THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, February 28, 2017
The Standing Senate Committee on National Finance met this day at 9:30 a.m. to study the financial implications and regional considerations of Canada’s aging population.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Welcome, good morning. Sorry for being late. We just had a press conference, and I would like to show you what great work our committee has performed.
We had a fantastic turnout today from the press about our plan of attack, which really is all about smarter planning, smarter spending, and achieving infrastructure success.
[Translation]
It is the first component and first report, entitled Smarter Planning, Smarter Spending: Achieving Infrastructure Success.
[English]
We were very excited to present, and we had good feedback. We actually have a couple of interviews coming up later, including the Business News Network with Michael Hainsworth, so we are excited about that. We had great support from the francophone media. I would like to thank everyone on the committee, because it was a great team effort. We had Senator Mockler and Senator Cools with us today, and I would like to thank our scribes.
[Translation]
You did a great job.
[English]
It’s a step in the direction of where we want to go.
Senator Stewart Olsen: And a big thanks to Communications.
The Chair: And a big thanks to Communications, because they did an outstanding job of setting and aligning us so that we could deliver this morning. We are excited about it and the response has been good.
My name is Larry Smith, a senator from Quebec, and I chair the committee. Let me introduce the other members.
[Translation]
Senator Moncion from northern Ontario and Senator Pratte from Montreal.
[English]
Of course, from New Brunswick, we have Senator Percy Mockler. Senator Cools is our deputy chair. Senator Neufeld is from beautiful northern British Columbia. From Saskatchewan — hopefully they’ll get a quarterback — we have Senator Raynell Andreychuk. From Newfoundland, The Rock, is Senator Beth Marshall. Senator Stewart Olsen is from New Brunswick and, of course, Senator Forest is from Quebec.
[Translation]
The committee’s mandate is to examine federal estimates and public accounts generally.
[English]
However, the committee asked for and received a specific mandate from the Senate to study the financial implications and regional considerations of Canada’s aging population. This morning we launch our series of hearings on this special study.
We welcome, from the Conference Board of Canada, Louis Thériault, Vice-President, Public Policy.
[Translation]
Mr. Thériault has studied the impact of the aging population on the health care system, publishing a number of articles on the subject.
[English]
We also have before us Dr. Dennis Furlong, who was New Brunswick’s Minister of Health from 1999 to 2001, and a long-time general practitioner. He published Medicare Myths: 50 Myths We’ve Endured About the Canadian Health Care System.
Dr. Furlong is someone that I’ve had the opportunity to meet over time through my connection as chair of the Canada Games. Dr. Furlong was a long-term player involved in the Canada Games in terms of his interest and participation. Doctor, thank you for that, also.
[Translation]
Lastly, we have economist and author Richard Saillant. Long associated with the Université de Moncton, Mr. Saillant published, this past fall, an essay on aging and equalization. His book, entitled Tale of Two Countries: How the Great Demographic Imbalance is Pulling Canada Apart, highlights the gap that could open up between Eastern and Western Canada if the demographic imbalance is not taken seriously.
[English]
Gentlemen, welcome. We are anxious to hear what you have to say. I would ask you give a short opening statement in turn and we’ll have question period afterwards. We appreciate the fact that you came on such short notice. Would you like to start, Mr. Thériault?
[Translation]
Louis Thériault, Vice-President, Public Policy, The Conference Board of Canada: Thank you to the committee and thank you, Mr. Chair.
[English]
It's a great honour for me to be here. The Conference Board, as you may know, is the largest research organization in the country, independent, non-partisan and not for profit. The work we do is for the greater good.
I’m in charge of public policy. Health care is a central component of the portfolio of public policy issues we tackle. What I’m talking about this morning is based on a detailed research study, which is part of a series on aging that we conduct under the Canadian Alliance for Sustainable Health Care at the Conference Board.
Care for seniors, funding, human resources and infrastructure: These three themes come back regularly. I have six take-aways that I’ll get into.
As we all know, delivering high-quality, effective and sustainable health and social care services is a top priority for Canadian governments and for many organizations in both the private and public sectors. The provision of continuing care supports is one of the most pressing challenges facing these stakeholders as they look to balance health care service, demands and costs in the context of an aging population. This challenge is the key focus of the Conference Board’s Canadian Alliance for Sustainable Health Care, and through a research series on future care for seniors, we explore the effects of aging on health care in particular.
This report is the second of a series. It’s an extensive modelling piece of work with some key take-aways about what it means to take care of an aging population in terms of hard numbers. There are key implications that we’ll get into in a minute.
Canada is grappling with the implications of the demographic bulge of aging baby boomers and wondering how concerned it should be about the associated impacts on health and social services. Our status quo projection of future continuing care needs for Canadian seniors suggests that if current patterns continue, Canada should be concerned, especially if the country wants to provide the same level of services together with the same cost-sharing agreements. That said, experimentation with various reforms are proceeding across Canada in an effort to diverge from that status quo. That is comforting. In terms of the magnitude, that is the right line of thinking, but we’re not done yet.
Many of the challenges in the continuing care sector are known. The report is unique. It presents the quantitative take-aways that are possible using consistent terminology, something we don’t necessarily do when we talk about home and community care — everyone has their own definition — and consistent methodology. That’s another thing; there are no real, good, hard facts to measure what we are dealing with. The take-aways provide critical insights for stakeholders, including policy-makers, health provider associations, educational institutions and the business community, of course, as they continue to develop and prioritize policies and make plans for investment, service delivery and infrastructure for the coming decades. The continuing care supports included in the analysis encompass all forms of assistance provided to seniors who can no longer live independently, as well as the assistance provided to those who can.
These supports are delivered in various settings, including private homes. “Home” is important, but retirement communities are important. Residential long-term care homes that are more traditional around what we call part of the health care system are also important. There are other facilities in the community as well that need to be included.
This includes health supports, personal and social supports, accommodation supports, voluntary donation and services. Something we often forget is the unpaid component of this service delivery. The status quo scenario provided by our forecast and analysis of continuing care supports for Canadian seniors reveals that there are major implications, mainly for infrastructure needs. Where do we care for seniors as they age? There are also labour demands associated with that in the context of aging. Labour force growth is slowing down while labour force demand in that sector is increasing. So there is a wedge, which we measured, in detail, by province, type of occupation and spending. Frankly, the spending component is part of the discussion, of course; it’s central but it’s not only about that. It’s how we spend.
With the first implication, the demand and expenditures for continuing care supports will rise dramatically. By 2026, 10 years from now, an estimated 2.4 million Canadians aged 65 and older will require paid and unpaid continuing care supports. That is a 71 per cent increase over 2011, which is the last year we had consistent data. So getting over the next 10 years is the central challenge. After that, it’s not necessarily easier, but the structural reforms to address the next 10 years will set the stage for what will happen after. By 2046, the number will reach 3.3 million. In terms of spending, that’s going from $28 billion in 2011 to $177 billion by 2046. Again, the next 10 years is where most of the increase takes place in terms of percentage growth.
The second implication is that the tremendous growth in projected spending does not account for the perceived unmet and undermet needs of seniors that are significant and projected to worsen. Often we talk about what we know, but it’s much harder to talk about what we don’t know. From some of the surveys available and some of the information gathered as part of this work, we have an estimate of people that are declaring unmet needs. It means there’s a gap in the current delivery of care, and that number grows from 200,000 today to almost half a million.
The third implication is that the reliance on unpaid caregivers and volunteers to provide continuing care supports will also grow dramatically. Again, that’s something we take for granted. Right now in the system we have a lot of volunteers and unpaid caregiving. As we age collectively, the pressure builds because a lot of these people are in the senior category themselves. That’s also a central element of what we’ve analyzed.
Canadians have provided some level of unpaid continuing care to seniors, and by 2046, 11.6 million Canadians will provide some, up from 5.3 million today.
The fourth take-away is that the challenge associated with meeting the continuing care needs of seniors requires a singular focus on efficiency and a reality check. Again, that’s back to how we spend. As governments in Canada struggle with the legacy of deficits in an environment of tempered growth, lower growth, responding to the need for increased spending in continuing care supports will require difficult decisions. To better inform these decisions, the drivers of growth must be better understood and managed. Not only will the decisions affect the delivery and cost-sharing arrangements of providing continuing care, whether it’s private-public, federal-provincial hospitals, non-institutional, et cetera, they will also affect other segments of health care, such as acute care, where we spend money in the system. Right now it’s largely driven by hospitals and acute care. In this context of aging, I’ll have to reassess that.
The Chair: Are you just about ready to wrap up? We want to make sure we can ask you questions.
Mr. Thériault: I will conclude by saying that the infrastructure component is important, but labour demand is something we have a hard time appreciating. The work we’ve done really puts that into perspective. Labour demand for the continuing care sector will outpace general labour force growth.
In a nutshell, you’ve all heard the new norm of the Canadian economy growing in real terms around 1.82 per cent versus the 3.5 per cent we were used to before 2007. That’s largely driven by slower labour force growth, which is the productive capacity that we’re talking about. When we look at the growth in the labour force over the long term, it’s about 1 per cent a year. That drives a lot of the new norm of the GDP growth around 2 per cent. The labour demand for health care based on what we observe today and on the increasing needs of an aging senior population group means that we’ll need 3.1 per cent. There’s a 2 per cent gap, year over year, that we observe between the needs for delivering home and community care and continuing care overall and what we can expect from the overall economy. To me, that’s one of the most pressing challenges to address.
