Health Information(CIHI)a, Alberta government health spending increases overthe previous two years are estimated at 8.3% for 2002-03 and6.2% for 2003-04.1,b The latter projection is low because it wasprovided to CIHI before several new health spending initiativeswere introduced during the fiscal year. The 2003-04 annualreport from Alberta Health and Wellness shows a 7.7% increasefor the year.2,c

So at first glance, Mar appears to be correct. The Graydonreport makes similar arguments, concluding that spending hasincreased by an average of 10.4% a year since 1997. However,between 1993 and 1996, there was a cumulative spending cut ofalmost 24%.d By discussing health spending since 1997, theGraydon report includes the years of catch-up spending withoutconsidering the years of cutbacks that made those largeinfusions of cash necessary.e

Finance Canada economists Harriet Jackson and AlisonMcDermott project provincial health spending in Alberta from2001 to 2040. Using the 1990-99 spending trend as a base — tocapture both cuts and expansions to the system — they predictthat Alberta’s health spending will grow at about 5% a year.

However, none of the above numbers adjust for either inflationor population growth - two factors that health economistsconsider when assessing government spending trends. Thegovernment might argue that because they are spendingcurrent dollars and dealing with population growth, there is noneed to adjust for inflation and population growth. However,we need those adjustments when looking at trends over time, sothat we “compare apples to apples”. And revenues generallygrow with population growth and inflation. This happens even

Chapter 1

a In most cases, this report uses statistics fromCIHI rather than Alberta Health and Wellnessbecause: (1) CIHI provides adjustments forinflation and population growth, (2) CIHIincludes health expenditures fromgovernment departments other than Healthand Wellness — such as Children’s Servicesfor dental, drug and optical benefits(Rondeau, personal communication, August26, 2004) and (3) CIHI allows for comparisonswith national averages. Thus CIHI providesthe most complete picture of healthspending. Their expenditure amounts areusually slightly higher than figures forAlberta Health and Wellness alone.

b Figures from those years await finalverification, but are based on budget andspending data provided to date by theAlberta government.

c By contrast, CIHI and Alberta Health andWellness estimates were close at 8.3% and8.2%, respectively -

d Per capita, adjusted for inflation

e The earlier report of the Premiers Council onHealth (Mazankowski report) painted aneven more alarmist picture of healthspending trends by using 1995-96 - the finalyear of cuts — as a baseline. A thoroughcritique of the Mazankowski report’ssustainability assumption is in the ParklandInstitute’s 2002 Reclaiming Medicare report.


if income taxes are indexed to inflation. Indexing the tax systemonly ensures that inflation alone will not raise taxes. Though theAlberta single-rate tax is indexed through raising the basicexemption to account for inflation, other major sources ofgovernment revenues - such as natural resource or corporatetax revenues — may grow faster than inflation.

We can see in Figure 1 that health care spending increases inAlberta have been modest for the most part in the 12 years sinceRalph Klein became Premier in 1992. The average yearlyincrease from 1992-93 to 2003-04, once compounding is takeninto account, is 1.6% per year in inflation-adjusted dollars perAlbertan.3,f This is slightly lower than the 2.2% average increaseover the previous 12 years from 1980-81 to 1991-92.

Chapter 1

f The CIHI 2003-04 spending statistics in thisreport have been adjusted to account for thedifference between CIHI’s initial estimate of a6.2% increase in current dollars and theAlberta Health and Wellness year-end reportof a 7.7% increase - by multiplying thereported amounts by 1.014 (1.077/1.062).This correction is still an estimate, as healthspending in other ministries that is includedin CIHI statistics could have increased bymore or less than 7.7%. However, as the bulkof CIHI’s data comes from Health andWellness, the present adjustment shouldyield an estimate close to actual spendingamounts.


However, it is misleading to only examine average increases. Asmentioned above, the Alberta government made deep cuts inthe mid-1990s. It took until 1999-2000 for health care fundingto return to 1992-93 levels. In Alberta, as elsewhere in Canada,health spending has grown faster since the late 1990s thanearlier in that decade. In their National Health ExpenditureTrends Overview, CIHI notes that this trend “appears to belargely due to reinvestment by federal, provincial and territorialgovernments after a period of fiscal restraint during the earlyand mid-1990s.” (p. 3)4

In Alberta, most of the overall spending increase since 1992-93happened in two of the last five years - 1999-2000 and 2001-02.In 1999-2000, Alberta Health and Wellness funded the hiring ofat least 1,000 additional full-time permanent front-line staff byregional health authorities. Just over half were registered nursesor licensed practical nurses. The province also provided one-time assistance to health authorities to retire deficits, purchaseequipment and prepare for Year 2000 computer complianceissues.5

In 2001-02, Alberta Health and Wellness negotiated newagreements with physicians, registered nurses and other healthworkers that provided substantial increases in compensation. Ofthe reported $711.5 million increase in the health budget over2000-01, $514 million went to those collective agreements.6

Exceptional spending years distort the average spending trendover time. If not for the years of deep cuts and under fundingearlier in the 1990s, there would have been no need for largeinfusions of catch-up funding in 1999-2000 and 2001-02.

For instance, the 2001 nurses’ settlement included a 22% salaryincrease, after several years of rollbacks and wage freezes. Bycontrast, in the present round of negotiations, salaries are not acontentious issue and requested increases are modest.Recommendations developed through a mediation process andaccepted by the United Nurses of Alberta include salaryincreases of 3.5% in the first year and 3% in the second and

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third years of the contract.7 The major focus of the presentbargaining process is working conditions. According to a recentreport from Health Canada’s Canadian Nursing AdvisoryCommittee, improving working conditions not only benefitsnurses but also patients and the health care system.8

The fallacy of assuming recent big spending increases are thebeginning of a trend is further illustrated by former McGillUniversity Medical Centre Executive Director Hugh Scott.Using CIHI data, Scott shows that the fastest increase inprovincial government costs across Canada from 1993-2003 wasfor capital spending — 179% over 10 years in current dollars.However, Scott explains much of the money went to upgrades ofdeteriorating facilities and equipment and investment in newtechnology such as magnetic resonance imaging (MRI)machines. A cardiologist who is intimately familiar with theworkings of health facilities, Scott sees no reason why the largecapital spending increases of recent years will be needed againin the near future.

Given these examples, large spending spikes should not beongoing — as long as the government provides the healthsystem with stable, predictable funding in the future.

Deficit and Debt Payments Have FreedUp More Money for Health CarePaul Boothe, a University of Alberta economist and member ofthe task force behind the Graydon report, argues that 10 yearsago about 15% of health spending was covered by deficitfinancing. He therefore concludes that statistics ongovernment health spending underestimate the spendingincreases that were actually paid by Canadian taxpayers.9

That might have been true when governments were stillrunning deficits. But it does not seem to explain the spendingincreases since 1997 that are the focus of the Graydon report.

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The federal government has not run a deficit since 1996-97 andAlberta has not had one since 1993-94.10 Klein is boasting thatAlberta has put aside enough money to pay off Alberta’s debtand that Alberta has racked up yet another budget surplus. Sothere should actually be more provincial revenues available nowto fund health and other public programs. At the federal level,Finance Canada economists Jackson and McDermott point outthat federal public debt charges decreased from 6.6% of GDPin 1990-91 to 3.2% in 2002-03, freeing up room for healthspending.11 This increased federal investment will benefitAlberta through increases in transfer payments such as thoseannounced in the September 2004 federal-provincial healthaccord.12

Is Health Care Crowding Out OtherGovernment Programs?

HIGHLIGHTS

Health care is not crowding out other programs; it issimply not experiencing the same degree of cutbacks. It isdeficit elimination and tax cuts that are crowding outnew initiatives.

Provincial and territorial governments across Canadahave reduced their overall program spending over thelast 10 years - to 15.9 per cent of GDP in 2003 from 20.4per cent in 1993. Comparable figures for Alberta are 12.9per cent and 17.3 per cent, respectively.

The Mazankowski report warned that the rising costs of healthcare would crowd out spending on other governmentprograms. And Premier Klein recently referred to health care asa Pac-man (video game) that would gobble up whatever moneyit got from the government.13

The above assertion was repeated in two influential reports in2004. Former Saskatchewan NDP Finance Minister Janice

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McKinnon argued in The Arithmetic of Health Care that healthspending is increasing to the point where it will soon crowd outsupport for other government programs, including otherdeterminants of health such as education. She uses Ontario asan example - noting that from the 1980s until 1994-95 healthused 32% of their overall budget, but by 2003-04, 39% ofOntario government spending was on health.14 TheConference Board of Canada makes similar points in theirreport, Understanding Health Care Cost Drivers andEscalators.15

If health care really was crowding out other programs andgovernments were powerless to prevent it, deterioration ofeducation and other public programs would be cause forconcern. But the gobbling up of public dollars by health care isan illusion.

Measuring health spending as a percentage of total spending ismisleading, because the percentage depends on policydecisions about how much to cut or expand other governmentprograms. Former Parkland Institute Research Director TrevorHarrison explains:

Without increasing health care spending, but by cutting spendingentirely for other programs, the government could make health carespending take up 100 percent of public spending...were thegovernment to spend an additional $6 billion on other programs, itcould return health care spending to the seemingly magical level of 27percent.16

A more down to earth example further illustrates Harrison’spoint. A gardener grows two dozen tomato plants and arrangesto give the harvest from eight of them (33%) to a neighbour.The next year the gardener again promises the harvest fromeight plants, but four of the original 24 plants die. So now theneighbour gets 40% of the harvest (eight of 20 plants) insteadof 33%. But the neighbour does not get any more tomatoesthan the year before. The third year the gardener puts in 32tomato plants in case some die, but none do. The neighbour

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again gets tomatoes from eight plants, but is now only getting25% of the total. So as the total harvest goes up or down, thesame specific share is made to look larger or smaller.

Hugh Scott points out that provincial and territorialgovernments across Canada have reduced their overallprogram spending over the last ten years — to 15.9% of GrossDomestic Product (GDP) in 2003 from 20.4% in 1993.Comparable figures for Alberta are 12.9% and 17.3%,respectively. Scott concludes: “An argument can thus be madethat health care is not crowding out other programs; instead it isnot experiencing the same degree of cutbacks. It is deficitelimination and tax cuts that are crowding out new initiatives.”(p.64)17

So what is happening in Alberta? Figure 2 shows the percentageof total provincial program spending attribute to health inAlberta. The percentage of spending taken by health in 2001-02was only three percentage points higher than nine yearsearlier.18 The projected jump to 39% for 2002-03 remains to beconfirmed by CIHI. Final 2002-03 figures from Alberta Healthand Wellness showed health taking 33.1% of programspending.19

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Is Health Care Spending Growing Fasterthan Government Revenue?

HIGHLIGHTS

The Alberta government’s Graydon report projects thathealth care costs will grow faster than revenues.

But the share of provincial government revenues takenup by health spending in Canada was virtually flat,despite health rapidly taking up an ever-greater share ofprogram spending.

Further, had governments not chosen to diminish theirrevenues through tax cuts, the share of provincialrevenues allocated to Medicare would be lower now thanin 1995-96.

Even with the tax cuts in effect, the percentage ofrevenue used by health spending was starting to fallagain by 2003-04 as the economy recovered.

If we look at total program spending as a percentage ofrevenue, it is evident that there is no danger ofgovernment program spending exceeding provincialrevenue.

The Graydon report projects that health care costs will increaseat 6% a year, even after reforms such as primary health care,while provincial revenues will increase at only 4% a year. But acloser look at long-term trends in both health spending andprovincial revenues shows no evidence that revenues cannotsupport spending.

Health economist Robert Evans from the University of BritishColumbia examined provincial/territorial health spending andrevenues across Canada from 1995-96 through 2001-02 in his2003 paper Political Wolves and Economic Sheep. His analysis showsthat the share of provincial government revenues taken up byhealth spending in Canada was virtually flat, despite health

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rapidly taking up ever-greater share of program spending.20

Furthermore, over a 20-year trend line, health spending usesroughly the same share of provincial revenue now as in 1980-81.g This is true of both Medicare spending (doctors andhospitals) and overall government health spending. Evansfurther projects that had governments not chosen to diminishtheir revenues through tax cuts, the share of provincialrevenues allocated to Medicare would be lower now than in1995-96.

A look at recent Alberta data is instructive. Figure 3 shows bothhealth spending and total program spending by the Albertagovernment as a percentage of total government revenues from1995-96 to 2002-03 - the years used in Evans’ national analysis.h

These calculations are based on statistics from the previouslycited Canadian Institute for Health Information and Finance

g There have been some variations in the shareof revenue used each year. Evans’ point wasthat there is not a lot of overall change, asincreases were usually followed by decreases,and vice versa. The trend line would be evenflatter if we were to use 1982-83 as thebaseline.

h Alberta’s total provincial revenues includeboth ‘own-source’ revenues and federal cashtransfers.

i Alberta Finance was used as the source of2003-04 revenue information, as FinanceCanada’s 2003 Fiscal Reference Tables end atyear 2002-03. Because revenue is onlypresented in total current dollar amounts peryear, overall current dollar health spendingwas required to calculate the percentages.

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Canada tables, as well as and Alberta Finance. 21, i

The last five years are especially interesting. In 1999-2000,health spending jumped to almost $6 billion dollars from $5billion the previous year. Yet health spending’s share ofrevenues stayed the same, as shown by the solid bars in Figure3. This is because revenues rose by $3.3 billion - from $16.8billion in 1998-99 to $20.1 billion in 1999-2000.

The following year (2000-01), health spending increasedanother $365 million, yet health’s share of overall revenuesactually dropped to the 1995-96 level. So between 1995-96 and2000-01, an upward trend in health spending as a percentage oftotal provincial government revenue had been stopped andreversed, because revenue climbed for most of those years.

It was only in 2001-02 that health spending as a share ofrevenues began another upward climb. That year the Albertasingle rate tax and new corporate tax cuts came into effect.Revenue in 2001-02 dropped by $3.6 billion (from $25.5 billionto $21.9 billion). Though some of the revenue loss was a resultof an economic slowdown both provincially and internationally,almost 40% of the lost revenue was due to income tax cuts.This is because Albertans saved $1.1 billion in personal incometax and $286 million in business income tax compared to theprevious year.22

Had the 2001-02 tax changes not happened, revenue for thatyear would have been $23.3 billion - all else being equal.Under that scenario, health spending would have taken 31.2%of total revenue, rather than 33.1%. Even with the tax cuts ineffect, Table 3 shows that the percentage of revenue used byhealth spending was starting to fall again by 2003-04 as theeconomy recovered.

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If we look at total program spending as a percentage ofrevenue, shown by the shaded bars of Figure 3, it is evident thatthere is no danger of government program spending exceedingprovincial revenue. Program spending as a percentage ofrevenue was similar in 2003-04 as in 1995-96, with somefluctuations in the intervening years. Even in the economicdownturn of 2001-02, program spending was just over 90% ofrevenues. So even in a “bad” year, Alberta was in no risk ofgoing back into debt due to spending on health care or anyother social program.

Lots of Money, Little Political WillIn fact, in 1995-96, Alberta began consistently recordingsurpluses over a billion dollars a year. These are shown inFigure 4.

jj Alberta Finance’s annual reports haveconsistently underestimated the PublicAccounts of Alberta statistics on the surplus,though the discrepancies have been within$200,000,000.

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The prices of oil, gas, and resource revenues in general are upsubstantially from earlier 2004-05 budget forecasts.23 And inJuly 2004, Klein announced that the government has put awaythe funds needed to retire the remaining provincial debt as itcomes due. In late August, Albertans opened their mailboxes tofind a survey asking their opinions of what the governmentshould do with all the extra money. Options included programspending, tax cuts and rebates.24

If the health care system really was in fiscal crisis, it would befiscally irresponsible for the government to be asking Albertanswhat to do with the newfound windfall. More likely, thegovernment knows that the evidence on health care spendingdoes not support their rhetoric. We will return later to why thegovernment would want Albertans to believe the health systemis in crisis when it is not. First, we will look at one moreindicator of the affordability of health care.

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Can the Economy Afford the PublicHealth Care System?

Another way to look at the sustainability of provincial healthspending is to examine it as a percentage of provincial GrossDomestic Product (GDP). In other words, how much does the

HIGHLIGHTS

The best way to look at the sustainability of provincialhealth spending is to examine it as a percentage ofprovincial GDP. This ratio is less open to influence bygovernments.

Health spending is at roughly the same percentage of GDPnow as it was in 1993-94 - just over 5 per cent.

Alberta has had the lowest provincial health spending as apercentage of GDP in Canada for the last 12 years. Thenational average has hovered around 6 per cent for mostof that time.

In future, the Conference Board of Canada predicts thatoverall provincial and territorial health spending willreach 7.4 per cent of GDP by 2020, and that this increase isnot sustainable.

But Finance Canada economists say provincial healthspending relative to GDP is within the range of bothhistorical increases over the last 20 years and existingprovincial spending variations. They project that healthspending will be about 7 per cent of GDP in 2020 and 10per cent by 2040.

There is some degree of consensus that aging will causehealth care spending to grow by 1 per cent per year. Thisis well within economic growth rates.

With better management and allocation within thesystem, even the Conference Board of Canada agrees thatthe ‘greying’ of Canada’s population does not have toresult in a more expensive health care system.

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province spend on health care services relative to the size of theeconomy as a whole? Figure 5 illustrates that health spending isat roughly the same percentage of GDP now as in 1993-94 — atjust over 5%. For the years in between, which involved deep cutsfollowed by catch-up spending, health care spending as apercentage of GDP was less than 5%.25 Alberta has had thelowest provincial health spending as a percentage of GDP inCanada for the last 12 years. The national average has hoveredaround 6% for most of that time.

Hugh Scott offers an historical perspective on health spendingrelative to GDP. He points out that spending on doctors andhospitals alone actually declined from 5.1% of GDP in 1993 to4.3% in 2003 — concluding that Medicare has adapted throughincreased productivity to accommodate technological anddemographic changes. Therefore there is no evidence thatMedicare is unsustainable.

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In future, the Conference Board of Canada predicts thatoverall provincial and territorial health spending will reach7.4% of GDP by 2020, up from about 6.6% in 2002. k TheConference Board argues that this increase is not sustainable.

However, Finance Canada economists Jackson and McDermottargue that the increase in Canadian provincial health spendingrelative to GDP is likely to be sustainable, as it is “well withinthe range of historical increases over the last 20 years...andwithin the range of existing provincial variation in spending.”(p.11) They project that provincial and territorial healthspending as a percentage of GDP will grow from just over 6% toabout 7% in 2020 and to just under 10% by 2040 l — primarilydue to aging.m

Finally, Robert Evans cautions us in his 2003 paper that futureprediction of spending based on past trends is imperfect. Heexplains that such projections do not account for the ability ofcomplex systems to “mobilize the ingenuity” to adapt tochange. (p.8) There are limitations to measuring healthspending in relation to GDP. The ratio is distorted by economicvolatility. That is, the amount spent on health will be a largerpercentage of GDP when the economy is weak, and a smallerpercentage when it is strong. However, the health spending toGDP ratio is a reasonably accurate indicator of affordabilityduring times of economic stability with moderate growth.

If Alberta’s Heritage Trust Fund and the more recentSustainability Fund are used to reduce the highs and lows inAlberta’s economy, the health spending to GDP ratio will begenerally be a sound indicator. Furthermore, the healthspending to GDP ratio is less open to influence by governmentsthan are measures of health spending relative to total programspending or revenues. It is harder for governments to influencethe GDP of a province or country than it is for them to altertheir own patterns of program spending or revenue generation.

k See Chart 4, p. 12 in their report Understand-ing Health Care Cost Drivers and Escalators

l See Figure 13 on page 8 of their paper.

m This is because productivity within thehealth system kept pace with the increasedvalue of health services provided in the1990s. Productivity and increased value ofservices (enrichment) are the other majorfactors that can influence the healthspending to GDP ratio.

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Some other criticisms of the health spending to GDP ratio maybe valid in some cases, but are less problematic in the presentcontext. For example, McKinnon argues that the ratio excludesdeficits, debts and costs of replacing equipment and facilities.However, the present report uses statistics from the CIHINational Health Expenditure Database. This database includescapital costs and deficit/debt repayments on capital.26

McKinnon’s second criticism is that government revenue doesnot necessarily increase at the same rate as GDP. She cites aConference Board of Canada prediction that revenues relativeto GDP will decline over the next 20 years, partly due to thechanging spending patterns of an aging population. McKinnonfurther suggests that an aging Canadian population will notonly use more health services, but will generate less tax revenuebecause there will be fewer people working. This is true, butthe impact is manageable - as we will see in the next section.

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Which Health Care CostsNeed to Be Controlled?

Areas with Extensive PrivateInvolvement are Escalating

HIGHLIGHTS

Though health care spending is not out of control,Albertans should not be complacent about costs.

After 1991, there was a sharp upward trend in thepercentage of health care that is privately funded frominsurance or out-of-pocket costs. Privately fundedhealth costs have also increased as a percentage of GDP.

The three categories that receive more than half theirfunding from private sources - prescription drugs,health insurance administration, and other healthprofessionals (such as dental, eye, physiotherapy) areamong the fastest-growing in terms of costs.

For example, the cost of administering public healthinsurance increased by 40 per cent over 10 years. Incomparison, administrative expenses for private healthinsurance increased by 145 per cent. This serves as awarning against more private health care.

Over the last 10 years, public drug spending has beenthe second-fastest growing cost category after capitalexpenditures.

Based on the indicators discussed in the last section, healthcare spending is not out of control. However, Albertans shouldnot be complacent about costs. Some spending categories havebeen escalating - particularly those with extensive private sectorinvolvement. Some of them, like drugs, also raise costs for thepublic sector. Others, like insurance administration, increasecosts for individuals and businesses.

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After 1991, there was a sharp upward trend in the percentageof health care that is privately funded from insurance or out-of-pocket costs.n CIHI illustrates that between 1992 and 2001,private health spending in Canada grew faster than publicspending in seven of those 10 years. The previously-cited CIHINational Health Expenditure Trends Overview forecasts privatespending to grow faster in 2002 and 2003 as well. In 1992,private funding made up just under 26% of all health funding.By 2001, the private percentage had risen to 29.9%. Alberta’sprivate funding share is 29.1%.o

Privately-funded health costs have also increased as apercentage of GDP. Hugh Scott uses CIHI data to calculate thatprivate spending rose from 2.7% of GDP in 1993 to 3.0% in2003. By contrast, provincial/territorial spending acrossCanada decreased from 6.7% to 6.4% of GDP between 1993and 2003.

At first, it appears that Alberta did not see the shift towardmore private funding in the 1990s that is evident for Canadaoverall. From 1996 to 2001, public and private increases wereidentical at 6.9%. However, from 1990-1996, public spendingshrunk by 3.0% — the biggest provincial decrease — whileprivate spending grew by 0.6%.p So while almost half the publicspending between 1996 and 2001 was to make up for publiccuts before 1996, private spending from 1996-2001 keptincreasing without any intervening cuts.

Scott also uses CIHI data to provide public-private breakdownsfor specific categories of health spending. The three categoriesthat receive more than half their funding from private sourcesare prescription drugs, pre-payment (health insurance)administration, and other health professionals (such as dental,eye, physiotherapy). These spending categories are also amongthe fastest-growing in terms of costs.

n The CIHI Report National Health ExpenditureTrends uses calendar rather than fiscal years.

o See Table 7 in CIHI (2003b)

p See Figures 28 and 29 (CIHI 2003b)

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Governments must get better control over drug costs. Over thelast 10 years, public drug spending has been the second-fastestgrowing cost category after capital expenditures, averaging9.6% annually compared to 11.3% for capital. This will befurther discussed in a later section on Pharmacare.

