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Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 59 - Evidence


OTTAWA, Monday, June 3, 2002

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 9:00 a.m. to examine the state of the health care system in Canada

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, today we will continue our discussion of the reform of Canada's health care system. Our subject today is the methods of financing health care. The committee has already dealt with the question of additional federal revenues at other hearings and has taken the position that they will be required. The question before us is, essentially, if new federal money is required, what are the most appropriate means of raising it? How should individual Canadians contribute revenues to the federal government so that it, in turn, is able to substantially increase its contributions to the Canadian health care system? Our purpose in this round table is to put before the committee, and before Canadians, a series of options for raising additional federal revenue for health care.

We have with us today a panel of experts from across the country, including Professor Raisa Deber, Professor Robert Evans, Mr. Walter Robinson, Mr. Paul Darby and Mr. David Kelly.

Mr. Paul Darby, Director, Economic Forecasting, The Conference Board of Canada: The Conference Board of Canada is certainly in agreement with the Senate committee's conclusion that current funding of health care in Canada is not sustainable. We have done a fair amount of work forecasting health care expenditures as far ahead as the year 2020, and looking at forecasts of provincial and federal budget situations. We have concluded that, indeed, over the next 20 years, various forces will put enormous pressure on the health care system in Canada.

We wish to note that those pressures are not just 20 years down the road, but are also pressing fairly heavily on provincial budgets. When we look at real per-capita health care spending at the provincial level, we see that by 1998 it was already back to the 1992 peak. The cuts in health care spending that took place in the 1990s are now beginning to look like a small blip in a substantial upward trend. From 1996 to 2001, real per-capita health care spending grew at 4.4 per cent per year in this country. That is enormous. We are now well above the 1992 peak.

Yet, in spite of these substantial increases in health care spending on a real per-capita basis — and let me again emphasize a ``real per-capita basis'' — and, under all normal economic measures, the fact that we should be looking at much higher volumes of delivery, people still seem to feel that the system is inadequate, as reflected in various polls. At the same time, when we examine the polls, and the Conference Board pays some attention to value surveys of Canadians, it seems clear that they still feel that the health care system is a huge priority and do not wish to see it disrupted.

Reacting to these pressures, we would argue, provincial governments are obviously still paying an enormous amount of attention to health care. At the Conference Board, we fear that that is beginning to crowd out other areas of spending. If you look, for example, at increases in provincial spending between the 1999-2000 and 2001-02 budgets, over a three-year period, 63 per cent of the increases in spending went to health care and 20 per cent to education. The situation becomes even worse when we look at the 2001-02 budgets and on to the 2002-03 budgets, where 80 per cent of the increases in provincial government spending over those two years went to health care. The only way provinces such as British Columbia could finance this was to actually cut back on spending in other areas. This is a problem that we are beginning to see surface. This is not something that is 20 or even 10 years down the road. Health care spending is, if you like, quite a ``monkey on the backs'' of the provinces.

Briefly, the Conference Board's position on how to address the financing issues over the next 30 years tends towards consumption taxes, such as the GST. We would tend to try to avoid taxes on working, which would include income and payroll taxes. We sense that, at this point, taxes on consumption would probably have the least disincentive effects among the various tax options one could consider. We would also want to avoid taxes on capital, since we feel this puts a disincentive on investment. Other esteemed panellists would probably be in a better position to comment. We would certainly consider looking at specific, targeted taxes for health care, such as we already have in the employment insurance and the Canadian and Quebec pension plans, CPP/QPP. We would want to see a specific link between the taxation and the spending on health care, in the hopes that those taxes would, as a result, be much more politically palatable to the general public. It is clear, however, that with such targeted taxation, provincial governments especially would have to recognize that it limits their flexibility in determining what to do with tax revenue.

Professor Robert G. Evans, Department of Economics and Centre for Health Services and Policy Research, University of British Columbia: Honourable senators, Mr. Darby has set up my remarks nicely. I do not find, in the evidence, support for his position that the system is unsustainable. Rather, I find that the proportion of national income in Canada being spent on medicare in 2001 is identical to the amount spent in 1975 — about 4.2 per cent. The curious rhetoric of unsustainability has its roots in other interests entirely, and Mr. Darby, on behalf of the Conference Board, has made those clear. However, they were also laid out clearly in a vigorous editorial written by Mr. Conrad Black after the last federal election, in which he poured contempt on Canada and all things Canadian, and particularly on the fact that Canadian governments ``take money from those who earn it and give it to those who do not.'' This is a true statement, if one leaves out the meaning of the word ``earn,'' because that is exactly what modern governments do — they take money from people who have a larger income and either give it to those who do not, or they use it to purchase services on their behalf.

Medicare is a major program — it is $46 billion, nearly 5 per cent of national income — and it does precisely that. It is financed out of taxes that are borne most heavily by people with high incomes and is used to purchase services for the whole population. However, lower-income people use more of those services. Hence, it is a redistributive program. Mr. Black's agenda, which is widely shared, although few people have put it so explicitly, is directly anti-egalitarian. It is an inegalitarian agenda that you could call the ``Black agenda,'' if you wish. It is one of changing fiscal and program structures such that they transfer less income from high- to low-income people.

If that is your objective, which I think is widely shared among the highest-income people in Canada, although only Mr. Conrad Black is the kind of person who would put it in black and white, you can accomplish it in two different ways: Change the tax structure, which is proportionate or mildly progressive at present, to make it more regressive.

This is what Alberta and B.C. have done. They have cut their income tax and increased their poll taxes. When I say ``poll taxes,'' I mean health care premiums, as they are per-head taxes. They are not, except at the lower levels, sensitive to income.

A shift from income tax to a poll tax, a health care premium, means a transfer of income from low- and middle- income people up to the highest ends of the income distribution scale. The discussion of health care premiums versus income tax at the federal level is precisely a question of how much will the relatively wealthy pay, or how much tax relief will they get. That explains why you get so much anomalous rhetoric, what we call ``zombies,'' in the claims about non-sustainability or abuse of the system. All of these things have been refuted many times by the data, but keep coming back because they serve the interests of the inegalitarian agenda.

This committee has largely dealt with the entire question of user fees and trying to make the system bear more heavily on those who are ill, and for good reason. The issue of tax structure can be addressed, and I have done so in the material I have given out, on the basis of a unique study done in Manitoba by Cameron Mustard and his colleagues some years ago. They were able to link together the utilization and cost patterns generated by specific individuals from the records in the health service programs with income levels from the census at the individual level, with remarkably stringent privacy considerations, which is just as it should be. It enables you to observe how much the amount contributed by people in different income brackets exceeded or fell short of the amount they used.

If you look at the tables at the back of my presentation, you will see the first one is sorted by income decile in Manitoba. Each of those deciles represented about 100,000 people at that time. The amount of money spent by all of the public health care programs for the permanently institutionalized population was about $375 million. Then it drops down to the non-institutionalized lowest income, which is the number one decile. It falls all the way down to the middle, and then flattens out for the top five deciles. That is really where the money goes.

The next figure shows where it comes from. There is the same amount of money, through the tax system, and you can see that a very high proportion of the total raised, over $400 million, comes from the top 10 per cent of the population, where there is much more income. Average family incomes in that decile were about $120,000 in that year, compared with $71,000 in the next decile down and about $35,000 for the average. There is a lot of income at that level and they pay a lot of tax.

The next figure shows you the difference. It shows you who gains and who loses from a tax-funded system. The losers are in the top 10 per cent, where you and probably many of the people around this table and your witnesses are, Mr. Chairman. Most of the people you talk to on a regular basis are in that top decile that is supporting the system.

The next figure shows the same story, only now it is by percentage of consumable income, that is, income after taxes and transfers. Over 20 per cent in the bottom bracket of income are represented by the transfers under medicare. Put another way, if it could be fully privatized, the lowest-income people would lose over 20 per cent of their income, while the highest-income people would gain nearly 15 per cent.

The next figure, in green, is perhaps the most interesting of the lot. What would happen if income taxes were cut by 20 per cent and an offsetting poll tax, called a health services premium, was brought in? Notice how the top bracket would have gained over $4,000 per family back in 1994. You can see that that comes from the rest of the group. Mr. Chairman, you are in a direct conflict of interest because you are in that top bracket, as am I, although I suspect you are somewhat higher up that bracket than I am. Most of the people who are making presentations on this issue stand to gain personally from using a poll tax rather than an income tax.

It is the same story with the next figure, only now I have put it in terms of percentage of consumable income. As the incomes are so different as you move up the scale, you can see that the percentages are different. A 20 per cent income tax cut, which exempts the bottom bracket and the permanently institutionalized — because they do not have much money — bears only on the other 90 per cent. There is an approximately 6 per cent drop in consumable income in the second bracket, and about a 5 per cent increase in the top bracket. Of course, a 5 per cent increase in the top bracket is a lot of dollars.

Then, for comparison purposes, I suggested we cut the income tax, and instead of putting on a poll tax, put in an offsetting co-insurance charge. That leads to an even bigger jump at the top end. Of course, they use less care on average. A co-insurance rate would be an even more effective way of transferring income from the lower- and middle- income groups to the upper, if that were your objective. Of course, the rate would be about 55 per cent. That is a large impact.

The committee is clearly right in backing away from co-insurance charges, quite apart from the fact that a very small proportion of the population uses most of the care anyway. If your objective is to make income distribution more inegalitarian and put money in your own pockets at the expense of people with lower incomes, then the health premium is a very good way of doing it without disrupting the rest of the system or interfering with people's access to health care. The Conference Board, whose members are all in that top bracket, says exactly the same thing: Do not tax income, tax consumption. Do not tax capital, use poll taxes. Yes, wealthy people like poll taxes; there is no mystery about it. What the Conference Board has again made clear is the pattern of interests in the tax system in this country.

In finishing, I should like to quote Sir Frances Bacon in connection with Conrad Black. Bacon said we are much indebted to Machiavelli, and others, who write of what men do, and not of what they ought to do. Lord Black has written of the real objective that underlies all of these strange forms of rhetoric about un-sustainability, about how Canadians are overtaxed and all the sorts of things that do not make any sense when you study the data. However, they make perfect sense if you view the entire scenario in terms of the inegalitarian objective.

Mr. David Kelly: Honourable senators, I have some brief comments to make about a potential federal health care premium. There are some other comments in my brief about privatization and the relationship between payers and providers in the Canadian health care system. In the interests of brevity, I will pass over them at this point and perhaps come back to them if time permits.

There may well be a need for additional federal revenues to support the Canadian health care system. A federal health care premium would be a means of raising funds in a fashion that provides visibility for a federal contribution. In considering a federal premium, two related issues must be kept in mind. First, the effort to identify and raise increased sources of revenue must not detract from the necessary task of improving the productivity of the Canadian health care system. It is possible that improvements in efficiency will not by themselves generate sufficient savings to undertake the investments in service expansion necessary to meet the legitimate demands our health care system is facing. Nevertheless, they must continue.

Often, during times of financial stress, organizations strive hardest to find better ways of doing things. Perhaps one of the conditions that should be attached to any additional federal funding is a commitment that provincial efforts to improve the health care production function must continue.

Second, a very large part of the increased federal funding in the February 1999 budget and the September 2000 first ministers accord quickly found its way into increased compensation for physicians, nurses and other health care providers. No doubt, much of this was required. However, we have seen generous compensation settlements in wealthier provinces place severe pressure on budgets in other jurisdictions that find it necessary to match those deals. It remains to be seen whether these increases will lead to the supply and, more importantly, the distribution of health care professionals that we need.

A second condition that might be attached to an increase in federal funding is the development of a national health care compensation strategy to ensure that further increases in resources are used to improve the supply and distribution of services, not just the unit price.

The provincial premium programs that operate in Alberta and British Columbia, and at various points in my career I have had responsibility for managing both, raise significant revenue. Premiums are fixed amounts applied universally, in that payment is mandatory. They are income related to some degree, in that they are reduced or eliminated for the very lowest of income earners. However, they are unrelated to program eligibility, in that late or non-payment does not result in termination of benefits to an individual or family.

Premiums are collected, where possible, through payroll deduction, with the balance billed directly to provincial residents. The administrative costs of collecting premiums through a process separate from the income tax system are not trivial. Were a federal health care premium to be introduced, it would certainly make sense to collect it through the income tax system rather than through a separate administrative procedure.

There are many potential designs for the structure of a federal premium, and as Mr. Evans has so articulately described, all have their own equity implications. There is a substantial element of income redistribution associated with the financing of Canada's universal health care program. Any move to finance the system in part through a federal premium, which might be less progressive than existing funding sources, would affect the nature of that income redistribution and therefore add to the list of value issues that the committee must sort through.

Professor Raisa Deber, Department of Health Policy, Management and Evaluation, University of Toronto: Honourable senators, you will note that I have just completed a study comparing the elements of private and public delivery. I know it is not the topic for today, but later, if people are interested, I could share some of the findings with the committee.

Most of my comments are in my brief, so I will give the ``sound bite'' version. The first is that I very much commend the committee on the first seven principles of financing. I wish to stress that, given the fact that a single payer can achieve economic efficiencies, as recognized by the committee in their report, it is important to recognize that pluralistic funding arrangements or other sources of revenue will not be less expensive for society. If services are not affordable for a society on a universal basis through a single-payer system, they are not affordable on a universal basis for that society at the higher cost implied by mixed financing.

We must be very clear that, if we are saying certain things are not sustainable through the tax system or by government, we are saying that we are okay with these things not being delivered universally and allowing people who wish to, and can, pay the difference to buy them for themselves. I am not saying this is bad. However, a number of the commissions that have come forward have talked about retaining universal access, but because we cannot afford to finance it publicly, introducing mixed financing — the two are contradictory.

If we cannot afford it universally through public financing, we are no longer talking about it being universal; or we are talking about higher total costs that will be paid for in different ways, with much of the burden being placed on business. I am very uneasy about the parallel financing approaches that have been suggested by a few of the provincial commissions because I think they lessen the economic competitiveness of business and make us less competitive as a nation.

There was a very nice piece in the Globe and Mail today about the fact that Canada has such an attractive business climate that we are attracting business from other countries, including the United States. It is very important not to lose that, and I commend the committee for it.

The other sound bite is that the CHST/EPF approach has demonstrably failed, and I welcome the rethinking of it. Additional funding for health care from the federal government should not go into the untargeted funding arrangements that have been made to date. It has neither relieved the federal/provincial tensions nor done the things one wants to have happen.

There are some cautionary points in my notes about internal markets and service-based financing. We could, if the committee wished, also look at some work that I have done with Manitoba in testing out medical savings accounts and looking at the incidences of costs in the population. The bottom line is that if you take all of the health care costs and arrange them not by income but by how much people have been spending on health care, it turns out that the bottom 50 per cent of the population — the healthiest — are spending about 4.5 per cent. This is taking three years worth of money added together. The sickest 1 per cent is spending about 35 per cent.

I can think of no one who would want to take one per cent of premium income for 35 per cent of expenditures. There are many people who would like to take 50 per cent of premium income for 4.5 per cent of expenditures. That is why everyone who has tried to look at a choice-based system, in which money follows the patients, has found they cannot get rid of these risk selection issues, because there are so few people that you must leave out of your package in order to avoid such high expenses.

I would be extremely cautious. Professor Jerry Hurley and Dr. Brian Hutchison found the same thing in looking at capitation funding formulas in their review for the Canadian Health Services Research Foundation, CHSRF. I am not easy about internal markets precisely because of some of these issues around risk selection and the fact that government will end up with the highest risks. Quebec is finding similar issues in their drug plan. Whenever you have situations where people are allowed to siphon off the better risks, you create systems in which the public ends up with the most expensive pieces.

I can also go into more detail on issues related to service-based funding, particularly for hospitals in smaller provinces or smaller communities, where such funding will not be enough to cover the infrastructure costs of running the organization. I can share the work of a student of mine on what would happen to pediatric hospitals under that sort of funding arrangement — there would not be any. On that, I will conclude.

Mr. Walter Robinson, Federal Director, Canadian Taxpayers Federation: Honourable senators, it is a pleasure to once again appear before you and your colleagues here this morning to continue our dialogue on the future of the health care system in Canada because it is indeed Canada's number one social policy challenge.

The Canadian Taxpayers Federation, CTF, was founded in Regina in 1990 and has grown to 61,000 members. We are a non-partisan, not-for-profit organization and do not receive financial assistance from any level of government. While I appear before you today in my capacity as federal director of the CTF, allow me to mention my community and personal experience in health care governance as a former volunteer trustee on the board of the Ottawa Hospital and current board member of the Ottawa Regional Cancer Centre Foundation. I am sorry that Senator Keon is not here this morning. He would have been interested in some of my perspectives on the current CHEO pediatric cardiac surgery unit issue that has gripped the local community.