Thank you.
[Translation]
Dennis Furlong, former Minister of Health of New Brunswick, as an individual: Thank you very much for the opportunity to appear before the committee this morning. This is truly an honour and a pleasure, so I will try to do my very best.
[English]
Thank you again for the opportunity to be here. I took an approach to this to try you give you the bullets rather than try to give you information, because the Canadian health care system and its adjoining systems are very large, very convoluted, very expensive and very everything — very much a challenge now. I’ll try to take you to the level of where I worked most of my life in rural general practice and give you some of the cardinal and salient messages that may provoke questions afterwards.
I wrote the first paragraph to tell you that there are going to be global financial challenges for all governments until the baby boomers pass through the system the same way as they passed through the education system. We built all kinds of temporary classrooms to get them through, and the classrooms disappeared. Now we have to get the baby boomers through their old age.
You can conjure your questions as I speak, and I will try to be succinct and rapid.
The big picture, the satellite image of Canadian health care, the Canada Health Act, needs to be revisited. It’s 50 years old. It does not include pharmacare. It also still covers the first dollar coming in the door, unlike most of the OECD countries who have public health care programs where they have some patient participation. We do not. That is a problem.
As to the five tenets of the Canada Health Act, we still have two that are basic. If you’re a Canadian citizen, you’re covered. If you’re a Canadian citizen from one province, you’re covered in another province. Universality and portability are still there solidly.
Comprehensiveness has been compromised somewhat, but it’s still there and relatively good.
Being publicly funded has been hammered. We’re now into the area of privatization. The Supreme Court in Quebec has made the Chaoulli decision. We’re going to entertain another one pretty soon from Quebec, and I think publicly funded is gone.
Accessibility? We might as well not even discuss it because it’s not there in the Canadian health system any more. One has to wonder that if you’re waiting two years for visits to neurology, orthopedics and so on, do you actually have a publicly funded health care system? And that’s the way it is now right across the country. I predicted the unravelling of the system 10 years ago in my book, and it’s happening.
Transformative change is needed. We have to revisit that act and we have to modernize it. We have to make it reflective of how we’re delivering the care in the country.
I must not go any further without telling you that the caregivers in Canada — doctors, nurses, associates, clinicians in the area of allied health professionals — are the best in the world. You can’t beat them anywhere in the world. The Americans take every Canadian they can get because they’re so well trained. So we can deliver quality care in this country and we can deliver it as good as anybody in the world. The problem is that the system is overwhelmed.
Cost-wise, another concept is that we are now spending a huge amount of money. The provinces are somewhere around plus or minus 45 per cent of their budgets, which is very compromising to all of the other budgets and other programs. We do that as a collective. I don’t know how many in this room could do it as an individual. If we can’t do it as individuals and spend half of our income on our illness care, I’m not sure how we do it as a collective. So it’s just a message.
Again, the quality of our care now is more dependent not on the people providing it but on their ability to get to it. It's a big, big problem.
The book I passed out represents my thoughts from 10 years ago. The numbers are dated, but the concepts are more real today than they were then. There’s a little bit of Newfoundland humour in there as well if you can get through it. It’s not a long read. It’s about four hours; maybe for me it’s longer.
Sustainability of our health care system: In the last 10 years, all the premiers of the country have said that it’s not sustainable. Universally, the Ministers of Health and Ministers of Finance have said it’s not sustainable. Sheila Fraser effectively said it’s not sustainable. So we must agree that it’s not sustainable the way we’re going.
As we get the wedge of health care that’s coming at us demographically, we must be ready. I keep using the analogy that if you jump out of a plane with a parachute, it makes a lot of sense to open it before you hit the ground and not after. We’re waiting and delaying and hoping for somebody to lead the parade to make effective and transformative change.
Sustainability in our system is all about affordability. Affordability in our system is all about utilization, and that’s one of our cardinal problems. I’ll explain that later.
Not every service delivered in the Canadian health care system is necessary. As a matter of fact, about 20 per cent of the services delivered in the Canadian health care system are useless. They don’t do anything for anybody except incur a fee.
Now, utilization can only be controlled with accountability, and there’s none in the system now — none for the providers and none for the consumers. It’s a blank cheque that the provinces of Canada have to pay every year. As they have worked themselves through the last 25 years of health care, it has been the spending determining the budgets rather than the budgets determining the spending. We now have accumulated deficits right across this country that I would say empirically represent 60 per cent overspending on health over that period of time. Newfoundland has 15; New Brunswick has a $14 billion debt. I would suggest that at least 60 per cent of it is overspending in illness care.
We call it the Canadian health care system, but it really isn’t. It’s an illness-care system, and it’s not a Canadian system. It’s the conglomeration of 13 provincial-territorial jurisdictions that all do things differently. They all fund things differently and all have a different perspective on what is necessary in the Canadian health care system.
So we must understand that the system that we have is an illness-care system. It doesn’t produce much wellness in our society except for one or two components. About 7 or 8 per cent of the budgets generally are public health, clean water and safe food and immunization. Those things come out of the provincial systems, and they are more effective in producing population wellness than all the doctors do and the nurses do together.
We need to apply some insurance principles. I’ll try to get into that a little later. As I said, most of the OECD countries have some prorated type of participation.
I’m in good company. This book here has been written by Fred Vettesse and Bill Morneau, somebody you might know. They wrote that together about two or three years before he ran for politics. Now he’s the federal Minister of Finance. I’m in good company because he says in here that we need to have some accountability in the Canadian health care system that’s participatory. I’ll get into that a little bit more as I try to explain how it can be done in Canada and why it should be done.
The costs and the cost distribution of illness care: We’re at $230 billion a year right now in Canada. That’s private-public spending, closing in on 12 per cent of GDP. Prior to medicare, it was 6 per cent. It’s 45 per cent of budgets. The federal component, when we started this system 50 years ago, was 50/50. The provinces and territories thought they had died and gone to heaven. They could build a hospital for 50 cents on the dollar, hire a doctor for 50 cents on the dollar. Today, it’s about 80/20. The load is shifting very rapidly towards the provinces. Some can absorb it and some can’t.
The new health accord was projecting — as we get into the baby boomers — restricted increases, not decreases. With the oncoming swamp of utilization, we may see the point where the federal component gets down to 10 or 12 per cent. One wonders, then, why we have a national Health Care Act; maybe we should have all provincial. If it’s provincial, maybe it should be.
On the national pharmacare issue, I will try to be dynamic. We don’t have a pharmacare program in Canada. We have a big, expensive illness care system. People enter the system with a complaint, injury or whatever, then get in, get diagnosed, get service and get to the point where they may need surgery, medication, a coronary bypass, whatever. Instead of that arc continuing into therapy, it drops off right here and there is no therapy — no pharmacare. It’s a big problem.
About 10 to 15 per cent of the people in the country don’t fill prescriptions, mostly the working poor. They then end up back in the system. I have had them many times in my office, coming outside of a coronary event, having $900 in drugs from the heart centre, and their income is $1,700 a month. That doesn’t jibe.
We need to do something about national pharmacare. We have been talking about it since the 1940s. I have thoughts on that which I can share with you after.
Emergency room overload: You and I live with it. Everyone lives with it. Why is it there? I will give you some numbers, and then you will know right away.
About 80 per cent of the care given in emergency rooms in this country is primary care. This is witnessed by many studies, the last one in Nova Scotia by Dr. Ross, where 80 per cent of visits to the emergency room were primary care delivered by doctors who are trained to do high-intensity, low-volume work in an emergency room. Primary care is low-intensity work, high volume. They are equally unable to do it. They get swamped by it.
What they generally order is lots of tests. So a primary care issue that is $50 ends up in an emergency room and will cost $200 to $300 — maybe more. That’s what’s going on from Victoria to St. John’s, and Windsor to Inuvik.
Primary care is the biggest problem in Canadian health care today. It is only available about 21 per cent of the week, based on hours. If you look at days, it’s maybe 30 or 35 per cent of the week, but it is never available on Saturday, Sunday and most Fridays.
We have a considerable problem in primary care in that people say we have a shortage of primary care doctors. Well, we don’t. I said that 10 years ago. We have 80,000 doctors in Canada; 40,000 are primary care. With 40,000 doctors, the Canadian Medical Association standard is that you have 1,000 to 1,500 patients. Let’s forget the 1,500 and go back to 1,000. We have 40,000 doctors in primary care. That’s 1,000 each, which is coverage for 40 million Canadians. We have 36 million or 35 million.
It’s the application of this unit of energy to the people. It’s misapplied and needs to be revisited.
Primary care should be 24-7 and it’s not. We have to find a way to do it, and we can. It’s not hard.
On the hospital-based core system of severe and significant injury, I said in my book 10 years ago that there is a core system in Canadian health care where people who have severe injuries and disease get triaged by anybody from the guy at the front door to the hospital to the people rolling the stretchers, right up to the doctors who say, “This person is really sick, so let's get him to the front of the line and get him cared for.”