Scott uses data from CIHI’s 2003 National Health ExpenditureTrends report to calculate that the cost of administering publichealth insurance increased by 40% over the 10 years. Incomparison, administrative expenses for private sector healthinsurance increased by 145%. CIHI presents this data incurrent dollars only, so these percentages are not adjusted forinflation or population growth. However, the main point is theimmense gap in the rate of public versus private cost increasesfor insurance administration - a gap that would be only partiallyattenuated if adjusted statistics were available.

Based on these escalating private costs, Scott warns against anincreased role for private health insurance. He explains it willlead to both employee demands for increased benefits andhigher employer premiums. He concludes: “Those whoadvocate increased private health care to permit a corporatetax cut should reflect on what this would mean to employerspremiums generally and to the costs of prepaymentadministration specifically.”(p. 62)

Despite his finding that private spending has been growingfaster than public spending, Scott does not let the public sectoroff the hook. He identifies fast-growing spending categoriesthat are largely in public sector domain - such as public healthand research. He argues that these categories need the samescrutiny typically reserved for hospitals, doctors and drugs - inorder to understand reasons for cost increases and how futurecosts can be controlled.

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The Myth that Aging WillBankrupt Health CareAs previously discussed, aging tends to both increase healthspending and reduce GDP growth, resulting in health spendingtaking up a bigger share of GDP. However, Finance Canadaeconomists Jackson and McDermott project that the impact ofaging on both health spending and GDP would increase theratio of provincial and territorial health spending to GDP from6.3% today to 9.8% in 2040. They note that this is similar to thehistorical rate of increase in Alberta since 1981.

There is a general consensus that aging alone will increase percapita costs to the health system by about 1% per year. Thisconsensus is shared by health economist Robert Evans and theConference Board of Canada, and is recognized by the authorsof the Graydon report. Evans points out in his 2003 paper thata 1% rise in per capita health costs due to aging is within therange of economic growth rates.

In an earlier paper, APOCALYPSE NO, Evans and his colleaguespresent research from British Columbia showing that changesin the age structure of the population have not contributedsubstantially to trends in health care use. Rather, people of allages are using more drugs and doctors’ services.27 Evans saysthat the argument that an aging population threatens healthcare sustainability is a “zombie - an idea or allegation that isintellectually dead but can never permanently be put to rest”(p. 21). He maintains that vested interests are using“apocalyptic demography” to deflect attention away fromwhether patients are getting appropriate and effective care, andto create the spectre of unsustainability as an argument formore private financing of health care.

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The Conference Board of Canada is more concerned about thepotential impact of this 1% a year on long-term sustainability.But even they conclude, in their report Challenging Health CareSystem Sustainability: “The ‘greying’ of Canada’s population doesnot have to result in a more expensive health care system.”(p.108)28

The Conference Board concludes that costs associated withaging are real, but can be managed through better elder andpalliative care, as well as better integration of services along acontinuum of care. Public drug costs are of greater concern tothe Conference Board than are costs due to aging.

Finally, predicting the impact of aging on either futureeconomic growth or health care use is an imperfect science. Itwill depend on the spending patterns of older adults once theystart drawing pension and investment income, the numbersand ages of immigrants coming to Canada, and the health ofthe next generation of older people compared to the presentgeneration.

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Does Health Care Spending Make AnyDifference to Health?

HIGHLIGHTS

The Conference Board of Canada acknowledges thatfactors outside the health care system have the greatestinfluence on health - the social and economic environment,the physical environment, and biology/genetics.

Canada is falling behind other countries in environmentalperformance and social conditions.

Canada ranks fourth on the United Nation’s HumanDevelopment Index, which considers life expectancy,literacy and education, but ranks 12th-place on the HumanPoverty Index for industrialized countries.

Alberta can afford to invest in both public health care andin policies and programs that address the broader socialdeterminants of health.

The two recent Conference Board of Canada reports discussedearlier point out that Canada ranks 13th out of 24industrialized countries on a number of population healthindicators, but is sixth in public spending and third in totalspending on health care. The Conference Board concludesfrom this that Canada’s health care system is a mid-packperformer when it comes to producing positive healthoutcomes. This section briefly addresses the ConferenceBoard’s findings, because a misreading of their evidence couldgive fuel to those who are motivated to undermine the publichealth care system.

First, the Conference Board acknowledges that factors outsidethe health care system have the greatest influence on health.For instance, in their March 2004 report, they present datafrom the Canadian Institute for Advanced Research showingthat health care determines about 25% of overall population

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health. The rest is determined by the social and economicenvironment (50%), the physical environment (10%), andbiology/genetics (15%).

The Conference Board calls for more attention to thosebroader determinants of health - arguing that Canada is fallingbehind other countries in environmental performance andsocial conditions. For example, they note out that Canada is thesecond worst performer in per capita sulphur oxide emissions.This recognition of the broader determinants of health ispositive. The limits of health care and the need for programsand policies in other sectors have long been argued byresearchers and practitioners in population health promotion.

For instance, one key determinant of health is income. So let’slook at the Conference Board ranking of Canada’s populationhealth status in light of our ranking in the United NationsDevelopment Programme’s Human Development Report.q

Canada ranks fourth on the UN’s Human Development Index,which considers life expectancy, literacy and education.However, Canada’s 12th-place ranking on the Human PovertyIndex for industrialized countries (HPI-2) is less than stellar.

HPI-2 rankings are available for 10 of the 12 countries thatranked ahead of Canada on the Conference Board’s populationhealth indicators. Nine of those countries also ranked ahead ofCanada on the HPI-2.29, r One could question whether Canada’s13th place ranking on the population health indicators is anindictment of our health care system, or of our questionablerecord on poverty reduction. Social determinants of health willbe further discussed in a later section of this report on healthpromotion.

q Both the Conference Board and UNDPreports use indicators collected between themid-1990s and 2002.

r See Table 4 on page 150 of the UNDP report

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Despite the fact that health care is only one of manydeterminants of health for the population as a whole, it is amajor influence on people’s health when they are sick.The Conference Board did not look at health outcomes forpeople who had recently used the health care system. It focusedonly on population-level indicators, such as mortality rates forheart disease and some cancers.

To evaluate the impact of health care on the people who use it,we need to examine “quality of care indicators” at the patientlevel. An example might be: did cancer patients survive for atleast five years post-treatment? These types of questions wereasked in a recent five-country comparison of Canada, the U.S.,England, Australia and New Zealand led by Peter Hussey ofJohns Hopkins University. The study found Canada had averageto above average cancer survival rates, depending on type ofcancer. Deaths from strokes were relatively low. However, moreCanadian patients died after heart attacks compared to those inAustralia and New Zealand, in the older age groups. Hussey’steam concludes that none of the countries consistently scoresbest or worst on all indicators.30

The key message is that we must consider health outcomes attwo levels - for patients who use the system and for thepopulation as a whole. Governments need to invest in highquality health care to treat the sick. This contributes in part tooverall population health. However, population health is morestrongly influenced by factors beyond health care. Sogovernments also must support programs and policies thataddress broader determinants of health like income, education,employment and people’s physical and social environments.Alberta can afford to both invest in public health care and inpolicies and programs that address the broader socialdeterminants of health.

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Why Is the GovernmentTelling Us Health Care isNot Sustainable?

Investing in Social ProgramsContradicts Market IdeologyThe Alberta government has been rolling in large surpluses forseveral years, and now wants advice from Albertans on how tospend all the extra money. So why are Albertans hearing themessage that we can no longer afford our current public healthcare system?

This government is not comfortable having extra money lyingaround. An increase in public spending on social programs iscontrary to their ideology, which promotes market solutionsand individual responsibility. Witness their rapid paydown ofthe provincial debt while decrying health care costs,underfunding education and providing only token increases tosocial assistance rates that were cut over 10 years ago.s

The government has used various strategies to keep revenuesout of program budgets. Until this year, allocating money todebt reduction made it unavailable for program spending.However, a 2004 pre-budget analysis from Parkland Instituteresearchers points out that it has actually been a few years sinceAlberta has had any net debt, as defined by assets minusliabilities. The report quotes a government news release:“Alberta’s net assets are forecast at $20.4 billion as of March 31,2004. This includes capital assets of $10.5 billion.” (p. 13-14).The Parkland researchers conclude:

The Alberta government is caught in an illusory debt trap, one whichit exports to its citizens at large, as a means of ensuring continuedpublic sacrifices and reduced public expectations, while absolvingitself of genuine or wholesale reinvestments in the public sphere.(p. 6)31

s See the Parkland (2004) budget analysis forexamples of how the government hasunderfunded other areas like primary andsecondary education and social services.

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The government’s aversion to both debt and public spendingis also leading it to experiment with public-privatepartnerships, where private companies build facilities andlease them back to the government. For many reasons, someprominent economists argue that these arrangements end upcosting governments more in the long run than if theyborrowed the money and kept the facilities in the publicsector.32

In 2003, the Alberta government announced the creation of aSustainability Fund to ensure stable and predictable revenuefor government programs. The fund will allow the governmentto avoid cuts to existing programs if revenues dropsignificantly, and to cover unforeseen events like naturaldisasters. However, if the fund grows beyond its target of$2.5.billion, the extra money may not be used for programfunding.33 Setting aside money for unforeseen downturns isprudent in Alberta, where revenues can be volatile due tochanges in natural resource prices. But the Parkland pre-budget analysis, though generally supportive of the fund,cautions that it could also be used to shelter surpluses in orderto avoid investments in social programs.

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Forgone Tax and ResourceRevenues: Turning Downthe Money Tap

HIGHLIGHTS

In Alberta, foregone revenue from personal and corporateincome taxes combined was $8.4 billion between 1996-97and 2003-04 - and is projected to reach $13.8 billion by2005-06.

What is really unsustainable is the tax cut agenda.Using data from 30 OECD member countries, Marc Lee, aneconomist with the CCPA, says there is no correlationbetween size of government and growth rates of eitherper capita GDP or productivity. Lee concludes that lowtaxes are not a precondition for a strong economy.

Other research has shown that rather than stimulatingeconomic growth, tax cuts can actually suppress it.

Support for tax cuts, compared to other priorities, hasbeen declining steadily over the last 10 years.Albertans are not clamouring for a tax cut. When askedwhat the provincial government’s high priorities shouldbe, the most common response - from over 70 per cent ofAlbertans - was improving the public health care system.

The easiest way for governments to convince citizens that theycannot afford generous social programs is to reduce theirrevenues by cutting taxes. Economist Armine Yalnizyan of theCanadian Centre for Policy Alternatives (CCPA) uses FinanceCanada data from Budget Plan 2003 to show that the federalgovernment will forego $130.2 billion in tax revenue from1997-98 to 2004-05. She also calculates provincial revenues willlose $118.8 billion to tax cuts over the same period.34 Theseforegone revenues are a result of personal and corporate taxcuts, plus Employment Insurance premium cuts and other taxcuts - after accounting for increases in other taxes and fees.

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Yalnizyan concludes:...tax cuts cost public coffers a cumulated total of almost $250 billionin foregone revenues since the late 1990s. At the same timecumulative increases in public spending on health care, about $108billion, have been increasingly portrayed as a fiscal threat. (p.8)

So what is really unsustainable - health care spending, or thetax cut agenda?

In Alberta, foregone revenue from personal and corporateincome taxes combined was $8.4 billion between 1996-97 and2003-04 - and is projected to reach $13.8 billion by 2005-06.t

Let’s compare Alberta’s foregone income tax revenue withprovincial health spending. Both tax cuts and healthexpenditures are in current billions of dollars.

The overall trend in Table 1 show us that as health spendingrose, the government was letting potential revenues slip awaythrough tax cuts. Almost half the foregone revenue since 2001is a result of Alberta’s switch to a single-rate tax system in 2001,which has reduced revenues by $1.1 billion a year.35 TheParkland pre-budget analysis points out that although thesingle-rate tax has reduced income taxes for low incomeAlbertans, it favours high income Albertans over middleincome earners.

From the years 2001-02 to 2003-04, the value of the tax cutswere worth a quarter to a third of provincial government healthspending. In 2005-06, foregone income tax revenue isprojected to be $2.8 billion. If a gap ever does develop betweengovernment revenues and health spending, it will be a fiscalcrisis of the government’s own making.

1996-97 1997-98 1998-99 1999-2000 2001-01 2001-02 2002-03 2003-04

0.008 0.03 0.2 2.5 1.1 2.3 2.2 2.3

4.2 4.6 5.0 5.9 6.3 7.3 7.9 8.5

Table 1. Comparison of Foregone

Income Tax Revenue with

Provincial Health Spending for

Alberta ($ billions)

Personal andCorporate Tax Cuts

Health Spending

Sources: Finance Canada (2004) unpublished tables; CIHI (2003a) Table F.1.1.1.

t These figures were calculated fromunpublished Finance Canada tables forprovincial tax decreases from 1996-97onward, provided by Yalnizyan.

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Albertans and other Canadians also need opportunities todiscuss tax fairness and a progressive tax system that wouldgenerate enough revenue to pay for social programs thatcitizens cherish as high public priorities - like health,education, employment, poverty reduction and theenvironment. As Tom Kent states in his tax reform paper: “thefuture does not lie with the tax cutters”. (p.1) If more of the taxload is shifted toward those who can most afford to pay, taxesfor lower and middle-income Canadians may indeed fall. Thatwould further diminish the already-low public support for taxcuts - and take the wind out of the sails of the anti-taxcrusaders.

Not only has the Alberta government forgone significant taxrevenue, but it also draws much lower royalties and taxes fromoil and gas development than other jurisdictions. A 2004 studyby Alberta’s Pembina Institute concludes that from 1995 to2002, Alaska collected 2.7 times more than Alberta in taxes androyalties for each unit of oil and natural gas produced. Norwaycollected 3.3 times more such revenue than Alberta.36, u A 1999Parkland Institute study shows a similar pattern - Alaskacollected almost 1.6 times the petroleum revenue as Albertabetween 1992 and 1997, while Norway collected 2.7 times asmuch.37, v The Parkland study also shows that under the Kleinregime (1992-97), Alberta has received less than half the oiland gas revenues per unit produced, compared to theLougheed years (1972-85).

The overall message from the two studies is that the Albertagovernment could generate more resource revenue by bringingroyalty and tax measures closer to those of other jurisdictions.Much of this extra revenue could be reinvested in health andother social programs as well as clean energy sources. Andsome funds could be set aside in the Heritage Fund or the newSustainability Fund.

u Calculations by author based on Table 4-2.

v The unit of production used was theequivalent of a barrel of oil.

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Why the Obsession with Tax Cuts?Evans argues in his 2003 paper Political Wolves and EconomicSheep that the real agenda behind claims of health systemunsustainability is “regressive income redistribution” -particularly for Alberta, B.C. and Ontario, where tax cutsbenefit higher income earners and governments haveinstituted numerous regressive fees for public services. He alsonotes that after-tax income inequality in Canada is rising.

He further explains that higher income Canadians presentlycontribute more to the health system, without getting preferredaccess or better care. Any shift toward more private financing,through user fees and/or private insurance, would reduce therelative contribution to public health care by people withhigher incomes. Further, if private payments limit access forpeople with lower incomes, those who are willing and able topay will get better access. In other words “Private financingquite genuinely offers (the wealthy) ‘more, for less’, whileoffering the rest of the population ‘less, for more’.” (p. 19)Evans further notes that this conflict is not just financial, but isa moral issue concerning what people in a society owe eachother.

Pressures for private finance are not limited to wealthy peopledesiring preferential treatment. Evans argues that privateinsurers and providers - especially drug companies – havevested interests in a system that mixes public and privateinsurance. With multiple payers, the ability of governments tocontrol costs and type of care is reduced.

Evans maintains that the sustainability of the publicly fundedhealth system is more a political issue than an economic one:

Claims that Canada’s Medicare is economically or fiscallyunsustainable represent part of a broader propaganda campaign toadvance these priorities, ‘softening up’ a generally sceptical andunsympathetic public to accept that the current form of public healthinsurance (which most Canadians strongly prefer) is simply

Chapter 1


impossible to maintain. The agenda is being advanced by right-winggovernments in the larger provinces, with sympathetic coverage fromthe country’s dominant newspaper chain. In those circumstances, thepolitical sustainability of the public system is very much an openquestion. But the claims of economic unsustainability appear from thedata to be themselves wholly unsustainable. (p.19, emphasis inoriginal)...

He concludes “There is a wolf at the door of the Canadian Medicaresystem. But it is a political wolf dressed in phony economic clothing todeceive the sheep.” (p. 23, emphasis in original)

But Don’t We Need Low Taxes to Have aStrong, Competitive Economy?Proponents of tax cuts argue they improve our country’seconomic performance. In other words, smaller governmentmeans a stronger economy. But some have questioned thisdominant discourse. Marc Lee, an economist with the CCPA,says there is no correlation between size of government andgrowth rates of either per capita GDP or productivity. Hisconclusion is based on data for 30 member-countries of theOrganization of Economic Co-operation and Development(OECD).38, w

So why have some high-tax countries, such as Norway, theNetherlands and Demark achieved higher rates of productivitygrowth than lower tax countries like the United States? Lee saysit is not so much a question of how much tax is taken as apercent of GDP, but what the taxes are based on and how theyare spent.

For example, Lee outlines a recent study showing some welfarestates with large public sectors tax investment capital lightly inorder to keep it in the country. These countries also rely moreon consumption taxes – particularly gas, alcohol and tobacco -assuming these taxes will fund beneficial social programs. 39, x

Low taxes are not a precondition for a strong economy.

w The OECD measured size of government bytax revenues as a percentage of GDP, andproductivity by growth of GDP per hour ofwork.

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On the spending side, Lee notes that welfare states invest inpublic health care, education and child care. They believepublic investments in health and education improve the qualityof the workforce, and therefore the growth potential of theeconomy. Lee also cites research showing that publicinvestments in transportation and communication are positivelycorrelated with economic growth. 40

Other research has shown that rather than stimulatingeconomic growth, tax cuts can actually suppress it. Ian Hudson,professor of economics at University of Manitoba, notes thatprovinces with balanced budget legislation ensure that tax cutsare accompanied by spending decreases. He argues that this inturn reduces economic activity.41 In British Columbia, theLiberal government dramatically cut spending on publicservices to fund a 25% tax cut when it came to power in May2001. The BC tax cuts led to larger deficits and the highestdebt-to-GDP ratio in BC’s history.42

Some people in the business community recognize thateconomic growth will not cover the total cost of tax cuts. Thereason is “leakage”, which describes money that leaves thecountry when the wealthy spend and invest their tax savingsabroad, or when those who can afford it put their tax savings ina bank account instead of spending the money. In 1999, theBC Business Summit agreed that a tax cut of $1.5 billion wouldonly recover a third of its value through revenues fromeconomic growth. The rest, they said, would have to be paid forby curtailing government spending. 43

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Finally, Yalnizyan argues that the public sector should berecognized as an economic stimulus:

There is nothing wrong with spending a greater proportion of theeconomy on health care...Health care is one of the economy’s engines,offering well-paid, high-tech jobs in a sector with robust consumerdemand. If we, as a society, choose to buy more health care than SUVs,what’s the problem? (p.5)

Is the Public Clamouring for Tax Cuts?In May 2004, the Canada West Foundation released Looking West2004. This public opinion survey included 800 Albertans. Whenasked what the provincial government’s high priorities shouldbe, the most common response - from over 70% of Albertans —was improving the public health care system. In comparison,only 41% of Albertans said tax cuts were a priority. Other highpriorities mentioned by at least two-thirds of Albertans wereensuring skilled labour, protecting the environment, improvingthe K-12 education system, and reducing poverty.44

A recent national Ekos poll, Tracking Public Priorities, found thattax cuts are a modest priority at best. Support for tax cuts,compared to other priorities, has been declining steadily overthe last 10 years. Of the 3,000 Canadians surveyed in 2003, 93%said health care was a top priority, compared to 52% for level oftaxation. Respondents’ average ratings for health care as apriority, on seven-point scales, was 6.2 for the federal and 6.3for the provincial government. By contrast, ratings for tax levelsas a priority were considerably lower - at 4.8 for both federaland provincial governments.45

When asked how they would like the federal government to useits budget surplus, 63% of Canadian respondents said invest insocial programs, 20% wanted debt reduction and 18%preferred tax cuts.

Among Albertans, 52% favoured social programs, 23%

Chapter 1


preferred debt reduction, and 25% asked for tax cuts. Resultswere similar when Albertans were asked what the provincialgovernment should do with its surplus. Half preferred socialprogram investment, 22% suggested debt reduction, and 27%wanted tax cuts.y

Both surveys suggest that almost twice as many Albertans arecalling on governments to priorize health care than are askingfor tax cuts. Why is a government supposedly concerned aboutcosts spending a half-million dollars on an unscientific mailsurvey to gauge public priorities — when the answers arealready available from reputable research organizations like theCanada West Foundation and Ekos?

Do We Need Higher Health CarePremiums?

HIGHLIGHTS

Health care premiums are regressive taxes. Health carepremium revenue in Alberta hit an historical high in2004. A single individual now pays $528 per year and afamily of two or more pays $1,056.

The Graydon report proposes that premiums rise tocover about 20 per cent of the total costs of publiclyinsured health services, up from the present level ofabout 14 per cent. This would require premium in-creases of about 4.5 per cent a year.

Seven of 10 Canadian provinces do not collect healthcare premiums at all. They fund health care throughincome taxes.

Surely Alberta, with its ballooning resource royaltiesand annual surpluses, can afford to eliminate healthcare premiums for all Albertans.y The Alberta subsample was small at 146.

Therefore the margin of error would beroughly 8%. However, the difference betweenthe percentage who preferred socialprograms versus tax cuts is much larger thanthe margin of error.

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Health care premiums are regressive taxes. Albertans pay thesame flat premium regardless of income, unless their earningsare low enough to qualify for premium subsidies, or if they areseniors.z As noted earlier, health care premium revenue inAlberta hit an historical high in 2004. In Alberta, a singleindividual now pays $528 per year and a family of two or morepays $1,056.46

The Graydon report proposes that premiums rise to coverabout 20% of the total costs of publicly insured health services,up from the present level of about 14%. This would requirepremium increases of about 4.5% a year. With seniors no longerpaying premiums, other Albertans will see premiums rise by aneven greater amount so the government can reach its 20%target.

Only three Canadian provinces charge health care premiums.BC’s premium system is similar to Alberta’s. Ontario has just re-introduced health care premiums after abolishing them in theearly 1990s. The new Ontario premium depends on one’sincome. Individuals with taxable income of $20,000 or less payno premiums. Those earning over $21,000 will pay an income-graduated amount, from $60 to a maximum of $900 per year.47

The income-graduated Ontario premium is similar to theVariable National Health Care Insurance Premium proposed in2002 by the Standing Senate Committee on Social Affairs, Science andTechnology, chaired by Senator Michael Kirby.48 This is moreprogressive than a flat-rate premium like Alberta and B.C. have.However, it may be less costly from an administrativestandpoint to simply increase income taxes to capture theamount collected through the premium, and to dedicate theincrease to health care. It seems that governments will go togreat lengths, and added costs, to try to convince the publicthat a tax is not really a tax.

Seven of 10 Canadian provinces do not collect health carepremiums at all. They fund health care through income taxes.Surely Alberta, with its ballooning resource royalties and annualz Premiums for seniors have been abolished as

of October 2004.

