Proceedings of the Standing Senate Committee on
National Finance
Issue No. 26 - Evidence - March 1, 2017 (evening meeting)
OTTAWA, Wednesday, March 1, 2017
The Standing Senate Committee on National Finance met this day at 6:49 p.m. to study the financial implications and regional considerations of Canada's aging population.
Senator Larry W. Smith (Chair) in the chair.
The Chair: Welcome to the Standing Senate Committee on National Finance. My name is Larry Smith, senator from Quebec and I chair the committee. Let me introduce the other members of the committee:
[Translation]
To my left, from northern Ontario, is Senator Moncion. To her left is our superstar.
[English]
He is a very good man who has made a super contribution to the Senate in a very short period of time, Senator André Pratte from Montreal.
[Translation]
To my right, from New Brunswick, is Senator Mockler, one of the people behind this study.
[English]
From Rimouski, Quebec, a great athlete in his time, and in his own mind, Senator Éric Forest.
To his right, they called her "the hammer" because she was so tough in handling all of the issues as Auditor General of the Province of Newfoundland and Labrador, Senator Beth Marshall.
And, of course, they used to call him "the fireman," out in B.C. because he took care of more fires than other provincial politician in the history of British Columbia, Richard Neufeld.
This evening, we continue our study on the financial implications and regional considerations of Canada' aging population. To talk about it, we welcome David K. Foot, economist and demographer. As professor emeritus at the University of Toronto, he specializes in the interactions between the economy and demographics.
We also have from the Canadian Medical Association, Dr. Granger Avery, President, Canadian Medical Association, and Owen Adams, Chief Policy Advisor. Eventually joining us by teleconference or video conference from Scottsdale, Arizona, we will welcome our next guest, but let's make sure we get him, Professor Donald Drummond. I should point out that Professor Drummond worked for nearly 23 years at the Department of Finance so we will have a connection from past history with today.
Gentlemen, welcome. We're anxious to hear what you have to say. I would ask that you give a short opening statement, and in turn, we will have a question period afterwards. If I could ask you to limit your statement to five minutes, that would be helpful. The other day we had great introductions, but they took an hour and we lost valuable time. Because it's such an intense and important subject, we want to ask the right questions of you.
Mr. Foot, would you like to start?
David K. Foot, Economist and Demographer, as an individual: Thank you for the invitation. I appreciate it.
We're talking about population aging. Let's define what we mean by "aging." It's caused by two things. First is increased life expectancy. We're living longer — thank goodness; that's a good thing — and second is below- replacement fertility. Fewer children are being born, so both of those things are a double cause of population aging.
Canada's demography is characterized by what we call a "boom, bust, echo, bust" profile. I have circulated a handout so you will have some data on which to form your opinions.
That's the baby boom up here, and then the introduction of birth control meant fewer people were born over the late 1960s and 1970s. Then the boomers had their children, and that's the echo of the baby boomers over the 1980s and 1990s, and the declining fertility means far fewer young people in our population. This has very important policy implications down the road.
Over the page, I've summarized it in five-year age groups; it gets rid of all the little wiggles. These are estimated 2016 data. The census data from 2016 will not be available until May this year, so these are Stats Canada's estimates.
Once again, you can see that boom, bust echo profile and the reduction in the numbers under age 20 at the base of that population pyramid.
On the next two charts, I want to touch on the regional implications, since that's one of the things you want to do.
We have the coloured data in the background for Canada, and the white outline is for New Brunswick, which is a significantly older province. In every age group over age 50, the white outline is further out telling you there are more people in the age group over 50 relative to the national average in New Brunswick, and that's true for all of our Atlantic provinces and even true for Quebec a little bit. To contrast that, out West, things are exactly the opposite. Our youngest province is Alberta, and you can see in their age group over 50 in Alberta on the back page, the white outline is inside the coloured data, showing that Alberta has significantly fewer people in the 50-plus category, so comparing New Brunswick and Alberta will help you understand clearly the regional implications of population aging.