That triage system was working 10 years ago. Now it’s unravelling rapidly. People with significant illnesses such as cancers diagnosed with a CT scan of the chest on December 1 will get their first visit to oncology in February, for a disease from which you can die within six months. This is a major issue. It’s unravelling now in the core system for a variety of reasons. Not all of them are money. Some of it is abrogation. Some is that it is just overwhelming. Some are the professions saying that if the government wants to run it all, run it all. Those things are happening inside the system.
Other issues include the migration of primary care into secondary care hands. That’s a huge cost. There are lots of things out there that primary care physicians should be doing and don’t; they just refer. Again, a $50 item becomes a $250 item. We are absorbing those costs.
Custodial non-medical personal care: This is the sort of seniors’ custodial care thing we are dealing with. It is not even a universally publicly funded program where we have to find a place for people to live. The illness care program is a universally funded program for every Canadian for illness, but when we decide where they live, who takes care of them at that address and so on, that is not a universal publicly funded program. But we do the egalitarian thing and provide the best we can. That load, as I just said, is coming at us very hard. I will give you some of those numbers.
I am almost done. Once I get to this, I think the questions will be very clear.
We have to start thinking home- and community-based. We are still building nursing homes everywhere. We have to stop that and we have to change it. The Europeans figured it out two decades ago; we haven’t yet.
With regard to infrastructure needs, the question arises: As the baby boomers pass through and need all this non-illness and non-medicare care that falls outside the system, how will we pay for that? Should we do that with a vertical type of funding — in other words, send it down to the road to many generations — or should we do it horizontally? With succession taxation, the baby boomers may very well be the richest cohort in the history and future of Canada. We have to find a way, perhaps with succession taxation, of trying to redistribute that horizontally, not vertically to our great-great-great-grandchildren.
Demographic overload: When we started the Canada Pension Plan, we had about ten workers, one consumer. We are edging toward three workers and one consumer pretty soon.
The model that I suggested in my book I think needs to be discussed. I wrote the book to try to get it on the agenda; it never made it. It was read around the country, but it needed some impetus. It didn’t get it. Prorated patient participation: The 20 per cent of useless utilization in the Canadian health care system right now transmits to about $45 billion a year. That money can be rationalized, not at a Monday morning at nine o’clock, but if we change the structure of the system, we can rationalize that over five years if we get a proper actuary-supported system. Two basic provisos have to be absolute and not compromised: first, no barrier to access, which is financial; and second, no exposure to catastrophic costs. We can do that, as I explain in my book.
We have now had 50 years of public health care, and we have never tried to solve a problem with something on the demand side. We have always gone on the supply side. If we have a problem, write a cheque, provide more money, resources or something else. We are at the point now where the provinces are doing top-down austerity to try to control costs to keep things fluid. Top-down austerity limits growths when the utilization is going up. It is very logical. The more you restrict here, the more it comes out here in wait times. We have some huge problems.
There are other numbers I can give you, but I am at the end of my time, so thank you very much.
The Chair: Thank you, Dr. Furlong.
Mr. Saillant, can you do it in five minutes? We have a bunch of senators who would like to ask questions, and we would like to have some interaction. Go ahead.
Richard Saillant, Economist and author, as an individual: I will do my best.
[Translation]
Good morning everyone. I am pleased to be here today. I would like to commend the committee for undertaking this study, which is critical to the country’s future. Of course, the aging population is nothing new. It is an old issue that most Canadians would say they are quite familiar with, one that has been discussed at length in the media and in public policy circles.
I am here today to address an aspect of population aging that is much less talked about at the national level, the incredibly uneven pace of population aging in the country’s various regions. It is a phenomenon I refer to as the great demographic imbalance, and it has just as many consequences for the country’s future as population aging itself. The country’s very identity is at risk if we do not adequately rise to this challenge.
[English]
The Chair: I need you to slow down a bit because you are killing our translators in the back. I can see smoke coming out of their ears.
Mr. Saillant: You told me to go quickly. I am switching to English now.
Today, the great demographic imbalance is there for all of us to see. At the end of the baby boom, the median age in Canada was 25, and 50 years later, it’s a bit over 40. Although this is a significant increase, it masked enormous differences among regions and provinces. In 1966, the median Albertan was 25 years old; today, he or she is around 36. In 1966, the median Newfoundlander — because it was Newfoundland back then — was 19 years old, below the legal drinking age in most provinces. Today, the median Newfoundlander and Labradorian is 45. The median age in Newfoundland and Labrador rose twice as fast as in Alberta.
Obviously, this highly uneven pace of aging translates into vastly different shares of seniors across regions. In Atlantic Canada today, almost one in five residents is a senior, but in Alberta it is less than one in eight.
Looking forward, the gap between younger and older provinces will only widen. Today, the median Prairie resident is eight years younger than his Atlantic Canadian counterpart. By 2038, this age gap will exceed 10 years: While the median Prairie resident will gain about three years, to reach the age of 40, the median age in Atlantic Canada will be 50. Atlantic Canada will age twice as quickly, or nearly so.
Furthermore, by 2038, one in five Prairie residents will be a senior and in Atlantic Canada it will be close to one in three. In other words, in less than a quarter century from now, the Prairies will have, more or less, the same share of seniors that we do now in Atlantic Canada, while our share will have grown by two thirds.
[Translation]
The highly uneven pace of population aging in Canada also means highly uneven economic growth from one region to another. Until the turn of the decade, population aging had little impact on population growth. The entire country was benefiting from the demographic dividend attributable to the fact that baby boomers were all still in the workforce. That is no longer the case. The effects of the great recession are often blamed for the fact that Canada’s economy did not regain its pre-crisis steam.
What people often forget is that, ever since baby boomers began leaving the workforce, the country’s economic growth potential has fallen significantly. While it may have been reasonable to expect Canada’s economy to grow at around 2.5 per cent to 3 per cent a year before the turn of the decade, that rate now sits at about 1.5 per cent to 1.7 per cent. The country’s economic growth has shrunk by nearly 40 per cent since the great recession, and it will take another 25 years to get it back, barring a productivity boom.
With the gradual exit of baby boomers from the workforce mainly to blame for the economic downturn, it is no surprise, then, that the provinces with the highest proportions of baby boomers will be hardest hit by population aging. Between 1978 and 2008, the Maritimes added 10,000 workers to the workforce every year. Since 2010, the region has been losing 3,000 workers a year. The workforce used to be an engine of economic growth in the region. Today, however, not only have things slowed down, but that economic engine is also in reverse. If current trends hold, what that will mean over the next 20 years is that the economy in the Atlantic region will not grow.
In the Prairies, the economy can be expected to keep growing at around 2 per cent a year, which is roughly equivalent to the growth rate in the Maritimes before baby boomers began retiring. In 20 years, the economy in the Prairies will be 70 per cent larger than it is now, even though the proportion of seniors will not necessarily be larger than it is now in the Atlantic region. In 20 years’ time, the Prairie provinces will have an economy that is 70 per cent stronger and an aging population to care for that is no larger than the one in the Atlantic provinces now. From a demographic standpoint, two countries are emerging in Canada.
[English]
In my book, I examine the consequences of population aging on regional economic performances. My conclusion is that over the next two decades, the gap will widen between rich and poor, young and old, east and west.
To be sure, much can happen over the next two decades. It may well be that the Prairies will not fare as well as they did over the recent past, and it may well be that we will do a little better in Atlantic Canada. But if the Prairies don’t do well economically, there is 100 years or more of history to suggest that the workers there will not migrate to Atlantic Canada. They will migrate to Ontario or British Columbia, west of the Ottawa River.
That great demographic imbalance is not going anywhere soon. In my book, I talk about Rumsfeld’s known unknowns, unknown unknowns and known knowns. To me, the great demographic imbalance is a known known. We don’t know how we will respond to this yet. That is the great known unknown of the book.
I will go briefly into the implications for health care only to conclude that 10 years or so from now in Atlantic Canada, without much further assistance from Ottawa, health care, as we know it, will disappear. There will be two health care systems in Canada. There is a region west of the Ottawa River that will likely be able to maintain the status quo. East of the Ottawa River, in Quebec, they will be in dire straits in 15 to 20 years. That is more of a question mark because it has Montreal that can draw immigrants and therefore have a bit more labour force growth. But Quebec is already the jurisdiction that is most heavily indebted in North America and the most heavily taxed if we exclude Puerto Rico, and its program spending is already 40 per cent, as a percentage of GDP, higher than in Ontario. Ontario has got room to raise taxes a bit, but Quebec doesn’t have that much room and Alberta doesn’t have a sales tax yet.
My conclusion is this: In the years ahead, the great demographic imbalance could deal a mortal blow to Canada’s shared experience of citizenship through social policy. At least this much is clear: Unless major changes are brought to how wealth is redistributed across Canada, poorer, faster-aging provinces will not be able to maintain their much-cherished social programs at comparable levels to other provinces. Without further assistance, poorer, faster-aging provinces will most likely have to make decisions inconsistent with the idea that there is no second-class citizenship in this country.