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surpluses, can afford to eliminate health care premiums for allAlbertans.

The Bottom LineAlberta’s health care system is sustainable. Health spendingincreases have been modest, once adjusted for inflation andpopulation growth. Both provincial revenues and Alberta’s GDPare keeping up with increases in health spending. Projectionsof future spending trends by Finance Canada economistssuggest that health care systems in Canada will continue to beaffordable as a percentage of GDP. Some specific health carecosts are escalating. These are mostly in categories where thereis extensive private sector involvement - in particular, drugcosts.

The government is misleading Albertans about the state ofhealth care spending to support an ideology that favoursmarket solutions and an excessive emphasis on individualresponsibility. That same ideology drives the government’sobsession with having the lowest tax regime in Canada - the so-called “Alberta Advantage”.

Foregone revenue from income tax cuts and uncollectedresource royalties restricts the funding available for health careand other public priorities — a skilled workforce,environmental protection, education and poverty reduction —identified by Albertans in the recent scientific survey by theCanada West Foundation. Tax cuts are a low priority for mostAlbertans.

If the government is truly worried about a fiscal crisis in healthcare, why are they boasting about annual surpluses? And whyare they doing an expensive, unscientific survey of Albertansabout what to do with all the extra money in a debt-freeAlberta?

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References1 Canadian Institute for Health Information (2003a). Table F.1.1.1.

Provincial/Territorial Government Health Expenditure, by Province/Territory and Canada, 1975-1976 to 2003-2004-Current dollars (inmillions) http://secure.cihi.ca/cihiweb/en/media_17dec2003_tab_f.1.1.1_e.html (Accessed August 26, 2004)

2 Alberta Health and Wellness (2004a). Alberta Ministry of Health andWellness Annual Report 2003//2004 Section I. www.health.gov.ab.ca/resources/publications/AR03_04/ARI_04.pdf (Accessed August 26,2004)

3 Canadian Institute for Health Information (2003a). Table F.1.1.7.Provincial/Territorial Government Health Expenditure, by Province/Territory and Canada, 1975-1976 to 2003-2004-Constant Dollars (in 1997$ per capita) http://secure.cihi.ca/cihiweb/en/media_17dec2003_tab_f.1.1.7_e.html (Accessed August 26, 2004)

4 Canadian Institute for Health Information (2003b). Canadian Institutefor Health Information (2003). National health expenditure trendsoverview. Ottawa, ON: CIHI http://secure.cihi.ca/cihiweb/dispPage.jsp?cw_page=AR_31_E (Accessed July 14, 2004)

5 Alberta Health and Wellness (2000). Alberta Ministry of Health andWellness Annual Report 1999/2000 Section I. http://www.health.gov.ab.ca/resources/publications/ar99-00/AR_sec1.pdf(Accessed August 28, 2004)

6 Alberta Health and Wellness (2002). Alberta Ministry of Health andWellness Annual Report 2001/2002 Section I. http://www.health.gov.ab.ca/resources/publications/AR01_02/section_1.pdf(Accessed August 28, 2004)

7 United Nurses of Alberta (2004). Nurses taking mediationrecommendations to a vote Negotiations continue with other Employers.(Media release, May 29). www.unitednurses.org/media%20releases/Mediation%20Recommendations (Accessed September 2, 2004)

8 Advisory Committee on Health Human Resources (2002). Our health,our future creating quality workplaces for Canadian nurses: Final reportof the Canadian Nursing Advisory Committee. Ottawa, ON: HealthCanada. http://www.hc-sc.gc.ca/english/pdf/Office-of-NursingPolicy.pdf(Accessed September 2, 2004)

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9 Boothe, P., & Carson, C. (2003). What happened to health-care reform?Toronto, ON: C.D. Howe Institute. www.cdhowe.org (Accessed January14, 2004)

10 Finance Canada (2004). Fiscal reference tables 2003. http://www.fin.gc.ca/frt/2003/frt03_e.pdf (Accessed September 5, 2004)

11 Jackson, H., & McDermott, A. (2004). Health care spending: prospectand retrospect. Government of Canada, Department of Finance.www.healthcoalition.ca/finance-note.pdf (Accessed August 26, 2004)

12 Government of Canada (2004). A 10-year plan to strengthen health care.www.healthcoalition.ca/deal-text.pdf (Accessed September 17, 2004)

13 Kennedy, M. (2004). Leaders confront medicare troubles. CalgaryHerald, January 31, A.11.

14 McKinnon, J. (2004). The arithmetic of health care. Ottawa, ON:Institute for Research in Public Policy.

15 Conference Board of Canada (2004a). Understanding Health Care CostDrivers and Escalators. Ottawa, ON: Conference Board of Canada.www.conferenceboard.ca/boardwiseii/Signin.asp (Accessed August 15,2004)

16 Harrison, T. (2002). Public Health Care and the Sustainability Myth(Ch.2, pp. 15-23). In Reclaiming Medicare: A response to theMazankowski misdiagnosis. Edmonton, AB: Parkland Institute

17 Scott, H. (2004). The “other” health system: Reflections on the dark sideof the moon of health and health care in Canada. Policy Options,August. www.irpp.org/po/index.htm (Accessed September 3, 2004)

18 Canadian Institute of Health Information (2003a). Total Provincial/Territorial Government Health Expenditure as a Proportion of TotalProvincial/Territorial Government Programs, by Province/Territory andCanada,1974-1975 to 2002-2003-Current Dollars. http://secure.cihi.ca/cihiweb/en/media_17dec2003_tab_f.1.1.4_e.html (Accessed August 26,2004)

19 Alberta Health and Wellness (2003). Alberta Ministry of Health andWellness Annual Report 2002/2003 Section I. http://www.health.gov.ab.ca/resources/publications/AR01_03/section_1.pdf(Accessed August 1, 2004).

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20 Evans, R. (2003). Political wolves and economic sheep: The sustainabilityof public health insurance in Canada. Vancouver, BC: Centre for HealthServices and Policy Research, University of British Columbia.www.chspr.ubc.ca/chspr/pdf/chspr03-16W.pdf (Accessed September 3,2004)

21 Alberta Finance (2004a). Government of Alberta 2003-04 Annual report:Fiscal highlights. www.finance.gov.ab.ca/publications/annual_repts/govt/ganrep04/execsumm.html#6 (Accessed September 4, 2004)

22 Alberta Finance (2002). Government of Alberta Annual Report 2001-02:Quick Facts www.finance.gov.ab.ca/publications/annual_repts/govt/ganrep02/quickfacts.pdf (Accessed September 4, 2004)

23 Alberta Finance (2004b). First Quarter Fiscal Update confirms debtelimination. News release, August 31. www.finance.gov.ab.ca/whatsnew/newsrel/2004/0831.html (Accessed October 14, 2004)

24 Olsen, T. (2004). Survey to gauge Alberta priorities. Calgary Herald,August 26, A.7.

25 Canadian Institute for Health Information (2003a). Table F.1.1.3. TotalProvincial/Territorial Government Health Expenditure as a Percentageof (Provincial/Territorial) G.D.P., by Province/Territory and Canada,1974-1975 to 2003-2004-Current Dollars http://secure.cihi.ca/cihiweb/en/media_17dec2003_tab_f.1.1.3_e.html (Accessed August 26, 2004)

26 Rondeau, A., personal communication, August 27, 2004

27 Evans, R.G., McGrail, K.M., Morgan, S.G., Barer, M.L., & Hertzman, C.(2001). APOCALYPSE NO: Population aging and the future of healthcare systems. Canadian Journal on Aging, 20, 160-191.

28 Conference Board of Canada (2004b). Challenging health care systemsustainability: Understanding health system performance of leadingcountries. Ottawa, ON: Conference Board of Canada.www.conferenceboard.ca/boardwiseii/Signin.asp (Accessed July 15,2004)

29 United Nations Development Programme (2004). Monitoring humandevelopment: enlarging people’s choices . http://hdr.undp.org/reports/global/2004/pdf/hdr04_HDI.pdf (Accessed September 9, 2004)

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30 Hussey, P.S., Anderson, G.F., Osborn, R. & Feek, C. (2004) How DoesThe Quality Of Care Compare In Five Countries? Health Affairs, 23, 89-99.

31 Parkland Institute (2004). A time to reap: Investing in Alberta’s publicservices. Edmonton, AB: Parkland Institute.

32 Auerbach, L., Donner, A., Peters, D.B., Townson, M., & Yalnizyan, A.(2003). Funding hospital infrastructure: Why P3s don’t work, and whatwill. Ottawa, ON: Canadian Centre for Policy Alternatives. http://www.healthcoalition.ca/p3-hospitals.pdf (Accessed December 2, 2003)

33 Government of Alberta (2003). New sustainability fund will bring stabilityto Alberta’s fiscal framework. News Release, February 24, 2003.www.gov.ab.ca/home/index.cfm?Page=374

34 Yalnizyan, A. (2004). Can we afford to sustain Medicare? A strong role forfederal government. Ottawa, ON: Canadian Federation of NursesUnions. www.healthcoalition.ca/cfnureport.pdf (Accessed August 8,2004)

35 Alberta Finance (2001). Budget 2001: Alberta tax advantage.www.finance.gov.ab.ca/publications/budget/budget2001/tax.html(Accessed August 30, 2004)

36 Taylor, A., Severson-Baker, C., Winfield, M., Woynillowicz, D., & Griffiths,M. (2004). When the Government is the Landlord Economic Rent, Non-renewable Permanent Funds, and Environmental Impacts Related to Oiland Gas Developments in Canada. Drayton Valley, AB: Pembina Institute.www.pembina.org/publications_display_all.asp?category=11&current_record=0 (AccessedSeptember 7, 2004)

37 McNab, B., Daniels, J., & Laxer, G. (1999). Giving away the Albertaadvantage: Are Albertans receiving maximum revenues from their oil andgas? Edmonton, AB: Parkland Institute.

38 Lee, M. (2004). Size of government and economic performance: whatdoes the evidence say. Behind the Numbers, 6 (4), July 22. Ottawa, ON:Canadian Centre for Policy Alternatives.. www.policyalternatives.caAccessed August 10, 2004.

39 Lindert, P. (2004). Growing Public: Social Spending and EconomicGrowth since the Eighteenth Century. Cambridge, UK: CambridgeUniversity Press. (Cited in Lee, 2004)

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40 Easterly, W., & Rebelo, S. (1993). Fiscal Policy and Economic Growth: AnEmpirical Investigation, Journal of Monetary Economics, 32, 417-58.(Cited in Lee, 2004)

41 Hudson, I. (2001). Balanced budget legislation: tax cuts threatenprosperity. Winnipeg, MB: Canadian Centre for Policy Alternatives -Manitoba. www.policyalternatives.ca. Accessed August 10, 2002.

42 Lee, M. (2002). Let them eat cake: The anniversary of BC’s tax cuts is noreason to celebrate Vancouver, BC: Canadian Centre for PolicyAlternatives. www.policyalternatives.ca. (Accessed August 10, 2002)

43 Canadian Centre for Policy Alternatives (2002). The (real) bottom line: Ataxing question. www.policyalternatives.ca. Accessed August 10, 2002.

44 Canada West Foundation (2004). Western directions: An analysis of theLooking West 2004 survey. Calgary, AB: Author. www.cwf.ca (AccessedSeptember 12, 2004)

45 Ipsos-Reid (2004). Tracking public priorities. www.ekos.com/admin/articles/PublicPriorities04Jan2004.pdf (Accessed September 6, 2004)

46 Alberta Health And Wellness (2004b). Health Care Insurance Plan AndServices: What Do Pay For Alberta Health Care Insurance Plan Coverage?www.health.gov.ab.ca/ahcip/faq/premiums.html

47 Government of Ontario (2004). Ontario Health Premiums.www.health.gov.on.ca/healthpremium/fact_sheet.html Accessed August13, 2004.

48 Standing Senate Committee on Social Affairs, Science and Technology(2002). The Health of Canadians - The Federal Role Final Report:Volume Six: Recommendations for Reform www.parl.gc.ca/37/2/parlbus/commbus/senate/com-e/SOCI-E/rep-e/repoct02vol6part6-e.htm#CHAPTER%20FIFTEEN (Accessed October 18, 2002)

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CHAPTER 2

Private Finance, PublicAccess and Social CostsAs we saw in Chapter 1, the Alberta government has beenmusing about expanding the role of private financing withinthe public health care system. In this chapter, we examine user-payment proposals that will make sick people pay more fortheir public health care than healthy people, and queue-jumping schemes that will allow people with money to buyfaster access to procedures that are already covered byMedicare. We will see that private financing does not savemoney. Rather, it increases health care costs for individuals,businesses and governments. Private financing is therefore nota solution for health care sustainability.

Making Patients Pay

HIGHLIGHTS

User fees succeed only in keeping the poor, the sick, theelderly and the disabled from promptly visiting a doctor.

Health problems from delayed diagnosis and treatmentwill cost the heath care system more in the long run.

When health care is paid from income taxes, the healthyand wealthy pay more of the total cost; when health careis paid for by users, the sick and the poor pay a largershare.

User payments undermine a key principle underlyingMedicare - pooling our collective resources to care foreach other as part of a common good.

The Alberta government and conservative policy analysts whosay the health system is unsustainable are not calling for morerevenue through progressive taxation. And they argue that


better management and innovation in public and not-for-profitdelivery is not enough to keep costs under control. Instead,they tell us that people who use health care should pay moreThe call for user payments is couched in the rhetoric ofincentives, choice and individual responsibility.

Charging patients for health care is a form of privatization.User-pay schemes shift costs from government revenues, towhich we all contribute through our taxes, onto individuals whohave the misfortune to get sick.

Most analysts acknowledge that point-of-service user fees, wherepeople pay up front at the doctor’s office or hospital, are abarrier to service for people on low incomes.1, 2 Instead, thosewho favour user payments propose schemes like medical savingsaccounts and taxation of health care use, which do not involveup-front payments. But these more complex schemes are reallyjust user fees with a few added wrinkles.

The Premier’s Council on Health recognized this in theMazankowski report, when discussing the idea of making healthcare services taxable benefits: “In effect, making health careservices taxable benefits is a form of user fee that is graduatedaccording to people’s level of taxable income. On thedownside, this approach would mean financial hardship tosome people.” (p. 55)

In an influential and often-cited 1995 paper, User Fees for HealthCare: Why a Bad Idea Keeps Coming Back, health economistRobert Evans and his colleagues explain that even if user feesare geared to income, they still shift costs away from the wealthytoward the less wealthy. And people who use health care willstill pay more than those who do not. 3 Evans further notes in a2002 background paper to the Commission on the Future ofHealth Care in Canada (Romanow Commission) that those whoare better off and do not use health care would, in effect, see atax reduction.4

Chapter 2


The following sections first look at how user fees affect patientdemand, costs and patient access. Then more complex user-payschemes like medical savings accounts and taxation of healthcare are addressed. As we will see, the motives behind userpayments are based not on evidence, but on ideology andpolitical interests.

Do User Fees Reduce Patient Demandand System Costs without CompromisingAccess to Health Care?No. Most people are not health professionals. They do notknow if their symptoms are serious or not. That nagging coughmight be just a cold, but it could be the first symptom ofpneumonia. If a patient puts off visiting a doctor because of auser fee, a disease may not be detected and treated until itbecomes serious. Years of research from various countries haveshown that user fees only succeed in keeping the poor, the sick,the elderly and the disabled from making a timely visit to adoctor.5

Health policy analyst Raisa Deber of the University of Torontoexplains that most doctor visits, beyond the first one, arerequested by doctors rather than patients. And going to thedoctor is not like going to the mall - doctor visits are ofteninconvenient and uncomfortable. Patients are not consumerswho “shop” for needles, pap smears, or barium enemas justbecause Medicare pays. They do not go to doctors unless theyare concerned about their health.

Chapter 2


Deber also says that delayed diagnosis and treatment cost thesystem more in the long run, and that user fees are costly toadminister. Evans makes similar arguments. He told theCanadian Health Services Research Foundation (CHSRF) in2001 that:

- about half of physicians’ visits are callbacks or referrals;- hospital care and drug prescriptions only happen by a

doctor’s order;- patient-initiated first visits likely make up 6-7% of all

health spending, and;- only about 1-2% of all doctor visits could be seen as

patient-initiated abuse of the system.6

Even the latter 1-2% could be questioned as to whether itabuse. That term implies intent to harm. It would be moreabusive to deter people from seeking early care. If forsakingearly care leads to more serious illnesses and invasivetreatments, the result will be not only be higher health carecosts, but more stress for patients and their families.

Despite his general opposition to user fees, Evans acknowledgesin his 1995 paper, a possible role for “steering charges” todiscourage behaviours like non-emergency use of emergencywards. However, if people use health care inappropriately, theonus is on the system to both educate patients aboutappropriate use and make other opportunities for accessavailable to them. For example, some people may go toemergency because they lack a family doctor or their doctor isunavailable at the time they need care. The solution isimproved access to primary health care (including nights andweekends), rather than charging fees to steer people to a familydoctor or medical clinic. If a hospital were to charge fees,emergency staff could be tied up providing non-emergency careto those who can afford to pay for the convenience, at theexpense of those with real emergencies.

Chapter 2


Because user fees for doctors and hospitals in Canada werebanned in 1984 with the passage of the Canada Health Act, thereare no recent Canadian studies on direct point-of-service userfees. However, when Saskatchewan had user fees for doctor andhospital visits from 1968-71, the poor and the elderly saw theirdoctors less often than before the fees were instituted. On theother hand, middle and upper-income patients saw theirdoctors more often. There was no change in hospital use, asdoctors determined hospital admissions. So the Saskatchewanexperiment found that user fees did not lead to public healthcare savings. Instead, private costs to individuals went up - inparticular for the poor, the elderly and those who wereadmitted to hospital by their doctor.7

The Saskatchewan results are disputed by economist Carl Irvineand physician David Gratzer, research associates with theAtlantic Institute for Market Studies. They draw heavily fromthe RAND Health Insurance Experiment that randomlyassigned 5800 U.S. patients to either free health care or one ofseveral user fee groups. Irvine and Gratzer argue that evensmall fees discouraged use, especially of services considerednon-emergency such as cuts that did not need stitches. AndRAND also found that higher fees led to less use. Furthermore,patients in the various user fee groups had lower costs fordoctor and hospital visits than patients in the free group.8

RAND’s findings have been more critically assessed by theCHSRF. They point out that people in the higher user feegroups got less care. The proportion of inappropriate antibioticuse, hospital stays and admissions were the same with orwithout user fees - so fees did not lead to more appropriatecare. The CHSRF emphasizes that in addition to poorer peoplein the RAND study using fewer services, sick people were morelikely to die when user charges were initiated. The CHSRF alsoargues RAND’s finding that lower health care costs are linkedto user fees cannot be generalized to the health system as awhole. Each doctor in the RAND study only had a few patients.By contrast, the CHSRF explains that the Saskatchewan studyexamined population-wide trends in use of the health system.

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Irvine and Gratzer do acknowledge that the RAND experimentfound poorer patients were more affected by user fees. Theytherefore suggest that putting upper limits on fees orexempting some services from payment would resolve theseinequities. But evidence from Sweden suggests that thesestrategies do not work.

Sweden: The Poster-Country forSuccessful User Fees?Sweden is often presented as a user fee success story. BecauseSweden is often governed by social democratic political parties,the presence of user fees in their health system is offered asproof that such fees are effective and fair. Irvine and Gratzername Sweden as a country where user fees have no negativeimpacts on public health, because there is an annual cap on thefees, and some people are exempt on the basis on age, income,high recent system use, or other characteristics.a

As well, the Conference Board of Canada, in its recent seven-country comparison of health systems and population healthindicators, concludes “Sweden applies cost sharing successfullyand seems to have avoided the consequences that othercountries, such as New Zealand, have experienced.” (p. 109) 9, b

But Swedish researchers, like those elsewhere, have beenfinding that user fees deter people, especially the poor, fromseeking necessary care.

A study of about 5400 randomly selected Swedes found almostone in four had foregone seeking medical care at least onceduring the past year due to cost. Women were more likely thanmen to forego care. Of those who described their financialsituation as poor, more than half had chosen not to seek care atleast once in the past year. In fact, the poor were ten timesmore likely to forego care due to cost than those who said theirfinancial situation was good. The unemployed, students,foreign nationals and single mothers were over-represented

a The most recent figures for Swedish userfees, from the Swedish Institute (cited in theConference Board of Canada’s June 2004report) are $14/day for hospital and $18-26for consultation with a primary health cardoctor. Total for a year is capped at $155.

b The Conference Board notes that NewZealand has higher fees than Sweden - about$30 Canadian for a doctor visit. Their reportconcludes that New Zealanders are reluctantto visit a doctor, often leave symptoms toolate, and go to emergency where they do nothave to pay.

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among the poor and so were less likely to seek care. 10

Furthermore, people who had foregone care perceived theirhealth as worse and reported more general pains and chronicdisease/disability, including psychosomatic, gastrointestinal,musculoskeletal and heart/lung symptoms. The studyconcludes that user fees deter people from seeking medicallynecessary care.

More recently, a team of American and Swedish researchershave suggested that Sweden’s move toward more costcontainment in health care - and user fees in particular - isthreatening historical goals of solidarity pursued since the1930s.11 They cite other research showing that throughout the1980s and early 1990s, Swedes made equitable use of primaryand outpatient care regardless of income. However, by 1993-94,manual workers were less likely to use the health system thanother workers with similar health status. And between 1990 and1994, highly educated Swedes were more likely to report seeinga doctor within the past three months, despite their betterhealth.

Swedish researcher Bo Burstrom of the Karolinska Institutecompared health care use in 1988-89 and 1996-97 for Swedeswho reported having a chronic illness or disability.c User fees tosee a doctor almost doubled during that time. Burstromconcludes that low income adversely affected whether Swedessought medical care in 1996-97. In contrast, income did notinfluence care-seeking in 1988-89. People with lower incomeswere most likely to have chronic illnesses or disabilities. Thosein the lowest income groups were less likely to seek the medicalcare they believed they needed in 1996-97. This was especiallytrue of younger patients and immigrants. The study alsoshowed that lower income groups were more likely to useemergency, but less likely to be admitted to hospitals, in 1996-97 than in 1988-89. There were also trends toward less use ofdoctors and hospitals in general by lower income groups,though these findings were not statistically significant.12

c Data was from the Swedish Survey of LivingConditions. Sample size for people withchronic illnesses or disabilities was about2600 in 1988-89 and about 3000 in 1996-97.

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The Swedish health system underwent restructuring similar toCanada in the time period Burstrom studied, with cuts tohospital beds and shorter in-patient stays. So user fees were notthe only influence on the care people received. However,Burstrom points out that income disparities in Sweden alsogrew during that time period, as user fees increased. He alsonotes that other surveys showed more people with chronichealth conditions reporting financial difficulties.

Burstrom therefore concludes that low income Swedes mayperceive a financial barrier to health care. This is consistentwith his finding that the link between income and the decisionnot to seek care was stronger than the relationship of income tocare actually received. This confirms Deber’s assertion thatpatients have more control over their first contact with thehealth system than over subsequent care received, and that userfees most likely deter the first visit.

