THE MONSTER

Health spending the monster that ate the budget
Ian Urqhart
QUEEN'S PARK

THE SAFEST promise the provincial Tories made in their 1999 election platform was that they would increase spending on health care by 20 per cent by the end of their mandate.

Today, less than two years into their mandate, they are already there.

And now, instead of bragging about how much more they are spending on health care, the Queen's Park Tories are struggling to control the beast that threatens to gobble up the whole provincial budget.

A worried Premier Mike Harris said outside a special Tory caucus meeting this week that spending on health care has gone up from 38 per cent of total government expenditures to 44 per cent of spending in the last five years.

Added the Premier: ``If you continue doing that, it will be 100 per cent on health care . . . We cannot sustain that kind of growth.''

Queen's Park is not alone. Similar concerns are being voiced in provincial capitals around the country.

What has the provinces really concerned is not just the current rapid increase in spending on health care. Rather, it is that future projections show an even faster rate of increase due to demographic changes.

Specifically, the baby boom bulge in the population is getting older.

As a result, over the next 40 years there will be a staggering 154 per cent increase in the number of Ontario residents aged 65 and over, compared to a 22 per cent rise for the population aged 15-64, according to a study released this week by the C.D. Howe Institute.

The provinces spend roughly five times as much for health care for people aged 65 and over as compared to those under 65, the study notes.

It is numbers like these that have the provinces thinking, however tentatively, about ways to reform the system to exercise restraint.

Just a year ago the provinces were singing a different tune. Rather than address the restructuring of health care, as federal Health Minister Allan Rock was suggesting at the time, the provinces got together to press Ottawa to give them more health dollars to spend.

As the provinces portrayed the situation - most memorably in a series of TV ads sponsored by the Ontario government - the only problem with health care was that Ottawa wasn't paying its full share.

Saskatchewan's Roy Romanow was a lonely voice calling on his fellow premiers to consider, as well, the long-term sustainability of the medicare system.

He suggested the establishment of a national commission to study changes to medicare that would keep the system viable.

But Romanow was brushed aside as the premiers plotted their assault on the federal treasury.

They got what they wanted in a $21 billion dollar deal last fall.

Now that looks like a drop in the bucket.

Ontario's share of the federal swag - $1 billion annually - won't even cover the increased costs of health care in the province for the coming year. (In a press conference this week, Harris let slip the figure of $24 billion for health care spending for this year, up about $1.5 billion from last year.)

Until now, the Harris government has been able to count on economic growth to pay the bills.

Last year, for example, Ontario's real Gross Domestic Product (GDP) rose 5.5 per cent.

Each percentage point of growth brings in about $565 million in additional revenues, so that meant the provincial treasury was about $3 billion richer.

The problem, for Harris and the province, is that growth is slowing, due to the American economic downturn.

Jim Flaherty, the new provincial finance minister, said yesterday that he is still counting on growth of 3.1 per cent this year. But he's whistling past the graveyard.

Private-sector economists have begun revising their forecasts for Ontario downward to below 2.5 per cent.

That means Flaherty will have less than $1.5 billion in additional revenues to play with, instead of the $3 billion his predecessor, Ernie Eves, had last year.

Compounding Flaherty's problem is that he must still implement the remainder of the tax cuts - income, property and corporate - promised by the Tories in the 1999 election campaign.

The Tories say these tax cuts pay for themselves in increased government revenues resulting from the economic stimulus, but no one really believes that.

Liberal finance critic Gerry Phillips believes the remainder of the cuts will cost the treasury about $4 billion, when fully implemented, and budget documents would appear to back him up.

The push is on, then, to find ways to hold down spending. Flaherty admitted as much yesterday in his first press conference as minister of finance.

``We have to be prudent,'' he said. ``We have to be vigilant. We have to keep looking for efficiencies in all the ministries.''

Unlike the past few years, health is not excluded from this search for ``efficiencies.''

Behind the closed doors of the special Tory caucus this week, the MPPs talked of tougher audits on hospitals and the like.

But measures like these are unlikely to make much more than a dent in the health budget.

Eventually, the Queen's Park Tories - and governments across the country - are going to come to a health-care crossroads where they will be faced with a choice between two politically explosive alternatives.

One fork - the choice being urged by the Conrad Black press - is to move toward two-tier health care.

This approach has many suggested forms - user fees, extra-billing, private clinics, individual health-care accounts, and so on - but they all add up to the same thing: The additional money for health care would come directly from individuals (and private insurance companies) rather than from governments.

The second route is some form of rationing. One model proposes putting primary care physicians on salary (instead of fee-for-service), bringing them together in group practices with rosters of patients and parcelling some of the work off to nurse practitioners.

While there are differences, the model is not unlike that of health maintenance organizations (HMOs) in the United States.

Tony Clement, the newly appointed health minister, was reluctant to be drawn into this debate this week. Asked about two tiers, he said: ``I'm not sure what that nomenclature means actually.''

But in a speech last year to the Empire Club in Toronto, when he was still municipal affairs minister, Clement was quite forthcoming on the topic.

Perhaps he foresaw his next job.

Clement said that in health care, as in other areas, the guiding principle ought to be to ensure consumer choice and added:

``If the reforms merely seek to ration health care more efficiently, are the rationing decisions based upon the choices of consumers or are they merely the result of government or provider convenience? An answer to (this) question was sought in Oregon by the refreshingly honest method of putting the proposed priorities of public health on the ballot for the citizens to choose. Why not let the people ration, if rationing is the best that public delivery of health care can manage?''

Harris himself steered away from loaded terms like rationing and two tiers in unveiling his new cabinet this week. Instead, he said Clement would be asked to pursue ``needed health reforms.''

For now, such euphemisms are the order of the day in the Canadian political debate on health care.

But sooner or later, the scarcity of dollars will force the debate on to more open ground.