Canada built the social safety net and expanded the transfer payment system that sustains it in good economic times. It is fairly easy to be prosperous in prosperity, but we quite naturally tend to look to our own backyards first in more difficult times. While it will hit poorer provinces hardest, population aging will also affect richer provinces. It is thus in a time when richer provinces will also feel the pinch of demographics that poorer provinces will be asking for more money in federal transfers.
In my book, I argue that nothing less than a major revamp of fiscal federalism will be needed to maintain a single social citizenship in Canada in the age of the great demographic imbalance. I make the case that equalization is the best tool to deal with the consequences of this imbalance and to take the uneven aging of regions into account.
The Canada Health Transfer, or CHT, which has funded growth, is not the right tool in my view. I looked it up on the Finance Canada website, and from 2010 to 2016, the Canada Health Transfer in young, prosperous and slower-aging Alberta has grown by 12 per cent annually. In poorer, older and faster-aging New Brunswick it has grown by about 4 per cent.
The per capita formula that we have right now will not address the great demographic imbalance in the CHT. In fact, it exacerbates it because there is one single market for health care providers in Canada outside Quebec, and if you provide more money to one area, according to Jeffrey Simpson, in the long run it will fuel an escalation in wages.
When Paul Martin came forward with an increase in the CHT of about 6 per cent, guess how fast salaries grew over that period: about 6 per cent, or a little below that.
I will conclude with this: In the future, Ottawa will also feel the pinch of demographics. It has Old Age Security and the Guaranteed Income Supplement to take care of. Ottawa will not be able to provide a bazooka approach to fiscal federalism and lift all boats. It should be much more nimble in targeting funds so as to address the successful outcomes in ensuring human dignity across the land. I will leave you with that.
The Chair: It sounds similar to some of the conceptual recommendations we were making this morning with regard to infrastructure as well, which is interesting.
Thank you very much and thank you for the passion, all three of you.
We have a list of senators interested in asking questions. We will start with Senator Marshall from Newfoundland.
Senator Marshall: Thank you very much. I’d like to hear all of your views on private health care, which a lot of people don’t want to talk about.
This morning we talked about sustainability of the health care system. For decades now we’ve heard that the system as we know it is not sustainable. We know we are faced with an aging population, at least in some parts of Canada. There are always new and more expensive technologies, treatments and drugs. And we don’t even have a pharmacare program yet. A number of provinces are into difficult fiscal problems, such as New Brunswick and my home province of Newfoundland and Labrador.
We’ve heard about other issues this morning, such as the labour demand for continuing care. We keep hearing about transformative change. Even in the most recent round of negotiations, Minister Philpott kept talking about transformative change, but I didn’t get the impression that that is figuring into whatever deals have been made with the provinces that have signed on.
It seems to me that most people are reluctant to talk about private health care. I would like to know what your views are on this and whether you see it as part of the solution to the problems we are facing.
The Chair: Who was your question addressed to?
Senator Marshall: I think we can start with Mr. Thériault, and go from there.
Mr. Thériault: The fundamental question, the famous third rail of politics, explains why those structural reforms haven’t taken place yet. Given these trends, I think it will hit us anyway so we will have to do something about it. We have a bit of a runway right now to do it how we see fit.
I would suggest, in terms of answering specifically on the private sector’s role, making a clear distinction about who delivers and who pays. Back to what Dr. Furlong said, if you look at Western European countries, they get better outcomes for less money. You just have to look at the aggregate per capita spending. The private sector is extremely involved in the delivery of care. In Sweden, of all countries, in the home care business, the private sector competes with the public sector to deliver care for seniors and institutional facilities of all kinds. That is an example, but there is a series of them — pharmacare would have some of these examples, and the role of insurers.
Bringing the private sector on the delivery side with some of the business discipline that the private sector can bring to the delivery of care is an important element of the solution totally.
With regard to who pays, and given the amount of money we already put in the health care system, I would put that issue on the side for now. I think there’s enough money in the system. It’s more around the design and incentives.
There are fundamental questions around new technology, whether it is medical devices or drugs, and how we leverage that to reduce demand on the system as opposed to creating more space in the system for people to fill with that new technology and increase costs. You need to field the productivity gains that are typically associated with innovation in any industry. In health care, which is probably one of the most innovative industries, we have never seen the productivity payback from it. We have to start thinking along the lines of what any economic system goes by and apply those to the health care system.
My hope would be that in the end we still pay for more because right now we have an illusion of a publicly funded system. About 70 per cent is public and 30 per cent is private. What’s worse is that in the portion where it’s private, it is 100 per cent private, and the portion where it’s public, it’s 100 per cent public by design. Hospitals are 100 per cent, but almost everything else is private, whether it is insurers or out-of-pocket.
In a nutshell, yes we are back to fundamental incentives and the concept of business models being applied to health care as they are applied in other industries. It is that line of thinking that we need to start adopting.
Dr. Furlong: This has been bandied about for quite a while. You are quite right. I can make categorical statements about it and give you a categorical reference.
First, a private parallel system is different than private care inside the public system. Everyone has that concept. With a parallel private system, we have to be aware that that will not fix anything in the public system. We still have to fix the public system no matter what we do.
The prototype for this would be Australia where they did the same thing. They are a country like Canada with 20 or 25 million people, English speaking, indigenous people, a public health care system and so on. They got to the point where they were getting what we have now: long wait times, inaccessibility and so on. A cadre of people decided to do a public-private parallel system. A number of things happened.
First, when they had leeway to do this — and they did and we are getting it now in this country with the Supreme Court of Canada decisions — they started a private parallel system, which rapidly emptied a lot of resources out of the public system because they paid more money to the high-level resources. That weakened the public system.
Second, it rapidly increased the cost of care in Australia globally, both systems, by about 1 per cent of the GDP. They opened the door wider, and that is what we are trying to do in our system. Keep the door closed so fewer people come in and the wait times get long.
Third, they lobbied government for support in the parallel private system. That became the political thing to do, so they started funding the private system even though they had a public system. Within about five years, the support of government for the parallel private system superseded, in budgeting, all of manufacturing, agriculture and mining combined. Do we go that way?
I remind you that it’s a private system. It’s insurance. It will be for the well. They will not bring in people with major illness. It will be for the wealthy and for large, urban Canada. It’s not going to be in Jacquet River, New Brunswick, in Outer Cove or somewhere else.
I also remind you that it will be for high-volume, low-risk procedures like hips, corneas, knees, hernias. They will not transplant your heart or take care of you when you are having a major coronary event. It will be 9:00 to 5:00, five days a week. They will not see you on Christmas day, I can assure you.
So a private parallel system has a downside. I don’t have any observations to it happening in Canada, but make sure of what we are getting. It will not improve the public system. And even if we had yaffles of money, we still should be doing in the public system what I suggested and cull out the waste, which is about 20 per cent.
At a Canadian Medical Association conference last year, there was a doctor from El Paso who was doing health economics in the United States. I asked him a question publicly. I said that I think there is 20 per cent useless utilization in Canada, empirically, after 40 years in the system. Do you have any idea what it is in the United States? He said, “Sure I do.” I asked him to enlighten us. He said 35 per cent, but for different reasons than Canada. So 35 per cent on a $3 trillion budget is $1 trillion they are wasting in health care the United States because it is a commodity, not a service to the people.
We give health care to our people. They sell it. The Americans sell it to Americans. It is a different concept. Some Canadian doctors and health people can’t work in it because they don’t have that mindset.
Yes, I have no objections to it, but it will not solve our problems in the other system.
Mr. Saillant: Let's speak to the inertia in reforming health care in Canada. I think it is related to the fact that it is a sacred cow and a pillar of our national identity.
In 2004, there was a show by CBC, “The Greatest Canadian.” We could have chosen Sir John A. Macdonald, Wayne Gretzky, Maurice Richard, Larry Smith or whoever we wanted. But we picked Tommy Douglas. When something is a pillar of national identity, it is hard to reform.
Two major decisions were made in health care 50 years ago, and they still shape our system today. The first dollars are covered for an insured service, and second, we decided to treat medical doctors as small business people; they are not employees of the state. These decisions shaped the system today and drive costs in different ways. We haven’t been able to discuss any reform to health care, despite all of the major studies that have been conducted over time, from politicians eager to lower costs to academics who want to improve the system.
Obviously, some countries that rank better than us do have private-delivery and single-payer systems, but I suggest that we should look at the overall political and cultural setting of these countries before we look at borrowing from them because that’s very dangerous. In France, if you are used to having a medical doctor treated as an employee who does night calls and home visits, it will not necessarily work in Canada.
So I suggest that if we are to look at these issues, it has to be a made-in-Canada solution. It will take time and there is not much time left.
In a region such as mine, the Maritimes, pressure on the system will foster innovation. We will be forced to experiment unless Ottawa provides us with much more funding. How we will manage to do so and what it will mean for health outcomes, I have no idea at this point.
Senator Stewart Olsen: Thanks for being here, everyone. It’s very depressing news.