Your research, hearings and publications continue to create room in the public policy spectrum for a broad and inclusive debate about health care reform. I would be remiss in my capacity as a taxpayer advocate if I did not commend you for the probity with which you have spent taxpayer dollars, as you have conducted your inquiry on a cost-effective budget that has now been running for some three years, if not more. Your work has also served to bring a measure of public respect and relevance back to the Senate and is a credit to the foundational idea that your institution would indeed be a place of sober second thought on public policy.

Since you heard from me back in October in Toronto on our formal submission both to your committee and to the Romanow commission entitled ``The Patient, The Condition, The Treatment,'' I will leave most of our substantive points to emerge during our discussion. I will confine the remainder of my remarks this morning to areas where I believe your 20 principles governing the organization of our health care system work — as outlined in your volume 5 released this April. I will give our perspective on where they add to the debate, as well as point out areas of continuing concern that we believe you have failed to address.

Principle number 4, which argues for an open and transparent process with respect to funding decisions, is essential. Canadians must come to understand that advances in technology and new findings in clinical research will mean that services will be listed and delisted on an annual basis into the foreseeable future. It is not necessarily something to be feared, but Canadians must come to understand it as an annual and normal practice of provincial health ministries.

This goes hand in hand with principle number 7, calling for greater public education when governments make health care service or funding decisions.

To slightly pervert and paraphrase Jack Nicholson, as Canadians, ``we can handle the truth.''

Principle 11, with respect to changing physician remuneration, is balanced in that it provides flexibility for a variety of alternate payment models. There is no one-size-fits-all model with respect to fee for service, capitation or other incentives in compensating health professionals.

Principle number 15, advocating national electronic health records, is laudable. However, we should always be mindful of the sanctity of the patient-doctor relationship. We should ensure that the aggregation of this data to inform broader policy decisions on regional, provincial or national resource utilization does not permit the need for system- wide reporting requirements to ever outweigh the privacy rights of the individual, physician, nurse or allied health professional.

Many other principles in your list of 20 are laudable. They echo what we said during our first appearance before this committee in October 2001. We are glad that your committee agrees with us that government's conflicting roles as a funder/insurer, major service-delivery organization and system quality evaluator must be de-linked to remove the inherent conflicts of interest endemic in this set-up.

Those are our plaudits. Let me now turn briefly to the two principles that were discussed in abstract and sometimes detailed terms in your earlier work, yet seem to have vanished from your recent report released two months ago.

The first is the Canada Health Act. Allow me to reiterate our desire to see the act modernized. Your committee can play an integral role in advocating that. We agree with those who have concluded that the act often constrains provincial initiatives and that core principles are often in conflict. Meanwhile, public opinion continues to reveal a thirst for fundamental changes, even if they contravene some of the act's existing principles.

Contrary to the point made by Dr. Evans in his presentation, this is not a Conrad Black agenda, but a Canadian agenda common to all income spheres, as 13 consecutive public opinion polls have shown. The act continues to fuel the fight between Ottawa and the provinces over historic and recent funding levels. While some jurisdictional tension is inherent in our federal system and necessary for it to function, it has reached a counterproductive level. Health care is complex, and it is clear that there are no magic bullet solutions to address its many shortcomings. There are many successes, as well.

However, key principles do exist that should be employed in both legislation and restructuring service delivery. Modernization of the act is long overdue. Its current five principles should be replaced by six, including: Public governance that is a truer reflection of system organization today and its trend in the future; and universality that would encompass elements of portability, comprehensiveness and accessibility along the lines of the World Health Organization definition of the ``new'' universalism — if all are to be covered, then not all services can be covered from a sustainability perspective. The other four principles that should be added are quality, accountability, of which you speak often, choice and sustainability, not only in the context of three-, four- or five-year funding agreements, but also in designing a system that will serve generations to come.

I remain open to discussing these principles with you further today, as time did not permit us to engage in a frank exchange regarding CHA last October. At the structural level, we are disappointed that you appear to have abandoned any discussion of pre-funding options. While I take the points of Professor Deber and Professor Evans with respect to capitalization, health care utilization and expenditures to heart, there is still no discussion of pre-funding, either for patient care, as advocated by the Mazankowski report in Alberta, or for technology and needed ongoing capital improvements, as proffered by the Clair commission in Quebec over two years ago.

If I may digress, we have already adopted a pre-funding approach in the maintenance of our public and private retirement insurance systems. The same provision should be adopted in health care.

Again, I leave the details of these concerns for our discussions today. I look forward to offering our view of some of the cost numbers and drivers that stem from your 20 organizing principles. We could also discuss the cost-driving issues of demographics, patient utilization, the exponential progression of pharmaceutical costs and our expectations as Canadians — the biggest driver of all.

I will conclude my formal remarks this morning in the way that I have previously, and in a similar vein to that when we appeared before Mr. Romanow in March 2002.

The principle and laudable aim of medicare was to provide health services without hindrance. Now, the greatest hindrance to reform is the intransigence of those who refuse to accept that the problem with health care is the system itself. It is unsustainable as presently structured and funded.

I wholeheartedly concur with the conclusions of the Conference Board of Canada. It is not about Conrad Black or some evil corporate agenda, but about building a future system for more than 31 million Canadians. Attacking the motives or the size of the paycheque of anybody who dares to advocate the responsibility of the citizenship to engage in this debate is just plain wrong and counterproductive.

Thankfully, the group advocating that position is becoming smaller, partly due to the objective work of your committee in contributing to an advanced public debate on this. The sign of a healthy democracy is one that finds fault with itself, for if it cannot, it has ceased to be a democracy.

I look forward to our discussions and a respectful debate throughout the course of the day, including the ideas that my esteemed fellow panellists will no doubt place before you for consideration.

The Chairman: Thank you very much, panel, for raising a number of issues that we can now proceed to explore.

I want to concede a point. We all agree with Professor Evans that the issue of raising taxes goes to the heart of who will pay and how much. When you raise the issue of who will pay, you immediately find relative parts of society deciding that they would much rather be receivers than givers.

It is the exact opposite of ``It is better to give than to receive.'' When it comes to paying money to government, from the point of view of individuals, it is clearly better to receive than to give.

Therefore, as a value issue, this topic is fraught with politics. It was agreed that this committee undertake this work because House of Commons committees have greater difficulty entering such a debate due to its emotional and highly politically charged nature. I am delighted at the way in which Professor Evans put the issue on the table.

No one raised a certain item on which I would like to have an initial reaction. Last September, when this committee released its fourth report, one of the options included for funding health care originated in the early 1960s at the beginning of the debate, before medicare was even started. That was that individuals would, at the end of each year, receive from their governments, federally and provincially, a statement of the costs that the health care services they had received had imposed on the system. That amount would be treated as a taxable benefit. It would be capped, so that the maximum impact on any individual, regardless of income level, would be controlled.

The original argument in favour of that approach was that one ought to pay proportionally for the use of a service. It was progressive in that it was related to the income tax system. It did not have some of the negative redistribution elements upon which Professor Evans commented.

We floated that idea in our report last September. It has been picked up Jack Mintz, the President of the C.D. Howe Institute. He recently co-authored a paper that explores that idea in some detail, looking at the amount of revenue that would be generated under certain assumptions.

No member of the panel raised that option. Could we have a quick reaction?

Mr. Darby: It has a high degree of attractiveness in that it does remove some of the mystery surrounding the cost of health care to various users of the system.

It does have the advantage of tying those costs, to some extent at least, to payment. I am not sure it completely gets around the issue of redistribution or the burden perhaps falling on the less advantaged members of society. Users of health care tend to be the elderly and those at lower income levels. Taxation would still increase for those individuals, proportionally more, I would argue, than might be the case for those with higher levels of income who tend not to use the system as intensively. Capping gets around that to some extent.

The other issue is, of course, that the whole notion of redistribution, which I think is crucial and needs to be on the table, can operate independently of any funding for health care. We have already used the income tax system in various ways to redistribute income. The reform of the family allowance regime was a recent interesting example of that.

I share with Professor Evans concerns about the redistributive aspects of poll taxes —

The Chairman: May I suggest we not use the words ``poll taxes,'' which I think viewers will regard as confusing. I know it is the correct economic term, but ``poll taxes,'' which many provinces had years ago, will not be understood. Perhaps we should talk about ``health care premiums,'' rather than poll taxes, to make communication simpler.

Mr. Darby: Health care premiums, and to some extent, taxable benefits within the income tax system, could have negative redistributive aspects. We have to ask ourselves, if we are worried about income redistribution — as we should be generally in the context of our entire taxation system — what is the most appropriate vehicle to maintain that more egalitarian distribution of the tax burden? We might be able to separate that from the issue of financing health care and then move forward on that basis.

The Chairman: I want to ensure I understand what you are saying. You seem to be saying that each time we think about adding any other type of federal revenue, whether it is an airport security tax or an excise tax on cigarettes, we ought to look at the redistribution system separately and not necessarily purely in the context of raising health care revenue. Is that right?

Mr. Darby: That is right. At the same time, one does not necessarily have to separate the two completely. For example, with the imposition of the GST, credits were given through the income tax system to help allay its redistributive aspect as it relates to lower-income people. We could look at implementing things such as rebates through income tests, which are already available through the income tax system, in order to allay those redistributive aspects.

Ms Deber: I have ethical, practical and political problems with the idea. It seems to be assuming that consuming medical care is something you are lucky to do, like, ``Oh, boy. I was lucky enough to have cancer, and they gave me a whole $20,000 worth of therapy, so of course I should be paying taxes on that as though it were income.''

People already have enormous out-of-pocket costs that are not picked up by the tax system. I have a student looking at the out-of-pocket costs for cancer patients such as travel expenses, wigs and family members having to take time off work. Already these are burdens. Do we turn around and say, ``Well, because you were lucky enough to get really ill and we gave you a lot of medical care, you are in a better position to pay tax than someone else''? Is it the functional equivalent of winning the lottery or receiving additional revenue? It is not revenue you can spend and therefore should pay tax on.

The underlying assumption in a progressive tax system is that if you have money, it puts you in a better position to be able to pay taxes. I fail to see how needing medical care puts you in the position of having additional disposable income.

The other point, which comes from the Manitoba data, is that most people access very little health care in a given year. If you do, presumably you have good reason. Full body scans ``for the heck of it'' should not be publicly paid for. If there are services we think are marginal, and we do not think any business should be paid publicly, the answer is to say, ``No, we are not going to pay for this part of the system.'' If you have your child immunized against measles, is it reasonable to say, ``Here is a nice taxable benefit''?

I keep hearing Tom Kent talk about it. I do not understand why it is an attractive idea. If we are going to say that people who have more income should pay more, I am not sure why we would restrict it to those who happen to be sick.

Mr. Robinson: As you rightly mention, it was Tom Kent who pointed out that in 1961, there was originally a Liberal Party resolution to adopt something similar to the British system, with universal access at point of service, but a claw- back or taxable benefit somewhere down the line.

To pick up on Professor Deber's point, and using the example of immunization, which is almost universal, you could also make the argument that perhaps the person should get a rebate because they have protected their child from needing to use the health care system in the future.

It gets back to the central issue on the funding component, that we are still operating under this pay-as-you-go philosophy on health care: Yesterday's revenues fund today's medical procedures. We do not believe that will be sustainable in the future, given demographic projections.

To return to the specific issue of a taxable benefit, we would then have to have point-of-service verification, which the Province of Ontario tried, and found, regrettably from their point of view, that it costs a lot of money to send out dummy invoices. It is not an effective use of taxpayer dollars. That brings you back to premiums. Alberta and B.C. use premiums, but they go into consolidated general revenues, with no guarantee they will be directed toward health care. Consequently, we have a problem there.

The underlying governing principle is accountability in reporting. We need to concede that we will have to pay more if we want to follow your governing principle of accountability, because we do not have that in our system now. This is where, although I am not advocating an American model, some of the insurance overhead and information technology infrastructure in the U.S. system, or in some of the sickness funds in Germany or the Netherlands that are run by guilds, can give that you reporting and accountability.

The Chairman: This committee has argued, entirely independently of the funding issue, that the information systems in health care are unbelievably antiquated, particularly for what is truly an information-intensive industry. For that reason, we have argued, again entirely independently of the funding question, that two things are critically needed: One is an electronic patient record, because that is the fundamental piece of information in the information systems; and second, substantially improved information systems in the health care institutions — hospitals, et cetera — so that they can manage the system. It is remarkable — and this committee has said so in its reports — that you can run a billion- dollar hospital and not know how much it costs to provide any given service.

There is no other business in the world in which the costs of production are absolutely unknown to the people managing the system. Faced with that problem, and again independently of the question we are discussing today, if you are a hospital administrator, how can you decide if you have improved the efficiency with which you deliver a particular service when you do not know what it costs you to deliver that service today?

Furthermore, once you make the changes, you will not know what it costs. We have argued strongly, therefore, that it is critical for the federal government to substantially fund the development of an information system so that boards of directors, trustees and people managing hospitals have access to one that is consistent with what anyone running a modern business would have.

The need for those systems does not relate to the question before us today, except that, quite clearly, the presence of the information system makes some other funding models possible because you will have patient-driven data.

Mr. Evans: I would like to reinforce your comments about information systems. We found the same thing on the Seaton commission in B.C., which will not surprise you, because the reality is that we could not get any reasonable estimates of the cost of doing things from anybody. It surprised some of the commission members, although not me, because one of my first research projects 30 years ago was to get estimates of the relative costs of different procedures in hospitals. It was a substantial research project that took us a year and a half to two years. The data was not the greatest when we were through, but it was the best around.

The Chairman: It was better than nothing.

Mr. Evans: We could claim that, yes. That is to be supported strongly, with the caveat that you can spend a great deal of money dealing with electronic records and computer companies, and you have to be a prudent purchaser if you are to get into that game, which you have to, absolutely.

That is part of the committee's more general principle of transparency, to which I also subscribe strongly. I would like to have my presentation taken in the context that I am trying to achieve transparency in the distributional implications of doing certain things. I did not say anything about anybody being evil. The rational pursuit of self- interest is a basic principle in economics. There is a maxim in the law that a person must be presumed to will the consequences of his own acts, and I am simply trying to lay out what some of those consequences are. After that, it is the committee's decision.

On the idea of taxing back utilization, I have little to add to Professor Deber's very articulate dissection of it. As somebody who has been responsible for a good part of the health care cost crisis, I am acutely sensitive to the points she makes. I would add that you should remember that all it would do here is set up a non-transparent user fee. This thing was debated intensely by the Ontario Economic Council back in the 1970s. Marty Feldstein put it forward in the States in 1973. It has been around a long time, and it always comes back to this: First, it is a non-transparent form of user fee, a hidden fee that people will not understand. Second, it makes transparent the fact that you are taxing the sick because it is included on the tax schedule.

I would underline the points that were made about the extreme concentration of utilization in a small part of the population. We have a study now being written up in British Columbia that tells the same story. Heavy utilizers of the system are elderly, disproportionately female, poor, and they die disproportionately. They have seven to eight times the death rate of the general population. They are sick people with multiple system problems. Whether the care they are getting is the most appropriate or cost effective is highly doubtful. However, the fact that they are sick is not. That is easy to pick out.

Therefore, it seems to me that this feature dissolves away as a plausible piece of public policy, which is why it has been around for so long and is always pushed back down. Moreover, it is not true that it gets around the redistribution problems. If you sit down with a copy of the Canadian tax form, which I have done, and look at the income brackets and the proportion of income that would be paid in tax under different assumptions about utilization, it goes down steadily as you work your way up the brackets. It is regressive, although less so than a straight user fee. It is not the same as a tax-based system.

To me, the fact that it keeps returning in spite of this evidence is enough to make it an example of what we call a ``zombie.'' A zombie is an idea that is intellectually dead, but will not go away, because no matter how many times you bring forward the evidence, it bounces back from the grave. A zombie has two features. First, it is superficially plausible until you look at the evidence, and second, it serves some narrow economic interest, which is what I have tried to lay out in my presentation.

Mr. Kelly: Briefly, from my point of view, the Kent idea would be preferable to a flat-rate federal premium.

The Chairman: You say you like it better than a flat-rate premium.