Now what are the macroeconomic implications? You have slower population growth, fewer people under 20 now to come into the workforce, many fewer people to come into the workforce, and as a result, we will have significantly slower economic growth. This has been going on for a long time. In the 1950s and 1960s, we had 5 per cent real economic growth; in the 1970s and 1980s, 4 per cent real economic growth; in the 1990s and 2000s, 3 per cent real economic growth; and now we're lucky if we get 2 per cent real economic growth. That's significantly higher than almost all other developed countries in the world, but we'll leave that to the side.
Slower labour force growth and economic growth means it will be much more difficult to pay down the national debt. You have to worry much more about building a national debt when you have a slower growing economy, so servicing, reducing and eliminating the national debt becomes more difficult when you have slower economic growth.
The micro-implications of population aging are that aging leads to changing expenditure patterns. At the individual level, as they get older they spend less money on child care and clothing and more money on dental and pharmacare, and that's the logical consequence of people moving through their life cycle — changing expenditure patterns. This has been going on since Statistics Canada collected the data in the 1960s. We watched these trends over the last 50 years.
At the national level, you spend less money on child support and education and more on health care and pensions. You save in one area and transfer the money to another area. Whether there is enough money to transfer is another question, but the point is that at the individual and national levels we get changing expenditure patterns associated with aging.
Rising life expectancy means most health expenditures are now delayed. You use half of your lifetime demand in the last year of your life, and instead of the last year of your life being 75, it's now 80 or 85, but it's still the last year of your life. Aging doesn't lead to more spending necessarily. It means delayed spending, and we're benefiting from that at the moment with the baby boomers. These are not new trends or unique to Canada. We've known about them for a long time.
Let me turn to solutions. The first solution is when the baby boomers, this massive generation, were young, lower levels of government looked after young people. Municipalities are responsible for recreation, for example, and child care. Provincial governments are responsible for post-secondary education. In our Constitution, it's the senior level of government, the federal level, that is responsible for older people. When the boomers were young, back in the 1960s and 1970s, we had to transfer tax points to the provinces who could then allocate some of that expenditure to the municipalities. As the population ages, we should actually be transferring those tax points back up to the federal government. That's what our history tells us. I know that none of you are going to do this, but I want to remind you of our history. Lower levels of government look after the young. The federal government has primary responsibility for the elderly. In an aging society, that means expenditures move backwards.
How will we pay for this? Everyone thinks their own sector is the most important one, whether it's health care, leisure and recreation, criminal justice or roads and infrastructure. I have seen many government departments. Everyone thinks their sector is the most important thing. Everyone wants to spend more money. I told you that the debt now is increasingly difficult. How can we think outside the box?
What we should do is probably institute a very small, one tenth or one fifth of 1 per cent, what they call 10 or 20 basis points tax, on all stock market transactions in Canada. At the moment, if I sell a stock in the U.S., a fee is automatically deducted. You can deduct this very easily; no bureaucracy is required. If you don't like a tax on all stock market transactions, then a tax on all foreign exchange transactions, anything that involves changing the Canadian dollar, would generate billions of dollars. This is the way we pay for health care in the future. That money should be earmarked for a health care fund, not go into general revenues. The population out there does not trust politicians any more, but if you put it in a special health care fund that every Canadian believes they will benefit from, you will get full support for either or both of those initiatives. We can afford pharmacare and dental care if we choose to think outside the box and fund it appropriately.
The Chair: Thank you very much, Mr. Foot.
I would like to welcome Don Drummond, Adjunct Professor and Stauffer-Dunning Fellow, School of Policy Studies, Queen's University.
I should point out that Professor Drummond worked for nearly 23 years at the Department of Finance Canada in economic analysis and economic forecasting in tax policy. We would like to welcome you, and sorry for the delay.
We'll hear from Dr. Avery with his opening remarks and Mr. Adams, and if you could give us your time after that, we will hear from you. We asked everyone to take no more than three to five minutes in terms of opening remarks because we have lots of questions we would like to ask.
Dr. Granger Avery, President, Canadian Medical Association: Thank you and good evening, senators.