From what I’m gleaning, we have to have governments with the courage of their convictions, and if we don’t have that, we’re dead in the water on all of these issues. I’m not certain it’s going to come from the politicians. I think it has to come from the grassroots level that demands better health care. Everyone is a bit afraid to say to their politicians, “It absolutely sucks that I have to wait two, three years for a hip replacement.” I have doctors who tell my people, where I live, “If it’s not bone on bone, you’re not getting it.” In those three interim years until it is bone on bone, they suffer enormously. The other joints go. We’re just compounding everything.
I’m wondering how you think we can deal with that. I don’t see any government — we just had the example of the Minister of Health trying to make changes in the monies given for senior care, and the provinces digging their heels in and saying, “No, we decide.” So I’m not sure how we address any of that.
Dr. Furlong: You said something that raised the hair on the back of my head, not because you said it but because it’s an issue.
As long as political power and getting it and keeping it trumps fiscal sanity, we’re going to be in that ball game. What we’re trying to do is to tell governments, “For heaven’s sake, we now are at the point where we need fiscal sanity.” We can’t afford $45 billion worth of wastage in our health care system. We can’t afford 30,000 beds out of the 100,000 we have in Canada occupied by people who are living there at $1,000 a day, which translates to about $10 billion a year in Canada, when they’ve got a home with a bed, a kitchen, a toilet and all that stuff sitting there. The only reason they’re not there is because there is nobody to take care of them there.
We build nursing homes for $250,000 a bed, so we have Ma and Pa Kettle’s half a million to find a room with two beds and then $10,000 a month to take care of them when they can be home. We are doing things without thinking. It’s rote.
Unfortunately, the way we’re set up, I’m not sure, unless we conquer that one thing you said. Sometimes I think it’s very clear that governments are going to have to make the hard decisions.
Mr. Thériault: There’s a really good reason why we never did it. The third rail of politics is part of it, but I think we were just flushing cash. We could put more money into the system. Rich societies do that. It’s one of the core values of any human being. Health is seen as a priority until there is the real notion of lost opportunities, when you start crowding out other services such as education, infrastructure, all of the big questions that Canada faces now. We are in that environment where we have to make hard decisions.
So I see that as an opportunity, really. I think we’re starting to mature our thinking around all of this in a way that’s quite constructive.
We have been running the Canadian Alliance for Sustainable Health Care for five years. It’s different now than just five years ago. The maturing, the facts and the rhetoric have been understood for quite a while. In fact, talk about prevention in population health; we talked about it in the Lalonde report in 1973, but now we’re starting to say that wellness and population health and prevention should be central components of what we talk about when we talk health care.
All of that is to say that I think we’re on the right track. I’m an optimist. An economist needs to be an optimist. I am an economist as well, and I’m in the forecasting of all fields of economics and macro forecasting. So you have to be an optimist. There are solutions. Dr. Furlong suggested some, and Dr. Saillant as well.
We posed some diagnoses and mentioned the magnitude of some of the challenges. If you are a decision maker, one of the big problems is that everything can come at you on equal footing. Every issue has to be tackled now, and all of them are equally important. The reality is not that. You can go at this incrementally.
I was talking about leveraging information in the health care system. That should be the number one priority. As to electronic medical records, if you want to leverage how information circulates in this system, get people other than doctors who are involved in primary care, like their famous primary-care teams. In fact, after the health accord in 2004, we had that whole initiative, over three years, around primary health care and leveraging teams, which is not just about doctors. So how do you do that? How do you provide the proper incentives so that works?
How information circulates in the system is central around the patient. Electronic medical records have been talked about forever. It’s a necessary condition, and, frankly, that’s one of my disappointments because we haven’t been there yet. We’re not yet done with this. But, as I just mentioned, I think diagnoses have been made clear, so we’re now in a position to drive solutions.
Mr. Saillant: On this question, if you want to know what is going to happen in the future in some regions of Canada, you just have to look at the provinces that are aging fastest, because in our region the future is already here. What we see in that future is that New Brunswick, for instance, has had the tenth consecutive deficit since 2007. It has doubled its debt. If we include other government entities, it’s almost triple what it was.
You have a settling in of what I will call, for lack of a better word, “gerontocracy” because older people vote more and older people are more numerous. What we have seen so far is that as soon as you appear to be touching the possibility of affecting entitlements to senior services, you get a massive backlash and a government that backtracks almost as fast as you can say the word “backtrack.”
So thus far, we don’t see a positive future. Maybe once we have a situation where we really have a crisis, Ottawa will respond and the provinces will start innovating. But, again, health care is the most important service when you require it, and governments have an effective monopoly over much of those services. So they need to provide high quality, unrationed and timely care. We are failing, in our region at least, on that front, and my sense is that as soon as it reaches a threshold of tolerability, all bets are off unless we receive much more help from Ottawa, as I said.
Dr. Furlong: If we want to know how to save money, we have to know how we’re spending it, and we have to have the determination to sort that out.
With regard to more money in the system, we’ve been doing that for 30 years — more money, more money, more money. We’ve doubled the cost in the last 12 years from $110 billion to $230 billion, but the wellness of Canadians is worse than it was 10 years ago and was worse then than it was 10 years before that. So population wellness doesn’t come out of the illness care system. That’s very clear. We can’t keep thinking of it as a health system; we have to start thinking of it as an illness system, which is what it is.
To get a grasp of what is coming at us, I need to give you a few more numbers.
The Chair: Please go ahead, sir.
Dr. Furlong: The cost per capita is just short of $6,000 per capita Canada. In the United States, it’s $8,000. We’re at about 12 per cent of GDP; the Americans are closing in on one dollar in five, which is 18.5 per cent — huge.
Our per capita cost from birth to one year old is about $7,500. My numbers are not as sharp as the pen my colleague has, but they are in the category. The first year of life is maybe $7,500. That’s immunization, “well baby” care and making sure everything is okay so that they’re launched into life without things that we don’t find until they’re so many years old.
But from age 1 to age 65, it’s about $3,000 a year. It’s substantially less than the average cost of $6,000.
This will clinch the nail of what’s coming at us with the demographics of seniors. If you go to 65, you’re still somewhere around $3,000 per year, but then it starts to go up. From 65 to 69, it’s about $10,000 or $11,000. From that to 80, it’s about $14,000. After 80 and getting into the 90s, it’s close to $30,000 a year per capita.
As we speak, I believe we’re about 13 per cent of the population. Within the next 20 years, some provinces will be at nearly 30 per cent. From that escalation of costs in the age group, you can see what’s coming, and we have to be ready for it. It's the parachute thing. We have to be ready for it. We’re not ready for it and no one is talking about it.
Having sat in the chair with the health ministers of Canada, I’m not sure anybody really knows what to do. But I’ve suggested that what I think we need to do is get away from “wants” in health care and get back to “needs.” There has to be accountability in that space. We have to reduce utilization, and if we can’t reduce utilization, we can’t reduce costs.
But clearly with those numbers, we can’t make it work. It’s bound to get to the point where we’re funding it, yes, but at great difficulty, like now. And this is dramatically worse. If that graph was like this, we would have half a chance, but it’s not like that. It’s like a hockey stick. That’s what’s coming at the poor provinces very soon. The poor provinces have the worst problem with population aging and have the least ability to cope with it.
We need to be alert.
I was asked by the French press one time in New Brunswick why we don’t change it. In my inimitable fashion, I said, “Because I don’t think anybody knows what to do.” He said, “Can you repeat yourself?” I repeated myself. We all keep doing the same thing over and over again — the old definition of insanity. We’ve added money on top of money to the system, but I can assure you that wellness in the population is not the absence of illness. It’s something else that’s delivered in other systems.
We must reflect on it and have a plan. The analogy I would use is that if you go into a store and you don’t know what you want, chances are you’re not going to find it. That’s where we are in Canadian health care.
As big as it is, as expensive as it is and as convoluted as it is, no one really has the answer. If you get 10 or 15 people in the room, there are 10 different answers, like Archie Bunker, and they’re all extremely right. We have to make a decision and we have to move with it. Any decision right now is better than no decision.
Mr. Saillant: We’ve barely seen the tip of the iceberg. The first baby boomers are 71 this year. Between the ages of 70 and 74, the number I have here is $8,000 per capita in national spending. When you move to 85 to 89, it’s about $25,000.
To those who say that population aging is bankrupting health care systems, it’s not the case yet. There are other non-aging-related expenditures. But 15 years from now, half the baby boomers will be 75 and above. That’s where it’s going to start really having a major impact. I say that certain regions will not be able to support that — not even get with the health care system without further help to maintain health care as we know it 10 years from now.
But more important, this is not the only driver of spending. Chronic conditions also have a major impact on spending. The poorer regions tend to do more poorly on that also. When you put it all together, you’ve got a picture of certain regions that can barely hold water now. Ten years from now, it’s not going to be possible.
And these are just the numbers.
Obviously we need to address those issues. One of the things they say is that it’s the final year of life that costs more. Maybe there are ways to look into that issue. When Dr. Furlong talks about wellness, chronic conditions are related to that and how we deal with those. After that, becoming more innovative with inpatient versus outpatient care and how we deliver care.
Those are parts of solutions. But at this point, every time you have a politician making an electoral promise, most of the time they will say, “We’re going to get more doctors.”