Mr. Kelly: I like it better than a flat-rate premium. I am not sure I like it better than continuing to utilize the general tax base as it is presently structured. Certainly, its redistributive consequences would be less deleterious than a flat-rate federal premium.

I would like to put a few numbers on the table about the flat-rate premium. Try to think of particular individuals who are adversely impacted by current premium systems in the Western provinces — for example, a single mother with two kids who makes $15 an hour. Many people are in that situation, and $15 an hour for a single mother is not a bad wage; that is $30,000 a year. That income does not qualify for premium assistance in my province of British Columbia. Yet that mother pays a premium of $1,296 from after-tax income. That is a very significant hit. That mother may already be paying as much as $1,000 for pharmaceutical costs. To impose another flat-rate health care revenue-raising hit on top of that is not something I would encourage the committee to recommend.

Senator Morin: Mr. Darby, I see you support earmarked taxes for health funding and you used the examples of employment insurance, CPP, et cetera. The U.K., as you know, has embarked on a specific study and has recommended a move away from earmarked taxes. They now feel that health care should be funded from general revenue. They give 12 reasons for that, including flexibility, as a response to changes in demand for health care, and so on. You probably read this report. What do you think of it?

I will move to Professor Evans, and I hope that I will not be associated with Mr. Black through my question. He seems to be the most unpopular person in Canada — well, he has since moved — and I hope I am not inadvertently quoting him in my questions. Since health care delivery is funded from general revenue, part of it is funded through the GST. Should we actually abolish the GST, as it is a regressive tax? You support, as does the committee and many others, a single-payer type of funding for the health care delivery system and, in your case, through a progressive income tax. Each province, as you know, has separate funding for its Workers' Compensation Board. Why do you think that is the case, and what is your opinion of it as a specific funding mechanism for health care delivery?

Mr. Kelly, I am not certain, but I thought that in your brief you were supporting progressive health care premiums. However, now I see that you seem to be moving away from that. My question has to do with the non-payment of premiums, which is a problem in Alberta, as you know. I am not sure whether you support premiums. However, if you do, that was my question.

My question was based, I must say, on the brief. Perhaps I did not read it correctly, but you seem to have shifted your position somewhat there.

Professor Deber, I have one question for you. A single-payer system is the most economical way of funding health care. Obviously, if there were many insurance plans we would see the same situation as in the U.S. The ideal way is a single insurer.

We may move to multiple funding for different reasons — not reasons of sustainability, but rather, for example, of availability. I will make a hypothesis about a situation in which a service is not available in a given time and the patient's life is actually at risk as a result. Should this person not have the opportunity to purchase private insurance within this country? They should not have to move across borders.

Mr. Robinson, Mr. Clair has been in support of pre-funding. I believe you are aware that this has not been implemented in Quebec and will not be. The main reason is that it would imply increased taxation for those Canadians to support whatever increase in cost is needed for the present health care system, plus a tax to pay for future costs. The popularity of tax increases is not very great. The Clair recommendation was very logical and along the lines of the system that Germany has had for many years. I doubt if that is politically possible, but perhaps you have a different view.

Mr. Darby: We did indicate in our brief that, subject to the redistribution issue — and that can be handled through the income tax system — our preference was for taxes on consumption. We did indicate that it might also be possible to consider a tax that would relate directly to health care systems and to estimates of the increased burden of expenditure that we see over the next 30 years. Some of them, for reasons that Mr. Robinson has already indicated, have to do with the demographic pressures that the system will experience with the aging population.

The advantage that we saw — and there are a number of disadvantages, as you are well aware from the British report — was twofold. To some extent, you tie increases in health care costs to demographic trends, and others, to an increase in general revenue required to fund those increased societal costs. Not that long ago, we looked at demographic pressure on the Canada Pension Plan. There were increases in premiums in order to fund that plan and put it back on a sustainable basis. The Canadian population generally accepted those increases in premiums because they could see the connection between the increased funding required, and targeted toward a specific plan, and the increased costs they would have to pay out of their pocketbooks. This was after-tax revenue.

The Chairman: Is it not true that those were flat increases, in the sense that individuals paid the same CPP increase regardless of their income level?

Mr. Darby: That is correct.

The Chairman: In that sense, it is a counter-example to Professor Evans's data — not that his conclusions were wrong, but just that there is a precedent in Canada for doing exactly that.

Mr. Darby: Again, we get back to redistribution issues being addressed through the income tax system in other ways, if you like. It is obviously a complex issue. However, the increased funding for the CPP was required because of some sense that it too was non-sustainable because of demographic pressure. There was at least some pressure for doing something similar in Canada. This increase in costs as we go forward may, in fact, be temporary to some extent, because once we get to a period in which the baby boom no longer exists and those demographic pressures begin to tail off, we could even imagine a situation in which health care costs on a real per-capita basis in Canada could fall. At that time, you can look at changing the funding for the system.

There is some attraction in the CPP precedent, in the sense that when you see some increased funding pressure, you make an estimate of the amount, and you increase in a targeted way the revenue you are collecting.

Mr. Evans: I have two comments. First, the demographics of the aging population is a leading example of a zombie. There have been studies of this, including by the Economic Council of Canada in 1978, the Canadian Society of Actuaries, the report from Health Canada earlier this year, and through much of the work we have done, all saying that demographics alone is not the issue.

The Chairman: This committee has repeatedly said that demographics is the least significant of a whole series of components, including drug costs, technology and a variety of other things. That is not to say you should ignore it, but it is not the driving variable.

Senator Morin: Chronic disease is more common in the elderly population.

Mr. Evans: The issue is how you treat the elderly, not how many there are.

I can give you a very easy way to pre-fund: Pay down the public debt. That is all. That does it for you. The difference between that and the various schemes that have been floated is that, when you pay down the public debt, the burden of the pre-funding is distributed more or less in proportion to the tax base. On the other hand, if you set up a separate system that again uses per-capita charges of one sort or another — I take your point about poll taxes — the problem is that poll taxes is exactly what they are. Transparency is enhanced if you say what they are — except, as you point out, people do not understand them.

The Chairman: The only people to whom the term ``poll tax'' makes sense are academics. The rest of us do not use that word any more.

Mr. Evans: That word also makes sense to the British, who lived through Mrs. Thatcher.

The issue of pre-funding is as much, or more, of a distributional issue as an issue of doing things over time. If you really just wanted to pre-fund the system, that would certainly be my recommendation as a taxpayer — pay down the public debt. That is perfectly straightforward, and leaves you more tax room later when it is needed.

Now I will move on to specific questions. Would I be in favour of getting rid of the GST? I will recast my remarks. Again, under the principle of transparency, I am trying to lay out as clearly as I can, first, the consequences of different choices, whatever my personal views, and second, which groups benefit from those choices. The notion that there is a collective ``we'' who will benefit from these particular tax choices is, as I think the chairman made clear at the beginning, simply incorrect. There will be winners and there will be losers. Who will win, and how much? Is that winning and losing pattern connected to the advocacy of different policies? The answer to that question is, of course. What would you expect?

I have not really thought hard about whether the GST would be better replaced by an increase in the income tax because it seemed like an unlikely prospect. My colleague, John Kesselman, has produced a number of schemes to make commodity taxes, consumption taxes, progressive, or at least less regressive. Those are interesting. To the best of my knowledge, no one has ever implemented that. I would argue that it is partly because they are complex and partly because the advocacy of consumption taxes is based on their distributional consequences. The people who advocate them stand to gain, and that would all be spoiled if you introduced some complex system that removed the progressive aspects.

As for the Workers' Compensation Board, the real issue there is the distortional effects it can have on the delivery of health care in the public system by virtue of its paying for people to ``jump the queue'' essentially.

As to how it is financed, my understanding is that the principle is to try to distribute the burdens among employers in proportion to the risk of their occupations, so that employers in high-risk industries should pay high premiums on behalf of their employees because the aim is to encourage employers to produce safer environments. That is very different from what Professor Deber pointed out, about how we are going to tax the sick because they were somehow responsible for getting cancer.

We tax cigarettes partly for that reason. We want to discourage people from using a product that is likely to cause cancer. That is the framework in which one should look at the WCB.

Mr. Kelly: With respect to paying down the debt, one additional advantage to doing that rather than pre-funding future health care costs is that it gives us a great deal more policy flexibility. We think we know what the health care picture will look like 20 years down the road, in terms of a general sense of costs and delivery issues and so on, but we have been wrong before when projecting health care problems into the future. It might be better to pay down the debt, with the policy flexibility that will produce, rather than pre-funding and then finding out we have got it wrong and still have the debt.

The Chairman: Before we go on, I must challenge you on that issue. We are not dealing with the theoretical world of academic economics; we are dealing with the practical world of actual tax making. If we want to persuade Canadians that they should pay more for health care, this committee has taken the position that it is critical that they see that extra money actually going to the system, which is what a number of you commented on under the issue of ``transparency.''

If you told Canadians that $5 billion or $6 billion a year will be used to pay down the debt and the resulting interest savings will go into health care, to put it bluntly, I would have serious doubts as to whether that would be a saleable proposition. Despite its intellectual appeal, it seems to me — and this is a personal view, not the committee's — that it is a total political non-starter.

The other issue we must keep in mind is that currently, governments take in money and it apparently vanishes, in the sense that people are not able to say, ``I paid this amount of money, and this is what I get in return.''

The committee was clear in its last volume that if people are to be asked to contribute additional money, they must have some confidence — I would say almost bordering on certainty — that the money will be used to provide additional services, or at least go directly into health care. That is one of the arguments against just a general income tax increase. You need an element of certainty in the system and we must address that.

Mr. Kelly: Are we talking about additional health care costs now, or in the future?

The Chairman: We are talking about both.

Mr. Kelly: I view paying down the debt in terms of Mr. Robinson's issue, raised earlier this morning, that we should be pre-paying now — if I understood him correctly — in order to be in a position to fund costs that will be incurred down the road. We might be much better off giving ourselves flexibility, so that 20 years from now, we can do what we want to do, or what voters and politicians 20 years down the road want to do. We are not just dealing with hard politics; we are also dealing with human behaviour. I do not think any of us know how the boomers will behave when they hit 75.

The Chairman: No one disputes that. I am saying that there needs to be a cause and effect here. My concern about the paying down the debt argument is that average citizens would regard the cause and effect linkage as pretty tenuous.

Mr. Kelly: Let me make one other point. I have worked for 15 different ministers in three different provinces. Some of them were incredibly effective communicators. I do not believe that it is beyond the ability of political leadership in this country to enter into an informed debate with the Canadian public and convince them that paying down the debt is a very good idea in terms of their future and the future of their children.

In regard to Senator Morin's question, I have no problem with flat-rate premiums as an income-raising measure as long as they are income tested at the lower end and reasonable. My sense is that recently, those premium levels imposed in the Western provinces have become somewhat onerous. I ran the Alberta health care insurance plan from 1989 to 1995, and then I ran the B.C. equivalent for a short period after that. We certainly had a significant non-payment problem in both provinces. It was my sense that that was due, to a considerable degree, to the fact that people at the lower end of the income scale were really struggling to pay. Some of them could not afford it, so they did not pay.

The Chairman: What happens in those provinces when people have not paid?

Senator Morin: Nothing. That is the problem.

Mr. Kelly: It varies. Alberta is somewhat more aggressive than B.C. has been to date in imposing penalties and pursuing debtors. Neither province strikes individuals off the registration file. Were they to do so, of course, they would torpedo the universality principle of the Canada Health Act. I hope that will not happen.

Ms Deber: Senator, the question of what happens when someone needs a life-saving procedure and cannot get it is clearly a critical one. The trouble is that insurance cannot step in at that point, because insurance is about risk pooling and probability of risk. Once you know you need a procedure, it is no longer a probability; it is a certainty.

Senator Morin: I said ``purchase.''

Ms Deber: You cannot purchase insurance.

Senator Morin: Forget insurance. Can you purchase a procedure?

The Chairman: So there is no confusion, let me clarify the question. Currently in Canada, you cannot buy health insurance that will pay for services at, for example, a private hospital. As a Canadian, you can buy insurance that will get you health care coverage in the United States.

The question that Senator Morin raised — and I do not think you need to take it all the way to a life-saving procedure — was whether individuals who want a hip replacement, because it will improve substantially their quality of life, should be able to buy an insurance policy in Canada. They are for sale in the country.

Mr. Evans: They will not sell it to you.

The Chairman: You can buy a health insurance policy that will cover a whole series of things. You do not buy it once you become sick. You buy it as you do any ongoing insurance, such as your car insurance. You can now buy such a policy in Canada in order to receive treatment in various places in the United States.

The question Senator Morin raised was, since you can buy it in Canada for treatment outside the country, why can you not buy it for treatment inside the country?

The second thing is that if having to wait a long time would be an expensive proposition, then whether you buy insurance or not, you just pay for the service.

Senator Morin: That was my first question. My second question is about a life-saving procedure that you would purchase without going through insurance. I realize that at that time, you will not be able to purchase insurance because you are high risk. I understand that argument. Let us deal with just purchasing the service.

Ms Deber: We have been tangling with a couple of things that I would not mind getting into. One is the issue of public versus private delivery. It is important to recognize that delivery is already private. Hospitals in Canada are not public —

The Chairman: Just to be clear, this committee uses ``private'' to mean ``private, for profit.''

Ms Deber: There has been much confusion around private, for profit, between ``small business'' and ``corporate,'' and we can get into some of that if we want to. There is a heck of a difference between the small business for profit, like the Shouldice Clinic or the Cross Cancer Clinic, and the industrial corporations. Their response to incentives is different, and there are many issues there.

If you are talking about whether people should be able to buy extra services, I am sorry, but I am a bit confused.

I thought the committee had accepted the principle that there should be a single payer for medically necessary care.

Senator Morin: Just answer my question, please.

Ms Deber: Your question contains a few elements. If you are saying that if you need medically necessary care that the publicly funded system is not providing, you should be able to buy it, I believe the committee had already said that this was a bad idea, and that high-quality, medically necessary care should be provided in a timely manner.

Whether or not you should you be able to buy insurance is a real question. I have spoken to benefits managers who are becoming increasingly upset about the number of costs that have been dumped on them for which they did not budget, and that the premiums were not set to cover. Employers and insurers are now finding themselves stuck with pharmaceutical costs that they do not think are appropriate. They are calling for the public system to stop doing that. The Ontario Chamber of Commerce said that privatization is a tax on business, and they are right.

We are back to the issue of whether you should be able to buy your way in. My feeling is, if this is medically necessary care, it is a false economy, it is penny-wise and pound foolish, not to provide people with such care when they need it. If we do not want to provide it universally and it is not part of the system, then you can buy anything you want.

I find myself somewhat confused by the question.

I should point out the part we are not doing. We are talking about pharmacare and home care. We are not talking about public health. I think some of the biggest holes that are opening up now in the system are in interventions that we know make sense, that we know have major health consequences, but that provincial governments and others are cutting back.

We have an outbreak of childhood obesity. Why is the Province of Ontario forcing school swimming pools and community recreation programs to close, and cutting back on physical education in schools? Why are we not treating water properly? Why are we not doing things about air quality? One of the reasons why the projections of the Conference Board had to be modified is that the age-adjusted utilization rates have been going down. Straightforward projections greatly overestimated health care costs because people have been getting healthier. What we were doing was working.

We are undoing it. I would really like to see some attention return to all of the interventions we know make sense. Why are we getting rid of parenting programs? Why are we getting rid of interventions to decrease the number of low birth weight babies? I am becoming very worried about the potential health costs for the current generation of children when they grow up, given the changes that many of the provinces are making. We know it is cost effective.

There is a terrifying book that shows the implications for public health in the former Soviet Union and in other countries that have privatized the system. Drug-resistant tuberculosis is appearing because people cannot afford the medications. They are buying small amounts of therapy and not treating it well enough. If there is one thing I would push, it is the public health consequences of having two tiers of care for some things, in which people get some care but not enough, and put the entire population at risk.

Senator Morin: The answer to my question is ``no''?

Ms Deber: The answer to your question is that you cannot buy insurance under those circumstances. The solution must be something other than insurance. If you are asking if the person should be able to buy the service, then we are into all of the questions about non-single payer, two-tier systems and how we handle that. Again, my reading of your report was that you had rejected that option.

Senator Morin: If the waiting time is life-threatening for evidence-based cancer treatment — for example, cancer of the breast; if you do not have your treatment within two months the risk of dying is 90 per cent — there is no possibility? I can give you examples of people getting treatment within that given time — let me finish — if I understand correctly, as the patient may purchase this treatment after hours at the hospital. You feel that these patients should not have the right to purchase it?

