Alberta’s Debt “Built to Last” – Part 3 Health Care

Budget 2018 begins the election cycle.  The NDP’s policy choices will form a large part of the debate this year. About 40% of the budget is dedicated to health care. In the election campaign, the political parties will position themselves along two dimensions, cost management and the quality/ availability of health services.

An earlier post describes the NDP’s mostly thankless task of controlling salaries across the health care provider groups.  These cost control measures have reduced upward pressure during the NDP’s time in office. That said, health care remains expensive. People in Alberta spend well above the Canadian average on health care.  Alberta’s per capita health care costs and its cost growth rate are higher than most of the rest of Canada.

Despite the NDP’s attempts to contain costs; Alberta’s provincial health budget continues to grow. According to the federal government health research people, last year’s growth rate was 4.3%. By comparison, the Canadian average growth rate was 3.3%.  In 2014, per capita costs were $4,676; and now are $5,000 per person.  The Canadian average is $4,300 ($700 less!).  Alberta population is 4.1 million so when you do the math; Alberta’s government pays about $3.0 billion above the average.

And the NDP’s plan to contain spending increases at 3% isn’t feasible.  The 2018 budget suggests that savings will be found by using more generic drugs, improving hospital efficiency and reducing payments to pharmacists.  Those initiatives will apparently amount to a savings of $275 million.  But if the province grows by 60,000 people a cost pressure of about $300 million will be created.  It isn’t realistic to think that the salary restraints will continue indefinitely either.

Nor does the Alberta Health Services (AHS) (Alberta Health’s delivery arm) business plan emphasize much in the way of cost savings.  The focus of the agency, which is the fourth largest public-sector organization in Canada, are

  • Improving patient experience
  • Improving health and population health outcomes
  • Improve the experience and safety of staff
  • Improve financial health and value for money

Its “financial health” priorities are to work on hospital-based efficiencies and integrating information systems and rural health care alternate delivery approaches.  While there is talk of “transformation,” there is nothing that sounds genuinely able to “bend the health care cost curve”.

The fledging Alberta Party has produced a shadow or alternative budget to demonstrate how they would manage costs.  They suggest that AHS should relinquish most vacant positions, focus on a wellness strategy and empower frontline workers to do more tasks. They would also review the utilization of some facilities and change the culture of AHS that has become resist to change.  They propose a mostly flat operating budget at $20 billion annually (+1%). The capital expenditures would be held flat too at $2.0 billion.

The United Conservative Party proposes greater private delivery of services, a focus on wellness and continuing care and rural emergency services upgrades.  They have not produced a budget for health.  But propose personal, business and carbon tax reductions or eliminations, while returning the budget to balance in four years. They also propose a full review of every government program which would include AHS.  Returning to balance in four years, with reduced taxes, without cutting the Health budget, will require miraculous economic growth.

The Auditor General has also made recommendations in a special report in 2017.  He doesn’t think more money is the answer:

  • He flags the turnover in top levels of Alberta Health Services (AHS) and Alberta Health and suggest that stability is needed.
  • He also points to duplication of management by AHS and Alberta Health
  • He sees  a big disconnect between the budget and health outcomes. Funding and physician compensation are not linked to results, just volume of services.
  • Primary care physicians need to be better connected to AHS. They impact system costs through fees and the tests and prescriptions, they order.
  • He notes that a brand-new system has a major shortcoming of excluding primary care information.

Severely Normal Albertans will find that the politicians will not be very specific about their plans to get the costs under control.  Expect vague generalities and rhetoric on a commitment to health care quality.  If you are a skeptic, you might expect that only after the election will the winning party discover how bad things are, and embark on a plan to fix things.  It should not be lost on you that the system employs 30,000 voters.

And while you are being skeptical, be careful about plans to re-organize or decentralize or privatize.  If it sounds like a quick fix… It probably won’t really work!