[Translation]
Senator Forest: Thank you for joining us today. To begin, I have a short comment. The demographic challenge you so rightly highlighted for us is probably one of the biggest challenges facing our society. It affects workforce succession not just in the health care sector, but also in every sector.
Behind a demographic reality lies a socio-generational reality. For example, when I would go from Bonaventure to Moncton, it was quite the journey. Nowadays, however, people in my son’s generation talk about moving around the world, going to London, India, China and all over the place. Not only will young people choose their workplace, but they will also choose the place where they will live. That will intensify the phenomenon in communities that are slightly less appealing, across all sectors. That was my short comment.
My question for Dr. Furlong has to do with medication, which accounts for a significant share of costs.
At one point, I was told that a medication used to treat colon cancer — I believe — had quite a significant and beneficial effect on eye degeneration. Consequently, health care workers began using the leftovers of the drug, which had beneficial effects and cost nothing.
When the drug maker realized what was going on, it took the drug and altered it slightly. A treatment now costs between $1,500 and $1,800. The whole drug issue has a tremendous impact on system costs.
In that sector, specifically, are there steps we could take to better manage public funds?
Dr. Furlong: Absolutely.
[English]
On the question of “pharmacy” in Canada, Quebec is leading the country right now with a program. It’s universal, publicly funded and so on.
I was challenged five or six years ago to put together a program for New Brunswick. I did exactly that. I patterned it after Quebec. Shortly after that, the Canadian Medical Association said it was a prototype for a national pharmacare program. So did the C.D. Howe Institute.
Yesterday, there was a study that came out of Vancouver. Maybe you have seen it. It looks at Canada, where we pay pretty close to the highest cost for medication in the world. The one number I read there said that New Zealanders pay 85 per cent less for pharmaceuticals in their country than Canada.
Do you think we should be on a plane going over to find out what they do? Yes, but the pharmacy industry is private and for profit. They are going to maximize their profits. That’s what they do. Across this country, when there were new drugs coming on, they would manage to get a government that was pre-electoral by six or eight months and they would hammer and get them to cover a drug and put it on the formulary. Then they would run to the next government that was pre-electoral and hammer them for six months prior and get advocacy people to talk and make a disturbance and say, “Well, New Brunswick is doing it, so there, Nova Scotia.”
We have been at the mercy of the research-based pharmaceutical industry, not the pharmacies as such. We have to get back at that, and the best way to do it is to bring your procurement all together and negotiate for 35 million people if you want to supply this drug, or, in Quebec, for 7 million people, and we’re not doing it.
We are ripe bait now for the industry to do what they’re doing. Drugs themselves are very costly and if they see an avenue to make it more costly, they will.
[Translation]
Mr. Saillant: I would like to respond to what you said about your son who moves around a lot. That is the challenge. If young people are overtaxed, lack access to social programs — be it education, child welfare or other services — and they see that wages are higher elsewhere, they will do what many others do and move. And that could create a vicious cycle.
I wrote a book in New Brunswick called Over the Cliff? Acting Now to Avoid New Brunswick’s Bankruptcy. There is indeed a cliff, and after a certain period of time, there is no going back. I often elicit a reaction from people in New Brunswick when I say that Ottawa is less interested in us than we are in ourselves. Forget about Bay Street and Wall Street. The fundamental risk is an intergenerational conflict. Faced with the importance of health care in the country, we will have to choose between investing in health care and diminishing the student/educator value. We will choose health care.
In the long run, economies in certain parts of the country could become much less dynamic, resulting in an overall loss. Allow me to explain. Statistics Canada estimated that New Brunswick would have a population of 756,000 in 2016. The census, however, revealed that the number was actually 747,000. That means the province had 10,000 fewer people in five years. The reason is that much of the dynamic I am describing is beginning to come into play. Taxes are going up, incomes are not and good jobs are increasingly rare, and if that continues, the phenomenon will gain steam until it reaches the point of no return. It is not out of line to think that Canada could let New Brunswick decrease in population size while ensuring human dignity. The idea that New Brunswick could lose vitality within the boundaries of a more dynamic and wealthy federation is entirely logical. That has been the case since Confederation. Our population has tripled since Confederation, while Canada’s has grown tenfold. This is the first time in the history of humanity that we have to manage a demographic bubble, in which the government is responsible for citizens from the time they are born until they die.
Mr. Thériault: I agree with Mr. Saillant. The report you have in your hands, Future Care for Canadian Seniors: A Status Quo Forecast, puts the numbers into perspective. What I want to say is that we are at the diagnosis phase. The diagnosis is clear. As far as solutions are concerned, I have one I would like to put forward. It has to do with achieving efficiency gains through innovation, so that every dollar invested can go much farther, whether by reducing the demand for services or transforming service delivery.
The dynamic Mr. Saillant is describing, with respect to the Atlantic provinces and New Brunswick, in particular, is not all that different from the dynamic associated with services that have to be delivered to remote communities. The technology in that area is promising. A condition must, however, be met: patient information has to be able to flow between the various service providers. It begins, then, with the much talked about electronic health file. That is the tie-in with your question, the technology element and access to medical devices or medication. That is what is being discussed as far as an accessible plan for all Canadians goes.
As to Discussions on the issue fail to take into account the fact that the pharmaceutical industry can be a source of solutions. Historically, it has been a pillar of Montreal’s economy that, through research and development, has contributed to productivity gains and collective wealth. That dimension has been lost for all kinds of reasons, and I think it is time to examine the issue when considering the technologies accessible to Canadians as compared with populations in certain European countries, say.
For instance, biologic drugs for rheumatoid arthritis come to mind. Our treatment rate is equivalent to Portugal’s, in other words, 6 per cent or 7 per cent, whereas France’s rate sits at 20 per cent, even though its investments in the system are roughly the same. My point is that we need to pay attention to the pharmacological consideration, whether that involves medical devices or drugs. If we fail to pay attention to the innovation issue, things like personalized medicine and the way that genome decoding can lead to better-targeted treatments, we will pay a very high price. Without a business model that gives us access to these types of cutting-edge technologies, fundamentally, we are shooting ourselves in the foot.
The Chair: Are there any follow-up questions?
Senator Forest: You are right. The trade agreement with Europe presents opportunities and risks, which we should consider very carefully. The risks include higher prices on certain products such as drugs. We need to be aware of that reality, with all due respect to the sponsor of Bill C-30.
[English]
Senator Andreychuk: I have many questions, so I’ll try and restrict myself to a few.
In your presentations, someone said it was gloomy, but the reality you’re putting forward is the way I would put it. Yes, there is more than one question and more than one answer within the medical system. Administration-wise, we have a convoluted system in which you go to a general practitioner to get to a specialist. Everything is a time delay, so a very simple procedure can take a year, and that’s with all administrative costs built in.
My point is that we know all the problems. You have graphically laid them out again, yet we see a government that has negotiated with the provinces what I would call a stopgap and taken the issue off the table again. New Brunswick signed on, got their deal and unravelled the deal for the rest. I think there was a moment where we could have addressed the medical crisis and the aging crisis, and we didn’t.
We understand it’s politics, but I guess I would say you are the people who ponder this issue. How do we get it done?
Dr. Furlong: I think that categorically, having been in the system for 40 years at all levels, I can say to you that there’s another analogy. If you want to know about the river, ask the alligators, not the zebras. I’m an alligator. I’ve been in the river for 40 years, and I can see what has been happening and what it has been doing. I can see where we’re going and how government has responded to challenges in the system — always with a cheque — and I can see how my profession has reacted.
I am not a popular guy in the Canadian Medical Association or in other medical associations because I say it the way it is, and they don’t want to hear that. But we have a Canadian illness care system that is dysfunctional and failing. When you have to wait two years for a service, then you wonder whether you have a public health care system. It’s there, but we are now in dysfunction. We are graduating orthopaedic, cardiac and general surgeons, but they have no place to work in Canada; no job.
Mr. Thériault talked about the biologicals. That is autoimmune disease. It is a grossly expanding part of health care today. Autoimmune disease and biologicals, the people who quarterback those are called rheumatologists. We have one for every 100,000 Canadians.
What is wrong with our universities? Why are we producing what we don’t need and not producing what we need?
I got them all together once in 2000. I got all the presidents of the medical schools in one room with all the Ministers of Health in Canada and said, “You make the widgets; you use the widgets. Can you please talk once in a while so that we get some kind of a human resource plan for Canada?” That was the only time that I know they met.
The point being made is it’s dysfunctional and failing. The only thing I can see at this point is that the money is in the system now to do all that we want to do in a better way and include pharmacare. The $45 billion that we could save if we can get at that useless utilization is enough for two pharmacare programs. A pharmacare program in Canada, when you do the jigs and reels, so to speak, will cost about $20 billion. We have $45 billion that we can get at.
If I went into a private sector business today and said, “Sir, I know how you can reduce your costs by 20 per cent and not affect anything else,” do you think he would ask me to sit down? I suppose he would, but I can’t get to first base with politicians.
I have spoken to a couple of federal ministers: We have to react; we have to bring insurance principles in.