Ms Deber: No.

Senator Morin: Your answer is ``yes'' or ``no''?

Ms Deber: My answer is, why is there no way that that person could get the treatment?

The Chairman: That is a cop-out. As we are friends, you do not mind my saying that.

The reality is that that is precisely the kind of situation that exists in the real world. That is precisely the kind of problem for which a policy response is needed. We agree with you that it should not be allowed to happen. That does not answer the dilemma of what you do when in fact it does.

Ms Deber: Let me tell you one of the reasons why I do not think the purchaser option is an answer. If I am a venture capitalist and I set up a company and say, ``I will give you treatment if you pay your way,'' there is absolutely no way you can fix the problem in the publicly funded system, because if you do, you eliminate the market for that privately funded clinic.

In every country that has allowed these double tiers, care in the publicly funded tier got worse, not better. The Cross clinic runs the same equipment after hours and is not charging patients. I do not have problems with that. That is different from allowing investor-owned private clinics to be set up, with their own infrastructure.

The Chairman: We must clarify what the Cross clinic is.

Senator Morin: I am not talking about providers. That is okay.

Ms Deber: We must have a provider. The model that you are talking about, that may allow that individual to buy the care, guarantees that everyone who does not have the money will be inadequately treated. Otherwise, there is no market for that private clinic.

Senator Morin: You are talking about providers again.

Ms Deber: Who will treat you, if not a provider?

Senator Morin: The public system, after hours.

Ms Deber: I am going to pull someone off the subway and ask, ``Will you please treat me?''

Senator Morin: Public, after hours.

The Chairman: In the example you use, try to stay away from words that viewers will not understand. The Cross clinic came out of Sunnybrook Hospital in Toronto. The hours of the radiation clinic have been extended through a group of doctors and technicians operating it on a privately run basis. The patients go to the clinic. Essentially, this private group rents the facilities at the hospital. Mr. Cross is the name of the fellow who runs it.

Ms Deber: It is actually Dr. McGowan. It is ``Cancer Care Ontario.''

The Chairman: This group rents the facilities at the Sunnybrook Hospital radiation clinic from something like 5 to 10 p.m., five nights a week. They provide services to patients who would otherwise be on the waiting list. That is essentially what happens.

Senator Morin was asking whether people should be allowed to buy insurance so that they could get access to that kind of after-hours clinic if they could not be treated during the regular daytime hours.

In fact, the Ontario medicare program pays for all the patients at the after-hours clinic in Toronto. That just effectively shortens the waiting list.

Mr. Robinson: Perhaps it would be appropriate for me to jump in. I would point out that you said we need a public policy response to the question Senator Morin asked. That is the constructive nature of Stanley Hart and Professor Monahan's column arguing that the Canada Health Act violates the security of the person provisions of the Charter. We will get that response —

The Chairman: I cannot resist pointing out to our viewers that it was this committee that first put that issue on the table, and was subsequently pilloried at great length by many people. It was interesting for the committee to see that someone as distinguished as Professor Monahan, who, among other things, is Associate Dean of Law at the University of Toronto, and Stanley Hart, former Deputy Minister of Finance, former Chief of Staff to Prime Minister Mulroney and now the senior partner in a law firm, thought enough of the idea to pursue it, and concluded that denying people who cannot receive timely service the right to buy insurance is unconstitutional.

Mr. Robinson: If I may add, the precursor to that was the European Court of Justice decision in the summer of 2001,which we note on page 41 of our paper, that a patient in the U.K. facing undue delay could go to another country to have the procedure done and the U.K. system would have to pay — period, full stop.

Working backwards to Senator Morin's questions, thank you for putting the debt argument on the table. We are all in favour of legislated debt reduction. However, if you follow the argument that you should simply pre-fund by paying down debt through to its logical conclusion, then there should not be a Canada Pension Plan. We should be paying down the debt each year and meeting the pension needs of the future. We know, from what is politically possible, that if you free up that debt interest — $41 billion per year or $115 million per day — it will be utilized in the next fiscal year for a variety of things perhaps not related to health care. It could be utilized for a variety of other public spending pressures of the day.

It is intellectually appealing, but from a practical policy application viewpoint, it does not work. That is why we argue for pre-funding. I would take issue, Senator Morin, with saying that it may not be double taxation. Saying that it is double taxation, that we will have to pre-fund the system for today and for future generations, gets back to the premise of your question. As the Clair report pointed out with respect to technology, there is the premise that everything is okay in your existing budget envelopes today. As we will argue this Wednesday, there is $4 billion in regional development subsidies that should be cut, corporate welfare should be shut down, and those taxes that people are paying now could be reallocated to those future funds and disbursements.

I also come back to the issue of demographics, which, as people point out, is not the major cost driver. However, the expectations of this aging population are the major cost driver, which necessitates, in our belief, pre-funding. We should point out, as you did in your question, that the need for chronic care comes with an aging population, and we did not have that in the system 40 and 50 years ago. It was devised as two silos — primary care and acute care — and chronic care is the new area that has surfaced with an aging population. There are the protein-based diseases of aging such as Parkinson's, Alzheimer's and other disorders. We are also seeing, as Professor Deber pointed out, sicker children, with symptoms of obesity, asthma, et cetera. There is also an alarming exponential explosion of autism among Canadian children. All of those costs will necessitate pre-funding. Some say it is not politically possible, but I believe it is, although it takes political courage to do it, just as did when we set the system up, as much as we have a problem with some parts of the pay-as-you-go structure. The government has already acknowledged the failures and shortcomings of that pay-as-you-go plan to a certain degree by setting up the Canada Pension Plan Investment Board to make returns for the future, capitalizing on the market. You can pre-fund, and it is essential to do so, whether in the context of a medical savings account or single-payer, dedicated funds. You can and must do that, to make the system, as you mentioned, ``sustainable,'' not just for the next four or five years of a political cycle, but for the next 25 or 30 years, as Professor Deber pointed out, for our kids.

Senator Robertson: It is most interesting to hear these comments, although also a bit confusing. There is such a variety of opinions to be considered.

Let us do a reality check of what is occurring in each province — the waiting lines and the difficulties that the public is having in receiving adequate health care now. Some people argue that they are happy with the system. You may be satisfied once you are in the system, but getting there seems to be the main difficulty in every province.

Then, we have to look at the reality that the poor require more health care than the affluent. We have to look at the reality of senior citizens on limited income who are suddenly faced with massive drug costs that they cannot afford. God knows, they could not afford a premium on top of that. You would have to exclude large numbers of people.

You also have to look at the differences in provincial requirements. We are a diverse country and the ability to deliver the service is not the same in each province. Let's face it, if you have a small population, the public will have to travel to obtain certain levels of health care, and rightly so. Those are all factors to be considered. Our current system is based on population. It is difficult to fund a health care system on that basis when, if you have a small population, you obviously do not have the funds for the basic infrastructure that is required to provide the care that everyone expects.

I want to put those practical realities, which we all face on a regular basis, on the table and then look at something additional. Professor Deber, I am not sure if I heard mention in your comments of anything that you would want to see done, other than an implementation of our recommendation on preventive medicine. You talked about prevention, and this committee is well aware of the requirement for better preventive processes to do with lifestyle, et cetera. What would be your favourite approach to funding existing programs? We have the problems of today and the potential problems of 10 and 15 years from now. I do not know how far into the future you can extend this because of the changing complexity of our societal values and structures, et cetera. We have heard so many contradictory arguments, that it becomes a little difficult to sort out the realities of the proposals. As a member of this committee, I am looking at the reality of a proposal.

Many people want two-tier health care, which we already have with workers' compensation, for example. Do not say it is not two-tier because it is. If I am fortunate enough to be eligible for workers' compensation, then I can get into the hospital faster than I could otherwise. That is a fact of life and I do not begrudge it. Rather, I think it is great. However, I would like some of the other citizens of Canada to have the same opportunity.

That preamble is long enough — you know where I am coming from. I should like to ask the panel about the proposals that have been tossed around and what their one recommendation would be. We all know that the system needs more money, even with all the tinkering that is being recommended in some quarters. This committee has determined that we must do something because it is currently not financially sustainable. I would like to hear your favourite proposal for financing that you think would help Canadian citizens to receive adequate health care within a proper time frame.

The Chairman: For the benefit of our panellists, Senator Robertson is the former Minister of Health for New Brunswick and Senator Morin is the former Dean of Medicine at Laval University. Be specific in your answer. The question that Senator Robertson has put to you is: ``All right, wise guy, what do I do now?'' We want to hear from the one-armed economist, not the two-armed economist. In other words, we do not want to hear, ``on the one hand and then on the other hand...''

Ms Deber: I assume that you are asking about my favourite approach for the federal government.

Senator Robertson: Yes.

Ms Deber: It is quite different from what most people have been recommending. Primary care is a provincial responsibility and I do not sense a strong federal role in it.

I would like to see a stronger federal role in disease management through networks of centres of excellence, which would not be exclusively academic health science centres. Disease management should be funded for particular conditions, where you have the expertise and can use tele-health, research and evaluation, possibly even paying for drugs within a protocol, and evidence-based evaluation.

It could be done on a condition-by-condition basis. The family doctor of a person in rural New Brunswick with cystic fibrosis could get support from the cystic fibrosis network in managing the condition. The drugs could be provided within the context of an evaluation, so you could move the quality of care forward. Similarly, with cancer, if you have a rare condition, your chemotherapy can be administered anywhere, but you would not want people anywhere monitoring it. I prefer to see a federal role in national centres of excellence. It could include things like ethno- culturally specific information for Chinese diabetics.

Senator Robertson: Are you saying those centres of excellence should be funded by the federal government?

Ms Deber: The federal government should provide money for an evaluation network and linkages through tele- health. Again, I am not so crazy about service-based funding, as you would have some people on salary, and part of their job description would be that they had better be supporting the people who need that sort of care across the country.

One of the things we are doing some research on in Atlantic Canada is the big problem of procedures not being done in centres of excellence, as experts now say they should be. I am not sure what the outcomes are, and whether they are getting worse care than they should.

As for pharmacare, there are certain expensive drugs. Rather than having all or nothing coverage, there could be funding for particular drugs in certain situations where we think it might be appropriate, and within the context of very careful protocols, evaluation and monitoring of what good they are doing. I would tie it in with CIHR, as I love some of your recommendations around research. There could be an opportunity to roll out and improve evidence-based practice. That is why I prefer a national role, rather than trying to micromanage how a doctor works in a primary care setting in a community, where you get enormous variation.

Senator Robertson: Are you saying that those initiatives should be funded federally?

Ms Deber: There will not be a critical population mass for centres of excellence in any one region, so there could be a role for federal funding, with the very clear proviso that the money must be stable. There have been too many pilot projects funded for a couple of years and then the rug pulled out.

I just found out that a SIPA project in Montreal has basically collapsed. This was seen as a world leader, doing very impressive work on care for the elderly. The minute the money disappears, the CLSC's are not picking it up and the project is dead.

In Ottawa, there are some fascinating tele-health initiatives providing support for cardiologists all over the country. That is the sort of project in which the federal government could have a role. No regional authority will pay for care outside of their region, yet the expertise should be a national resource. Complement the regional authorities, which are working in primary and community-based care, with national information that could support high-quality care for the people who are really ill. That is my preferred model. I have never heard anyone mention it.

Mr. Robinson: That would be to go ``back to the future,'' and return to 1940, allowing the provinces to deliver what the federal government funds and regulates, and the Green Book proposals of 1945. If the federal government regulates medical technology, it should play the key role in funding it. If you have federal building standards, the government should contribute to that infrastructure.

Clair is the only provincial report I have seen that touched upon those infrastructure and long-term systemic concerns. That is a role they can play and meet minimal provincial resistance. For example, Saint Justine's Children's Hospital in Montreal has an aging infrastructure; it is 60 or 70 years old. Those are the sorts of areas where the federal government could play a key role. It would also work in the context of long-term pre-funding. Once you have the technology, if you regulate research, you play the key role in funding it.

Those are the areas where the feds should focus on quality. Although there is disagreement on this panel, I am sure we all concur that good quality costs less than poor quality. Focus on quality, not on cost containment; otherwise you will simply shift the costs.

Mr. Darby: I need to ask a question of the other panellists, because constitutionally, primary care is a provincial jurisdiction. We could restrict federal participation in financing increased health care costs over the next 25 years, for example, through focusing on centres of excellence or looking at only what the federal government has direct regulatory responsibility for. The issue then becomes, how do the provinces, which are the primary care providers, deal with the quite substantial funding burden with which they will be faced? Also, to what extent does the federal government feel it has some responsibility to deal with the provincial burden in funding primary health care costs over the next 25 years?

I have seen a number of provincial speeches and briefs from provincial governments, yelling and screaming that the federal government has abandoned their primary responsibility to fund health care in Canada. If we want to tackle the increased burden in health care funding at the provincial level, we either have to open up an enormous amount of tax room, or somehow increase the transfers from the federal government to the provinces.

If I read your question correctly, senator, you are asking if we feel that the federal government has some role to play in substantially financing the increased costs that the provinces, as the primary health care providers, will be facing over the next 25 years, and what would be the best way to raise those revenues?

Senator Robertson: That is right.

Mr. Darby: Perhaps, as both my esteemed fellow panellists are suggesting, the provincial governments themselves need to be provided with the revenue sources to do that; or we need to look at some other way, besides funding centres of excellence.

Ms Deber: Why do you think the big cost pressure is on the primary care side? I do not think the data is showing that.

Mr. Darby: When we look at the data, and we have done the work using the CIHI data, the two major sources of costs are the demographic pressure, even taking into account the lower per-capita costs for the elderly, which had bottomed out by about 1997, and drugs. One could argue that primary care is involved in both cases, at least to some extent, and we are even, in the case of drugs, looking at an increased cost that would face both levels of government.

I do not really care whether you make that distinction or not. The real issue is that over all, we are facing substantially increased costs. We do not want to get into the red herring of whether it is primary care or other aspects of the health care system that is putting pressures on the costs. The point is that someone will have to bear those costs.

One either suggests that the only role for the federal government is funding centres of excellence and the areas they regulate, or that they have a larger responsibility to fund all aspects of health care, not just primary care. One has to avoid the cop-out. One could take the position that perhaps the federal government has no role, although I do not think the Conference Board of Canada is prepared to do that.

If we believe that increased revenue sources are necessary, it would be our position that we should look at taxes that place the burden more on consumption than on income directly; that are transparent; that are tied to estimates of the increased health care costs that they are expected to fund; and in which the redistributive aspects are dealt with through means tests and the income tax system itself, so that they are not inequitable and thus not fulfilling Conrad Black's agenda.

It is important, when doing something like that, to have done your homework and the research that gives you some idea of what you are facing and best estimates of increased costs over the next 20 or 25 years, so that people have some sense of the actuarial burden they are being asked to fund. How you are applying the tax to fund what extra costs needs to be made transparent. You need to make sure that you have the means tests, the redistribution aspects and the rebates through the income tax system that keep it as equitable as possible.

Senator Morin: You would increase the untargeted health transfer?

Mr. Darby: To the provinces.

Senator Morin: Of course. That would be your answer to Senator Robertson's question?

Mr. Darby: I would like to keep it as targeted as possible — although ``as possible'' can also be seen as a cop-out. I am not sure whether it can be targeted or not in the current funding arrangements.

Senator Morin: I thought you said a few minutes ago that you did not care whether it went to primary care or hospitals, there has to be an increase in spending and we should transfer more money to the provinces and let them deal with their own priorities.

Mr. Darby: That is right.

Senator Morin: It is untargeted.

Mr. Darby: It is untargeted within the context of the overall health envelope.

Senator Morin: It is not specific.

Mr. Darby: It is targeted in terms of health itself.

Senator Morin: I agree. Targeted to health but untargeted —

Mr. Darby: — within the envelope.

Senator Morin: That is your priority. I wanted to make sure I understood what you were saying.

Mr. Kelly: When I was a deputy, I learned that when a minister asked for a straight answer, it was best to give one, and to be as brief as possible. If the decision has been taken to increase funding for health and the question is what should be the revenue source, I would do exactly what the B.C. government did a few months ago when it discovered that it did not have sufficient revenue to cover rising health care costs — it increased the consumption tax.

The Chairman: You mean the provincial sales tax.

Mr. Kelly: Yes, the provincial sales tax.

The Chairman: I was not meaning to be critical. It is just that many in our audience might not be quite sure what a consumption tax is — it is the provincial sales tax. However, the federal consumption tax is the GST.