User-Fee Ideology:Better Care for the Better-OffIn their 1995 critique, Evans and his colleagues explain thatuser fees are attractive to some constituencies because theyshift costs from healthier and wealthier Canadians to the poorand the sick:

When health care is paid for from taxes, people with higher incomespay a larger share of the total cost; when it is paid for by the users,sick people pay a larger share. If user fees are increased, the amountof taxation required to finance a given level of health care will fall,reducing the burden on those with higher incomes and tax liabilities,and raising the burden on those with greater needs for, or at leastgreater use of, care services. Some gain, some lose...The wealthy andhealthy gain, the poor and sick lose. (p. 362-63)

Evans’ team further states that if user fees have differentimpacts on people in different income groups, they may alsodifferentially influence health status:

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If user charges are as likely to discourage ‘needed’ as ‘unneeded’contacts, and if they serve not to reduce overall use but to reallocateservices from those with less ability to pay to those with more, and ifat least some of the services thus reallocated are not only ‘needed’, asjudged by clinicians, but actually effective, then user charges willreallocate health outcomes as well...User fees may redistribute not onlymoney and access to care, but health itself, from lower to higherincome groups. (p. 381, emphasis in original)

In addition, they note that because small user fees do not savethe health care system money, there would be pressure onprovincial governments to continue to increase the chargesover time. This would lead to pressure to allow privateinsurance for Medicare-funded services:

At some point, the burden of such charges on patients will becomesufficiently severe that the ban on private insurance will no longer besustainable. After that, the spiral of increased user charges, increasedprivate coverage...and pressure for tax subsidies (such as now enjoyedby dental, pharmaceutical, and extended health services), will be veryhard to stop. There is a great deal of money to be made from breakingup Medicare. (p. 375, emphasis ours)

They point out that the argument for user fees definesappropriate care by willingness to pay. And because willingnessto pay is related to ability to pay, Premier Ralph Klein andformer Cabinet Minister Steve West assume that people withmore money have greater and more important health needsthan those with less money.d In summary, Evans’ groupconcludes that for user fee proponents, “the standard forjudging the appropriateness of care is not what the care does,but who gets it.”(p. 381)

d Evans et al. quote both Premier Klein andSteve West - a former cabinet minister in theAlberta government who is now thePremier’s Chief of Staff - making statementsto the Globe and Mail promoting user fees in1993.

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User Fees by Different NamesThe two most commonly discussed wrinkles on the user feeconcept are medical savings accounts and taxation of healthcare use. This section addresses each of these.

Medical Savings Accounts and Variable Premium Accounts

The Mazankowki report touts medical savings accounts (MSAs)and variable premium accounts as incentives for Albertans tostay healthy and use health care wisely. Both schemes wouldgive individuals a set amount of money in a personal healthaccount. Once a person used up those funds, she or he wouldpay for some portion of health care use until public coveragefor “catastrophic costs” kicked in.e

There was some anticipation that individual health accountswould figure prominently in the recent Graydon report onhealth care sustainability, given that its authors were from anMLA Task Force commissioned to follow up on theMazankowski recommendations concerning revenuegeneration. However, the Graydon report says there is noevidence that MSAs or variable premium accounts save systemcosts, and flags several problems:

- individual accounts would create hardship for peoplewith serious or chronic illnesses;

- when people are allowed to keep the “surplus” in theiraccounts from year to year, that money is lost to thehealth system as a whole; and

- having personal health accounts for Albertans is likelyincompatible with portability of health care betweenCanadian provinces.13

Many of their criticisms reflect previous arguments byorganizations concerned about equity in access to health care,such as the Parkland Institute and Friends of Medicare.14,15

The most research on MSAs is from Singapore, where they haveexisted since 1984. Health costs in Singapore continue to riseand shift from governments to individuals.16,17 A recent study

e A fuller discussion of these personalaccounts, including their implementationand evaluation, is contained in the ParklandInstitute’s 2002 report Reclaiming Medicare:A Response to the MazankowskiMisdiagnosis.

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in Manitoba examining the likely impacts of introducing MSAsin Canada concludes that “because most of the population isrelatively healthy and spends very little on hospital andphysician medical services, few savings can be found frominducing the general population to spend less.” (p.49) AuthorDeber and economists Evelyn Forget and Leslie Roos ofUniversity of Manitoba point out that the lowest spending 50%of Manitobans used about 4% of health care spending. Incontrast, he sickest 1% accounted for 26% of all expenditureson doctors and hospitals. 18

Deber and her colleagues explain that no savings can beexpected from people who use almost no health care. Costs togovernment would therefore increase and/or the sick would betaxed to provide money to the healthy. That is, MSAs wouldincrease both Medicare costs and out-of-pocket costs for thesickest individuals.

Taxing the Sick: Health Care Deductibles and Income Taxes

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HIGHLIGHTS

A health care tax (deductible) is just a user fee by anothername.

Taxing health care use hits a person in poor health harderthan a person with the same income who is in betterhealth.

Taxing health care use will not save money. It will just shiftcosts from the public purse to private pockets, penalizingpeople who need health care.

The health care deductible proposed in the Graydonreport lets the government raise taxes, while still beingable to say income taxes have not gone up.

If the health care deductible is adopted, Albertans will betaxed three times for health care - once through incometax, a second time through premiums, and a third timethrough the deductible.


The revenue-generating strategy favoured in the Graydonreport is a new health care deductible, to be added to theexisting system of health care premiums. The deductible wouldbe geared to income and administered through the income taxsystem - in effect making health care a taxable benefit.f

This scheme is the most progressive of user-pay options, and hassome degree of multi-partisan political support. ProminentLiberal policy architect Tom Kent proposed in 2000 that thecosts of Medicare services be totalled each year and provided toindividuals in a form similar to a T4 slip. The percentage of taxowing on health care would be geared to income, perhaps on aprogressive scale of 5-10% of total income. So for a familyearning $50,000 a year, the maximum value of health care taxedwould be $2500. This $2500 would be assessed at the 24% taxrate (in 2000), for payment of $600. Kent also suggests that thetax could be adjusted for family size and payment deferred incases of prolonged illness. Families with low incomes would paylittle or no tax. 19

Another model is presented by the C.D. Howe Institute. One ofthe authors is Jack Mintz, C.D. Howe President and Universityof Toronto economist. Mintz favours lower taxes and market-oriented health care reforms. Their proposal calls for people topay 40% of their health care costs, up to a maximum of 3% ofany income above $10,000. So if a family earns $50,000 a yearand uses $2000 dollars worth of health care, that family wouldpay $800. If the same family incurred $10,000 worth of healthcare, they would pay $1200 - which is 3% of $40,000 - ratherthan $4000. Because people would pay a fixed percentage ofhealth costs, capped at 3% of income, the authors call theirproposal a co-payment rather than a taxable benefit. However,it is still a tax on health care use, and less progressive thanKent’s proposal. 20

Proponents of taxing health care use argue that the paymentswould make both patients and providers more aware of healthcare costs, and provide an incentive for both to use the systemless. There are, however, ideological differences among those

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f The existing health care premium would alsobe collected through the tax system, butwould remain a flat fee that would not varyby use of the health system.


who favour the tax. Kent views it as a way to sustain andstrengthen Medicare. He generally supports strong socialprograms and progressive taxation. In a second paper in 2002,Kent is more attentive to the drawbacks of taxing health careuse. He acknowledges that a person in poor health would be hitharder than a person with the same income but in betterhealth.21 His primary rationale for taxing health care use ispolitical. He sees it as the least unfair option for politiciansfacing resistance to more progressive income taxes — fairerthan either up-front user fees or medical savings accounts. Hewrites:

Certainly over-doctoring and over-drugging are marginal to the totalcost of health care. But they are already enough in the public mind tobe fuel for critics...to ignore them is to invite reluctance to spendmoney on renewing Medicare and to strengthen the tax-cuttingpoliticians who would prefer to diminish it. (p. 16)

By contrast, the C.D. Howe team views taxing health care use asa way to save money for additional income tax cuts for the restof the population.

Health economist Robert Evans argues in his 1995 paper onuser fees, that if overt usercharges at the time of service do notlimit health care use and costs, income tax adjustments monthslater are unlikely to do so. The Mazankowski report makes asimilar point. It says that a taxable benefit would be less visiblethan other user payment options because many people do notrealize how much income tax they pay. For this and a numberof other reasons - including a concern that Albertans would feelthey were being taxed twice for health care — the Mazankowskireport does not support making health care a taxable benefit.

As previously discussed, most health care use is initiated byhealth professionals rather than patients. Therefore, taxinghealth care use will not save money. Rather, like other forms ofuser payments, such a tax will shift costs from the public purseto private pockets, penalizing people who receive necessaryhealth care.

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Taxing patients is also unlikely to alter provider behaviours.Informing doctors of the cost of each procedure will notchange their practice if they believe those procedures arenecessary and are rewarded for them through fee-for-servicepayment. The practices of doctors and other healthprofessionals are more likely to be altered through teamworkwithin primary health care centres, alternatives to fee-for-service payment, a greater emphasis on prevention, andenhanced opportunities for professional education aboutcurrent best practices. We will return to these issues in a laterdiscussion of primary health care.

A Made-in-Alberta Approach: The Health Care Deductible

The health care deductible is another method on taxing healthcare use. The Graydon report proposes that Alberta’s healthcare deductible be capped at 1.5% of a person’s income. So themaximum deductible for someone with Alberta’s averagetaxable income of $31,000 would be $465. The amount paidwould be less if the person used fewer than $465 worth ofhealth services. The deductible would be paid at income taxtime. Children and people with disabilities or chronic diseaseswith no earned income would be exempt. The Graydon reportstates that the deductible “is based on the idea that people whouse the health care system more should pay more if they canafford it, up to some point.” (p. 16).

The proposed cap on Alberta’s deductible is lower than thelimit proposed by either Kent or the C.D. Howe Institute. Thismay be due to the likelihood that Albertans will resist yetanother form of tax, given a 20% increase in the regressivehealth care premium in 2002 and the Graydon report’srecommendation for more premium hikes of about 4.5% a year.The report also acknowledges that the deductible cost might bea disincentive for some people to seek care, and that eventhough it is not a point-of-service user fee it might stillcontravene the Canada Health Act. All these factors may have ledthe report’s authors to set the Alberta deductible at a relativelymodest level compared to other models in the literature - inhopes of dampening political and public opposition.

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So why did the Graydon report favour the deductible, when theMazankowski report favoured medical saving accounts orvariable premium accounts and was cool toward taxing healthcare use?

When a Tax is Not a TaxThe health care deductible appears to be a retreat from themore radical proposals in the Mazankowski report - whilestaying consistent with its overall directions. Those includegiving people financial incentives to take care of their healthand use less health care, shifting a greater proportion of healthcare costs directly to patients, and connecting specific healthcare costs to individual Albertans.

The deductible is also a way for the government to raise taxes,while still being able to say income taxes have not gone up. TheGraydon report acknowledges the simplicity and relativeprogressivity of eliminating health care premiums by raising theprovincial single rate tax from 10% to 12%, and using theadditional funds for health care. But they ultimately reject thatoption.

One reason they reject an income tax increase is because theybelieve it provides no incentives for patients or providers tochange their behaviour. But their other two reasons are relatedto the Alberta government’s ideology around taxes. First, thereport states: “Albertans are not very supportive of income taxincreases and it runs counter to the government’s commitmentthat the only way taxes are going is down.” (p. 14) The otherargument is that Alberta’s tax competitiveness could be affectedunless other provinces and countries also raise taxes to providemore health care funds.

Those two arguments only make sense if individuals andbusinesses view the health care deductible as something otherthan a tax. This defies logic. The Graydon report suggests thatevery Albertan over age 18 would receive an annual statementof health care costs (a T4H). And payment of both thedeductible and existing health care premiums would be

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administered through the income tax system.

Instead of thinking that taxes are going down, individuals andbusinesses considering Alberta as a place to work, invest oremploy people are more likely to believe that Albertans aretaxed three times for health care - once through income tax, asecond time through premiums and a third time through thedeductible. Potential employers may fear having to pay the costof health care deductibles as an employee benefit, the way thatmany employers now cover employee health care premiums aswell as premiums for supplementary private insurance. Tripletaxation of health care hardly sounds like an Alberta Advantagefor either businesses or individuals.

A Trojan Horse for Expanding Private Health Insurance?

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HIGHLIGHTS

The combination of health care deductibles and premiumscould make Medicare start to resemble private healthinsurance in the eyes of Albertans.

If Albertans see little difference between Medicare andprivate health insurance, it would become easier for thegovernment to increase the private insurance role overtime.

If the government allows queue jumping through privatepayment for Medicare procedures, and raises health carepremiums and deductibles, Albertans may start asking formore private insurance.

Private health insurance costs more for individuals,businesses and the health care system.

Health care deductibles, along with premium increases, couldmake Medicare start to look more like private health insurancein the eyes of the public. The Graydon report confirms this


when explaining how the deductibles and premiums wouldwork together:

Health care premiums would become more like a ‘real’ insurancepremium. They would provide coverage in case people face high costsfor health care in a year if they are seriously ill, need surgery, or havean accident...In addition, people would also now pay a deductibleto cover the annual costs of the health services they use - up to alimit based on their income. After that limit, all further costs wouldbe covered by the premium. (p. 16)

Of course, the proposed premium plus deductible system is notidentical to private insurance. Deductibles would be geared toincome. Albertans would not be charged differential premiumsfor different levels of service or be penalized for pre-existingconditions like a previous heart attack or cancer. Nobody wouldbe refused coverage. In contrast, private insurance plansprovide different levels of service according to the premiumrates we can afford, and they can charge exorbitant premiumsor refuse coverage to people with pre-existing health problems.

However, the government could confuse Albertans intothinking a public “premium plus deductible” system is simply amore generous version of the types of private insurance plansthey have for drugs or eye and dental coverage. It would thenbecome easier for the government to create a greater role forprivate health care insurance over time. And as healthpremiums - and perhaps deductibles as well — continue to rise,Albertans may start asking for more private insurance options.At present, Albertans cannot use private insurance for publiclycovered procedures. But if Alberta were to opt out of theCanada Health Act, this restriction would no longer be in effect.

When the Graydon report was released, Premier Klein told theGlobe and Mail that the government had considered allowingpatients to pay directly for some Medicare-insured hip and kneesurgeries at facilities in Edmonton and Calgary.22 Should thegovernment allow this in future, there would be more demand

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for private insurance from those who want to pay to leave thepublic queue.

As well, the Mazankowski report suggests a larger role forprivate insurance companies to cover services not covered byMedicare. The more the government can promote privateinsurance, the easier it will be in future to de-list services oravoid covering new services through Medicare. For example,instead of expanding public coverage for diagnostics and homecare, as recommended by Romanow, the government couldpromote private insurance plans for those services and/orcontract with private insurers to provide coverage - as theypresently do for prescription drugs.23

There are other hints that the government has an eye on moreprivate health insurance in the future. For instance, theGraydon report proposes sending Albertans statements of theirhealth care costs. The government used to send out suchstatements until 1988. They stopped the practice because theyfound little value in it, and the annual cost of producing anddistributing statements was over $1 million. The stated reasonfor reviving the practice is that Alberta’s health care system hasgrown more complex and expensive, so it is important forAlbertans to know how and where money is spent on theirbehalf for health care.24

Given that most procedures are determined by doctors ratherthan patients, it is hard to see how sending Albertans coststatements will substantially reduce their health care use. If coststatements did not work before 1988, why assume they will worktoday?

But cost statements are consistent with an ideology that makesindividuals responsible for their health, and they can be put toother uses by the government. The cost information forindividuals will be used to calculate health care deductibles ifthe Graydon report recommendations are implemented. Andthe cost information could be used in the future to facilitatemore private insurance involvement in the system.

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Electronic health records make it much easier to trackindividuals’ health care use and costs than in past years.Electronic health records are viewed by some pro-Medicareanalysts as essential to improving co-ordination of care andevaluating health outcomes.25 However, Albertans must bevigilant as to how the records are used, and what safeguards willprotect us from invasions of privacy and commercialexploitation by insurance companies.

What’s Wrong with More Private Health Insurance?

Expanded private insurance would further shift health carecosts from the government to individuals, creating furtherinequities in access to care. High-income Albertans couldafford more private insurance than low and middle-incomeAlbertans.

Any expanded role for private health insurance will not justincrease costs to individuals. Business costs will also go up. A2002 Globe and Mail article outlines some concerns of businessand labour leaders. In that article, the Conference Board ofCanada points out the competitive advantage of public healthcare: “... any policy debate on the future of the health caresystem in Canada should recognize not only Medicare’ssymbolic value to individual Canadians, but also its economiccontribution to the competitiveness of Canadian businesses vis-à-vis the United States.” (p. B10)26

The article also reports a KPMG survey showing Canada as theleast costly place to do business out of nine countries — with a14.5% cost advantage over the U.S. This finding is based oncomparisons of wages and benefits, taxes, transportation andutility costs. The study concludes that universal health care is asignificant factor in keeping down private benefit costs inCanada. The Globe and Mail article includes a prediction fromthe Communication, Energy and Paperworkers Union that ifuniversal health care coverage is eroded and unions go afteremployers for private coverage, labour costs could rise - “it will

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become the bargaining issue of the decade” (p. B10). Given theconcerns raised by both labour and business, there would be noAlberta Advantage in expanding the role of private healthinsurance.

Expanding private health insurance will also add costs to thehealth care system itself. Harvard University researchers SteffieWoolhandler and David Himmelstein teamed up with TerryCampbell of the Canadian Institute for Health Information(CIHI) to compare health care administration costs in the U.S.and Canada. They present data showing that the averageoverhead cost of U.S. private insurers is 11.7%, compared to3.6% for U.S. Medicare (for seniors) and 6.8% for Medicaid(for the poor). Public and private insurance overheadcombined made up 5.9% of total U.S. health care spending.

In comparison, overhead costs of Canada’s provincial Medicareplans made up only 1.3% of the funds spent on doctors andhospitals. And overhead costs for Canadian private insurersaveraged 13.2% — higher than for their U.S. counterparts.27

Why would any government concerned about the sustainabilityof health care even consider a greater role for private insurers?

If Alberta allows a private payment alternative for Medicare-insured services like knee and hip surgery, people who want topay for fast access will create a market for private insurance tocover those procedures. Australia’s experience should serve asa caution.

Australia has a parallel private health insurance system thatcovers hospital services that are also insured by Medicare.g

Health economists from McMaster University and the NationalUniversity of Australia explain that the private system was set upbased on assumptions that it would save public costs, reducewait times and increase quality in the public system throughcompetition. To encourage Australians to buy privateinsurance, the government subsidized its purchase andlegislated industry requirements for coverage.

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g Australia’s Medicare has many similarities toCanada’s Medicare.


The research team, led by McMaster’s Jeremiah Hurley,evaluated the impact of Australia’s parallel private system. It didnot save the public system money. It actually cost the Australiangovernment $1.5 billion. If the money spent to encourageAustralians to buy private insurance had been given tohospitals, between half and two-thirds of all private sectordemand could have been met in the public system. 28

Hurley and his colleagues note that even without providingsubsidies for enrolling in private insurance, costs to the publicsystem are likely to go up when there is a parallel privatesystem. This is because private insurers focus on simple, electiveprocedures, leaving complex and expensive cases to the publicsystem. Pre and post-surgical care is often done in the publicsector. Furthermore, privately insured patients in Australia usepublic services whenever possible in order to avoid usercharges, unless they see a clear advantage to using privateservices in a particular instance. And because there is a limitedpool of health professionals, competition between public andprivate sectors can drive up human resource costs and reducethe supply of workers in the public sector.h

Hurley’s team argues that a parallel private health insurancesystem cannot be independent of the public system. The onlyway it can save public dollars is if the public health system isallowed to deteriorate. Otherwise, people are unlikely tochoose private payment over public services. The researchersalso conclude that Australia’s parallel private system did notreduce wait times in the public system.

h Though the main focus of both Hurley et al.’sevaluation and the present report is healthsystem financing, many of the points madeby Hurley et al. also apply to private, for-profitdelivery.

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Robert Evans explains that when Canadian Medicare coverageof doctors’services was implemented by all provinces in 1971,there was a sharp break in the preceding trend of escalatingcosts. Contrary to the arguments of those who believed at thetime that Medicare would be too costly:

Universal, comprehensive coverage was not more expensive than thefragmented mix of public and private insurance coverage and out-of-pocket payment. Consolidation of expenditures in the hands of asingle payer made possible control of rates of escalation (of costs).(p. 5, emphasis in original)29

The Bottom Line on User PaymentsArguing that user payments provide financial incentives to stayhealthy is misguided. Not only do they deter people with lowerincomes from seeking care, but they do not save overall healthcare costs because most patient care is determined by doctorsrather than patients.

User payments also over-emphasize individual responsibility forhealth. Taking good care of ourselves is important. But despiteour best efforts, any of us could be struck down by weak genesor bad environments. Eating well and exercising may notprevent a degenerative disease like multiple sclerosis. Andpeople who live close to sour gas flaring can do little to protectthemselves from air pollution.

Medicare provides a collective pool of funds from which all ofus draw when we get sick, according to our needs. Userpayments undermine the principle of caring for each other aspart of a common good.

More user payment schemes will make it easier for thegovernment to enhance the role of private insurance in thehealth care system. This will lead to higher costs for individuals,businesses and the health care system itself.

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Jumping the Queue

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HIGHLIGHTS

The Premier has proposed that people be allowed fasteraccess to hip and knee surgery by paying privately fortreatments covered by Medicare. This violates the CanadaHealth Act.

There are already some forms of queue jumping inAlberta - such as when people buy a private MRI andthen get faster treatment in the public system.

Allowing private payment for medical procedures onlyshortens wait times for people who can pay to jump thequeue - while public system wait times for the rest of ususually get longer.

If for-profit facilities really reduced wait times, theywould go out of business. People would not pay forprivate care if they were satisfied with public wait times.

Three Tales of Buying Faster Accessto Health CareThree scenarios presented below illustrate how Albertans can,or soon may be able to, jump the queue for health care becauseof their ability to pay. The first scenario involves direct privatepayment for treatment covered by Medicare. This is presentlyillegal, but if the Alberta government carries out its threat tochallenge the Canada Health Act, patients will be able to leavethe public queue and start a shorter private one - if they canafford to pay. The government recently proposed this scenariofor hip and knee replacements.

The second scenario involves private payment for diagnostictests, and is already common. For example, Albertans can buy aprivate magnetic resonance imaging (MRI) test rather than waitfor one in the public system. They can then use their quickresults to jump the public queue for treatment. This happens


because the Canada Health Act does not legislate that diagnostictests must be publicly insured through Medicare.

The third scenario involves bundling a Medicare-insuredprocedure with one that Medicare does not cover. The patientcan pay for the uninsured procedure and get the Medicareprocedure as part of the deal. This sometimes happens withcataract surgery.

Contrary to the government’s assumptions, queue-jumpingdoes not reduce wait times in the public system. Public waitseither get longer or remain unchanged. Queue-jumping viaprivate payment only shortens wait times for those who can buytheir way to the front of the line - resulting in greater inequitiesin access to care.

Political Heat Forces Premier to Retreat on Allowing theSale of New Hips and knees – Until After the Election

When Premier Klein spoke to the media on June 30th afterreleasing the Graydon report, he confirmed that the report didnot include all the government’s intentions for changes tohealth care. As previously discussed, Klein told the Globe andMail that his government had considered allowing private for-profit hip and knee replacement clinics to operate inEdmonton and Calgary. His caucus backed off because the issuebecame a focus of the federal election campaign. Klein said theprivate surgery proposal would violate the Canada Health Act,and that Albertans would be consulted about such controversialreforms. Consultations did not happen. Perhaps the Premierdid not want to hear Albertans’ opposition to queue-jumpingbefore the fall election.