The irony of it all is OHIP, the Ontario Health Insurance Plan. It is not an insurance plan. It is a 100 per cent social program with a premium that you take back to what they call “Premium McGuinty.” Premiums drive utilization. They bring more money, but they drive utilization. People say, “I put in my $600, so I’m going to use it. It doesn’t matter what it is.”
Alberta started; they backed off. Quebec is backing off now on premiums.
Premiums don’t work; user fees don’t work. There are only three basic principles in insurance: premiums; fees at the interchange of the provider and the consumer, which we call user fees or co-pay. That didn’t work. We tried that because we didn’t want to put a whole cadre into the system to start collecting. If you have a mother coming down the corridor with a five-year-old kid that’s having a seizure, you’re not going to say, “Where’s your $5?”
The only thing I believe will work is deductibles. Deductibles will work. I have sung the song in my book that that can work, but we need to do the actuarial work. We need people to take responsibility and accountability so that someone in the system that I have been in for 40 years thinks about cost not the second time but the first time. No one does now.
Mr. Thériault: I was making a point earlier on incentives. Incentives matter in any business model, whether it is for health care delivery or another.
Right now, fee for service is largely driving how physicians deliver care. That doesn’t make sense, given how we can deliver a different type of care. I’m curious about Dr. Furlong’s perspective on that.
There are degrees of complexity in how we deliver care. I think we can start with how we pay for the various outcomes we’re looking for. Complex diagnosis is one thing, and fee for service makes sense for that. Commoditized-type care for even heart surgeries, to a certain extent, is pretty routine for some of them; and hip replacement; some eye surgeries. All the technological changes over the years have just driven costs higher, and we haven’t changed the way cardiologists or surgeons are paid for these procedures.
Why not, like we do in many other industries, pay for outcomes? The outcomes are clear. The empirical evidence to support what we should expect is very clear. We could pay for that. That would be a start. Then chronic disease management; how we manage people that will have a condition for the rest of their lives. Again, fee for service for that doesn’t make any sense.
That is a simple way to start talking about how to re-incentivize the players in the system to deliver care in a way that makes more sense.
Navigating the system in that context would force some exchange among the providers of services. It would minimize the burden on them and, at the end of the day, maximize the return on their time spent or their income. By re-crafting and redesigning how we incentivize, physicians are part of it, but there are also all the other providers. Often, in primary care teams, the physician is the leader of the team. It doesn’t have to be like that. We have published a number of reports on this.
I would propose that as starting point, re-crafting incentives on how we deliver care and start parking the types of services in different categories. There is no way it makes sense to pay and provide incentives in the same way for all providers and all types of care.
Mr. Saillant: Your question is very relevant because you talked about the CHT, and we are now into the role of the federal government in health care.
We need to back up a bit to understand what the CHT is. In my view, the CHT and the CST are largely anachronistic. They go back to a time of what was called “collaborative federalism,” when Ottawa was trying to legislate in areas of provincial responsibility through its spending power. We often say that Ottawa was paying for 50 per cent of health care. In reality, the actual number peaked in 1977 when it was 43 per cent because some types of expenses were not eligible under the programs at the time.
I say in my book that in 1977 the fiscal chicken of paying for health care at the federal level came home to roost in the midst of inflation. Ottawa did what we expected it to do, which was retrench, because it couldn’t afford to pay one for one. It was also a source of inefficiency because when provinces got 50 cents for a dollar, they had no incentive to lower their spending.
As we move toward unconditional transfers, Ottawa is increasingly providing money, fungible money, with little accountability. If you look at the Canada Social Transfer, there is only one condition tied to it: You can’t take welfare recipients and bus them from Alberta to British Columbia, as Ralph Klein did. That is the only condition. Other than that, you can spend the money as you see fit.
In health care, there is the Canada Health Act, which has various parameters, but in the future, provinces that are richer will be able to respect the Canada Health Act as they see fit; provinces that are poorer will not. The solution will not be in using the enforcement sledgehammer of the act to make them comply. The solution will be in revamping fiscal federalism so that we have appropriate resources in the system to fund health care in Canada.
What is appropriate? The question here becomes, what can you do as a federal government to impose conditions knowing that we are no longer in an era where Ottawa can easily invite itself to the table? When it retrenched in the 1990s in the midst of the deficit, some provinces, not just Quebec, were no longer keen on seeing Ottawa trying to impose new conditions when it was not even appropriately funding existing programs. You are going to have a major issue right there.
I personally believe that the CHT funding right now is appropriate because the issue is not, as Louis was saying, that there is not enough money in the system. If you want to incentivize change, don’t throw money at it.
Down the road, we will have to look at something else other than CHT and CST, and look at equalization. What equalization does is work on the horizontal fiscal imbalance among provinces as opposed to the vertical between Ottawa and the provinces. Ottawa, going forward, has no ability — and I said it before — to go at it through a bazooka-like approach. It needs to be nimble. That is what equalization does.
Equalization could be amended to take into account the fact that public spending is now age dependent. In the past, the equalization formula worked well. There are two things about equalization. Every time we talk about equalization it gets complex fast, but it’s a simple thing.
The Constitution of Canada says that Parliament and the Government of Canada are committed to ensuring that provinces have sufficient resources to provide reasonably comparable services at reasonably comparable levels of taxation.
The way we legislated it in the equalization formula, we didn’t say “sufficient resources.” We said “comparable resources.” Until recently that was fine when the age profile of the population was not affecting spending patterns. Now that we move forward, the principle of equalization in the Constitution is still operative and probably right from a public policy standpoint if you want to maintain a single welfare state in Canada. That principle is not what dictates policy right now. What dictates policy is that we should all have the same money, but we have vastly different needs.
Newfoundland still gets equalization. We will see if it does in a few years from now. If Newfoundland still qualifies for equalization, it should get less than a province that does qualify now so you can adjust for the uneven pace of aging and resources. That is what the principle says, but as it stands right now, we are not respecting the principle. I conclude my book that we should honour the Constitution, but we are not right now.
Senator Andreychuk: We have talked about the health care system, but aging also involves living longer and meaningful lives. We’re not talking about changing the RRIF policies from RRSPs; we are not talking about changing a lot of things that could keep seniors more productive. And moving back to age 65 from age 67 regarding some of our fiscal policies is not addressing a problem that exists in our capability to fund issues.
How do we balance the medical aspect? We seem to do it is silos. We talk about financing over here and then we talk about medical. You are trying to say that aging is an issue that should hit all of us. I say that because when I talk about medicare with someone who is young, they are committed to this equality: “I don’t want it to be private,” et cetera. Only when you live through the system do you begin to realize that that is not helpful and there is a lot of difficulty within the system.
Are you paying attention to our fiscal and monetary policies at the same time as you are looking at the medical aspect?
That is a long question. I hope it is a short answer.
Mr. Thériault: That is the bread and butter of the Conference Board of Canada. It’s all driven from our macroeconomic analysis and long-term forecast. You are identifying a key challenge, which is tied to our lower economic growth potential down the road, and that is labour.
There are some solutions. Immigration is part of that. In terms of macro solutions, it is not so much immigration but how we leverage new Canadians to the maximum potential skill set that they bring. That ties to skill adaptation. As you move from one stage of your career to another, whether you are a new Canadian or a Canadian that has had a career but wants to work longer, how do you adjust the skill sets of these people as they move in age if they still want to stay involved in the labour market? That is really a macro consideration. Given the U.S. election, Brexit, Marine Le Pen in France, a whole generation of people have been left behind and are looking forward to what these politicians are suggesting. That is an oversight of the promises of globalization, the opening of our borders and how we foster the wealth that comes with trade and being more open than closed.
Some people have a hard time in the transition, and we have to look after that. The concept of being open is not debatable. It is how we take care of the transition costs that are obviously part of that.
If you want to be macro again on some of the themes that we consider as part of all this, the low-carbon economy is not easy for everyone. There are no easy solutions for all these things.
The macroeconomic and macro social ambitions we have must be tailored in a way whereby we have social and political support along the way. That means crafting solutions before you head into major change in a way where people that will feel the tension will be looked after. We have to consider all of that as part of moving into more fundamental structural shifts, whether it is health care, integrating immigrants or how we deal with the current backlash of 20 years of globalization.
Dr. Furlong: That is a great question because we have to figure out how 50 per cent of our budget affects all other things. With pharmacare, for instance, people really don’t realize how big a barrier that is between a social services life and a work life. People will not go to work because they need prescription drugs. If we had a national pharmacare program for the working poor and the people on social services, that barrier would largely be relieved. It is in Quebec, but it’s not very much across the rest of Canada. Unfortunately, the program I gave to New Brunswick addressed that, but it was six months before an election and they didn’t move on it.
We have these wonderful social programs in Canada to try and do horizontal social justice. We do probably better than almost any other country in the world with that and we have wonderful social programs to support everyone, but now it is starting to compromise vertical social justice or inter-generational social justice. The point to be made — I can make it with Newfoundland debt, which is about $15 billion. If they were to balance the budget tomorrow, it will cost about $1.5 billion this year but maybe $500 million in New Brunswick. If we were to balance the budget indefinitely, find $100 million to put on the debt every year, not taking into account interest, Newfoundland will take 150 years to pay it off; New Brunswick would take 140 years. Throw in interest and we are looking at two centuries.