Mr. Kelly: There are others, but the GST is obviously the largest.

I say that for three reasons. First, it raises revenue quickly. Second, we have to keep our income tax, corporate tax, payroll tax and so on within shooting distance of America's, which significantly constrains our policy flexibility. Third, it is a visible tax. It would make consumers fully aware of the implications of health care cost increases. It might bring additional consumer pressure to bear on the cost side of the equation, which, from my point of view, would be healthy.

Mr. Evans: Both the federal minister and Mr. Romanow have recalled the National Forum on Health from time to time. I subscribe to the position of that rump group. First, it is quite evenly split on the question of whether it is true that the system needs more money. There are those who take that view strongly, in much the way you have done. I am on the other side.

This committee should get hold of the speech that Dr. Charles Wright gave at the meetings in Halifax — he was this year's Emmett Hall lecturer — on the subject of why we need more money to provide more services that do not work. A year ago, he completed a study on cataract surgery in British Columbia that indicated that cataract surgery waiting lists are now for surgery that is at the margin, and on balance, likely to do more harm than good. This is not a wholly uncontroversial finding, but it is on the table and deserves further evaluation.

His Emmett Hall lecture was devoted to a wide array of areas in which we are over-servicing and providing inappropriate care. The largest single area has to be drugs. It matters — and here I disagree with Mr. Darby — where the pressures are coming from; it matters that the pressures are not coming from medicare, as everybody who has looked at the Canadian Institute for Health Information data has pointed out; it matters that they are coming from the drug costs, which are not under medicare — and that is your target.

I agree with you, Chairman, that the federal government has been engaged in regulating drugs without any corresponding fiscal responsibility. We all know that has created enormous burdens for the provinces that are not commensurate with the benefits. That is the area you have to target, although there are others.

I think it is the unanimous view of the national forum that whether or not the system does need more money — we need to remember that, except for the American extravagance, ours is the most expensive in the world — the reality is that the public believes it does. Therefore, the federal government does have to put more money on the table, whether or not the system really needs it.

We should keep in mind that the crunch period of the 1990s was an enormous step forward in terms of the effectiveness of the hospital system. Things happened in the 1990s that we had analyzed in the early 1970s, at the beginning of my career — for example, the potential for day surgery and the enormous cost savings that could be achieved. The inertia in the system meant that it happened only slowly and partially, until the fiscal crunch hit people between the eyes. The mid-1990s was not a period of tragedy; it was a period of significant advances in productivity and effectiveness in the Canadian health care system. There is more to be gained.

You will notice that I am taking two separate positions: First, I do not think the system does need more money. I think it needs better management of the money it has. Nonetheless, the feds have to put that money on the table because of the central issue of public confidence. Therefore, to reconcile those positions, the feds put the money on the table, with strings attached that are negotiated province by province. You say to the folks in each province, ``There is money on the table. You tell us what you think are the crucial areas in your province that are causing the problems, and let us see if we can figure out how to use that money to make this system run more effectively.''

The Chairman: I wish to thank our audience on CPAC for being with us for the past two hours. CPAC will be covering other sessions of the committee, and our final report will be out at the end of October.

Senator Keon: In regard to your line of reasoning, Mr. Evans, it is debatable whether or not there is enough money in the system. I have found myself over the years frequently saying that there is enough money in the system if we could change the way some things are done.

It has become perfectly obvious that we are in an era of paralysis, because all our institutions are running deficits. The provincial ministries are running deficits and going on hands and knees to treasury boards. There is absolutely no money for change.

Would you comment on that, please?

Mr. Evans: Fifteen years ago, Fraser Mustard said that it is difficult to make progress when there is a hyena gnawing on your foot. That is a more graphic way of making the same point.

The issue of whether there is enough money for change is highly debatable, as evidenced by the fact that we debate it. You and I may find ourselves in agreement on the possibilities of making effective economies. The informal, unanimous position of the forum on that matter is similar to yours, with perhaps slightly different reasoning.

As I tried to express it, it is because the general public believes that the system is underfunded that we must do something about it. There is a loss of confidence. You have added the additional point that you must grease the system if you want to make it move. That is correct.

The problem you run into is that which Mr. Kelly emphasized: Money is being put into it now. There has been increased funding over the last five years that has been principally absorbed by increases in compensation levels. The additional money has not been tied to making the specific changes that would make the system function better.

The only way we can make it function better is to hit it over the head with a two-by-four, as we did in the 1990s. That has other side effects.

I would agree. There must be more federal money, and it must be tied to federal-provincial agreements about the changes required.

Years ago, there was a paper entitled ``A System Held Hostage.'' That title was perceptive. You need money to free the hostages, but you must make sure that the money is not put into general revenue and used to fund more of the same.

The Chairman: For many years, Senator Cook has served in a variety of capacities on hospital boards in Newfoundland, starting with a tiny hospital all the way up to the new amalgamated General Hospital in St. John's.

Senator Cook: That is the process that is causing me angst this morning. I do come from a small island — not the smallest — with few resources. I am trying to understand what this means at the end of the day for rural Canada. I know that we have to devise a system that will take care of all of us. I know there will be diversity within it, as there is in the nation.

We are at a point now where we have set out our principles. Over the summer, it is my understanding we will look at how we can implement them. I have been trying to do three things here this morning. I do know one thing, that I am not the trinity. I have tried to listen and read — because some of your information has just arrived — and then I will try to understand.

If you will be patient with me, I should like to have some comment, in order to gain an understanding, on the consumption taxes. I would like to hear the rationale for the notion that more private funding is needed. The second speaker mentioned this.

I am very interested in the payer-provider relationship, the open-ended billing contracts and the provincial medical services. This one really goes to the heart of who I am: ``Many Canadian regions are too small to allow for optimal care for specialized services.'' I am interested in the reality of tele-health.

Lastly, Mr. Robinson, I heard you say, ``Do not be concerned about costs, be concerned about quality.'' I should like to hear about the details of public governance.

Senator Keon just mentioned costs. If there is one thing I learned as a volunteer when we amalgamated six hospitals into one, with two sites, it is that we should have budgeted for change. If we are to get to the implementation of principles, it will take time and there will be a cost. I should like to know if there is any collective wisdom as to how that should happen, given the political reality that in this democracy, there are elections every four or five years and priorities change.

I should like to hear what you consider to be ``accountability,'' not only between the federal jurisdiction and the provinces, but within the system, between the physician and those people who deliver the service and so on.

Mr. Darby: The main consumption tax that is collected at the federal level is the GST. There are excise taxes on alcohol and tobacco. If you were to increase taxes on consumption, you could look at either an increase in the GST directly, or imposing what you might call a ``special health care tax'' on top of the GST, but using the same collection mechanisms. It would have to be sold in that context, as it will obviously need consumer buy-in. To sell it, you would need good estimates of the extra burden in health care costs in the future. As a result, it would have to be carefully fashioned. It would have to be billed and accepted as a tax resulting from the increased costs of health care.

In British Columbia, there was a half-point increase in the retail sales tax to cover some off-budget costs they had not anticipated.

If you are talking about a federal consumption tax, given the magnitude of the requirement, you are looking at something in the context of the GST.

Does that help?

Senator Cook: That does. However, my province now has a blended sales tax of 20 per cent. What kind of increase in the GST do you see? Are you saying 1 or 2 per cent? I am trying to decide, not whether it will be acceptable, but whether it is possible.

Mr. Darby: I cannot answer your question at this point with the data I have. We would be prepared to come up with an estimate of what those costs would be over the next 25 years and what increase in the GST would be required to fund that. It is possible to do the research. I am not sure that has been done yet. As a result, unfortunately, senator, I am not in a position to answer your question directly.

My sense, though, is that you are not looking at a massive increase. Perhaps a half a per cent to 1 percent would be adequate. I do not think we are looking at more than that, but it would need some work.

The Chairman: We will take you up on your offer of free labour. We will have our researchers talk to you.

To put a number on the table, a 1 per cent increase in GST, taking into account GST rebates — in other words, looking at the total amount of money that comes in and the total that goes out — leaves you with $3.2 or $3.3 billion a year, somewhere in that range. That is the revenue in, minus the rebates out.

Senator Cook: Thank you for that.

Mr. Evans: That is pretty close to, although perhaps not quite as large, the size of the federal subsidy to the private insurance industry as calculated by Jim Smyth at the University of Alberta last year. He estimated the tax expenditure subsidy received by private insurance in Canada in 1994 at $2.5 billion. We are now subsidizing the private insurance industry from the provincial treasuries to about the amount you just quoted. That is intriguing.

Senator Morin: Could you expand on this?

Mr. Evans: Sure. An employer deducts the cost of employer-paid health insurance against income. It is a tax deduction. The benefit is not taxable in your hands. It creates a distortion in the tax system that subsidizes private insurance. The numbers have obviously been studied intensively in the U.S., where it was about $125 billion two years ago, or about 10 per cent of total health expenditures. Ours runs in the neighbourhood of 3 to 4 per cent. It is a pretty big number. That is part of the subsidy process that is very rarely talked about.

Mr. Darby is absolutely correct to be reticent about calculating those costs. I am somewhat nervous about his accepting the responsibility to do it in the near future. You are not talking about a scientific process, like calculating how to get a rocket to the moon or to Mars. You are talking about something that is more equivalent to handicapping the World Cup, estimating who is going to win what is ultimately a contest. It is a contest of accounting, in that every dollar of expenditure is a dollar from someone's income. There is no way around that when it is an iron law. Therefore, when you start projecting future costs, you are predicting the outcome of political contests between providers and payers.

As David Kelly has said, much of the new money going into health care has been absorbed by increased compensation to hospital workers and doctors, certainly in British Columbia, where the government played hard and largely lost.

Therefore, when you estimate the need for tax increases to cover increases in expenditure, you are forecasting the outcome of contests over remuneration, and not only that. For example, you are forecasting the contest over drug use. As you have undoubtedly seen in the medical literature, we found that the B.C. pharmacare program has been successful, to some extent, in limiting the growth of drug costs through its reference pricing. Therefore, that program has been the explicit target of the drug industry, for the obvious reason that it reduces their sales and their profits. That is what it was intended to do.

I do not think any forecast you could make will be any more reliable than the underlying political assumptions. I would caution Mr. Darby on taking that line.

The Chairman: Let me be clear. It does seem to the committee that we need to make a reasonable estimate of numbers, as opposed to throwing up our hands and saying it is not possible.

Mr. Evans: You must make the conditionality of the scenarios explicit. That is critical.

The Chairman: On your comment about subsidizing the health insurance industry, if premiums paid by employers were not tax deductible, presumably they would not pay the same level of premium. The money would then have to come from somewhere else, and that would be taxpayers. It should not be thought of as a subsidy to corporate Canada. In reality, a decision was made to allow employers that deduction, and therefore, to have part of it paid for by all Canadians.

Mr. Evans: Those are two different things. I was not suggesting for a moment that the deduction was inappropriate. It is a cost of doing business and ought to be deductible. However, it ought to be taxable in the hands of the employee.

The Chairman: You mean the benefit itself.

Mr. Evans: That is right. However, you and I know that Allan MacEachen tried to go down that road and was shot down.

The Chairman: Slightly more than the 20 years have passed since that November day. I remember it well, although not with fondness.

Mr. Evans: Other countries have done it, and I understand that Quebec has too.

Mr. Kelly: Senator Cook raised the issue of payer-provider relations, which I addressed in my brief. I do feel that the contractual relationship, particularly between provincial governments and physicians, is dysfunctional. This is especially so with respect to community-based physicians, primary care physicians and so on. When I ran the Alberta insurance plan and, later, the B.C. plan, it was my responsibility to hand out billing numbers to newly licensed physicians. Those billing numbers required the province to pay for their services, but they put no requirements on physicians as to where, how, when and on whom they practised. I always felt that was a somewhat open-ended arrangement that created inappropriate incentives.

I felt then, and still feel, that it is possible for those who govern the system to have some appreciation of where the needs are, and that resources should be directed to meet those needs and physicians encouraged to locate and provide services in accordance with those needs.

It is not the doctors' fault that a particular incentive system is in place. I am not suggesting that doctors act inappropriately. I do believe that provincial policy in that respect is inappropriate. I would suggest that provincial governments should enter into meaningful contractual relationships with physicians.

On the other side of the coin, there may be physicians who do not want to enter into such a relationship. I would encourage them not to do so, if they do not wish to, and take the opportunity to practise privately.

Ms Deber: You are absolutely right. Part of the trouble with many funding formulas, particularly per capita and per service, is that they are granular. Yet the expenses tend to be high fixed costs for the infrastructure, actually having the service there, that is, the building and the staff, and relatively low marginal costs, in many situations, for one more or one less patient. It is why the numbers on the cost of an emergency room visit are phoney. Most of that is for the emergency room itself, and having one patient more or less is an extraordinarily trivial cost.

That is why, for example, one size does not fit all in these models. That is why they have been moving from fee for service for emergency rooms in small communities to just paying a sessional fee to have someone cover the emergency room.

It is an issue of physicians. If you are using fee for service, there may be enough patients to support two providers. There is no way an on-call arrangement can allow two providers to have a life. You cannot be on call one in every two days. You may need a minimum of five. You cannot move your fee for service levels high enough to support five on enough business for two. It may make sense to have an alternate arrangement and not try to pretend that we can do it all through fee for service. Ontario is doing that now with its funding formula for schools. A school will receive enough money for a third of a librarian, but it will not be able to actually have a third of a librarian.

Most Canadian regions are much too small to have the critical mass for many of the things we do. That is why I am somewhat nervous about the internal market and service-based funding recommendations. They will not work for much of the country, or for many services. We need to figure out what services and resources we need to provide, and what incentive arrangements will not get in the way of good critical care. That will vary by service and area. There is no best way to pay. That was recognized in the 1970s. You must tweak your incentives to make sure they do not get in the way of what you want to accomplish.

For the same reason, I do not like capitation. You say to a doctor, ``You will be fully responsible for all the costs of treating all your patients, and we will see what the average is.'' Then you get an HIV-positive, homeless schizophrenic and your cost estimate goes out the window, because he is not a healthy 35-year-old man. That is one of the reasons we have not been able to move doctors.

The Chairman: That is why you said we need a blended system.

Ms Deber: Yes, but it is the same for hospitals. I do not like the idea of going to service-based funding. It puts the same perverse incentives into play. There may be other things for that unit to do that would make more sense. That is another reason why competition is somewhat tricky. At the same time as we are talking about competition, we are also talking about the need for cooperation. Ontario went to a managed competition approach for home care and it has destabilized the entire sector. It has driven down wages and driven out workers. Best practices can no longer be employed. Groups who used to cooperate on best practices are now saying it is trade secret, so VON cannot tell St. Elizabeth about their best practices because they may lose clients if they do.

The benefits of competition in some of this have been way overblown. I can get into some of this in more detail, if you wish. There is a background paper that I looked at. In some of the work Preker has done for the World Bank, he talks about the need to have contestability and measurability. I do not know if you could define what a good clinical visit is, when someone goes to see a cardiologist, for example, such that you could measure contract compliance and find out if someone is trying to cut corners. You work on the assumption that people are professionals. You do not want to create a situation where you cut corners.

Some wonderful work was done for the Pentagon in looking at contracting that found that when there is too much emphasis on performance specification and measurement, you end up with 16 pages of specs for a toilet seat. That has come about because someone cut a corner on a previous contract. This admin trivia starts to produce a reaction. Then what happens is that very few people can meet the contract. You drive out all kinds of providers that you need.

Preker also found that if you want a contestable market, you have to have low barriers to both market entry and exit. That is fine if you are considering home care — for example, someone to clean the carpets — because there are low barriers to market entry and exit. The employees may find another to place to work.

However, you will not want to say to the Ottawa Heart Institute, ``Oh well, I am sorry, you did not get the contract, so pack up your machinery and go away.'' You will not say to the Hospital for Sick Children, ``There is someone else who could do the routine pediatric care, so we do not need the Hospital for Sick Children any more.''

He mentioned expertise and trust as barriers to contestability. I do not think we want to create a system in which we do not care if the providers go under because they do not have expertise and we do not trust them. The rhetoric of competition, even at the World Bank, has very limited applicability to many of the things we do in health care. I am throwing that out as a caution.

Senator Robertson: Mr. Kelly, you said you would like to see a contractual arrangement with the physicians. Would you explain that, please?