Private MRI Results: Ticket to Public Queue Jumping

As mentioned earlier, some Albertans pay privately for an MRI,rather than waiting for one in the public system. Those patientsthen get faster public treatment. In 2000, the provincial health

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care advocacy organization Friends of Medicare challenged thefederal government to investigate Alberta for allowing this formof queue-jumping. Friends of Medicare documented 32 peoplewho were told by doctors they could get faster treatment bypaying for an MRI at a private clinic. Many people felt they hadno choice but to pay. The federal government ruled that theseprivate charges were a user fee, but charged no penalties toAlberta for violating the Canada Health Act. The Albertagovernment then set up the MRI Review Program to assessclaims from 2600 patients who felt forced to pay for privateMRIs due to long waits in the public system. By October 2001,the government had paid out $1 million to reimburse 1400Albertans for tests that the committee judged had beenmedically necessary.30,31, 32 However, the situation remainsunresolved. The province currently provides an MRI scan freefor anyone with a doctor’s referral, but Albertans can stillchoose to buy a private MRI if they wish.33 Because the CanadaHealth Act does not classify diagnostic tests as medicallynecessary, there is no restriction on paying for a private scan toget a quicker diagnosis than the public system can provide. Thatis why the Romanow report proposes that the federalgovernment close this loophole by:

- bringing diagnostic services under the CanadaHealth Act;

- dedicating funds to improve diagnostic wait times; and- reconsidering present regulations that allow workers

compensation agencies to contract with private clinics forfaster diagnoses than the public system provides.34

Cataract Surgery:Bundling Insured and Uninsured Procedures

A recent Globe and Mail article describes a private cataract clinicin Montreal that charges $1500-2500 per eye for faster access tosurgery than is available in the public system. The President ofCataract MD, Dr. Mark Cohen, wants to expand to otherprovinces. He proposes bundling insured with uninsuredservices to avoid running afoul of rules in provinces with more

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restrictions on private clinics than Quebec. Cohen says that inOntario, he will combine free cataract surgery in a package dealwith corrective laser surgery, a cosmetic procedure not coveredby Medicare. A federal health spokesperson responded thatsuch “bundling” raises concerns under the Canada Health Act.35

Bundling insured and uninsured procedures is not new. It hashappened in Alberta. In March 2000, retired electrician JackCaswell told CBC-TV he paid $4,000 to the Gimbel Clinic inCalgary for refractive lens surgery, which included removing hiscataracts.i His private payment allowed him to wait a fewmonths rather a year in the public system.36

Gordon Guyatt, a physician and researcher at McMasterUniversity, argues laser surgery leads to complications for somepatients, including loss of night vision.37 So bundling necessarycataract surgery with laser surgery exposes patients to addedrisks from a medically unnecessary procedure.

The Myth of Private Finance as aPressure Valve for Wait TimesMore private finance is a simplistic solution to a complexproblem. And it does not work. A recent review by University ofToronto health policy researcher Carolyn Tuohy and hercolleagues examines how private finance affects public healthcare, including wait times. They conclude that where parallelprivate insurance systems exist for procedures that are alsopublicly insured, public wait lists and times actually get longer.Britain and New Zealand, which have parallel systems, havelonger waits than Canada.38

Tuohy’s team also note that in Australia, where private healthinsurance is heavily subsidized by government, patients’ use ofthe parallel private health system has had no effect on publicwait times. The percentages of Australians on wait lists andthose waiting more than four months for elective surgery aresimilar to Canadian percentages. Jeremiah Hurley and hisi Laser surgery is the most common type of

refractive lens surgery.

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colleagues conclude from their evaluation of Australia’s parallelprivate system that wait times did not change from before toafter its implementation. A recent review by researchers JeremyHurst and Luigi Siciliani for the Organization for EconomicCooperation and Development (OECD) presents a moreoptimistic view. They suggest that more uptake of privateinsurance from 1999-2001 may be contributing to fallingAustralian wait times for some procedures. However, the OECDreport also shows that waits have shortened by less than 20% formost of those procedures, and wait times for other procedureshave gone up.39

Recall that Hurley’s team concludes that Australia’s parallelsystem costs the government $1.5 billion a year - an amount thatwould meet one-third to one-half of all private demand in thepublic sector.j It makes no sense for Australia’s public system toforego this revenue for the sake of marginal improvements inwait times for a few procedures.

The Netherlands, where patients must choose either the publicor private system and cannot move between the two, has similarwait times to Canada. However, Tuohy and her colleagues notethat the Dutch system requires extensive regulation of bothpublic and private insurance to make the two systems worktogether, and that there is a lack of political consensus on howthey should work.

Tuohy’s team acknowledges the difficulty of internationalcomparisons because of differences in definitions andmeasurements. So they also present within-countrycomparisons from Britain. Regions with higher levels of privateinsurance coverage had more people waiting in the publicsystem - even after controlling for household income, age ofpopulation and public spending levels. When public wait timesdropped in Britain, it was because of increases in publicfunding.

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j This is based on a $2.2 billion a year net lossfrom subsidies for private insurancepurchase, minus $800 million in savings tothe public hospital sector.


Private Financing and Day Surgery Wait Times

The above comparisons focus on inpatients, or lump inpatientsand outpatients together. However, many procedures are doneas day surgery on an outpatient basis. How does private financeaffect public wait times for day surgery? This issue has beenextensively studied for cataract surgery.

A 1997 study by Carolyn DeCoster and her colleagues atUniversity of Manitoba found that patients waited longer forcataract surgery if their doctors worked in both the public andprivate sectors. Those patients waited up to 23 weeks in 1996,compared to waits up to 10 weeks for patients whose doctorsworked only in public hospitals.k The shortest waits - up to fourweeks - were in the private for-profit clinics that charged afacility fee of about $1000.40, l So when governments say privatepayments shorten wait times - they do, but only for those whocan afford to pay or who make a financial sacrifice because theyare desperate for prompt treatment.

A follow-up study by the same researchers in 2000 found similarresults. Patients whose doctors practiced only in the publicsystem waited up to 10 weeks for cataract surgery. Those whosedoctors practiced in both public hospitals and private for-profitclinics waited up to 26 weeks. Once again, private clinic waitswere shortest. People from high income neighbourhoods weremore likely to pay for private surgery than people from lowerincome neighbourhoods. Women, on average, waited aboutthree weeks longer for surgery than men.41

Consumers Association of Alberta researcher Wendy Armstronghas studied cataract surgery wait times in Alberta. ThoughArmstrong used expected wait times rather than actual waittimes used in Manitoba’s study, she also found that more privatefor-profit involvement was linked to longer wait times in thepublic system. Wait times were related to how much cataractsurgery was contracted out by regional health authorities toprivate clinics. In Calgary, where all cataract surgeries wereperformed in private clinics, patients waited an average of 16 to

k Major hospitals are often private not-for-profit entities that operate at arms lengthfrom provincial governments. However, theyare often called “public” because they get alltheir funding from government and are anintegral part of the public health system.

l The surgery itself was covered by Medicare.

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24 weeks. In Edmonton, where 80% of cataract surgeries weredone in public hospitals, waiting lists were five to seven weekslong. In Lethbridge, where all cataract operations wereperformed in the public system, patients waited an average ofonly four to seven weeks.

Though Armstrong focused on for-profit delivery rather thanprivate financing, she argues that public contracts to privateclinics often subsidize start-up costs of other services notcovered by Medicare. This eventually draws doctors away fromMedicare-insured work to more lucrative uninsured activitieslike laser surgery.42 Armstrong’s example illustrates that evenwhen governments provide financing for Medicare proceduresand only the delivery is privatized, the private for-profit sectorcan use that public financing to subsidize development of otherprivately-financed services.

Why Does Private FinanceNot Solve Wait Time Problems?Tuohy’s research team offers several possible reasons whyprivate finance lengthens public wait times. First, providerscould be drawn from the public to the private system if they canmake more money from private patients. Second, providersmay have an incentive to maintain lengthy waits in the publicsystem in order to increase demand on the private side. Third,private finance may increase overall demand for care, includingcare in the public system related to complications or follow-up.

In addition, DeCoster and her Manitoba colleagues suggest thatdoctors who practice both publicly and privately might putpatients on a public wait list earlier so they are ready for surgerywhen called. The researchers did not suggest that those doctorsare trying to influence patients to choose the private side.However, putting patients on a public list early could lead someof them to pay for faster treatment if they believe that they arewaiting a long time and are at risk.

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Gordon Guyatt offers yet another reason that private for-profitclinics are unlikely to shorten wait times problems in the publicsystem:

If there aren’t substantial waits in the public system, why wouldanyone pay more for surgery? If for-profit clinics substantiallyreduced waiting lists, they would drive themselves out of business.Investors who own clinics that charge patients depend onunacceptable waits in the public-pay system for the survival of theirenterprise.43

The Bottom Line on Private Financeand Wait TimesAllowing private payment for publicly insured procedures doesnot shorten wait times. At best, private finance has no positiveimpact on public wait times; at worst, it lengthens them.Allowing people to pay to jump the queue only succeeds increating inequities between those who can afford to buy fasterservice and those who cannot. The solutions to long wait timesare stable resources and better management, as we will see inthe next chapter.

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ConclusionPrivate finance does not make health care more affordable orwait times shorter. Private finance actually adds costs to thepublic system. If lower and middle income Albertans put off adoctor visit because they know their health care use will betaxed, they may develop more serious health problems that aremore expensive to treat. If employers cover deductibles foremployees, as many now cover premiums, the cost of doingbusiness in Alberta will go up. The costs of administering thenew health care deductible and sending a health care coststatement to each Albertan could be better spent on providingcare. And if the role of private insurance expands, costs toindividuals, businesses and the government will go up. Privatepayment for medical procedures does not shorten wait times,except for people who can afford to pay. Wait times in thepublic system either remain long or get even longer.

The main impacts of injecting more private finance into publichealth care will be to create inequities among Albertans in theiraccess to care, and to make health care more expensive foreveryone, including taxpayers.

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References1 Premier’s Advisory Council on Health (PACH) (2001a). A Framework

for Reform. Main Report. Edmonton, AB: Government of Alberta.www2.gov.ab.ca/home/health_first/pach.cfm (Accessed January 9, 2002)

2 Aba, S., Goodman, W.D., & Mintz, J.M. (2002). Funding public provisionof private health care: The case for a co-payment contribution throughthe tax system. Toronto, ON: C.D. Howe Institute. www.cdhowe.org(Accessed May 30, 2002)

3 Evans, R.G., Barer, M.L., & Stoddart, G.L. (1995). User fees for healthcare: Why a bad idea keeps coming back. Canadian Journal on Aging, 14,360-390.

4 Evans, R.G. (2002). Raising the Money: Options, Consequences, andObjectives for Financing Health Care in Canada. Discussion paper no. 27,Commission on the Future of Health Care in Canada. www.hc-sc.gc.ca/english/pdf/romanow/pdfs/27_Evans_E2.pdf (Accessed September 15,2004)

5 Deber, R. (2000). Getting what we pay for: Myths and realities aboutfinancing Canada’s health care system. Paper prepared for Dialogue onHealth Reform, Toronto, ON. www.utoronto.ca/hpme/dhr/4.html(Accessed March 12, 2002)

6 Canadian Health Services Research Foundation (2001). Myth: User feeswould stop waste and ensure better use of the healrhcare system.(Mythbusters series, No. 4). www.chsrf.ca (Accessed March 10, 2002).

7 Beck, R.G, and Horne, J.M. (1980). Utilization of publicly insured publichealth services in Saskatchewan before, during and after co-payment.Medical Care, 18, 787-806.

8 Irvine, C., & Gratzer, D. (2002). Medicare And User Fees: Unsafe At AnyPrice? Halifax, NS: Atlantic Institute of Market Studies. www.aims.ca/library/fees.pdf (Accessed September 16, 2004)

9 Conference Board of Canada (2004). Challenging health care systemsustainability: Understanding health system performance of leadingcountries. Ottawa, ON: Conference Board of Canada.www.conferenceboard.ca/boardwiseii/Signin.asp (Accessed July 15,2004)

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10 Elofsson, S., Undea, A.L., & Krakau, I. (1998). Patient charges: ahindrance to financially and psychosocially disadvantage groups seekingcare. Social Science and Medicine, 46, 1375-1380.

11 Anderson, R., Smedby, B., & Vaegero, D. (2001). Cost containment,solidarity and cautious experimentation: Swedish dilemmas. SocialScience and Medicine, 52, 1195-1204.

12 Burstrom, B. (2002). Increasing inequalities in health care utilisationacross income groups in Sweden during the 1990s? Health Policy, 62,117-129.

13 M.L.A. Task Force on Health Care Funding and Revenue Generation(2004). A Sustainable Health System for Alberta. Edmonton, AB:Government of Alberta www.health.gov.ab.ca/resources/publications/pdf/Graydon.pdf (Accessed June 30, 2004)

14 Horne, T. (2002). Private follies: why profits do not belong in publichealth care. In Reclaiming Medicare: A response to the Mazankowskimisdiagnosis. Edmonton, AB: Parkland Institute

15 Friends of Medicare (2002). Real reform or road to ruin: Friends ofMedicare analysis of the Premier’s Health Advisory Council Report.Edmonton, AB: Author. www.healthcoalition.ca/maz-fom.pdf(Accessed January 15, 2002)

16 Barr, M.D. (2001). Medical savings accounts in Singapore: a criticalinquiry. Journal of Health Politics, Policy and Law, 26, 709-731.

17 Hsaio, W.C. (2001). Behind the ideology and theory: What is theempirical evidence for medical savings accounts? Journal of HealthPolitics, Policy and Law, 26, 733-37.

18 Deber, R.B., Forget, E.L., Roos, L.L. (2004). Medical savings accounts ina universal system: wishful thinking meets evidence. Health Policy, 70,49-66.

19 Kent, T. (2000). What should be done about Medicare.www.caledoninst.org (Accessed August 19, 2004)

20 Aba, S., Goodman, W.D., & Mintz, J.M. (2002). Funding public provisionof private health care: The case for a co-payment contribution throughthe tax system. Toronto, ON: C.D. Howe Institute. www.cdhowe.org(Accessed May 30, 2002)

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21 Kent, T. (2002). Medicare: It’s decision time. www.caledoninst.org/(Accessed August 19, 2004)

22 Mahoney, J., & Walton, D. (2004). Klein offers big medicare changes. Hisvision includes deductibles, private orthopedic surgery. Globe and Mail,July 1, A1, A4.

23 Alberta Health and Wellness (2004a). Health Care Insurance Plan AndServices Non-Group Prescription Drug Coverage www.health.gov.ab.ca/ahcip/prescription/non_group.html (Accessed September 12, 2004)

24 Alberta Health and Wellness (2004b). Personal communication,September 28.

25 Rachlis, M. (2004). Prescription for excellence: How innovation is savingCanada’s health care system. Toronto, ON: Harper Collins.

26 Galt, V. (2002). Medicare cut seen raising labour costs. Globe and Mail,February 10, B10.

27 Woolhandler, S., Campbell, T., & Himmelstein, D.U. (2003). Costs ofhealth care administration in the United States and Canada. NewEngland Journal of Medicine, 349, 768-775.

28 Hurley, J., Vaithianathan, R., Crossley, T.F., & Cobb -Clark, D. (2002).Parallel private health insurance in Australia: A cautionary tale andlessons for Canada. Canberra, Australia: Centre for Economic PolicyResearch: Australian National University. Discussion paper no. 448.http://cepr.anu.edu.au/pdf/DP448.pdf(Accessed August 28, 2004)

29 Evans, R. (2003). Political wolves and economic sheep: The sustainabilityof public health insurance in Canada. Vancouver, BC: Centre for HealthServices and Policy Research, University of British Columbia.www.chspr.ubc.ca/chspr/pdf/chspr03-16W.pdf(Accessed September 3, 2004)

30 Pedersen, R. (2000). Rock rules out private MRIs in Alberta: But hedeclines to fine province dollar for dollar. Edmonton Journal, November4, A7.

31 Ohler, S. (2001a). It’s payback time: Gov’t could spend as much as $9Mto increase number of diagnostic scans — and repay those who couldn’twait Edmonton Journal, April 10, A1

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32 Ohler, S. (2001b). MRI rebates total more than $1 million: Albertareimburses 1,400 who paid for private tests. Edmonton Journal, October17, A7.

33 Alberta Health and Wellness (2004c). Stats and facts: Magnetic resonanceimaging (MRI) www.health.gov.ab.ca/resources/stats_facts.html#MRI(Accessed September 16, 2004)

34 Commission of the Future of Health Care in Canada (2002). Building onValues: The Future of Health Care in Canada. www.hc-sc.gc.ca/english/care/romanow/index1.html (Accessed November 28, 2002)

35 Abraham, C., & Priest, L. (2004). Crisis in cataract surgery epitomizeswaiting-list woes. Globe and Mail, September 11, A5.

36 Johnsrude, L. (2000). Eye patient paid clinic $4,000 to jump queue:Allegation comes as province prepares to table new rules for privateclinics. Edmonton Journal, March 2, A1.

37 Guyatt, G. (2001). Laser eye surgery threatens public health care andmany patients: Promo never mentions failure or complication rates,much less the risk to our health system www.straightgoods.com (AccessedSeptember 18, 2004)

38 Tuohy, C.H., Flood, C.M., & Stabile, M. (2004). How does private financeaffect public health care systems: marshalling the evidence from OECDnations. Journal of Health Politics, Policy and Law, 29, 359-396.

39 Hurst, J., & Siciliani, L. (2003). Tackling excessive waiting times forelective surgery: a comparison of policies in twelve OECD countries.Paris, France, OECD. http://www.oecd.org/dataoecd/24/32/5162353.pdf (Accessed September 14, 2004)

40 DeCoster, C., Carriere, K.C., Peterson, S., Walld, R., & McWilliam (1998).Waiting times for surgery in Manitoba. Winnipeg, MB: Manitoba Centrefor Health Policy and Evaluation. www.umanitoba.ca/academic/centres/mchp/reports/reports_97-00/wait.htm (Accessed September 16, 2004)

41 DeCoster, C., MacWilliam, L., & Walld, R. (2000). Waiting Times forSurgery: 1997/98 and 1998/99 Update. Winnipeg, MB: Manitoba Centrefor Health Policy and Evaluation. www.umanitoba.ca/academic/centres/mchp/reports/pdfs/waits2.pdf (Accessed September 16, 2004)

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42 Armstrong, W. (2000). The consumer experience with cataract surgeryand private clinics in Alberta: Canada’s canary in the mine shaft.Edmonton, AB: Alberta Chapter of Consumers Association.

43 Guyatt, G. (2004). For-profit, user pay clinics won’t solve waiting lists: Ifprivate clinics substantially reduced waiting lists, they would drivethemselves out of business. January 26, 2004. www.straightgoods.com(Accessed January 26, 2004)

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CHAPTER 3

Better Management andBroader Thinking

Tackling Wait Times

Albertans Are Waiting

More than one in five Albertans (22%) reported that they or ahousehold member were waiting for a health service in 2004,according to a recent Alberta Health and Wellness surveyconducted by the University of Alberta. And of the 14% ofAlbertans surveyed who received care but were dissatisfied withit, over 40% gave long waits as the reason.1

Almost 40% of Albertans experienced some difficulty withaccess. Two-thirds of them said the problem was long waits. Ifwe single out only those reporting a high need for health care ,almost 20% reported that it was very difficult to access healthservices and over one third said it was a bit difficult. So waittimes are a concern for Albertans.

Long wait times have costs — not only to the health system, butalso to patients in lost income and quality of life, to employerswhen employees on wait lists cannot work, and to governmentsthrough foregone income taxes.2 We could add costs to familymembers - most often women — who provide informal care forsomeone who is waiting. The recent Alberta survey foundnegative impacts on quality of life for people who felt that theyhad not been able to access a health service when needed -including emotional or physical distress, worsening health, ordelayed recovery.

What to Do About Wait Times?

There is no magic fix for reducing wait times. In 1998, a groupof Canadian researchers led by Claudia Sanmartin of Universityof British Columbia produced a major synthesis of wait listproblems and solutions. They published a concise version inthe Canadian Medical Association Journal. Some problems the


team identified include:

• lack of standards for whether and when a patient is placed ona wait list - for example, a patient could be put on a list onthe date of the first visit to a general practitioner, the last pre-surgery consultation, or the date the surgical facility isnotified;

• different ways of measuring wait times - for example, someevaluations of wait times use expected wait times; others useactual time between wait list placement and completedsurgery;

• statistics can be misleading - for example, if average wait timeis used, a few patients with long waits can skew the results,making wait times look longer than they really are for mostpatients;

• lack of consistency and co-ordination of lists, because mostlists are kept by individual doctors or hospitals;

• lists are not audited - they could contain patients who havealready had the procedure, no longer wanted it, had achange in condition so no longer needed the procedure, orhad died. People may also be on a list for a procedure that isinappropriate for their condition or for which there arebetter alternatives. Sanmartin’s team notes that research inother countries, particularly Britain, has shown that 20-40%of patients are inappropriately placed on wait lists.3

HIGHLIGHTS

Wait times are a concern for Albertans.

Research in other countries, particularly Britain, has shownthat 20 to 40 per cent of patients are inappropriatelyplaced on wait lists.

Large infusions of public money will not reduce wait timesin the absence of better management. The solutions tolong wait times lie in better management of wait lists.

The Canadian Medical Association and the CanadianNurses Association conclude that more public capacity andbetter management are the best tools to solve wait timesin the long term.

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So what are the solutions? Sanmartin and her colleaguesconclude that more private care will not reduce public waittimes, for reasons similar to those given by other researcherscited in Chapter 2 of this report. However, her team is equallycritical of large infusions of public money in the absence ofbetter management.

They are also sceptical of care guarantees within a fixed waitperiod, as recommended in 2002 by the Senate StandingCommittee on Social Affairs, Science and Technology (Kirbyreport) and the Premier’s Advisory Council on Health(Mazankowski report).4,5 Sanmartin’s team explains that inBritain, initiatives geared to patients with long waits did reducewait times for those patients, but lengthened waits for moreurgent patients who had been on the list for a shorter time.These concerns were later raised by the Commission on theFuture of Health Care in Canada (Romanow report) in 2002.6

The researchers also suggest that shorter wait lists could leaddoctors to more readily refer patients for procedures, which inturn could lengthen wait lists and times.

Sanmartin’s team concludes that the solutions to long waittimes lie in better management of wait lists. Their suggestionsinclude:• list audits and periodic reassessment of patients to remove

those who should not be on a list and to reduce last minutecancellations;

• prioritizing patients according to clinical urgency, withintimes defined as appropriate by clinical evidence;

• centralized wait lists within a region to facilitate prioritizationand co-ordination;

• referral to doctors with the shortest lists (In another article,the same research team recommends that the public, as wellas doctors and managers, should have access to wait timesinformation.7);

• reducing follow-up visits through more phone contact and agreater follow-up role for general practitioners and nurses.

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One of the recommendations in the Mazankowski report, whichhas since been implemented, is a website that informs Albertansand their doctors about wait times for different providers. Aswill be discussed later, this will only be effective if it is part of abroader strategy.

