Five challenges for bending the health care cost curve in Canada

By Greg Marchildon and Livio Di Matteo

Why health reform remains a challenge

Canadian economists received a pleasant surprise this year: expenditure growth on public healthcare in Canada finally appears to be slowing down. However, it is unclear if this slowdown is the result of explicit success in sustainably bending the cost-curve or more short-term cost-cutting in response to slower economic growth or future federal health transfers.

So is it a blip on the healthcare horizon or the beginning of a trend?

With the continued ageing of the Canadian population, the diffusion of new healthcare technologies, and increased pressure for other public spending, we anticipate healthcare costs will continue absorbing the energies of governments in Canada for years to come.  And bending—or breaking—the cost curve, will remain a perpetual challenge. Here’s why.

1. Bending the health care cost curve is a long-term process that is much more than a quick cost-cutting exercise or yet another “structural re-disorganization.” But the voting public is impatient for change. Governments have a time horizon that operates within four-year cycles and are expected to demonstrate substantive improvement in the short run.

2. When it comes to cost control, there must be an emphasis on prices as well as volume or numbers of health providers. Cost control attempts to date have focused mainly on the number of service and health providers with “prices” (the fees paid by government to providers per service) remaining the undiscovered country. At the same time, however, one person’s health spending is another person’s income, and constraining fees will likely be vigorously opposed by those affected (doctors and health providers), even if a clear public benefit can be demonstrated.

3. While health system sustainability is about revenues (how much tax money a province has at its disposal) as much as it is about spending, most provincial governments have seemingly determined that they are not prepared to increase tax revenues. The basis for this decision seems to be rooted in a general public aversion to higher taxes and a need for competitive tax systems. At the same time, there is an inconsistency in public attitudes that desire more and better public health services but with fewer or lower taxes.

4. While policy should be evidenced-informed rather than belief-based, the complexity of health-system change makes it difficult to draw a straight line from one evidence-based improvement to health-system change as a whole. Indeed, improving the quality and quantity of evidence-based decision-making is perhaps the greatest challenge in systematically devising policies for bending the cost curve.

5. While comparative evidence is essential for a better understanding of policy problems, you cannot bend the healthcare cost curve by cherry-picking reforms from other jurisdictions with other political and social contexts. Ultimately, solutions are devised within the context of specific political, economic and policy environments. Grafting quick fixes onto one health system based on experiences in another can quickly generate new problems to replace those they were intended to fix.

A major hurdle for health reform is that we need to decide exactly what changes we want to make in our health system.  While there remains room to increase efficiencies and gain greater value for money, bending the cost curve requires fundamental reforms to the way we manage and deliver health services in Canada.  This is a reality many Canadians seem reluctant to face.

Another challenge is getting federal, provincial and territorial governments to agree on the basic values or principles we want to preserve and enhance as we reshape policies, structures and the regulatory environments of healthcare in Canada.

Both challenges are formidable but surmountable barriers to ensuring the sustainability of publicly-financed healthcare in Canada.

Addressing these challenges will fall mainly on the shoulders of our provincial governments, and of course, the electorates they serve. However, the federal government also has both the potential and the responsibility to play an important role.  One thing is certain: whoever wins the next federal election in 2015 will have to meet these challenges head on.

Greg Marchildon is an expert advisor with EvidenceNetwork.ca, Professor and Canada Research Chair in Public Policy and Economic History (Tier 1) at the  Johnson-Shoyama Graduate School of Public Policy at the University of Regina. 

Livio Di Matteo is an expert advisor with EvidenceNetwork.ca and Professor of Economics at Lakehead University. 

They are the editors of the newly released, Bending the Cost Curve in Health Care (University of Toronto Press).