Mr. Kelly: Those who govern the health care system, such as the ministers of health and members of the boards of health care regions, have a pretty good understanding of where the priorities lie in the medical needs of the population. They know a great deal about the distribution of physicians. It does not seem illegitimate to suggest that physician resources should be focused on where the need is greatest and that someone needs to make the decision with respect to that need.

At the moment, the only people making decisions with respect to where community physician resources are focused are the community physicians themselves. Their decisions are not necessarily in complete alignment with community needs. That is why, in my view, we have a poor urban/rural distribution of physicians in many cases. It is why we have a poor distribution of primary care physicians within urban areas. Suburban middle-class communities are frequently reasonably well populated from a doctor's point of view, even overpopulated in some cases, whereas inner cities or ethnic communities are not. I would like to see those who pay enter into contractual relationships with those who provide that define what we want to buy and the services we need. We want these services provided in association with other services, that is, we want doctors and nurses working together. We want general practitioners working effectively with the home care system, for example. We want a diabetic treatment program operating in both the primary and institutional health care sectors in a way that is well integrated, efficient and effective. Compensation for physicians entering into these arrangements will be generous. Those who do not enter into such arrangements have the ability to operate privately, if they so wish.

Senator Robertson: Do you believe that one province could adopt this type of contractual relationship, this requirement before physicians entered the system, without damaging the ability of other provinces to recruit? Would one province with such contractual obligations have more difficulty in recruiting physicians unless the other provinces had similar regulations?

Mr. Kelly: I do not think so. My sense, in dealing with physicians over the better part of 15 years, was that many of them were dissatisfied with the current organizational and compensation arrangements. Not everything is wrong with fee for service, but many things are. Many physicians know that, and you have probably heard some evidence from the Canadian Medical Association that a substantial proportion of physicians are looking for alternate compensation arrangements. Many physicians would be delighted to work in association with nurse practitioners, to have a pharmacist as part of their practice or work in larger groups. There are many barriers to getting there. I believe the most significant one is the fact that newly licensed physicians can work wherever they are able to establish a practice. As long as that incentive is there and they are not being offered an alternative, we will have difficulty making progress.

I do not think that a move toward meaningful contractual relationships in the primary care area would cause physicians to shy away from a province. Much would depend upon the nature of the contract. Much would depend upon the compensation. I am not for a moment suggesting that this should be viewed in any way as a compensation reduction mechanism. It is not intended in that fashion.

In my own community, for example, the people who govern the system know well where the shortages are, what the needs are, and I suspect that they would not mind having the authority to begin to address them.

Senator Robertson: I do not disagree with you at all. Are you suggesting that this would help in moving from fee for service to a different model?

Mr. Kelly: Were the chief executive officer of a large British Columbia region to sit down with a group of physicians who were interested in entering into a contractual arrangement in the primary care area, they would not likely end up with an agreement in which fee for service was very heavily weighted. There would be some, but the physicians themselves, I suspect, would want a blended system that did not place the primary weight on fee for service. Those kinds of negotiations between regional CEOs and physicians do not occur because regional CEOs do not control the physician budget. I was pleased to see in your last report the suggestion that, at least in the long run, they should.

Mr. Robinson: Senator Cook asked two specific questions about public governance. The short answer is in our first brief to the committee, pages 38 through 40, in the committee's records. It gets back to your governing principle of separating the various roles that government — insurer, provider and quality evaluator — now plays. We have seen some examples of where it has worked. Governments have a responsibility to see that certain services are delivered. That does not necessarily mean that they must deliver those services themselves to live up to that responsibility.

We have seen at the federal level, in the context of the national airports policy, the transfer of airport authorities, for example, to local control, to be run as not-for-profit, private corporations and as a public trust. Similarly, hospitals are incorporated in this province under the Ontario Business Corporations Act, but they are run as a public trust by a community board of directors. I am saying that is a trend that will continue.

I also wanted to point out something, so as not to leave you with a mistaken impression, in regard to my comment about not focusing on cost containment as your primary objective in restructuring health care. There were successes in regionalization across the country, except for Ontario, which did not undertake it, but as Dr. Keon and others note, they have done things with Cancer Care Ontario, the cardiac care network, and have regionalized their service delivery to a degree. However, the failure, to a certain degree, of regionalization in nine other provinces was because they focused on cost containment, not bettering the health outcomes in certain identifiable metropolitan regions. If you focus on cost containment solely, you will shift from public to private, or to out of pocket, as I believe everyone on this panel would agree.

To pick up on Mr. Kelly's point about contractual arrangements, we are starting to see that trickle-down effect in British Columbia, where they restructured 51 health authorities into six super health authorities. The CEOs are now on performance-based contracts to some extent, so we are starting to define that accountability for the outcomes for which they are responsible. I hope that is a succinct answer to both your questions.

We should not be left with the mistaken impression that it is just small communities that are dealing with this centres-of-excellence approach. Harkening back to Senator Keon's challenge in his other life, trying to mitigate a conflict with respect to a metropolitan region of 1 million people, based on the evidence, Ottawa may not be able to support a pediatric cardiac surgery unit.

That centres-of-excellence approach is not just in small communities, although the issue is much more acute there, but is also in large metropolitan regions. The irony here is that principle no. 11 is not just to facilitate primary care reform so that the method of compensating GPs can be changed to an alternate, blended payment plan, but is also an issue of access in rural communities. If you are a kidney specialist in Ottawa, there may be an opportunity to move to Cornwall to serve an under-serviced population, but in a fee-for-service environment, it may take you a while to build your practice, unless there are massive waiting lists. That is an income hit for you and your family, whereas an alternate payment plan may provide better incentives for physicians or other allied health professionals to move to where they are needed. I take your concern to heart, and it is acute in rural communities, but big cities are not immune. Even with all our resources and wealth, the same kinds of concentration issues arise, which makes sense from an evidenced-based point of view.

Senator Cook: I know that the system must be reformed. I also feel that we are paralyzed by the thought of change, and there has to be a way out. It is not only the client or the patient. Let me put a human face on it. Last week, on the front page of my paper, there was a young emergency room doctor holding a two-year-old. He said, ``This is not about money. This is about quality of life. I will not work the emergency room hours any more.'' I thought, what is coming next? Three days later, I read in the same paper that in a catchment area of a couple of hundred thousand people, there was only one emergency room now open at night. Is that quality? Is it evidence based? Is it economics? That is why I search for the answer in the accountability factor and what is needed from an economic perspective.

Mr. Kelly: That is a very tricky issue. Is it a matter of lack of funding, that is, is there simply not enough money to pay the institutional costs, to pay the nurses and the support staff? Is it the reluctance of providers to work particular hours? Is it a desire to trade income for leisure, or lifestyle issues? Clearly, we need evidence before we make decisions in this area. I see some evidence that, in terms of the numbers in many physician groups, we are encountering problems, and we will have bigger ones down the road. I see evidence in other physician groups that there has not been much of deterioration in physician-population ratios. In fact, there has been some improvement.

As I tried to suggest a moment ago in response to Senator Robertson, from my point of view, while supply is important, distribution is also important, and so is what I call the ``production function,'' the way in which physicians, nurses and others work together. There is some evidence in British Columbia that the number of days that physicians are working is decreasing over time. That is true whether those physicians are male or female, generalists or specialists. Typically, physicians in British Columbia seem, at least when one looks at claims files, to be billing about 10 to 12 days a year less than they did 10 years ago. I think that is worthy of some investigation, if in fact there is a belief that we have shortages. Why are people working less when you would expect them to be working more?

I think the question needs to be addressed on the basis of evidence, not the preconceived biases of anyone, including former deputy ministers.

Mr. Evans: If I heard you correctly, you said there was a catchment area of 200,000 people with one emergency room.

Senator Cook: Open at night.

Mr. Evans: The average supply of all kinds of physicians Canada wide — not all of them necessarily useful in emergency rooms — is about two per thousand population, so if you had equal distribution, which of course you do not, then there would be 400 physicians serving those 200,000 people. In other words, I think that quick calculation reinforces David Kelly's point. This is not an issue of overall supply; this has a lot to do with who is doing what and where.

Senator Cordy: You touched briefly, in responding to Senator Robertson and Senator Morin's questions earlier, on funding given to the provinces for health care. Currently, federal funding for health care is transferred to the provinces and territories. You each made reference earlier to how the federal government could get involved directly in things like centres of excellence or research, which would be federal responsibilities. The reality is that most of the money that comes from the federal government is in fact spent by the provinces.

A number of witnesses who appeared before us talked about accountability, or lack of it, for these funds. In fact, we heard some people say that they are not sure that the money is in fact spent on health care. In the fall of 2000, the federal government gave the provinces large amounts of money to be used for equipment. We heard of one hospital that actually bought lawn mowers. Technically speaking, one could say that was equipment, but I do not think that was what the federal government had in mind when they gave the money. Certainly, as a taxpayer, that is not what I would classify as medical equipment.

Is there a way to make the provinces accountable for the money? Do we just say, ``Here is block funding, and it is yours to spend as you wish?'' Or should the funding transfers be designated? Should there be conditions attached to federal funding that goes to provinces? In other words, is there a way to get accountability?

Mr. Robinson: You mentioned the 2000 agreement between all first ministers. In that agreement, the provinces agreed to report this fall to the Prime Minister, to the federal government and to their own jurisdictions on what they did with that money. That is the first chance to see if they will meet that reporting deadline. I agree with former finance minister Martin, and I am sure the new finance minister will echo this, that there should be no increases in CHST funding until the provinces account for the increased allotment that they received in that 2000 landmark agreement. I know the Auditor General will be very interested in seeing that degree of accountability.

Dealing with the question of system-wide accountability as we defined it on page 40 of our report, we mention three components, with the first being consistent system monitoring and reporting on all aspects of the health care system, including funding, resources, waiting lists and health outcomes. We have seen a third iteration of the CIHI report, which is a big step in the right direction. We are all using the same data now and comparing apples to apples. We mentioned this to CIHI. They still do not have the legislative tool or hammer — because it is joint federal-provincial — to mandate consistent data reporting from the deliverers of health care, that being the provinces, as Statistics Canada had under the Statistics Canada Act, to gather that information more quickly.

We delivered over 100 Access to Information requests, an average of about 10 per province. ``Could you give us access to waiting lists? How many out-of-province surgeries are you doing with respect to your WCB patients, with respect to your cancer care networks, et cetera?'' For the most part, the provinces could not provide that data at all.

You cannot manage what you cannot measure. That is the second point.

That accountability, as I point out in my introductory remarks, will come with a cost. It gets back to some of the issues you have talked about with respect to health information technology.

The third component of accountability, and it goes hand in hand with our principle of public governance, is that it must come with corrective measures when deficiencies are found. We can take some encouragement, if retribution is required, from the fact that Ottawa and the provinces seem to be working toward some kind of dispute resolution mechanism with respect to the interpretation of the Canada Health Act.

Senator Cordy: By ``retribution,'' you refer to decreased funding for following years?

Mr. Robinson: I mean retribution in terms of government-to-government relationships, whether there is a clawback of funding in the previous year, or the feds are found to be in error. Right now, Ottawa still acts as judge, jury and executioner with respect to alleged Canada Health Act violations.

Retribution must also connect with your last three recommendations, about the focus on the patient. There is no sense in arguing, or listening to other people argue, about patients' charters and patients' bills of rights. It was a farce, in that in the last provincial election in this province, Mr. Harris and Mr. McGuinty were competing on who would keep new mothers after normal vaginal delivery longer. ``My new mothers will stay 15 minutes longer in the hospital than yours will.'' If that is violated, is there any opportunity for the patient, who has certain rights under the charter, to take the government to court?

There was another facile promise that you would be seen by a triage nurse within 22 minutes or something in a metropolitan hospital. If a bus crashes outside the hospital and you are there with a sprained ankle, you will not be seen in 22 minutes.

Therefore, those retribution measures must be real and not based on these political documents like patients' charters that may have no force or effect.

Ms Deber: You have arrived at a key point. The trouble is that there is an inherent conflict of interest for provincial governments because they can push costs onto someone else. They can give a tax cut; they can do other things; they can run an advertising campaign.

I am from Ontario. Every time an issue arises, rather than resolve it, the government runs an advertising campaign talking about how they have resolved it. Of course, all the money has gone into the campaign and none to the resolution.

It is upsetting, because what has been happening is that federal money going to Ontario is used to offset provincial spending, not to augment it. Ontario has done that with education, child benefits, health, you name it. You give money to Ontario and heaven knows what will happen. Ontario plays a lot of games with the numbers. The Ontario Auditor General has taken them to task for the way they handle the health contributions. There is a blistering attack on how Ontario reports the health contributions, what they have done with the numbers. I do not even know whether the spending is real. Things are reclassified, moved in and out. Multi-year funding is treated as single-year funding for some purposes, and as multi-year funding for others. Twenty thousand nursing home beds are supposed to be built. They are booked as nursing home expenditures when they are announced, even though they are not open and running. I do not know how much of an issue that is, but I agree with you that it is a big problem.

The trouble with accountability is that one cannot really know what is happening in a clinical encounter. These are what political scientists call ``street-level bureaucrats.'' A home care nurse visits a house and no one will know precisely what she does. They know what is filled out on a form, but they do not know what is actually being done. When push comes to shove, in the final analysis, there must be a lot of trust. Rebuilding this trust will be a big task. There is so much angst and change fatigue and anger in the system now that that would be a high priority.

There are federal conditions in the Canada Health Act. Despite all the attacks on the Canada Health Act, there is nothing in it that impairs flexibility except the prohibitions against user charges to insured persons for insured hospital and doctor services and refusing to insure people with high needs.

Is it complete? Are there things missing from the act? Are there many things that you need to do something about that the Canada Health Act does not cover? Yes. However, I have not yet heard of anything that the Canada Health Act stops you from doing except charging user fees to insured persons for insured services given in hospitals and by doctors, and that is the point of the exercise.

My colleagues and I have been doing a lot of work on health care. We have found that despite all the determinants- of-health rhetoric, despite all the closer-to-home rhetoric, despite all the things-should-be-done-in-the-community-and- transferred-to-the-community rhetoric, the only parts of the system that have been preserved across the country — and there are provinces that have done a great job — are the things that the Canada Health Act has put a line in the sand around and said, ``You cannot touch it.''

I suggest that the Canada Health Act principles are just fine. I have heard of no examples of where they have been a problem. They are inadequate for other things. If you move people home, you do so outside of the Canada Health Act, which is what the Canadian Medical Association long ago called ``passive privatization.'' Those things are problems and there may be a need for companion legislation, but the only parts of the system that have been immune to the sort of erosion that we have seen in other places are those that the Canada Health Act preserves.

In general, it has done a good job of doing what it was supposed to do, but it preserves the system as it was in 1957, and that is clearly not adequate for 2002.

The Chairman: I have to take issue with your logic. I believe you made an assumption and stated a conclusion that was not related to it. I would agree with the observation that the Canada Health Act does prevent extra billing. It does prevent charging for services that are insurable under medicare.

Having said that, that says absolutely nothing, to my mind, about whether or not the principles of the Canada Health Act are any good, but you jumped to saying that. You concluded from your two statements that therefore, the principles are okay. First, there is no agreement on what constitutes ``medically necessary.'' Try asking people in Quebec whether or not portability really exists. Accessibility depends on many factors. Therefore, I for one happen to think that the principles of the Canada Health Act, while terrific on paper, in fact are more honoured in the breach than anything else. You said that to make it effective, you must be very specific about what is not allowed. However, that is not a principle statement; that is much more detailed.

Mr. Robinson: For the record, I refer honourable senators to volume 1 of your research. Claude Castonguay reported to you that the Canada Health Act was seen as an impediment to Quebec's innovative approach to drug costs. In other forums I have appeared before in New Brunswick, the Canada Health Act is seen as an impediment to the unique extramural hospital approach that the New Brunswick government has taken, which falls definitely within the spirit of the act, but not within the letter of what it prescribes.

I want to put those facts on the table in opposition to Professor Deber's assertion.

Ms Deber: I do not see how the Canada Health Act is an impediment, because it only specifies that drugs have to be paid for if administered in the hospital. Similarly, it depends how you define ``extramural hospital.'' If you move people out of the hospital into their homes, you will not have to pay for nursing; you do not have to pay for devices or rehabilitation. How is it an impediment to drug control? The minute I move drugs out of the hospital, they are absolutely outside the boundaries of the Canada Health Act.

Senator Robertson: We established the extramural hospital under the New Brunswick Hospitals Act. It is seen as a hospital without walls. Therefore, patients in the extramural hospital receive all the benefits. There have been some adjustments over the years, but they should receive all the benefits that you get if you are surrounded by walls.