TAMING THE QUEUE

HIGHLIGHTS

Some strategies for reduced wait lists include:• using list audits and periodic reassessment of patients to

remove those who should not be on a list and to reducelast minute cancellations;

• implementing centralized booking and better co-ordination among health care providers and institutions;

• making referrals to doctors with the shortest lists;• ensuring that the public, as well as doctors and

managers, have access to wait times information;• reducing follow-up visits through more phone contact

and a greater follow-up role for general practitionersand nurses;

• consulting with the public and health professionals toprioritize medical conditions, starting with those ofclinical importance where waits are long;

• informing patients and the public about why and howlong they have to wait, as well as how their priority isdetermined compared to other patients;

• addressing gaps in human resources and expandingpublic capacity;

• creating benchmarks for wait times based on acombination of clinical evidence and public preferences,and using priority-setting tools such as those from theWestern Canada Wait List project;

• publicly reporting wait times using national databasesand regional on-line wait list registries;

• maximizing efficiencies for inter-provincial co-ordinationof specialized care and use of clinical practice guidelines;

• investing in a continuum of care - co-ordinating diseasemanagement strategies across prevention, primary care,acute care, home care, rehabilitation and long-term care;and

• enhancing research and evaluation of best practices.

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In July 2004, the Canadian Medical Association (CMA) and theCanadian Nurses Association (CNA) released The Taming of theQueue. The report proposes a 10-point plan to improve waittime measurement, monitoring and management. The first twostrategies involve communication. The first is to consult withthe public and health professionals to prioritize medicalconditions to be addressed, starting with those of clinicalimportance where waits are long. The second is to informpatients and the public about why and how long they have towait, as well as how their priority is determined compared toother patients.8

The third strategy is to address gaps in human resources andsystem capacity. The report notes that a shortage of doctors,acute care beds and equipment are associated with longer waittimes, and that Canada lags behind other countries on all theseindicators of capacity. So the CMA/CNA authors call forrecruitment and retention of health professionals, as well astraining more providers and developing long-term plans forhuman and physical resources.

The fourth strategy is centralized booking and better co-ordination among health care providers and institutions. Thefifth one involves creation of benchmarks for wait times basedon a combination of clinical evidence and public preferences,and use of priority-setting tools such as those from the WesternCanada Wait List project (WCWL). The WCWL has beentesting ways to help doctors prioritize where on a wait listpatients should be placed, based both on need and potential tobenefit from a treatment. The project has produced physician-scored point-count tools for assigning wait list priority topatients in five areas: cataract surgery, general surgeryprocedures, hip and knee replacement, MRI scanning, andchildren’s mental health. In jurisdictions where these tools areimplemented, there will be ongoing monitoring and evaluationof validity, reliability, feasibility, acceptability and benefit topatients.9

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Like Sanmartin’s team, the CMA/CNA authors reject thenotion of care guarantees. They reiterate that these have beenproblematic in other countries and that for doctors,“guaranteed waiting times represent a conflict between a policyof treatment according to clinical need and treatment basedsimply on time spent waiting.” (p. 19)

The sixth strategy focuses on publicly reporting wait times usingnational databases and regional on-line wait list registries. Theseventh strategy is maximizing efficiencies. This involves moreinter-provincial co-ordination of specialized care and use ofclinical practice guidelines. More controversially, the strategyalso suggests a move towards activity-based funding, similar tothe service-based funding proposed in the Kirby report. TheCMA/CNA team suggests that with activity-based funding,services could expand or contract as needed, rather than beingartificially constrained by budget caps.

Others have been critical of service-based funding. PaulJacobson, a health economist in Toronto, agrees service-basedfunding provides an incentive to treat. He also points out thatpaying a fixed amount up front for procedures, as in the U.S.Medicare system, shifts some cost risks to providers becausethey need to operate within the fees they are given. However,Jacobson also outlines some risks of a service-based fundingmodel. It can provide an incentive to cut costs and possiblyservices, or to focus on easier cases (“cream skimming”).Without global budgets, Jacobson suggests there will be anincentive to increase use of health services in order to bring inrevenue. Service-based funding can also lead to “up-coding,” -diagnosing a patient’s condition at a higher level of complexityto gain more funding.10 So overall, there is no evidence thatswitching to service-based funding would be superior to thepresent global budgeting system for hospitals.

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The eighth strategy presented in The Taming of the Queue callsfor investment in a continuum of care. The CMA/CNA authorscall for disease management strategies co-ordinated acrossprevention, primary care, acute care, home care, rehabilitationand long-term care. The report does not get into specificexamples of the continuum of care.

However, other research concludes that the best type of caredepends on the patient’s health and service needs. A BritishColumbia study by home care expert Marcus Hollanderconcludes that the evidence for home care as a cost-effectivesubstitute for residential long-term care depends on thepatient’s condition. His team found that, on average, healthcare costs to government for home care clients were half tothree quarters of costs for clients in residential care. But costswere lowest for clients who were stable in their level and type ofcare. For clients who died during the study, costs were higherfor home care clients than for residential clients. Half of allhome care costs were associated with hospital use and wereincurred when there was a change in the level and type of careneeded.11 We also need to consider whether savings from homecare or other types of community care are indeed savings, ormerely a shifting of costs to others such as family members (inparticular, women) or community not-for-profit agencies.

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The ninth strategy in The Taming of the Queue is to enhance theportability provisions of the Canada Health Act so patients canget timely care in another province or country if it is notavailable in the patient’s own province. The researchers alsopropose a Canada Health Access Fund to support patients andfamily members if a patient receives care in anotherjurisdiction. However, the report does not address potentiallyhigher health care costs to provinces if patients are sent out ofcountry for care, especially to the U.S. The earlier-discussedOECD report on wait times suggests that while strategies likesending patients abroad or purchasing services from the privatesector may be less costly in the short to medium term becauseof the high cost of building extra public capacity, it is likelycheaper in the medium to longer term to expand publiccapacity.

The tenth and final strategy is a commitment to best practicesthrough enhanced research and evaluation. This involvesresearch to learn success stories and best practices, includingways to prioritize patients for waits across different types ofservices.

In summary, The Taming of the Queue is focused on addressingwait times through reforms in the public system. More publiccapacity and better management are the best tools to solve waittimes in the long term.

Chapter 3


What Is Happening in Alberta?

HIGHLIGHTS

The Alberta government is doing some positive work toexpand public health system capacity and improve waittime management, especially for cardiac and orthopedicsurgery. Measures implemented to date include:

• the on-line wait registry is now in place for a numberof procedures;

• wait time standards have been set and are presentlybeing monitored for cardiac services, major jointreplacements, MRI/CT scans, breast and prostatecancer, and children’s mental health services, andmore flexible access standards have been set based onclinical evidence of what constitutes an appropriatewait time for a specific condition;

• the government is expanding public capacity, and hasalready announced $700 million in initiatives toreduce wait lists and times, half of which will go tobuilding facilities that add beds and service capacity;

• specific strategies have been set to target reducedwaits for cardiac surgery, MRIs and orthopedicsurgery; and

• province-wide centralized booking will beimplemented in orthopedic surgery for jointreplacements, to be expanded to other selectedservices by 2006.

This work needs to continue and be expanded to othertypes of procedures.

The government must also provide stable, predictablehealth care funding, rather than periodic one-timefunding infusions.

Alberta Health and Wellness is implementing wait listmanagement strategies that are consistent with somerecommendations in The Taming of the Queue. The on-line waitregistry recommendation from the Mazankowski report is nowin place for a number of procedures. The Health ReformImplementation Team has backed off from the Mazankowski

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recommendation of guaranteed wait times, and has instead setmore flexible access standards based on clinical evidence ofwhat constitutes an appropriate wait time for a specificcondition. Wait time standards have been set and are presentlybeing monitored for cardiac services, major joint replacements,MRI/CT scans, breast and prostate cancer and children’smental health services.12

The latest annual report from Alberta Health and Wellnesspresents wait times for a number of procedures in 2003-04.Progress from the previous year has been mixed. Waits for heartsurgery have generally been decreasing, and targets have beenreached for inpatient but not outpatient surgery. Waits forradiation therapy for breast and prostate cancer have improvedin some instances, but not consistently. Wait times for hip andknee surgery are similar to the previous year, and are still abovetargets. The number of Albertans waiting for MRIs continues torise.13

When the Alberta government released the Graydon report onJune 30th, they also announced $700 million worth of initiativesto reduce wait lists and times. Half that amount, $350 million,will go to building facilities that add beds and service capacity.Six hundred hospital beds will be fast tracked in the Capital andCalgary regions. 14

The announcement also included specific strategies to reducewaits for cardiac surgery, MRIs and orthopedic surgery. Somepatients scheduled for Coronary Artery Bypass Grafting willreceive intensive home care in order to free up hospital bedsfor more surgery. This is expected to reduce wait times to twoweeks from over nine weeks. New access standards also areexpected to shorten wait times for other cardiac patients.Capital Health will offer non-urgent MRIs on weekends. TheChinook and Palliser regions have already set targets to reducenon-urgent MRI waits.

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A major initiative is also underway to reduce wait lists for jointreplacements:

New centralized orthopedic intake clinics in Calgary, Red Deer andEdmonton will assess patients for surgery and assign them tosurgeons. Freeing orthopedic surgeons from initial screening willallow them to provide 1,200 additional joint replacements this year.For context, in 2003 the province provided a total of 5,328 jointreplacements. Improved co-ordination of care is the first step indeveloping access standards for orthopedic care. (p. 1)

Furthermore, the Health Reform Implementation Team’sreport points out that orthopedic surgery will be the first areato experiment with province-wide centralized booking. Otherselected services will be centrally booked by 2006. This ispositive, as the on-line wait time registry will only be effective ifthere is central co-ordination of wait lists.

MARKET IDEOLOGY PERSISTS IN SPITE OF EFFECTIVEPUBLIC SOLUTIONS

The government is doing some positive work to expand publichealth system capacity and improve wait time management,especially for cardiac and orthopedic surgery. This work needsto continue and be expanded to other types of procedures. Thegovernment also must provide stable, predictable health carefunding, rather than periodic one-time funding infusions of thetype announced on June 30th.

Private payment for surgery will not reduce wait times. We sawin Chapter 2 that private financing often lengthens waits andcosts overall - for individuals, businesses and governments. Sowhy is the government talking about letting people with moneypay for hip and knee replacements, when Alberta Health andWellness and the regional health authorities are already takingsteps to reduce orthopedic waits through public systemreforms? If the government goes ahead and allows this type of

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queue-jumping after the election, it will be yet anotherillustration of how they are letting market ideology takeprecedence over evidence in decision-making..

Renewing Primary Health Care

What Is Primary Health Care?

Primary health care is our first point of contact with the healthsystem, encompassing health promotion, disease prevention,treatment and rehabilitation. It involves teams of healthprofessionals who encourage our participation in decisionsabout our care, and recognizes the individual, social andenvironmental factors affecting our health.15,16

Health Canada further explains primary health care in itsguidelines for the Primary Health Care Transition Fund:• community-based and focused on specific needs of

individuals and populations;• more emphasis on health promotion, illness and injury

prevention, and chronic disease management - to helppeople to stay healthy and not just focus on treatment oncethey are sick;

• greater access to health services, 24 hours a day seven days aweek, so people can get advice and care outside regular officehours;

• care provided by a team (for example, nurses, familyphysicians, nutritionists, counsellors) so the most appropriatecare is given by the most appropriate provider; and

• greater coordination and integration of primary care withother health services, such as hospitals and home careservices.17

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Early Community-Centred Primary Health Care Models

Community-centred models have existed for over 30 years.There are now 160 centres locaux de services communitaires(CLSCs) in Quebec’s public health care system. There are 68community health centres (CHCs) in Ontario, as well as asmaller number in several other provinces including Alberta.CHCs are private not-for-profit agencies governed by electedcommunity boards. They contract with government to deliverservices to specific communities. Both CLSCs and CHCs serve

HIGHLIGHTS

Characteristics of a Community Health Centre includecommunity involvement, more extensive use of teams ofproviders from various professions, and a strong emphasison prevention. Doctors are often paid by salary ratherthan fee-for-service.

A variety of models of community care have been inexistence for many years across Canada. Such models haveexisted in Alberta since the 1980s.

Early evaluations of CHCs show some evidence for costsavings and improved quality of care.

We cannot conclude that the doctor payment methodalone made the difference in cost savings or quality ofcare, given other differences between community-centredmodels and conventional private medical practice.

The broader literature on primary health care is clear thatthere is no one factor that is singly responsible for theearly successes of community-centred models.

From 1998 through to 2006, Alberta has allocated $54million to 66 primary health care projects through federaland provincial funds.

The diverse variety of early and more recent primaryhealth care models in Alberta demonstrate thatinnovations can happen in the public sector or closelylinked community not-for-profit agencies.

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specific geographic populations and are open nights andweekends. They do health education and promotion, and linkwith other community services to address social issues. Healthprofessionals work in teams and doctors are often paid by salaryrather than fee-for-service.18,19

Salaries and other alternative payment methods are advocatedby health reformers concerned about the drawbacks of fee-for-service. For example, Cathy Fooks of Canadian Policy ResearchNetworks argues that fee-for-service is based on single servicesdelivered by one professional at a time. It does not facilitatecare delivered by teams of professionals. And it does notcompensate doctors for time spent on administrative,managerial, educational or communications tasks.20

Early evaluations of CHCs and CLSCs show some evidence forcost savings and improved quality of care. A Saskatchewan studyin the 1980s found that CHC patients used fewer hospitalservices and drugs than fee-for-service patients in the samecommunities. An evaluation in Ottawa indicated that hospitaluse was lower among CHC patients than fee-for-service patients.There is also evidence that CLSCs in Quebec have providedbetter quality of care for some interventions than doctors infee-for-service practice. Finally, a study in Sault Ste Marie innorthern Ontario found overall health costs per person werelower for patients in a health service organization (HSO),compared to fee-for-service patients. 21, 22

HSOs usually differ from CHCs in that doctors work in grouppractices and are paid a set amount of money for each patient -an approach called capitation. HSOs are typically notcommunity-driven. But the Sault Ste Marie clinic is anexception. According to primary health care advocates MichaelRachlis and Carol Kushner, it has many characteristics of aCHC, including community involvement, more extensive use ofteams of providers from different professions, and a strongemphasis on prevention.23

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All the above evaluations were small and had limitations. Wetherefore cannot conclude that the doctor payment methodalone made the difference in cost savings or quality of care,given other differences between community-centred modelsand conventional private medical practice. The broaderliterature on primary health care is clear that there is no onefactor that is singly responsible for the early successes ofcommunity-centred models.24

Recent Models of Primary Health Care

More recent models of primary health care have bothsimilarities to and differences from the earlier community-based models. For instance, S.E.D. Shortt, health policyresearcher at Queen’s University, identifies five key elements ofrecent approaches:

• rostering, whereby each patient is enrolled with a particulardoctor to enhance continuity of care and a closer doctor-patient relationship;

• better access to primary health care providers in order todecrease use of emergency rooms and walk-in clinics;

• multidisciplinary teams to increase preventive care andhealth promotion, and to redistribute the workload amongdifferent professionals - which allows doctors to focus onsituations where their skills are most needed;

• enhanced information technology to improve coordinationamong between multiple care providers; and

• changing payment for doctors from fee-for service toalternative payment plans.25

However, the recent models take place in a wider range ofsettings, like regional health authorities and private familydoctors’ practices. These models often use capitation payment,where doctors receive a fee to cover overall care of each patienton a roster.

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Primary health care reform is still in the early stages. Becausemany recent models were funded as demonstration projects, itis too early to tell which ones will be sustained in the long term.

Health policy analyst and physician Michael Rachlis furtherargues that newer models have not worked as well as the earliercommunity-centred models, because recent primary health carepolicies have been heavily influenced by provincial medicalassociations, to the exclusion of other groups such as nursesand existing community health centres. He gives the exampleof Family Health Networks in Ontario, where only 300 doctors(3%) had signed up by the end of 2002 and fewer than 10nurse practitioners were involved. Rachlis argued in 2003 that ifthe federal government wants effective models of primaryhealth care implemented, it will have to target funds tocommunity-centred models which have been recommended fordecades but have faced political resistance from doctors andprovincial governments.26

There is little hard evidence to date regarding which modelsare most effective. Evaluations of older models were limited.Evaluations of recent models have so far focused mainly onstructures and processes, with little data on patient outcomes orhealth system quality and costs. No one model has emerged asbest. At this point, Health Canada evaluation consultants AnnMable and John Marriott recommend that both newer andolder models should play a role in primary health carerenewal.27, 28

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How Should Doctors Be Paid?

HIGHLIGHTS

How should doctors be paid? Each alternative to fee-for-service payment has strengths and limitations.

Capitation with rostering provides a more co-ordinatedcontinuum of care to patients and targets resources topopulation needs. However, this approach could takeaway patient choice to seek service elsewhere and couldlead to under-servicing patients, taking only the easiestcases (“cream skimming”), or referring more patients tospecialists.

Salaried doctors can spend more time with patients.Salaries also promote more egalitarian organizationalstructures. However, salaried doctors may see fewerpatients because there are no incentives to see more.

A blended model with elements of both may be morepalatable to doctors at this point in time.

More evaluation is needed, different payment methodsand ways of organizing primary health care.

There is conflicting evidence on whether there is a relationshipbetween how doctors are paid and the quality of care theyprovide, according to Shortt’s recent review of primary healthcare issues. As we saw earlier, the degree of teamwork may bemore important than the payment method.

Furthermore, cost savings from primary health care may notshow up in doctor costs. For instance, the previously discussedSaskatchewan evaluation of CHCs found that in the short term,doctor costs were higher in CHCs than in fee-for-servicepractice. The savings were longer term, when CHC patientsneeded fewer drugs and less hospital treatment.

Each alternative to fee-for-service payment has strengths andlimitations. Mable and Marriott suggest that capitation with

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rostering has the advantage of allowing health professionals andfunders to get away from volume-driven services. They suggestthat capitation with rostering provides a more co-ordinatedcontinuum of care to patients and better targeting of resourcesto population needs, and also leads to development ofelectronic databases to better co-ordinate comprehensive careacross the health system.

However, Brian Hutchison and his colleagues at McMasterUniversity, who specialize in doctor-payment methods, cautionthat capitation could lead to under-servicing patients, takingonly the easiest cases (“cream skimming”), or referring morepatients to specialists.29 For example, the success story of theSault Ste. Marie HSO described earlier was unique. Some ofHutchison’s earlier research concludes that there were nooverall differences in hospitalization rates between patients ofcapitated Ontario HSOs compared to fee-for-service practice.30

As well, rostering could take away patient choice if eitherdoctors or patients are penalized if patients seek serviceelsewhere. York University health policy researchers Pat andHugh Armstrong explain that patients might sometimes wish todiscuss a sensitive issue with a health provider who does notknow them or their families.31 Examples might be birth control,abuse, or mental health.

Salary payment also has strengths and drawbacks. Rachlis andKushner note that salaried doctors can spend more time withpatients. Salaries also promote more egalitarian organizationalstructures and decision-making processes between doctors andother professionals. However, salaried doctors may see fewerpatients because there are no incentives to see more. So thoughsalaries encourage more time per patient, they could also leadto longer waiting times unless other providers like nursepractitioners are used to their fullest capacity.

Some of the newer primary health care models use variationson both the capitation and salary models, as well as models thatblend alternate payment methods with fee-for-service. These

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are negotiated between provincial governments and medicalassociations. Hutchison’s group suggests in their 2001 paperthat blended models may be more palatable to doctors at thispoint in time. The bottom line is that provinces areexperimenting with primary health care models that offeralternatives to fee-for-service payment, but no one paymentmodel is a clear winner.

More evaluation is needed, both of payment methods and waysof organizing primary health care. This will require supportfrom doctors. Hutchison’s group notes that though doctors aremore willing to consider other payment methods than in thepast, many perceive alternative payment plans as a threat toclinical autonomy. Also, doctors have little experience workingin teams, even with other doctors Rachlis suggests this beaddressed by starting with small projects that introduce doctorsto teamwork in order to gain their support.


Alberta has three long-established community health centres —Edmonton’s Boyle McCauley Health Centre, Calgary’sAlexandra Community Health Centre and the Calgary UrbanProject Society (CUPS). These have existed since the 1980s andare based on the CHC model adopted in other provinces,particularly Ontario. They contract with regional healthauthorities to serve geographic areas with large low incomepopulations.

This section briefly describes some of Alberta’s newer models.The diverse variety of early and more recent primary healthcare models in Alberta demonstrate that innovations canhappen in the public sector or closely linked community not-for-profit agencies.

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EXAMPLES OF RECENT PRIMARY HEALTH CARE PROJECTS

From 1998 to 2006, Alberta has allocated $54 million to 66primary health care projects through federal and provincialfunds. This section briefly describes three of them.a The newprovincial Local Primary Care Initiative model is also outlined.

Calgary Shared Mental Health Care Initiative.Forty-four Calgary family doctors have teamed up with fourpsychiatrists and five other mental health practitioners toimprove mental health care in the Calgary Health Region. Inthis shared care model, psychiatrists meet regularly with familydoctors, and they see patients together. This process betterequips the doctors to recognize mental health symptoms intheir patients and determine a suitable treatment plan.Feedback from family doctors indicates more comfort withtreating mental health patients.32

Northeast Community Health Centre (Edmonton).The Northeast Community Health Centre combinescommunity-based services with a 24-hour emergencydepartment. Multidisciplinary teams provide care. In additionto family medicine, the Centre offers home care, dietary,mental health and diagnostic services. It also has servicesgeared to specific population groups such as women, seniors,children and cultural groups. An independent evaluation in2000 found that patients living in the area had better access tohealth care, and providers and clients were generally satisfiedwith the model. However, it was too early to assess patienthealth status and cost-effectiveness. 33,34,35

Taber Integrated Primary Care Project.Eight family doctors from Taber’s only medical clinic are paidby capitation to look after the health needs of all Taberresidents. This gives doctors the freedom to participate inhealth promotion and health system planning. There isintegrated Well Baby care between doctors and Chinook HealthRegion’s public health nurses, which decreases duplication ofservices, increases access and improves communication amongproviders. A nurse practitioner delivers Well Woman clinics and

a Many more examples from across Canadacan be found in Michael Rachlis’s (2004) bookPrescription for Excellence.

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counseling. There have been fewer hospital admissions andemergency room visits since the project started. Doctors areseeing more patients, but seeing them less often and makingmore referrals to chronic disease and wellness programs.36

Local Primary Care Initiatives (LPCIs).In November 2003, the Alberta Medical Association (AMA),Alberta Health and Wellness and Alberta’s regional healthauthorities (RHAs) reached an eight-year deal on primaryhealth care.37 This agreement allocated $100 million for athree-year initiative to provide access to coordinated primarycare services 24 hours a day, seven days a week.

Doctors will partner with their RHA to form Local PrimaryCare Initiatives (LPCIs). Doctors must agree to deliver acomprehensive basket of services to a specified patientpopulation. Each LPCI will receive up to $50 per year perpatient.38 Nearly 300 physicians and eight RHAs are preparingbusiness plans to open 11 LPCIs by early 2005.39

LPCIs are supposed to improve coordination and integration ofprimary health care with other areas of the system — such asdiagnostics, hospital and specialist care, home and long-termcare, and public health. LPCIs will encourage more use ofmulti-disciplinary teams and greater emphasis on healthpromotion, disease prevention and chronic diseasemanagement. However, family doctors will have the centralrole. The AMA takes a strong position on the autonomy ofdoctors, their central role in primary health care and theirright to choose how they are paid.40,41 It remains to be seen hownurse practitioners and other professionals will be involved andhow broad their scope of practice will be.