Do we have to ring the bell to say we need to address this? My colleague here writes with a sharp pen; I write with a crayon in numbers and my numbers are all soft. But the reality is there. Burdened with the debt that we have put in place, we are compromising the ability of our future generations to function.
We can justify building a bridge that will last 200 years, but we can’t justify getting our blood pressure taken today and giving the bill to our great-great-grandchildren.
Mr. Saillant: With regard to Dr. Furlong’s point about inter-generational equity, these are comments that not everyone will like, but we don’t tax ourselves as much as we used to in this country. The federal fiscal burden is 20 per cent lower than it was at the turn of the century. I’m not implying that there is an optimal level; I’m saying that as a percentage of GDP we don’t tax ourselves as much as we used to.
At some point, once we have out-innovated ourselves and figured out all the solutions to provide health care at a lower cost, we will have to tax ourselves more. Some regions are taxed way more than others and others have reached what I consider a “proceed with care” zone.
The other part, and here I speak to my region, is that culturally speaking we need to proceed to transformation. We gladly accept dollars that come from oil sands extraction, and shale gas and oil from the Prairie provinces and British Columbia, but we will not accept fracking on our own lands. This is a bit pernicious because we turn around and then ask for more. To be morally consistent, we either ask for the equalization formula to be amended so those revenues are not taken into account in the formula or we start looking into how we can do that safely ourselves.
We have a moratorium in New Brunswick on that very issue. I think it is related to aging, personally. The younger the population, the more it needs to work, the more it is open to natural resources development. The older you are, the less you need to have that revenue coming, so I think there is aging related to that. It is transforming our society profoundly.
After that, we need to look at other options to foster growth, including immigration. On this count, immigration is one way to enhance national economic potential. It will exacerbate the great demographic imbalance, because immigrants tend to locate in areas where there are other immigrants who are thriving more, economically. We have a dramatic challenge in our place in retaining our immigrants. If we don’t do a good job at retaining them, they have to uproot their family again, and it is a tragedy for people to do these things.
Immigration is a big, big issue. We are slowing down because we have fewer workers coming into the workplace. One way to accelerate that is to welcome more immigrants.
Finally, we need to look at how we spend public dollars, not only in health care but in other areas, including education. Over the last 10 to 15 years, Canada has lost a lot of pupils in public schools, yet the number of educators is up, not down. In our region, we have local depopulation in northern New Brunswick, but we do not have a proportional reduction in the number of schools and educators. It is hard to manage rural decline. However, at some point we will have to recalibrate our new public spending to reflect the new demographic realities.
All of these things happen with a lag. Until 2008, all provincial boats were being lifted through the great demographic dividend coming from the fact baby boomers were all in the workforce.
Demographic change is a gradual phenomenon, yet its consequences in terms of economic growth were sudden. As of 2008, Canada’s productive potential was amputated by 35 to 40 per cent, just like that. We tend to think of demographics as a linear process, and it’s true, but in terms of economics, the future has been here for 10 years.
The Chair: Thank you. We have seven minutes left, and we have two colleagues who would like to ask questions. I would ask that you be sensitive to the questions so we can get them answered quickly.
Senator Neufeld: You have given us a lot of good, interesting information.
Coming from British Columbia, my experience is that if the public doesn’t know the system’s broken, you can try to fix it as a politician, but that is your death knell as a politician. I have always been told that doctors are trusted by the general public. There is no magic bullet, but I believe it is incumbent on doctors to start talking to the public about the issues that we’re facing in health care — not just here for a few people to watch and listen to on TV across the country — and the fact that the system will crash if we don’t fix something. If you are in the system, trying to get a hip replaced or whatever, you know there is something wrong, but generally the public doesn’t. I would like you to respond to that.
I would also ask Dr. Furlong something. I think you talked about a wealth transfer being horizontal instead of vertical. I would like you to explain that a bit more. Like a lot of people in their 70s, I am trying to save a bit of money so that if I have to go somewhere to get it done, I can afford it. When someone talks about taking that away and putting it across a horizontal system, the hair on the back of my head goes up a bit. I would like for you to maybe respond to that.
Mr. Saillant, with the growth in the number of seniors, never once did you mention British Columbia. I don’t know when you said “the Prairie provinces” if British Columbia was part of that; it isn’t a Prairie province. The fifth balanced budget was just tabled in British Columbia the other day, so they are making tough choices because they are doing it in the midst of a number of things. I was glad to hear you say that you don’t do fracking in New Brunswick, and maybe New Brunswick has to look at enlarging their economy — the pie — instead of figuring out how they will spend their way outside of it.
There are three questions.
Senator Mockler: Energy East.
Mr. Saillant: British Columbia is somewhat of an outlier. In terms of a population profile, it resembles Ontario and Quebec. It will grow faster than Quebec in the years ahead because its demographic dynamics are different, with more people coming in rather than through fertility rates.
However, in terms of what it has done in the recent past, it is the only province that has resisted the movement toward increasing the number of educators in the system. Yet, according to the Conference Board of Canada, a venerable institution, if British Columbia were a country, I believe it would be third or fourth behind Finland and Japan in terms of educational outcomes. Yet it is the province that has the largest student-to-educator ratio and is the only one that has managed it successfully over the last 10 to 15 years.
At times when people say the solution is spending more, British Columbia is an example of hard decisions in certain areas that have led to at least not worse outcomes. In the case of education, the report seems to suggest much better outcomes than elsewhere in the country. Correlation is not causation, but it’s still an important fact to know.
Dr. Furlong: Given what I said about 150 years to pay out existing debts at the kind of rates we have in the country — Quebec is at 54 per cent of GDP; we are at 45 per cent — the money has to come from somewhere for the custodial care of all these baby boomers, not for illness care or the medical system.
Do we borrow that money from the market and send that down three, four or five generations from now? I’m not sure any parent or grandparent would want to do that individually, but as a society maybe we ought to look at a succession tax for the several trillion dollars of wealth that is with the baby boomers to transfer to the next generation. It makes sense that they pay for their own care, that’s what I’m saying. I don’t know numbers. I’m not an actuarial guy, but I am not sure where that money will come from.
As I suggested to you, the cost to keep someone in a nursing home now is way larger than the illness care costs at $6,000 a year per capita. But when you look at $5,000 a month to keep someone in a nursing home, you’ve got a perspective of what’s coming at us.
When Roy Romanow looked at it, he talked about pharmacare and senior care. But what he didn’t say about senior care was how we’ll pay for it. Right now, it’s getting more ominous because provinces are strung out four, five and six generations in debt.
Senator Neufeld: Do you think it's the doctors’ turn to stand out and talk about the issue of health care? All politicians do is say, “You’re just feathering your nest.”
Dr. Furlong: I said it earlier and I’ve said in my book that I was concerned about the Canadian Medical Association. I think the “defenders of the faith” with regard to illness care or public care in this country, which is a prize — the prize — it is our most expensive program, more so than pensions. The people who should be speaking out are the doctors of Canada and they’re not. They are not defending the public health care system.
I say to you categorically that if we woke up tomorrow morning and there was no public health care system, about 30 per cent of the doctors in this country would be out of work and out of money in about three months.
The Chair: We need to move forward, gentlemen. One last question.
Senator Mockler: I would like to recognize in the audience one of the two co-chairs of the Council on Aging, which published a report entitled We are all in this together: An Aging Strategy for New Brunswick.
[Translation]
I would therefore like to highlight the fact that Dr. Suzanne Dupuis-Blanchard is with us today.
[English]
She’s also on the national advisory committee for health care. Thank you.
Dr. Furlong, you said that due to aging and health care, home care and a community base should be “la voie à suivre.” Do we have the same comments from the other two gentlemen?
[Translation]
Mr. Thériault: That was essentially my point. What is also important is how we define it. That is the central issue. That dimension often falls under the guise of health care services that are available, either through hospitals or long-term care facilities. At that point, however, we are talking about something else. We are talking about home care or services available in retirement homes that provide various levels of care. The health care network is expanding, and it is important to define it and give it structure. That is what our report advances.
Mr. Saillant: I agree. What you are talking about, senator, are basically technological changes. Technology has to be understood in the very broadest sense. It is the way services are structured, the methods used to deliver services. It can include the release from hospital to other settings. Overall, though, the challenge for the health care system will be the increasingly rapid pace of technological change in the years ahead across the entire system.
[English]
Dr. Furlong: As a final comment, we live in the best country in the world. There is no question about it. One of the reasons we live in a peaceful environment is because we redistribute our wealth. Peaceful countries are peaceful because they redistribute their wealth, and we do one of the best jobs in the world on that. We have to continue to do so, and we have to do that for the baby boomers as they pass by.
But I remind you that they will pass by. I gave the analogy of classrooms that were tagged on to every school in Canada for a while, but they all went. We then have to think that we can’t let this debt hang on for another six, seven or eight generations. We have to be active, innovative and fast about this.
The Chair: That was a fantastic session, and we thank you all for your participation today.
(The committee adjourned.)