Senator Keon: I wish to return to the subject of human resource distribution and the example that was raised of one emergency physician for 200,000 people. This has been on the agenda forever, as we all know. There has never been a solution to it. Could you go from left to right and suggest a solution?

Mr. Evans: I thought you were on the left.

It is said that Stalin's hatchet man could do many things, mostly fatal, but was not able to solve the problem of doctor distribution in the Soviet Union. I do not have such powers, or any of the other features, I hope.

The best attempt was made in B.C. in the mid-1980s with the allocation of billing numbers. We all have the scars from that experience. It is interesting that the judge in that case is the same one who gave this quite extraordinary award to the doctors this spring in B.C. There is an ongoing historical connection there.

It may or may not work, but doing the sort of thing that Mr. Kelly has suggested would at least take us forward, namely, actually make it possible to change the remuneration patterns and access to the public system so as to make it conditional on where you settle. As long as we stay in the present mode, you will not solve anything.

Coming back to the idea of zombies, the same solutions continue to be brought forward over and over. They never work, but they are brought forward because it is important to be seen doing something. It is not terribly important to be successful, but it is important to be seen apparently addressing the problem. We get symbolic action. The Americans have a term, TSG, or tiny symbolic gestures, which are politically very important.

Mr. Robinson: Reduce the number of visits to the emergency room in the first place with a variety of preventive and other measures. I took issue with Professor Deber's assertions, but she was correct in pointing out that the Ontario government has spent $275 million over seven years on advertising to say it had solved problems.

Mr. Kelly: Picking up on Senator Keon's question and Mr. Robinson's comment, the emergency room is not the front end of the system, but it is the part that is not allowed to turn to patients away. There is a degree of accountability in an emergency room that exists in few other places. You cannot say no. You can put people on gurneys in hallways, you can make them wait, but you cannot say no. There is no such accountability in the primary care system in this country. None. That is not a shot at physicians; that is a shot at the organization of the primary care system. That is where I would address the emergency room problem.

Senator Keon: There is the broader problem of manpower, of human resource distribution, though.

Mr. Kelly: If you dealt with the primary care problem effectively, you would have a much smaller demand on emergency rooms. That would begin to resolve the pressures, some of which are caused by manpower shortages.

I have always believed that we need to be risk averse in the training of physicians. I applaud the 25 per cent expansion of medical school enrolments announced over the last three years. I would suggest, though, that as those physicians begin to arrive on the market later this decade, if we have not dealt with the contracting problem, we will be hit with very significant cost increases and gain little return in benefits.

Senator Keon: How do you get physicians and nurses into Iqaluit?

Mr. Kelly: The same way we get teachers into Iqaluit.

The Chairman: I did not think you were being flippant.

Mr. Kelly: I was not. Most of you, perhaps all of you, are parents and know how the Canadian education system works. If we allowed teachers to teach whom they want, where they want, how they want, and the departments of education had to pay them anyway, we would not have a school system in Iqaluit or in large parts of New Brunswick, just as we have physician shortages in Iqaluit and in large parts of New Brunswick. That is the problem. Payers do not enter into meaningful contractual relationships with providers. That must be addressed.

Senator Keon: Would you use Professor Evans's billing number suggestion? How would you do it?

Mr. Kelly: I would do three things. First, I would stop giving out open-ended billing numbers to physicians. I would provide virtually all comers with contract offers. I would put some conditionality in those contracts — for example, that they define issues such as ``place of work.'' I am not suggesting at all that you should have administrators including clinical issues in contracts. However, the business relationship should be defined, and it currently is not. Eliminate the billing numbers, develop meaningful contractual relationships and you will begin to see the problem resolve itself. I also believe that many physicians would be supportive of such an approach, although they are not found in leadership positions of the provincial doctors' unions.

The Chairman: Following up on that, I do not know of any service purchased by a government in which there is not a contractual relationship. There is a contract that stipulates, ``This is what the supplier shall do in return for the money.''

When I got into this study, I was amazed to discover that those kinds of contracts, which routinely exist for the purchase of any service by any government anywhere, do not exist in this case. However, resistance from the profession to moving in that direction would be absolutely enormous.

Mr. Kelly has thought this issue through, but from a pragmatic standpoint, how do you get from here to there? Do you essentially grandfather all existing licence holders, billing number holders, and start imposing the contracts only on new entrants? Or do you attempt to change the process for people who already have billing numbers?

Mr. Kelly: One must be cautious. There are obviously constitutional implications here.

The Chairman: Why?

Mr. Kelly: The judges have told us that.

The Chairman: As I have always understood that judgment, it did not say that government could not enter into a contract. Government is under no obligation to hire every conceivable doctor who walks through the door. They cannot impose some conditions on some people. Government can decide to ``hire'' or not ``hire'' an individual — that is, enter into a service relationship. Therefore, they can impose certain conditions.

In the other case, it was challenged because it was attempting to impose a mobility rights condition on a profession. It is not clear what would have happened to the case on appeal. It is regrettable that it was never appealed. The judgment might not have stood if the case had been appealed.

Mr. Evans: Appealed to the Supreme Court?

The Chairman: Yes. The Supreme Court has been the arbiter on the interpretation of various Charter of Rights cases.

Mr. Kelly: A billing number is a privilege, not a right. It would be seen as such, at least at the superior court, when the issue gets there. I am convinced it will. However, it is not just a matter of mobility. There are equality issues as well.

You cannot indefinitely treat new doctors differently from established physicians. You must develop a scheme that ultimately applies to everyone, but perhaps has a long lead-in period.

The Chairman: Such as a 20-year phase-in.

Mr. Kelly: Exactly. That may well be doable. I do not know.

Mr. Darby: It is clear that when you enter into a contractual arrangement with someone in Iqaluit, it costs more money. No one is denying that aspect.

Mr. Kelly: Certainly, but it is costing us a lot because we do not enter into contractual relationships due to our extremely inefficient primary care system.

There will be opposition. I am not satisfied that any individual province has the political weight to take this on. This is an area where a national approach might serve well. Compensation generally might be an effective condition in future funding. One can address national issues in two ways: Get the provinces together and do it jointly, or throw the federal government into the mix. I would hope the federal government would see having an efficient primary care system as an objective of sufficient importance that it would want to play. It would have to be prepared to take some of the same political risks and pay the same costs as any province that entered into this pool. I would leave the precise nature of it to the politicians.

Mr. Darby: If you properly structure the contracts, you may reduce the opposition from the people who have to sign on.

Senator Fairbairn: On the subject of contractual arrangements, I am not entirely clear as to how they would work. I am thinking, Mr. Kelly, of the province of Alberta. What if nobody wants to go to Picture Butte or Milk River? We finally, with great effort, managed to bring in a doctor from Africa. Would the contractual arrangement work for him?

Mr. Kelly: Yes. That region would have the responsibility of ensuring the provision of medical services in the community, in the same way there is a school board with the responsibility of ensuring provision of educational services to the children of Milk River. That region should have sufficient resources to enable it to contract with a licensed physician, whether currently resident in Canada or somewhere else. However, I would give that region the responsibility of ensuring that it happened.

As you say, frequently it is not going to happen by itself because the physicians involved might prefer to practise elsewhere. The other side of the coin is I am arbitrarily taking away their right to decide where they will practise, unless another region offers them a contractual arrangement.

There is an incentive, as well as a disincentive, associated with this. It would be much easier to deal with the distributional problem if the choice that physicians currently have of practicing where they wish did not exist. It is not a choice other publicly paid service providers have.

Ms Deber: I agree with many of the points made. However, we must be somewhat careful, because if a teacher is not hired by a public school, he or she could still be hired by a private school, set up as a tutor or make a living otherwise. It will be a tricky situation when we say you can only be hired by the public sector and you have to go where we want. I predict there will be enormous pressure to set up some sort of parallel private system for people who do not wish to accept those contracts.

I would be somewhat milder. There should be performance expectations. There is recognition that, in many communities, fee for service will not be adequate. You may be able to induce people to accept alternative types of arrangements. All of the doctors I know are very unhappy about the fact that the incentives reward people who practise bad medicine the most. The people who practise good medicine know they will make much less than those who run revolving-door practices.

As opposed to this adversarial situation, we should work with the physicians to see how we can fix things to work smoothly, allowing them to deliver high quality care and have the critical mass they need to have a life and provide proper coverage. If they do not wish to work 70 hours a week, they probably cannot expect the same income as people who do. There will be some tradeoffs there.

We must be careful about setting up a single and adversarial model. It will not work if the providers do not wish to cooperate.

The Chairman: That amounts to saying we are prepared to give the providers a blanket veto, or, if you want, a complete endorsement.

It is always true that, in any negotiation, if you are not prepared to walk away from the table, you will lose. It seems to me, therefore, that you cannot give as much as the providers would like and think they deserve. You cannot give any group anywhere, particularly when dealing with public issues, that degree of power.

Mr. Kelly: I am not suggesting what Ms Deber implied, that physicians should be forced into these contracts. This is where I begin to part company with Professor Deber. I would provide an opportunity for those physicians who did not wish to enter into contractual relationship to practise privately. I would not let them have it both ways. I would not let them have a foot in both the public and private camps.

However, I would provide sufficient funding to the public system to run a quality system. I would provide the people who run the public system with the authority to enter into contractual relationships with people who provide services to that system. For those — and I suggest there would be very few — who did not want that arrangement for whatever reason, maybe because they saw some niche market somewhere that appealed to them, fine, let them have that alternative. By the way, that does not imply a change to the Canada Health Act. Current legislation permits doctors to opt out and work privately. In four provinces, people can even insure against that possibility.

Senator Fairbairn: The essence of my question, or my desire for clarification, returns to Senator Cook's statement. It really is a question of do we want to believe our health care system is equitable and universal. Yet, in one of these cases, this very small community had been used to having two doctors. They were the same age, and they got old and retired at the same time. For a time, there was nothing, until this wonderful physician came from Africa.

My question or concern is about places where people do not want to go. How high do the contract rates have to go to get them there?

Mr. Kelly: Some extremely high rates of compensation have been provided in recent contracts in Western Canada to get physicians to go to places that might not appeal to many people. However, there is still no requirement attached.

One of the problems in providing increased compensation in more isolated communities is that the definition of what is isolated and what is not becomes a matter of negotiation. It becomes blurred over time. It has been my observation, over 15 years in the business, that whatever one provides to a physician in a small, isolated, rural community today, will be provided province wide within a decade. If you want evidence of that, look at the contract that is currently in the process of being approved in British Columbia.

Mr. Evans: You must see at least some of the communities, particularly those on the Prairies, in a more long-term light. I grew up in a small prairie town and I have seen them die.

Ultimately, the width of the draw bar that you can take behind the diesel engine is driving that. As the diesel engines get bigger, the draw bar gets wider, and the number of people in the field decreases, the number of passes through the field decreases and the optimum man-to-man ratio drops. As that happens over time, the number of small towns that are economically viable shrinks.

Many of those small areas will simply disappear in the longer term, as many of them already have, certainly in my lifetime. You are looking for ways to deliver medical services, and not necessarily a doctor. It does not make sense for a young man or woman straight out of medical school to go off and set up a practice in a town that may not exist in 20 years. I notice that Mr. Kelly's response was in terms of the regional responsibility to ensure the availability of medical services, and not necessarily a physician. In general, those two things must be separated.

The townspeople may feel differently about that. They may feel that because they have had a doctor in the past, they would like to continue to have a doctor. The answer to that may be, ``You will not have one.'' We need to ensure that people have access to medical services. That may mean rotating people in or out of those areas. That would not be as good as having the same doctor available at all times, but that is what could happen in those small communities.

You need to monitor, not the presence or absence of bodies, but rather whether the folk in those remote communities are receiving the same level of services as others. Very often, you find that the degree of unequal distribution of services is much less than the unequal distribution of personnel. You need to build your regional structures to ensure that that happens.

Senator Morin: Are not negotiations between the Minister of Health, physicians and, especially, physicians' unions, intensely provincial? I cannot understand how the federal government has any influence in these negotiations. We often talk about the West, but these negotiations happening between the ministers of health and doctors in each province are different. This is, to my mind, so intensely provincial that, apart from wishing for a different outcome, I cannot see what the federal government can do.

Mr. Kelly: I am not sure that I have a specific recipe. However, I do not think that it is different from province to province. We have ten sets of similar problems. Certainly, I believe the provincial medical unions' approach to negotiations is on a national scale. They talk to and learn from each other, and they focus their objectives on particular provinces where they believe progress can be made.

Senator Morin: That is a matter of opinion.

Mr. Kelly: — and perhaps a little experience, as well.

I should like to think that at the least, provinces can do that, but they do not.

The federal government has provided $36 billion in the last two tranches in 1999 and 2000, and there may be more. Surely the federal government has an interest in ensuring that, while compensation is appropriate, and even generous, it is no more than that.

Mr. Robinson: I would support Mr. Kelly's opinion, based on media scans of the bargaining pattern that occurs amongst doctors, and all allied health professionals, province by province. Each sets the bar for the next set of negotiations, whether it is doctors, nurses or autoworkers. It is the same incentive in that kind of labour framework.

Senator Fairbairn: I take Mr. Evans's views, as harshly realistic as they may be, to mean that part of the equation is the ultimate disappearance of small communities, that this is a national problem. It is one that people in every province of this country are fighting at every level. We are offering support and diversification of many things to try to maintain viable opportunities for those towns and for the people who choose to live in them.

I would argue that the availability of adequate medical services is right up there with schools as a central focus in the viability of some of these communities. At any rate, it certainly will not be solved around this table, because it is obviously a critical part of that larger issue.

I should like to ask a question about home care. We have heard comments from a variety of witnesses that, as a viable and sensible option, the demand for home care will increase, because more and more people will want to remain in their own homes and not go to institutions.

More than that, many people in Canada forget that the Canada Health Act was founded on hospitals and doctors. Today, all of a sudden, people who thought that ``health care'' meant all health care are discovering, at accelerating levels, that that is not the case and that the ball is in their court.

Every province is trying to provide what they call ``home care.'' The standards across this country are wildly different. Could you express your view of the way that we can best develop a rational and responsible health care system in this country?

Is this important enough, in the overall health situation, to become, as someone mentioned, a piece of companion legislation to the Canada Health Act?

Ms Deber: Every one in this room has had personal experiences that caused them a certain degree of anguish. As we are in very privileged positions, one can only imagine the families that are not and have these enormous daily responsibilities. We are incapable of fulfilling them without a response from our health care system.

Mr. Evans: I presume that the committee has Marcus Hollander's report on home support, otherwise my response to your question would have been fairly sceptical about both the potential for cost saving and for improved health from home support as opposed to home care — there is an important distinction there. Marcus Hollander has analyzed a remarkable control trial, an accidental social experiment, from British Columbia and found quite marked differences in mortality rates two and three years out in regional populations with either high levels of, or discontinued, home support. By ``home support,'' I mean not health care as such, but the kinds of activities that enable people to stay in their homes. There were quite powerful differences, which surprised me considerably. The study is worth looking at.

The cost saving part of it needs to be looked at under a general rule that costs do not fall by themselves, because every cost is also somebody's income. However, there does seem to be quite a lot of scope for yet further reductions in hospital utilization by expanding the level of home care and home support. That is a long-winded way of saying I do think there is a lot of potential in that area.

Ms Deber: Home care is critical because it is very heterogeneous. Home care is a place, not a service. There are all kinds of different services given in home care, some of which do fit under the Canada Health Act universality criteria and some of which do not. This is where user fees would be entirely appropriate, as would family support. Some will be fairly predicable costs, for which Mr. Robinson's argument for a CPP type of pre-savings would be appropriate, as opposed to something like palliative care, for which it probably would not be. We have to stop talking about home care as though it is a homogeneous entity.

Most data shows that if it is to be effective, the population that will receive it has to be carefully targeted. One of the problems is that you start putting everybody on it, including those for whom it may not make sense, whereas for certain populations it makes enormous sense.

I can share with you a survey that we did. I have a research unit funded by Canadian Institutes of Health Research, CIHR, which has a lot of partnerships with national associations. The unit sent out a survey asking the leadership of key groups — including the Canadian Medical Association, the Canadian Nurses Association, the Canadian Home Care Association, the Conference Board of Canada, whose response rate is horrible, and the Federation of Independent Business — what they think should be included in medicare; what they think should be universal under Canada Health Act type conditions; what should be partially paid for and means tested; what should be partially paid for and non-means tested; and what does not belong in a publicly funded system at all. We are currently analyzing the results.