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ALBERTA NEEDS TO KEEP INNOVATINGWITHIN THE PUBLIC SYSTEM

Current primary health care initiatives in Alberta, includingthose involving private practice family doctors, are closelyintegrated with the regional health authorities that are thebackbone of our public system. However, the increasing use ofpatient rosters and electronic databases could make it easier infuture for investor-owned private for-profit providers to moveinto primary health care.b For example, the Mazankowskireport argues that:

Different health providers should be able to form ‘care groups’ andoffer a range of health services to individuals and to healthauthorities. These organizations could be established on a corporatemodel and allow providers the option of providing a range of insuredand uninsured services. This option would provide more flexibilityfor different providers to work together, provide comprehensive careand meet people’s needs. (p. 67)

This quote and other Mazankowski report statements about acorporate model raise concerns about a future expanded rolefor investor owned for-profit clinics. This happened in the U.S.with health maintenance organizations (HMOs). Health policyanalyst Colleen Fuller of B.C. explains that in the 1970s andearly 1980s, most HMOs were community-based, not-for-profitorganizations that offered a wide range of primary health careservices. By the late 1990s, most HMOs had been taken over byfor-profit insurance companies that limit how providers practiceand what services are available to patients.42 Given the Albertagovernment’s ideological commitment toward a greater role forprivate for-profit health care, Albertans would be wise to bevigilant as primary health care models evolve over time.

The existing primary health care initiatives in Alberta show thatinnovation can happen within the public RHAs and localorganizations closely tied to those RHAs. The governmentshould continue to evaluate these models, expanding andimproving them as needed.

b Private practice family doctors bill Medicarefor services, and the payments receivedcover their personal earnings plus overhead.So those doctors are accountable togovernment, as well as to their patients andto professional standards. However, doctorsworking in investor-owned private for-profitfacilities also have to be accountable toshareholders - whose interest in profits arelikely to conflict with the public interest inquality and cost control.

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Controlling Spiralling Drug Costs:Pharmacare

HIGHLIGHTS

According to the Canadian Institute for HealthInformation, public sector drug costs have been thesecond-fastest growing expense over the last 10 years,after capital expenditures.

There is still no national pharmacare program. Thoughthe recent federal-provincial agreement from the 2004First Ministers’ Meeting on Health Care includes aNational Pharmaceuticals Strategy, it falls far short of thefirst-dollar coverage for all drugs recommended by theNational Forum on Health.

Alberta’s present premium-based model penalizes lower-income Albertans and gives people with higher-incomes afinancial advantage.

Existing pharmacare coverage varies widely by province.Besides failing in terms of social equity, the patchwork ofprovincial plans leads to missed opportunities forsignificant savings in areas like bulk-buying and loweradministrative costs.

At the rate drug costs are climbing, reforms are essential.Solutions have been proposed for several years - bulkbuying, consistent formularies across Canada,professional education independent of drug companies,prescribing lowest-cost alternatives, and using non-drugoptions where possible.

This section describes how prescription drug costs are thesecond-fastest growing area of government health spending,and why we need a national pharmacare program. In theabsence of a national program, Alberta is taking some steps tocontrol costs. However, public drug coverage in Alberta is lessgenerous than in the other western Canadian provinces. GivenAlberta’s abundant resource revenue and annual surpluses, wecan do better.

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Growing Drug Costs and Limited Public Drug Coverage

The amount of government money spent on drugs is more thanthe amount spent on doctors, and is second only to the amountspent on hospitals. According to the Canadian Institute forHealth Information (CIHI), public sector drug costs have beenthe second-fastest growing expense over the last 10 years, aftercapital expenditures.43

Roughly 80% of drug costs in Canada are for prescriptiondrugs. The National Drug Expenditure Report from CIHI presentsdata for increases in prescription drug costs afteradjusting for inflation and population growth. The data showthat from 1993 to 2003 there was a 61.2% increase in provincialand territorial government drug costs, and a 72.2% increase inprivate drug costs.c Comparable figures for Alberta are a 70.6%government cost increase and a 74.1% private increase.44,d

Furthermore, CIHI shows prescription drug costs rising relativeto overall government health expenditures. In 1993, drugsmade up 5.9% of health spending. By 2003, drug costs wereprojected to reach 8.9% of spending.e Alberta spends a bit lesson drugs than the Canadian average, but shows a similarincrease. In 1993 drug spending in Alberta was 4.8% ofgovernment health spending, projected to rise to 7.1% ofhealth spending in 2003, or $204 per Albertan.f

CIHI shows that in Alberta, 46.4% of prescription costs arecovered publicly.g Alberta ranks fifth after Manitoba, Quebec,B.C. and Saskatchewan, all of which have higher shares ofpublic spending on prescription drugs. For 2003, Manitoba’spublic share is expected to be highest, at 53%. In 2001, B.C.paid the highest public share, again at 53%.h

c See Table A.2 Part 1 in CIHI (2004) DrugExpenditure in Canada 1985-2003.

d See Table B.9.2. Part 1 in CIHI (2004)

e See Table A1 Part 2, Table A2 Part 2 (CIHI2004)

f See Table B.9.1 Part 2, Table B.9.2. Part 2 (CIHI2004)

g This figure includes mainly provincialgovernment spending, along with smalleramounts of federal and Workers Compensa-tion Board contributions.

h All percentages are calculated from TableB.9.1 in CIHI (2004)

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The Need for Pharmacare

In 1997, a national panel of experts recommended apharmacare program for all Canadians. The National Forumon Health argues that prescription drugs are as medicallynecessary as doctor and hospital services, and that drugscovered in hospital are usually not covered when the patientgoes home. The Forum’s report calls for first dollar coverage,with no deductibles or co-payments.45 Joel Lexchin, Torontoemergency doctor and York University professor, argues thatPharmacare would most benefit people with lower incomes,who spend a greater proportion of their incomes on drugs, areless likely to have private drug insurance, and are more likely toget sick.46

There is still no national pharmacare program, though thelatest federal-provincial agreement from the First Ministers’2004 Health Summit includes a National PharmaceuticalsStrategy. The task of formally defining a national standard for“reasonable” catastrophic coverage is now in the hands of a taskforce that does not have to file a progress report until June2006.47 Catastrophic drug coverage would limit what peoplepay for drugs in a year, as recommended in both the Romanowand Kirby reports. But it falls far short of the first dollarcoverage for all drugs recommended by the National Forum onHealth. The CIHI National Drug Expenditure Report notes thatamong 11 OECD countries, Canada provides the third-lowestlevel of public spending on drugs, after the U.S. and Korea.

What does the lack of national pharmacare mean forCanadians? Existing pharmacare coverage varies widely byprovince. No province provides first dollar coverage and allhave deductibles and co-payments. Each province has it ownformulary, which is the list of drugs they will cover.48 In otherwords, our access to publicly covered drugs, and our protectionfrom drug costs, depends on where we live in Canada.

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The current system of deductibles and co-payments are in effectuser fees for drugs. The impact of these fees on lower incomepopulations is similar to what we have seen in the user feeliterature for doctors and hospitals.

For instance, Quebec expanded its public drug plan to coverthe general population in 1996. They offset the extra costs bybringing in fees for welfare recipients and low-income seniors,who were previously exempt from deductibles and co-payments.And the low fees that other seniors were paying were raised. Astudy led by McGill University epidemiologist Robyn Tamblynfound a number of adverse effects following these policychanges. Welfare recipients and seniors used fewer essentialdrugs, made more visits to emergency, had more hospital andnursing home admissions, and more deaths.49

How Does Alberta’s Drug Coverage Compareto Other Provinces?

ALBERTA’S CURRENT PLAN

Alberta’s provincial drug plan is administered through AlbertaBlue Cross. Most Albertans pay premiums. Seniors and peopleon social assistance do not. Single people pay $246/year; thoselow income Albertans eligible for subsidies pay $172/year.Families pay $492/year; those eligible for subsidies pay $344.Other low income Albertans can apply for premium subsidiesor temporary waivers due to financial hardship.50

Albertans are also charged co-payments of 30% of prescriptioncost, to a maximum of $25 per prescription. There are nomaximum annual co-payments, except for people on socialassistance. They pay a flat fee of $2/prescription for the firstthree prescriptions each month, to a maximum of $72/year.Alberta provides free drug coverage for children in low-incomefamilies, and for people in the process of leaving socialassistance. Palliative care patients with end stage terminal illnesscan apply to have drug costs capped at $1000. And there is

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public coverage of high cost drugs in areas like cancer, HIV andorgan transplants.

WHAT ARE THE MOST GENEROUS PHARMACAREPLANS IN CANADA?

Health economist Megan Coombes and her colleagues atUniversity of British Columbia (UBC) compared provincialdrug plans across Canada as of August 2003. They point outthat B.C., Saskatchewan, Manitoba and Ontario have nopremiums. Income-based plans in those provinces includedifferent combinations of deductibles and co-payments.Quebec’s model uses a combination of income-basedpremiums, as well as deductibles and co-payments, but hasmaximum annual co-payments. The Atlantic provinces have nopremiums, but limit coverage to seniors and social assistancerecipients.i

Coombes’ team compares the financial burden Canadianhouseholds would face from prescription payments if each ofthe current provincial plans were adopted as the nationalstandard. They applied the cost-sharing rules of each plan to anationally representative set of 4,860 households of differentsize, age composition, income and drug expense levels. Theythen calculated the proportion of households that would faceprivate out-of-pocket payments exceeding catastrophicpercentages of household income.51, j

The UBC study concludes that premium-free models, whichlimit out-of-pocket expenses to a given percentage of incomelike those in British Columbia, Saskatchewan, Manitoba andOntario, provide the best protection against catastrophic drugcosts for both senior and non-senior households. In contrast,models from the Atlantic provinces provide little or noprotection for non-senior households. Premium-based modelslike those in Alberta and Quebec lie between the two extremes.

i Details of each provincial drug plan as ofAugust 2003 can be found in Coombes et al(2004).

j With no national standard defining what‘catastrophic’ means, the researchers used4.5% of family income.

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How Would Pharmacare Save Money?

Joel Lexchin calls for a national drug plan that offers first dollarcoverage to all Canadians. He estimates that such a plan wouldcut drug costs by 10%. Lexchin points out that Australia’snational drug plan has been able to keep its drug costs morethan 30% lower than the OECD average, while Canada’s costsare almost 30% higher. He concludes that besides failing interms of social equity, the patchwork of provincial plans leads tomissed opportunities for significant savings in areas like bulk-buying and lower administrative costs.

Alan Cassels, drug policy researcher at University of Victoria,recently worked with Lexchin to identify several wayspharmacare can save money. First, they advocate a “back to theessentials” approach. There are currently over 5,000prescription drugs for sale in Canada, yet the World HealthOrganization identifies only 350 that are essential to the priorityhealth care needs of a population. Cassels and Lexchin arguethat a national formulary committee, such as the new federal-provincial Common Drug Review program, can identify thosedrugs Canadians deem essential and develop a process toexamine new drugs to determine if they merit public coverage.

Second, they argue that a national formulary would cut downthe number of drugs available within the same drug category,and enable more aggressive bargaining with pharmaceuticalcompanies. Australia takes a much more aggressive stance inbargaining with drug manufacturers on new drug prices.Cassels and Lexchin note that this results in drug costs that areis about 9% lower than Canada’s.52

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Cassels points out that in July 2003, British Columbia decidedto limit coverage to just one class of stomach acid suppressantsand to restrict automatic payment for the most expensive ofthese drugs. B.C. taxpayers spend $40 million per year on thisclass of drugs, which range from 70 cents to $4.50 a day. A switchto the cheaper agent could save the government $14 millionper year. Improved prescribing by doctors could further reducedosage - and perhaps encourage lifestyle changes that couldclear up heartburn and limit drug intake - saving taxpayers tensof millions more per year.53 This example is part of the B.C.’sReference Drug Program (RDP), which only covers thecheapest version of a drug within a particular drug class, butallows coverage of a more expensive drug if a patient cannottolerate the lowest-cost version. Cassels pointed out in 2002 thatthere have been no negative impacts in terms of deaths,hospitalization rates, or higher costs elsewhere in the healthsystem as a result of the RDP.54

Third, Cassels and Lexchin suggest that savings from a nationalpharmacare plan be put toward a program to promoteappropriate prescribing by doctors and ensuring that doctorslearn about new drugs from an objective source rather thanfrom pharmaceutical companies. They also recommend aNational Subscribing Service, similar to the one in Australia.

At the rate drug costs are climbing, reforms are essential. Thesolutions have been proposed for several years — bulk buying,consistent formularies across Canada, professional educationthat is independent of drug companies, prescribing of lowest-cost alternatives and using non-drug options where possible.Without these reforms, more generous public drug coveragewill simply increase health care costs - and undermine publicand political support for pharmacare.

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In the absence of a national pharmacare plan, provinces aretaking their own actions to control drug costs. Some ofAlberta’s initiatives are consistent with the Cassels and Lexchinrecommendations for the national level.

HIGHLIGHTS

Alberta participates in the federal-provincial CommonDrug Review program.

The province also requires patients to pay for brand namedrugs if they elect not to use a generic equivalent.

Alberta does not have a reference drug program like B.C.,which defines particular classes of drugs and then coversthe cheapest drug within that class.

Alberta sets maximum costs for some drugs and forpharmacy fees, and limits most prescriptions to 100 days ata time.

The Alberta Drug Utilization Plan is a positive example of“academic detailing.”

Alberta has future plans for regional health authoritiesand the Alberta Cancer Board to buy drugs in bulk. Albertaalso plans to share best practices for prescribing with otherprovinces, territories and the federal government.

Some of Alberta’s cost control strategies may be payingoff. In 2003, the Canadian Institute for Health Informationprojected Alberta government’s drug costs to rise by lessthan 1 per cent.

If Albertans want the same level of protection as people inB.C., Saskatchewan, Manitoba and Ontario, Alberta shouldat least eliminate premiums and limit co-payments to agiven percentage of income.

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ALBERTA IS TAKING SOME ACTIONS TO CONTROLDRUG COSTS

Alberta participates in the federal-provincial Common DrugReview program described above. The province also requirespatients to pay for brand name drugs if they decide not to use ageneric equivalent. Patients who are unable to tolerate ageneric drug may obtain special authorization for coverage ofthe brand-name version.55 However, Alberta does not have areference drug program like B.C., which defines particularclasses of drugs and then covers the cheapest drug within thatclass. The Alberta Health and Wellness prescription drugprogram (cited earlier) points out that Alberta sets maximumcosts for some drugs and for pharmacy fees, and limits mostprescriptions to 100 days at a time.

Michael Rachlis, in his recent book Prescription for Excellence,calls for better integration of pharmacists into teams of healthcare professionals. He lauds the Alberta Drug Utilization Plan(ADUP) as a positive example of “academic detailing.” Thisprogram focuses on anti-infection agents and gastro-intestinaldrugs. Doctors receive information and follow-up visits frompharmacists. Doctors get Continuing Medical Educationcredits.56 The ADUP is a promising approach, worth expandingacross Alberta if it changes doctors’ prescribing habits.

The previously-discussed Health Reform ImplementationTeam’s report states that Alberta has future plans for regionalhealth authorities and the Alberta Cancer Board to buy drugsin bulk. Alberta also plans to share “best practices” forprescribing with other provinces, territories and the federalgovernment. These strategies, if followed up, have the potentialto reduce future drug costs.

Some of Alberta’s cost control strategies may be paying off.Inflation-adjusted per capita drug cost increases were in thedouble digits from 1999-2002, peaking at over 16% in 2002. Butin 2003, CIHI projects the Alberta government’s drug costs torise by less than 1%. k This projection remains to be verified,and we do not yet know if one year of cost control is a “blip” or

k See Table B.9.2. Part 1 in CIHI (2004)

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the start of a longer-term trend. So Alberta needs to continueefforts to control drug costs and to share effective cost-savingstrategies with other jurisdictions. Alberta also needs moreevaluation to determine if their cost control initiatives areactually saving money while maintaining high quality care forpatients, as B.C. does with their Reference Drug Program.

ALBERTA NEEDS MORE GENEROUSPUBLIC DRUG COVERAGE

The earlier-described UBC study of provincial drug plansconcludes that Alberta is mid-pack in protecting the publicfrom catastrophic drug costs. If Albertans want the same level ofprotection as people in B.C., Saskatchewan, Manitoba andOntario, the Alberta government must at least abolish drugplan premiums and establish maximum annual co-paymentsbased on income. Alberta’s present premium-based modelpenalizes lower-income Albertans and gives people with higher-incomes a financial advantage. It is true that low incomeAlbertans can qualify for a subsidized premium rate. However,the rate is still flat within the subsidized category. So a familymaking $15,000 a year pays the same premium as a familyearning $30,000 a year.

Some fiscally conservative Albertans might argue that provinceswith more generous drug plans have higher drug costs thanAlberta. This is not necessarily so. If we compare provincialdrug costs per Albertan with per capita costs in the fourprovinces with more generous plans, Alberta is in the middle ofthe pack. CIHI’s National Drug Expenditure Report shows that in2001, the latest year for which expenditures are verified,Alberta’s per capita costs were higher than for Manitoba andSaskatchewan and lower than for B.C. and Ontario. Projectionsfor 2003 again put Alberta at mid-pack.

In the short run, Alberta should at least eliminate premiumsand limit co-payments to a given percentage of income. Withour ballooning resource revenues, debt-free status and annualsurpluses, Alberta can afford to match any province in Canada

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in generosity of prescription drug coverage. Ideally, Alberta willsome day be part of a national pharmacare plan, cost sharedwith the federal government, with first dollar coverage for allCanadians.

Preventing Disease, Promoting Health,Enhancing Equity

HIGHLIGHTS

Canada has been a leader in moving people’s view ofhealth beyond an illness-based model. However, theemphasis has been on lifestyle decisions, using theperspective that health is matter of personalresponsibility, controllable by individuals throughpersonal choices.

Lifestyles are not freely determined by individual choice,but exist within social and cultural structures thatcondition and constrain behaviour. Exhorting low-incomefamilies to ‘eat better’ and providing them with foodpreparation skills will not be enough to ensure they areable to choose diets that are consistent with healthyeating in Canada. Current low minimum wages and levelsof social assistance are significant factors in foodinsecurity.

The success of lifestyle programs has been especiallylimited for those segments of the population that aredisadvantaged.

The more equality there is within a society, the healthierits people.

Social determinants have a greater impact on the healthof the population as a whole than do individualbehaviour changes.

Health promotion is often equated with lifestyle behaviours likeeating a healthy diet, doing regular physical activity, andavoiding tobacco use. As we will see in this section, much of the

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Alberta government’s health promotion focus is on healthylifestyles. But health promotion is broader than the behaviourof individuals. The recent Conference Board of Canada report,Challenging Health System Sustainability: Understanding the HealthSystem Performance of Leading Countries, points out “countriesthat have a greater focus on broad determinants of health seemto have better population health status” (p. 2). For instance,France, Switzerland and Sweden have tough environmental lawsand also report better health status than Canada.

Among the report’s conclusions: “Canada needs to focus moreon health promotion, prevention and appropriate investmentsin the broad determinants of health as strategies to controlhealth costs over the long term.” (p. 108) The ConferenceBoard explains that leading countries focus on protecting theenvironment, promoting healthy lifestyles, investing ineducation and early childhood development, and providingsupport to low income individuals and families in areas likehousing and employment.57 The Conference Board’s reportwas sponsored by Alberta Health and Wellness. Let’s hope thegovernment takes their advice for a greater focus on thedeterminants of health.

Healthy Living in a Social Context

Canada has been a leader in moving people’s view of healthbeyond an illness-based model. The influential 1974 federalreport New Perspective on the Health of Canadians (Lalondereport) emphasizes that health is determined not only by thequality and accessibility of health care, but also by lifestyle,environment and biology.58 However, most of the uptake ofthat report was focused on lifestyle, with little attention paid toenvironment. Lindsay McKay of Canadian Policy ResearchNetworks explains:

Implementation of the Lalonde Report was based on what it presentedas amenable to change - lifestyle and individual persuasion - whichfit within the mandate of a health department. Policies and programsaimed therefore to empower individuals to assume health as an aspect

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of self-determination through lifestyle choice. (p. 23) 59

McKay argues that this individual focus is consistent with aliberal view of human beings as independent rational actors,and a perspective that health is matter of personalresponsibility, controllable by the individual through personalchoices.

Another influential Canadian-led health promotion document,the 1986 Ottawa Charter for Health Promotion, took a broaderview, as evident in the following statements from its preamble:

Health promotion is the process of enabling people to increase controlover, and to improve, their health... The fundamental conditions andresources for health are peace, shelter, education, food, income, astable eco-system, sustainable resources, social justice and equity.Improvement in health requires a secure foundation in these basicprerequisites... Good health is a major resource for social, economicand personal development and important dimension of quality oflife. Political, economic, social cultural, environmental, behaviouraland biological factors can all favour health or be harmful to it.(p.1) 60

The Ottawa Charter presents five action strategies: build healthypublic policy, create supportive environments, strengthencommunity action, develop personal skills, and reorient healthservices. These strategies require commitments fromgovernment departments beyond the health sector, as well asfrom sectors outside of government.

In 1994, the federal, provincial and territorial governmentsagreed on nine determinants of health, expanded to 12 in1996. They are: income and social status, social supportnetworks, education, employment and working conditions,social and physical environments, biology and geneticendowment, personal health practices and coping skills, healthychild development, health services, gender, and culture. Thesedeterminants interact to influence the health of thepopulation.61 For example, income and social status not only

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impact health directly - they also affect how well children canlearn, what neighbourhoods people live in, and what foods theycan afford.

Both the determinants of health and the Ottawa Charter embedlifestyle and health care within a broader social context. HealthCanada recommends using the Ottawa Charter action strategiesto address multiple health determinants.62

Most recently, the Integrated Pan-Canadian Healthy Living Strategywas developed to address healthy eating, physical activity andtheir link to healthy weights. The intent is to influencepopulation health, reduce the health care burden of chronicdiseases, and contribute to health system sustainability. A recentbackground paper notes that more than two-thirds of deaths inCanada result from four groups of chronic diseases -cardiovascular, cancer, diabetes, and respiratory. The estimatedcost of illness, disability, and death from chronic diseases inCanada is over $80 billion a year.63

The Healthy Living Strategy has two broad goals: “ImprovedOverall Health Outcomes” and “Reduced Health Disparities”.This initiative continues the discourse of earlier federaldocuments about the importance of social determinants ofhealth:

Exhorting low-income families to ‘eat better’ and providing them withfood preparation skills will not be enough to ensure that they will beable to choose diets that are consistent with healthy eating inCanada...current low minimum wages and levels of social assistanceare significant factors in food insecurity. The cost of housing is alsoproblematic. Poor people run out of money for food because the grocerybudget is considered flexible, unlike fixed payments such as rent andpower bills...Similarly, low-income families cannot afford to pay userfees for recreation services or join a fitness club. The costs of manysports that children enjoy (such as hockey and snow-boarding) areprohibitive for most families with low and modest incomes.(p. 11-12)64

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Why Is Lifestyle Promotion Not Enough?

Ron Labonte, Director of the Saskatchewan Population Healthand Evaluation Research Unit and a longtime critic of a lifestylefocus, explains the limits of this approach: “personal lifestyleswere not freely determined by individual choice, but existedwithin social and cultural structures that conditioned andconstrained behaviour.” (p.79) 65 Health promotion researchersKatherine Frolich and Louise Potvin of the University ofMontreal make a similar point, more succinctly: “life choicesare affected by life chances.” (p.S13)66

Community health promotion expert Meredith Minkler,University of California (Berkeley), discusses the balancebetween personal and social responsibility for health. She notesthat acknowledging personal responsibility recognizes people’scapacity to make choices and take actions to improve theirhealth.67 Think of the pack-a-day smoker who quits or theformer “couch potato” who walks an hour each morning. Theirsuccess gives them a sense of accomplishment in taking steps tobetter health.

