A Healthy Budget – Election Issues 2019

Effective health care is self-care; this fact is heralded as if it were a discovery – Ivan Ilich

Because health care is an important and large part of the Alberta public economy, it will be an important issue at election time in 2019.

The 2017 budget for Alberta Health is $21.5 billion.

  • $15.0 billion goes to Alberta Health Services (AHS)
  • $2.2 billion goes to drug benefit programs and
  • $1.0 goes to funding various population health programs and the department staffing
  • The remainder goes to pay doctors. AHS and the department combined pay $5.0 billion to doctors.

Health care capital spending in the next 3 years will be about $4.5 billion (15% of the overall capital plan). The plan includes $520 million for 145 long-term care beds at Edmonton’s Norwood long-term care facility and youth mental health facility. There will also be $130 million to build 200 long-term care beds in Calgary.

That is about 40% of the Alberta government budget. There are about 100,000 people employed in public healthcare in Alberta. The cash burn is about $2.5 million every hour! By the time you have read this another $200K will be expended.

The Ying and Yang of healthcare spending is balancing quality with cost. In good times, quality wins! In the downturns we remember how expensive health care has become. Alberta spends more than most provinces on a per-capita basis. (Newfoundland and the Territories per-capita spending is higher).

The cost drivers of health spending are a growing and aging population, more chronic diseases and inflation. Cost pressures arise from new technology adoption, salaries and fees, and pharmaceuticals. Containing costs was the subject of an Auditor General’s report. Read my post about it here. In brief the AG said there are three elements that must be focused on: building a patient-centered (as opposed to hospital based) system, integrating physician funding into the AHS, and transforming care through information systems.

 

The health system’s stakeholders are generally on board with that approach. In general terms, this has been the desired cost containment approach for the past decade or so. But success has been spotty; the drive to ever improve quality for a rapidly expanding population has taken priority. Thus (at 6% annually) costs have risen faster than population increases and inflation – consuming an ever increasing share of the provincial budget (up 10% over the last 20 years).

The cost of health care could be an election issue in 2019, particularly in the context of an ever growing public debt.

If the NDP are to win the healthcare cost debate, they will have to persuade the public that:

  • Healthcare quality is paramount over cost reductions
  • Opposition’s proposals for reductions will be dangerous (shades of Klein era cuts)
  • NDP priorities of hospital building, women’s health and indigenous population health are correct
  • Their approach to managing the system is sound (eg. no major management boondoggles and success in handling the opiod crisis)
  • Their fiscal track record in “bending the curve” (so that healthcare budget increases remain below population and inflation growth) is acceptable and better than the Tories of the past.

If the UCP or Alberta parties are to win they will have to present a discussion that says:

  • $60 billion in debt requires more aggressive measures than “bending the curve”.
  • Operating costs are too high and other jurisdictions have better systems.
  • Incentives can be built into the system that generate cost savings,
  • The opposition will find examples of waste and mismanagement.
  • NDP failed to build the 2,000 long term care beds as promised in 2015 election campaign.
  • More user fees (very selectively chosen) and increased private sector participation will reduce taxpayer costs.

Severely Normal Albertans should take all these arguments with a grain of salt; cost reductions in healthcare are hard to come by:

  • As we emerge from a recession, efforts to tamp down wages, fees and pharmaceutical costs will be more difficult.
  • Deferred maintenance and sustaining capital requirements will also put pressure on the budget.
  • The Canada Health Act restricts privatization.
  • Alberta’s growing need for facilities for the elderly and continuing issues of substance abuse and addictions, will drive costs upward.
  • There is unlikely to be any groundswell of public support to introduce significant user fees.

At 40% of the budget, healthcare is a tempting target for reduction. But it is a big system and not amenable to quick fixes. Expected increases from inflation plus population growth will be over 3% annually, making real reductions that much harder to achieve.  Ticking off 100,000 employees in the system isn’t something to be done lightly.

As for speedy reductions in health care to balance the budget  – “Don’t get your hopes up – it won’t happen!”