One thing that is striking is that the public support for things outside hospitals is less. There are all kinds of things where all the groups say, ``Yes, indeed, if it is in a hospital, it should be fully paid for.'' The minute you say it is either in a private clinic or at home, you start seeing differences. If you are going to go into home care, you do not yet have the strong support that you do for hospital services. When we have the results on this survey, if you are interested, we will be happy to share them with the committee.

Senator Morin: Could we have it fairly soon, because this is a very important issue? How was support for pharmacare in your survey?

Ms Deber: So far, it is considerably lower. There are some things in there that are plainly irrational. For example, there is very strong support for immunization, but not in terms of travel — immunization prior to a foreign visit — even though somebody could bring back a pretty nasty disease. If you were talking of being penny-wise and pound foolish, not paying for that would seem to fit the bill.

We were thinking it would be useful to indicate which things could probably be taken off the table. There is enormous support for continuing full coverage for hospital-based services. We could probably take that off the table and stop debating it because there is strong support for that even in the independent business community, whereas there are other things about which there is still debate. We will have it as soon as my research assistant can finish inputting the data, which she is feverishly trying to do.

The Chairman: You are talking about weeks, not months.

Ms Deber: I am hoping so, but we have some 1,500 responses and that is an onerous job. She is working as hard as she can. I will certainly give it to you as soon as we have it entered.

Mr. Darby: In the 1990s, when we looked at real per-capita health care costs by age and sex, particularly as the budget constraints began to bite, we saw substantial reductions in health care costs per person among the elderly — in particular, those over 65, but more especially, those 75 and over, to the extent where health care costs on a per-capita basis were halved.

Senator Fairbairn: Lots of women too, I would think.

Mr. Darby: Yes, women too. We do not have direct evidence, but a hypothesis that there was a lot of de- institutionalization of the elderly going on in order to bring those costs down would be supported by evidence about where the elderly were now resident. It is interesting that in the latter years of the 1990s, that trend stopped. There was a real question about to what extent the easy gains in terms of cost savings in the systems from increased home care had already been realized on a per-capita basis.

I think home care is with us now as a pattern of treatment, especially for the elderly or for chronic care. As we go forward, it will be tougher to get more cost savings out of the system through home care. As the number of elderly increase, the demands on home care will increase. As for changing the pattern of care, it looks as if that already took place in response to the substantial cuts in funding in the early to middle 1990s. It raises the issue of how much more savings we could get, at least on a per-patient basis.

Senator Morin: Savings is not the only issue.

Mr. Darby: Sure.

Senator Fairbairn: You are suggesting that a lot of what we are talking about has already been accomplished. I think anecdotally, you would find in almost every part of the country some very powerful examples of how it does not work, and how dreadful things happen between hospitals and homes that we should be able to deal with in this country.

Mr. Darby: Looking forward, we have big supply issues as well, and some of the stories you are talking about are part of the falling between the cracks. If we are changing our way of dealing with chronic care for the elderly in terms of no longer trying to do it in hospital settings, but we do not have the supply of the home care facilities to treat the ever-increasing number of elderly, then horror stories are almost the direct implication of those two trends.

Mr. Evans: Ms Deber made a point regarding the variety of different issues and that deserves to be reinforced. The decline in hospital utilization in the mid-1990s was an acceleration of a decline that had been happening for a long time. Some of that decline was a result of the substitution of day surgery for in-patient care and the shortening of acute care stays.

A need for home care is generated, but two or three days are lopped off of the hospital stay. You are not talking about a long-term, chronic issue. Those are relatively straightforward things with which to deal.

You are right. Much of that easy stuff has been completed.

We are now looking at a relatively small group of people, compared with the overall workload on the hospital system, with much more severe longer-term problems. For those, it is critical to have a precisely targeted home care program in place.

An erroneous position promoted by some of the hospital unions is that most of the contraction in hospital stays during the 1990s required creating home care. There were many people who should not have been in hospital in the first place. I was one of them.

We substituted day-types of care, about which we have known for 20 or 30 years. We never got around to doing it earlier because it was not worth the trouble. I can give you specific examples, if you are interested, over lunch.

Ms Deber: The complexity is caused in part by the large amount of unregulated care, particularly in retirement homes in Ontario. They are basically taking on the functions of nursing homes but are totally unregulated. You do not know what is happening there. The cost burden can become horrific, particularly if people do not have private insurance.

I know people who are worried that their elderly parents will fall. They are paying for 24-hour per day care for someone to watch them. It will bankrupt them. Home care is not cheaper if you need to bring in an enormous array of services.

It may be more humane and better, if people are isolated and not talking to anyone, to have them enter residential care. There are apartment-bound people who will never see or talk to anybody.

There is an extraordinarily complex array of needs. It depends on the type of supports available, such as family and church. People are more isolated when kids move away. They need a different type of care.

It is not a Canada Health Act thing. I can see room for user fees, family co-payments, pre-savings and other sorts of things for that sort of care. However, it does not make sense for much of the more acute care traditionally envisioned by the Canada Health Act.

I agree that it is an enormous problem.

Senator Morin: These are important statements. Professor Evans has stated the difference between home care and home support. They are two different issues. It does not lend itself as cleanly as pharmacare or hospital care to a national program.

The Chairman: That is right. The boundary lines are not clear.

Senator Morin: We hear over and over again that we should have a national home care program. We have just heard important points.

Mr. Evans: CIHI is trying to develop data systems that will make the distinction between home care and home support. I have a meeting on Thursday with CIHI to discuss the current stage of their efforts.

Mr. Robinson: Mr. Chairman, page 32 of this year's CIHI report points out a 350 per cent increase in spending over the last 10 years on what the provinces define as home care. It now consumes 5 per cent of provincial health budgets, up from 1.6 per cent a decade ago. As a point of information, a place in these Ontario centres costs between $1,500 and $4,000 per month. I do not know what pension could pay that.

Dr. Deber raised an important issue. We talk about the continuum of care. We must be careful to not let governments off the hook by saying that we need more home care services as a kind of catch-all to make up for their lack of planning for ALC beds, long-term care beds or palliative care.

For years, we dumped things on the school system and figured that they would take care of it. We should not go that same route in health care.

I am not trying to belittle the issue of home care, but I do point out that we cannot have, as Ms Deber says, a definition that makes it the catch-all for everything, because then the continuum of care would degenerate for patients needing other surgical interventions or hospitalization, or for those in a chronic disease management stage of life.

Senator Fairbairn: We should not let ourselves off the hook either because of the diversity, by saying that a little bit could be done here and there. It is bigger than that.

Mr. Kelly, you have really had quite a career with Alberta and British Columbia. When you talk about consumption taxes, what would you do about Alberta?

Mr. Kelly: I was in Saskatchewan before I was in Alberta, by the way.

I see nothing wrong with a consumption tax being implemented in Alberta. My advice to a minister would be to do it.

Senator Fairbairn: Just checking.

Mr. Evans: Were you not talking about the federal GST as well?

Mr. Kelly: Frankly, Alberta premiums are fairly onerous. I like many of the Mazankowski recommendations. However, I do not support the recommendation that provincial premiums in Alberta should be increased further unless there was a substantial improvement in the income support component. My advice would be to have a consumption tax like everyone else.

Senator Fairbairn: The current government in Alberta did substantially raise premiums, particularly for lower- income people. It is very tough.

Mr. Evans: Those premiums give the biggest boost to the people at the high end of the income distribution. It is not difficult to provide relief for people at the bottom. The people who really benefit from substituting a consumption tax for income tax, premiums for consumption tax, are the people at the very high end of the income distribution scale. It matters to everybody as an individual, but the big change in income from substituting one tax for another is at the high-income end.

The Chairman: I would like to wind up with several specific questions that will be easy for you to answer and hard for you to duck.

First, if we decide that the feds need to add revenue, which we have, what specific new revenue-generating source do we seek?

Mr. Darby: We have already tried to answer that question directly.

The Chairman: You said consumption taxes.

Mr. Evans: I would say income taxes. Remember, that is a personal opinion. I emphasize that the choice you make depends on your view of the equality or inequality that you want to impose on the Canadian population.

Senator Morin: Ear-marked?

Mr. Evans: No. You can label it.

Senator Morin: Labelled income tax.

Mr. Evans: Sure, but you will not earmark it. ``Earmarked'' means that you spend all of that, and only that, which you get from the tax. If you finance shortfalls from general revenue and absorb surpluses into general revenue, then the earmarking has no meaning. It is just political labelling. I see no problem with that.

Earmarking, no, I would not do that, and I do not think anybody would.

The Chairman: On income tax.

Mr. Evans: On any tax.

The Chairman: CPP is an earmarked tax.

Senator Morin: I still do not see the difference between earmarking and labelling. Could you explain?

Mr. Evans: The premiums in British Columbia are labelled as being for health care, but they do not fund the health care system. If the health care system costs more, general revenue makes up the difference. If the health care system should somehow cost less, the extra premium revenue would flow into the general treasury. In that sense, they do not determine the size of health care spending and they are not determined by the size of health care spending.

Senator Morin: If it is labelled...

Mr. Evans: They just call it ``health care premiums.'' That is why I am emphasizing that in reality it is a poll tax. However, as the chairman points out, people will not understand that term.

Senator Morin: Your income tax proposal would be labelled?

Mr. Evans: Sure, if you want to. I expect that would be good politics. I am not a politician. It might make people feel more comfortable about it. I have no problem with a labelled ``health surtax.'' That seems perfectly sensible. I think we recommended that in the Seaton commission report 10 years ago.

Mr. Kelly: GST, with a small caveat. January 1, 2003, the final tranche of the CPP raise will be finished. At that point, as EI comes down, there may be an argument for offsetting those reductions with a new health payroll tax.

Ms Deber: I am not an expert in tax policy. I think it is a question of what is the best way for the federal government to raise the revenue it needs, and I do not think that has anything to do with health care. The question of how much revenue health care needs is separable from the question of how best to raise it.

The Chairman: I agree.

Ms Deber: So I will not answer.

Mr. Robinson: Governments do not have revenue problems, but expenditure problems. Reallocation of resources: 4 billion in corporate welfare; 13 billion is documented by the Auditor General as discretionary HRDC funding, without touching a social program or a provincial transfer for health care at this point.

The Chairman: So you would do it through reallocation.

My second and last question relates to the issue we have touched on, principle 20, what we call the ``care guarantee,'' which was essentially as follows: If sufficient funds are not put into the system, if the system is not sufficiently restructured to ensure that people get timely service, which they are not getting now — I think the evidence is clear on that — what is the solution to that problem? Our proposal was that at that point, you are really forced to consider a parallel system, if for no other reason than you simply cannot allow the system to deteriorate and have waiting lines get longer. What is the solution to the problem if in fact the waiting line situation is not capped in some form?

Mr. Kelly: At the beginning of the 1990s in British Columbia, waiting time was about six and a half weeks. At the end of the 1990s, it was about nine weeks.

The Chairman: You are talking about an average waiting time?

Mr. Kelly: The average waiting time across the 34 surgical procedures that we measured. British Columbia has the best continuous data on wait times in the country.

There had been deterioration during a period of massive change. There has since been significant refunding. I am not sure we should go overboard on the access problem.

Second, the system in the 1990s was operating at 98 per cent capacity. Systems operating under that kind of pressure and run into service withdrawals can take a very long time to recover. When Tom Closson, who now runs the Toronto hospitals, was the CEO in Victoria, he did an interesting analysis of the impact of nurse and physician strikes on wait lists. He demonstrated that it took a long time — months, even more than a year — to recover from a relatively short strike. We have a labour management problem to address if we want to deal with wait times.

I have said, let's get into contracting. I think that will significantly improve access. There may be a small private market as a result.

Senator Morin: British Columbia also sends patients to the U.S. for cancer treatment.

Mr. Kelly: That happened about 15 years ago.

Senator Morin: More recently than that.

Mr. Evans: It is actually about 12 years ago. That was for heart bypass surgery.

Senator Morin: I remember seeing that in the newspapers.

Mr. Kelly: Some B.C. patients chose to go to the U.S.

Senator Morin: It was a matter of waiting lists. I am sure of that.

Mr. Evans: It is not widely reported that when the heart bypass surgery slots were made available in Seattle, it took about two years before they were all used up because many of the people on the waiting list said, ``The problem is not that bad. I will wait and have it done here.'' It kind of defused the situation.

With cancer treatment in Quebec and Ontario, there are some interesting things coming out about the way the therapeutic radiology systems operate may or may not lead to the backing up of patients. That comes back to the issue of accountability, of evidence, and why the heck the system is so clogged up. It is not simply a matter of lack of capacity; it is how it is used.

Senator Morin: Despite the fact that the waiting lines have not changed, Quebec has closed down the U.S. option because of costs. It is not an improvement.

Mr. Evans: Hugh Walker at Queen's University has done a lot of interesting, detailed simulations of the way therapeutic radiology facilities work. He has identified many areas where you could significantly improve the throughput in the existing capacity without risk to patients. It does not happen because ``We have always done it this way.''

Ms Deber: Another thing that is crucial is the appropriateness guidelines. The cardiac care network, for example, has agreed-upon standards about who needs to be seen quickly. All waiting lists are not the same.

Perhaps I can offer a personal anecdote. My husband has cataracts. At some point, he will need cataract surgery. He was referred to a very good cataract surgeon who happens to have a clinic that accepts private patients. He is reputed to be a very technically good surgeon. My husband, who is a leading scientist and a pretty smart guy, goes in, and the guy gives him a one-minute visit and says, ``Oh, absolutely, you need cataract surgery. Have you considered having the other eye done at the same time, which would of course not be paid for by OHIP, but it would be so much more convenient because you would not need glasses?'' My husband was sufficiently put off by the encounter that he sought out a second opinion, and the second opinion was there is absolutely no need for you to have surgery. You will not need it for years.

Senator Morin: Did you report it to the Ontario College of Physicians?

Ms Deber: It is probably borderline.

Senator Morin: A two-minute examination on both eyes, non-necessary surgery; that is malpractice. You should report him. Your duty as a Canadian is to report him.

Senator Cordy: It has been reported. We are on television.

Ms Deber: The point I am making is that, particularly around elective procedures, there are certain things you might need done at some point but it is not clear when, and there are other times where it is absolutely critical that you have this done quickly or your health will suffer as a result. We do not have a way of separating them out. So I would say one of the very first things we should have is some sort of quality control for appropriateness, to ensure that when care would make a difference, it is timely. I think transparency and public pressure is critical. I would say there is a lot of working with patient groups and working with others to ensure that government's feet are held to the fire. That does not mean that every low-priority elective procedure has to have a care guarantee and jump to the front of the queue.

The Chairman: We would agree with that. On the other hand, when talking about holding the government's feet to the fire, there is nothing with which to do that. There is no downside for them, other than general political discontent. There is no critical pressure on them, which is what the care guarantee was designed for.

Ms Deber: A related subject is queuing theory, which says you are better off with single queues than with multiple queues. There must be a way to ensure that someone who needs care can get to the next available caregiver. We are talking about systems, networks and coordination. We are talking about ways of making sure that the care works well for the sake of the people who need it. It is feasible. There certainly have been cases where they have done this. The waiting lists have gone way down, appropriateness has gone up, and outcomes are affected.

The Chairman: Other than the Ontario care network, it is difficult to find examples.

Ms Deber: B.C. has had great success. B.C. cancer outcomes are better than those in most of the country.

Mr. Robinson: To pick up on that, from my experience on the foundation board, Cancer Care Ontario has had better outcomes in terms of moving people around the province.

I would add a caveat when you are dealing with a major procedure. In elective procedures, there are people who wait for hip and knee surgery for 18 months or may never get it because of age, treatment modality or pharmaceutical intervention. Define ``major'' as you work through that to mean ``improved health outcome'' or ``dramatically improved health outcome'' or ``quality of life.''

I am still cautious, tepid at best, about endorsing the entire theory of wage and price controls. When you set a price ceiling, it becomes the price floor, to a certain degree. If you set certain standards with a legislative imperative, then you perhaps build mediocrity into the system. Even if the guideline is eight weeks, we would like to get people in in four. System imperatives would say wait eight weeks until the penalty kicks in, and then deliver the procedure. The wage and price control approach might foster mediocrity as opposed to excellence. That is just a caveat; however, it is not to say do not look at it further.

The Chairman: I thank all of you for coming, particularly the two witnesses who came all the way from the West Coast. It has been a long but very productive four hours.

The committee adjourned.