But Minkler is quick to stress that over-emphasizing personalresponsibility ignores the broader social context, such as theeconomic circumstances and environments in which peoplemake decisions. She argues that ignoring the context of healthbehaviours leads to victim blaming and stigmatizing peoplewith illnesses or disabilities.

One of the key determinants of health is income. RichardWilkinson of University of Sussex in England explains that themore equality there is within a society, the healthier its people.This is not just because people live more comfortably as theirincomes rise. Equality breeds social cohesion. There is moretrust and social support among people, and more participationin communities. By contrast, as income gaps widen, there is lesssocial cohesion. People feel high stress and little control overtheir lives. Wilkinson says this can lead people to seek comfortin tobacco, alcohol or food. For instance, when inequality grewin Britain in the late 1980s, the smoking rate among the

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poorest quarter of the population rose while rates for the rest ofthe population dropped. Wilkinson says that people at allincome levels want to quit smoking. But those with lowerincomes are less successful despite the high cost of cigarettes.He explains, “when things are going badly and prospects lookpretty hopeless, you are more likely to regard smoking as youronly luxury - as well as wishing you could give it up.” (p. 185)68

Dennis Raphael, a Canadian expert on the social determinants ofhealth at York University, further explains how low income is linkedto illness - in particular, heart disease. He says the link is explainedby social exclusion - which involves deprivation, lack of participationin one’s community, and exclusion from decision-making.69 Socialexclusion is also connected to the stress and lack of control discussedby Wilkinson.

Raphael points out that social determinants have a greaterimpact on the health of the population as a whole than doindividual behaviour changes:

The issue is not whether eating poorly, using tobacco and remainingsedentary are bad for health. Their impact, however, is limited ascompared with other societal determinants, and an emphasis uponindividual risk factors to the exclusion of all other considerations isproblematic. (p. 400)

Raphael also observes that the success of lifestyle programs hasbeen especially limited for those segments of the populationthat are disadvantaged.

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Why the Imbalance Between Lifestyle Promotionand Social Justice?

Despite Canada’s leadership in recognizing social determinantsof health, the dominant approach to health promotion is stillbehaviour change. Raphael points out that an excessiveemphasis on lifestyles, as well as medical issues, by the mediaand health organizations has limited the public’s awareness ofsocial determinants of health.

Minkler and Raphael suggest that an individual focus is easierfor health professionals with limited resources and narrowmandates. However, both researchers argue that politicalideology plays a stronger role. They explain that conservativegovernments portray health as an individual issue, because itlets them appear to be concerned about health while cuttinghealth and social programs and instituting regressive socialpolicies. Raphael notes how Ontario cut social assistancebenefits and social housing for people in need, while alsocutting income taxes for the well-off. He argues these policieshave a more profound, and negative, impact on health thanlifestyle promotion initiatives.

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How Do We Tip the Balance?

MAKE A “BUSINESS CASE” FOR INVESTINGIN SOCIAL DETERMINANTS OF HEALTH

HIGHLIGHTS

Excessive emphasis on lifestyles, as well as medical issues,by the media and health organizations has limited thepublic’s awareness of social determinants of health.

Conservative governments portray health as anindividual issue, because it lets them appear to beconcerned about health while cutting health and socialprograms and instituting regressive social policies.

There is a business case to be made for investing in thesocial determinants of health.

Researchers estimate that providing comprehensive careto all Ontario sole-support families on social assistancecould save up to $24 million a year. They also point outthat it does not cost more to provide comprehensivehealth and social services than it does to provide thebasic self-directed social assistance program.

The recent External Costs of Poverty report by Universityof Calgary economists Alan Sheill and Jenny Zhangconcluded that “savings in the order of $8.25 millioncould be made each year if we were to implementsuccessfully an effective and sustained poverty reductionstrategy.”

It is hard to argue for a more collective approach to healthpromotion when dealing with a government that puts anexcessive emphasis on individual responsibility. However, wecan most likely appeal to conservative politicians by making a“business case” for investing in programs and policies thatreduce social inequities.

One example of the benefits of social program investment isillustrated by the When the Bough Breaks study by Gina Browne

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and her colleagues at McMaster University. This 5-year studyassesses the effectiveness of providing a range of services to 765single parents on social assistance. One group received basicsocial assistance. Another got a comprehensive care packagethat included basic assistance plus three additional services -health promotion, employment retraining, and recreation/childcare/skills development for their children. The othergroups received basic assistance plus one of the threeenhancements.70

Browne’s team concludes that providing the comprehensivecare package results in 15% more families leaving socialassistance within a year, compared to the basic assistance group.The researchers estimate that providing comprehensive care toall Ontario sole-support families on social assistance could saveup to $24 million a year. They also point out that it does notcost more to provide comprehensive health and social servicesthan it does to provide the basic self-directed social assistanceprogram.

Furthermore, compared to the basic program, comprehensivecare results in equivalent improvements in parents’ mentalhealth and social functioning as well as childrens’ behaviourand skills. These benefits occurred regardless of family variableslike gender of parent or number of children. Families receivingcomprehensive care also used fewer health and social servicesoutside the social assistance program. Browne’s team notes thatthe recreation aspect was especially attractive to families, asboth the comprehensive care group and the recreation-onlyenhancement group had the lowest dropout rates.

The more recent External Costs of Poverty report by University ofCalgary economists Alan Sheill and Jenny Zhang makeseconomic arguments for poverty reduction in general:

The benefits of a sustained poverty reduction programme spreadbeyond those who currently experience poverty. While it is common toargue for poverty reduction on the grounds of social justice, our workshows that even those who are unconvinced by this argument stand

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to benefit from a reduction in the level of poverty... A society with anyappreciable level of poverty will need to use more of its resources tosupport the less well off, to provide health care for the additional lowbirth weight babies, to provide remedial education for children whosedevelopment is stunted by low income, to prevent family breakdownand minimize its consequences were it to occur for example, and thatthese actions incur costs. (p. iii)

The report’s overall conclusion is that “savings in the order of$8.25 million could be made each year if we were to implementsuccessfully an effective and sustained poverty reductionstrategy.” (p. ii)71 This is a conservative estimate, based onanticipated savings of at least $3.35 million on health care and$4.9 million on education for Calgary Taxpayers. Theresearchers suggest that the societal costs of poverty could bemuch higher - perhaps more than $50 million a year — if theirmore speculative estimates turn out to be valid.

BUILD COALITIONS AND NETWORKS

Given the narrow mandates of most health promotionorganizations to focus mainly on lifestyle behaviour, sustainedaction on the social determinants of health will require broadcoalitions of organizations and committed individuals acrossmany sectors of society. Raphael offers two examples of Ontariohealth units that have gone beyond a lifestyle focus, in partthrough working in partnership with diverse communitygroups. The Integrated Pan-Canadian Healthy Living Strategy alsocalls for a broad network of organizations to work together toimprove health outcomes and reduce health disparities. Thesuccess of this national strategy in reducing disparities willdepend on the degree and type of involvement fromorganizations with mandates to advocate for social andeconomic policies that address social determinants of health.

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The Alberta government’s main health promotion focus is onlifestyle behaviour. The recent Framework for a Healthy Alberta hastwo outcomes - improve healthy behaviours and reduce chronicdisease. The healthy behaviour objectives are focused onhealthy eating and weight, tobacco and alcohol reduction,physical activity, injury prevention, mental health andimmunization. Most strategies in the Framework areeducational. Examples are the Healthy U website and Healthand Life Skills Program in schools.

The Framework briefly discusses determinants of health, andacknowledges the role of community supports, public policiesand collaboration with partners outside the health sector.Examples of initiatives that take this broader approach are theAlberta Tobacco Reduction Strategy and the Alberta DiabetesStrategy. However, attention to broader health determinantsand collective strategies is narrowly focused on how theysupport behaviour change. For example, the Alberta DiabetesStrategy provides financial assistance to 40,000 Albertans forsupplies to monitor their blood sugar.

So as far as healthy lifestyle behaviour goes, the Framework isthorough and considers to some extent the role of socialdeterminants in shaping behaviour. However, there are noobjectives in the Framework that focus on changes to the socialdeterminants themselves. Alberta Health and Wellnesscollaborated with several other ministries in developing theFramework. Its preamble states that the Framework builds onother initiatives — including the Low Income Review, the YouthEmployment Strategy, the Parent Child Literacy Strategy andthe Aboriginal Policy Framework. So why did the Frameworkend up with such a major focus on health behaviour, and solittle on social determinants that have an even larger impact onchronic diseases?

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The 2004 pre-budget analysis from the Parkland Instituteidentifies some areas where the government could do better inaddressing social determinants of health. For instance, Albertahas the lowest minimum wage in Canada, at $5.90 an hour.Alberta’s social assistance rates declined in real terms by 30-40%from 1993 to 2003. There were slight increases for some typesof recipients in spring 2003 after the Low Income Review, butthey were small and less than the review recommends.Homelessness and food bank use continue to rise. Educationspending at all levels has been relatively flat since 1995 anduniversity student tuition has risen 21% since 1999. Given thatincome disparity and educational attainment are keydeterminants of population health, the government needs tostart assessing the health impacts of its policies.72

RAYS OF HOPE

Some health promotion coalitions and networks in Albertainclude a strong focus on social determinants of health. Threeare described briefly below.

The South West Alberta Coalition On Poverty involvesindividuals, groups, agencies, and businesses with acommitment to work together to reduce poverty and its effecton children, families and communities. The Coalition sponsorseducational events and does media work to raise professionaland public awareness of poverty-related issues. The ChinookHealth Region plays a key leadership role. 73

Growing Food Security In Alberta (GFSA) is developing abroad, multi-sectoral network of organizations and individualscommitted to ensuring Albertans have access to safe andnutritious food that is culturally appropriate, produced byenvironmentally sustainable methods, and provided in ways thatrespect people’s dignity.74 Members work at three levels on afood security continuum. The first is short-term hunger relief,through such means as food banks. The second level is capacitybuilding through activities like community kitchens andgardens. The third is “redesign,” which involves advocacy for

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policies that reduce poverty and increase access to safe, healthyfood.75

The Alberta Healthy Living Network (AHLN) situates healthyliving within a population health approach that includes socialdeterminants and recognizes the importance of integratingstrategies across organizations, sectors and topic areas. AHLNmembers work together to promote healthy living and toreduce chronic diseases such as cardiovascular disease, cancer,lung disease and Type 2 diabetes. 76

The AHLN presently focuses on diet, physical activity andtobacco use, and their underlying determinants of health.Their seven priority strategies include “Health Disparities” and“Healthy Public Policies,” which address not only howdisparities and policies impact health behaviours, but also theimportance of policies in reducing disparities by addressingsocial determinants of health.l

A particular strength of the AHLN is its commitment tocollaboration. Their “Partnership Development andCommunity Linkages” strategy involves organizations withinand beyond the health sector, and at multiple levels —particularly local, regional and provincial.m The larger andmore diverse this network becomes, the more influence it canhave on professionals, policy-makers and the public regardingthe importance of both health behaviours and socialdeterminants of health.

l See pages 42 and 44 of Alberta HealthyLiving Network (2004) for a fuller discussionof these links.

m The remaining four priority strategies areawareness and education, research andevaluation, best practices and surveillance.

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GREATER INVESTMENT AND BROADER FOCUS NEEDED

HIGLIGHTS

Some health promotion coalitions and networks inAlberta include a strong focus on social determinants ofhealth.

The Alberta government is doing some good work inpromoting healthy behaviours to reduce chronicdiseases. But even these prevention efforts are under-resourced.

Much more attention on the social determinants ofhealth is needed, given evidence that these have aconsiderably greater impact on population health thanbehaviour does.

Despite the low priority of social determinants of healthwithin the government itself, the ministry is supportingthe arms-length Alberta Healthy Living Network toaddress social determinants in its work.

Some of the government’s policies, such as thosesurrounding social assistance and education, areinconsistent with what we know about the keyinfluences on population health. The Albertagovernment needs to conduct health impact assessmentsof its policies both within and beyond the health sector.

The Alberta government is doing some good work inpromoting healthy behaviours that are linked to chronicdiseases. But even these prevention efforts are under-resourced.Health economist Philip Jacobs of the University of Albertaestimates that chronic diseases among Albertans cost over $1billion dollars a year. Yet the Alberta government spends justunder $24 million on chronic disease prevention educationthrough such means as counselling, group sessions, web sitesand print materials.77

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Free educational materials and programs about healthybehaviour from public sector sources is important, so thatAlbertans are not reliant on sources with a vested interest inselling health products. However, much more attention tosocial determinants of health is needed, given evidence thatthese have a considerably greater impact on population healththan behaviour does.

On a positive note, Alberta Health and Wellness is a key funderof the AHLN. And a staff person from the ministry is chairingthe AHLN Health Disparities Working Group. So despite thelow priority of social determinants of health within thegovernment itself, the ministry is supporting the arms-lengthAHLN to address social determinants in its work.78

The Alberta government needs to conduct health impactassessments of its policies both within and beyond the healthsector. As mentioned previously, some of the government’spolicies, such as social assistance and education, areinconsistent with what we know about the key influences onpopulation health.

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Conclusion

There are lots of positive reforms already happening inAlberta’s public health system. The government is increasingpublic capacity and implementing wait time managementstrategies. Regional health authorities are working withcommunity organizations and family doctors to enhanceprimary health care. Alberta has taken numerous steps tocontrol rising drug costs. And the government hasimplemented a number of initiatives to promote healthylifestyles in recent years.

But there is more to do. Long-term reduction of wait timesrequires stable and predictable funding of capacity and wait listmanagement within the public system. Private finance willincrease costs and wait times, and create inequities in access tocare. Primary health care models still face challenges. Simplychanging the way doctors are paid will make little difference forpatients or the system if the knowledge and skills of otherprofessionals are not fully tapped.

More work needs to be done to keep drug costs under control.This will require a positive working relationship with the federalgovernment as well as other provinces. A national pharmacareprogram is still a dream at this point. It needs to become areality. And Alberta is less generous in its public prescriptiondrug coverage than the other western provinces. We can affordto do better, given our escalating natural resource income,debt-free status and annual surpluses.

The government needs to do more to address the socialdeterminants of health. Many of Alberta’s social policiesactually work against key determinants of health like incomeand education. Assessing the health impacts of policies wouldbe a good start, along with a commitment to reduce inequitiesin our society. If the ideology of individual responsibility andmarket solutions makes the government reluctant to make suchcommitments, perhaps the business case for investing in moreprogressive social policies will make them more receptive.

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Finally, the government needs to put as much effort intotrumpeting successful reforms within the public system as theydo into telling Albertans the sky is falling and only more privatemoney will rescue health care from imminent fiscal collapse.Sure the media dutifully reports on the government’s “goodnews” releases. But the big stories focus on the negativesustainability myths - overshadowing the good work being done,and diverting public attention from ways to make the publichealth care system even better.

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29 Hutchison, B., Abelson, J., & Lavis, J. (2001). Primary care in Canada: Somuch innovation, so little change. Health Affairs, 20, 116-131.

30 Hutchison, B., Birch, S., Hurley, J., Lomas, J., & Stratford-Devai, F.(1996). Do physician-payment mechanisms affect hospital utilization? Astudy of Health Service Organizations in Ontario. Canadian MedicalAssociation Journal, 154, 653-661.

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31 Armstrong, P., & Armstrong, H. (2001). Primary health care reform: Adiscussion paper. Prepared for the Canadian Health Coalition.www.healthcoalition.ca/factsheets/primarypaper.pdf (AccessedNovember 22, 2001)

32 Alberta Health and Wellness (2004d). Family physicians, psychiatrists,and mental health clinicians team up to improve patient care. Newsrelease, January 14. www.gov.ab.ca/acn/200401/15737.html (AccessedSeptember 26, 2004)

33 Capital Health (2004a). Northeast Community Health Centre About Uswww.capitalhealth.ca/Health+Services/Hospitals/Northeast+Community+Health+Centre/About+Us.htm (AccessedSeptember 26, 2004)

34 Capital Health (2004b). Programs and services at the NortheastCommunity Health Centre www.capitalhealth.ca/Health+Services/Hospitals/Northeast+Community+Health+Centre/Programs+and+Services/default.htm (Accessed September 26, 2004)

35 Wilson, D., Howard, D., McCaffrey, L, & Fassbender, K. (2000). NortheastCommunity Health Centre Independent evaluation Final reportwww.health.gov.ab.ca/about/phc/projects/Capital/NortheastCHC/NortheastCHC.pdf (Accessed September 26, 2004)

36 Wedel, R., & Patterson, E. (2003). Summary report: Primary health carerenewal: Exploring the Taber Integrated Primary Care Projectwww.uleth.ca/man/taberresearch/Appendices/C1.pdf(Accessed September 26, 2004)

37 Kermode-Scott, B. (2004). Alta. MDs keen on primary care plan. MedicalPost, 40 (July), 28.

38 Alberta Health and Wellness (2003) Backgrounder: Primary careinitiative agreement, November 8.

39 Bunting, B.J (2004). President’s Letter (July 5). Edmonton: AlbertaMedical Association.

40 Alberta Medical Association (2002). Health care in Alberta may be in forsome major changes: What is “primary care reform?” Edmonton, AB:Author.

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41 Alberta Medical Association (2004). Look again - Taking another look atalternative payment plans. www.albertadoctors.org (Accessed September20, 2004)

42 Fuller, C. (1998). Caring for profit: How corporations are taking overCanada’s health care system. Vancouver: New Star Books.

43 Canadian Institute for Health Information (2003). Public sector healthexpenditure, by use of funds, Canada, 1975 to 2003-Current dollars.Table C.3.1. http://secure.cihi.ca/cihiweb/en/media_17dec2003_tab_c.3.1_e.html (Accessed September 28, 2004)

44 Canadian Institute for Health Information (2004). Drug expenditure inCanada: 1985-2003. http://secure.cihi.ca/cihiweb/products/DrugExpRep2004_e.pdf (Accessed July 16, 2004)

45 National Forum on Health (1997). Directions for a pharmaceuticalpolicy in Canada. In Canada Health Action: Building on the Legacy (Vol2,). Ottawa, ON: Author.

46 Lexchin, J. (2001). A national pharmacare plan: Combining efficiencyand equity. Toronto, ON: Canadian Centre for Policy Alternatives.www.policyalternatives.ca (Accessed September 22, 2004)

47 Government of Canada (2004). A 10-Year Plan to Strengthen HealthCare. Available at http://www.healthcoalition.ca/deal-text.pdf. (AccessedSeptember 17, 2004)

48 Abraham, C. (2004, September 18). Health talks offer no remedy fordisparities in drug policies. The Globe and Mail, A4.

49 Tamblyn, R., Laprise, R., Hanley, J.A., Abrahamowics, M., Scott, S., Mayo,N., Hurley, J., Grad, R., Latimer, E., Perrault, R., McLeod, P., Huang, A.,Larochelle, P., & Mallett, L. (2001). Adverse events associated withprescription drug cost-sharing among poor and elderly persons. Journalof the American Medical Association, 285, 421-429.

50 Alberta Health and Wellness (2004e). Health care insurance plan andservices: Prescription drug programs. www.health.gov.ab.ca/ahcip/prescription/index.html#funded (Accessed September 28, 2004)

51 Coombes, M., Morgan, S., Barer, M., Pagliccia, N. (2004). Who’s is thefairest of them all? Which provincial pharmacare model would bestprotect Canadians against catastrophic drug costs. Longwoods Review, 2,13-26.www.longwoods.com/opinions/LR32Coombes.pdf. (AccessedSeptember 17, 2004)

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52 Cassels, A., & Lexchin, J. (2004). We can swing no-frills Pharmacare.Vancouver Sun. September 1.

53 Cassels, A. (2004). Special to the Sun. Vancouver Sun, January 29.

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55 Alberta Health and Wellness (2004f). Alberta health and wellness drugbenefit list: Policies and guidelines. Special authorization guidelines.www.ab.bluecross.ca/dbl/pdfs/ahwdbl_sec1_sa.pdf (Accessed September28, 2004)

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70 Browne, G., Byrne, C., Roberta, J., Gafni, A., Whittaker, S. (2001). Whenthe bough breaks: provider-initiated comprehensive care is more effectiveand less expensive for sole-support parents on social assistance. SocialScience and Medicine, 53, 1697-1710.

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release October 29. www.chr.ab.ca/whats_new/news276.htm (AccessedOctober 1, 2004)

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The government of Alberta is trying to scare Albertans intobelieving that health care is on the brink of fiscal collapse. Theyare misleading Albertans about health care spending in orderto support an ideology that favours market solutions and anexcessive emphasis on individual responsibility. That sameideology drives the government’s obsession with having thelowest tax regime in Canada - the so-called “Alberta Advantage”.

Health spending increases have been modest, once adjusted forinflation and population growth. Both government revenuesand Alberta’s economy are keeping up with the increases. Ifthere ever is a shortage of funds for health care or othergovernment programs like education, it will be the result of lostrevenue from personal and corporate income tax cuts anduncollected resource royalties rather than reckless health carespending. The government needs to collect adequate revenuefrom those who can most afford to pay - higher-incomeAlbertans and profitable corporations.

Private finance does not make health care more affordable orwait times shorter. But it does create barriers for lower andmiddle income Albertans. A tax on health care is a user fee byanother name, and will make many Albertans think twicebefore seeing a doctor. The fairest way to fund the care of thesick is collectively through our taxes, as we have been doingthrough Medicare for many years. Rather than bringing moreprivate finance into Medicare, the Alberta government needs tofurther expand its public presence in areas that Medicare doesnot cover, such as prescription drugs.

Albertans who need hip, knee or other surgeries should not beable to use personal wealth to gain favoured access over otherAlbertans. Private payment for the privilege of queue-jumpingwill not shorten wait times for most Albertans. Indeed, thosewith no choice but to wait in the public system will often waitlonger. Allowing private finance of surgical procedures also willcreate a movement to expand the role of private insurance.

The Way Forward: Overall Conclusions


This will drive up costs for individuals, businesses and thegovernment. The solutions to wait time pressures lie in morepublic system capacity and better management.

Premier Klein has acknowledged that allowing user chargesand queue-jumping will likely violate the Canada Health Act.Albertans must tell the Premier not to “take on” the CanadaHealth Act, as he has recently proposed to do. And we mustalso call on the federal government to enforce the Act. If thereis a real threat of federal sanctions, it will be hard for theAlberta government to explain why they are giving up federaltransfers at the same time they are telling the public that wecannot afford health care. The evidence is overwhelming thatthe public system is more cost-effective. The government needsto continue to increase public capacity to address problemssuch as wait times.

Finally, the government needs to put as much effort intotrumpeting successful reforms in the public system as they dointo telling Albertans the sky is falling and only more privatemoney will rescue health care from imminent fiscal collapse.When the Premier talks to the media, the focus is seldom onthe positive efforts of the people who work in Alberta Healthand Wellness, regional health authorities and communityorganizations. Instead, he muses about taking on the CanadaHealth Act, charging user payments and letting wealthyAlbertans buy surgery. The government’s excessive focus on animaginary fiscal crisis, aided by sympathetic media, isovershadowing good work already being done. And playing upthe negative myths about health care sustainability is divertingAlbertans’ attention from ways to make our public health caresystem even better.


11045 Saskatchewan Drive,Edmonton, Alberta

T6G 2E1Phone: (780) 492-8558

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