On behalf of the Canadian Medical Association and its 85,000 members, we're pleased to have the opportunity to make this presentation.
I want to congratulate you for studying the implications of aging. The financial and regional implications are most important. This study is long overdue as witnessed by the fact that in 1998 the Auditor General of Canada projected that public spending on health could almost double as a share of GDP between 1996 and 2013.
Today, I will talk about what we know about the impact of Canada's changing demographics on health spending. Policy makers have tended to be complacent on this issue due to the finding that population aging alone increases health spending by about 1 per cent or less per year. However, there is a compounding effect that is readily apparent when you examine the impact on the age distribution of spending over time.
For example, a study completed for the Ontario Economic Council in 1981 projected that the senior population, 65- plus in Ontario, would increase from its share of institutional and physician costs from 38 per cent in 1976 to 47 per cent by 2001 and 57 per cent by 2026. Data from that estimation was done again in 1981.
Data from the Canadian Institute for Health Information today shows that these projections have been very accurate. The actual observed share was 47 per cent in 2001 and 51 per cent in 2014, the latest data that we have. If we apply the most recent age and sex-specific spending estimates for Ontario to the 2026 population projection, the share will be 60 per cent — higher than the original projection.
It is almost certain that this impending shift in the distribution is going to cause a lot of pressure. Since we know that average per capita health spending jumps by more than one third between the 70 to 74 and the 75 to 79 age groups, cost pressure is likely to increase substantially in 2021 beyond when the leading age of the baby boom turns 75, as we just heard.
The CMA is particularly concerned that the population aging is unevenly distributed across Canada. According the July 2016 population estimates, the population 65-plus exceeds 19 per cent in each of the Atlantic provinces, compared to 16.5 per cent for Canada as a whole.
So what is to be done? The Canadian Medical Association has been calling for a national senior strategy since 2014. Our efforts have been supported by some 50,000 Canadians who have joined the CMA's "Demand a Plan" campaign and have written nearly 1,000 emails and letters urging the government to act now for seniors. Our recommendation is clear, and we have four key actions that the federal government could take right now to improve this situation.
First, we have called for a demographic top-up to the Canada Health Transfer. This top-up would be based on increased provincial-territorial health expenditure due to aging alone and would provide additional funding to those jurisdictions where we see aging more quickly. This was previously recommended in the 2009 report of the Special Senate Committee on Aging.
Second, while we welcome the current focus and investment on home care and mental health being made by the government, Canada will still require thousands more long-term care beds. We therefore recommend that the federal government include capital investment, including retrofit and renovation as part of its commitments to investing in infrastructure.
Third, seniors also face a higher burden of out-of-pocket expenditures for prescription drugs. According to Statistics Canada in 2015, a household headed by a senior spent more than 55 per cent on average on prescription drugs, compared to all households. CMA recommends that the federal government take a first step toward universal coverage for prescription drugs by establishing a cost-sharing program with the provinces and private insurance companies that would cover part or all of the costs above the lesser amount of $1,500, or 3 per cent of gross household income annually.
Fourth, Statistics Canada has estimated that there are over 8 million Canadians serving as informal, unpaid caregivers to loved ones. Just 1 in 5 received any form of financial support, and just 1 in 20, 5 per cent, reported receiving support in the form of a federal tax credit. The CMA recommends that the federal government amend the caregiver and family caregiver tax credits to make them refundable.
In closing, we have ample documentation on our proposals, and we would be pleased to make those available to you.
Thank you, and we look forward to your questions.
The Chair: Mr. Adams, do you have any comments?
Owen Adams, Chief Policy Advisor, Canadian Medical Association: No, sir.
The Chair: Mr. Drummond, do you have an opening statement that you would like to make?
Don Drummond, Adjunct Professor and Stauffer-Dunning Fellow, School of Policy Studies, Queen's University, as an individual: Yes, thank you very much. I unfortunately, due to technical problems, missed much of what Dr. Foot said, but I'm assuming he dealt in the realm of demographics, and we just heard from health. I will come somewhat in the middle on the economic and fiscal elements.
The most obvious thing on the economics side is an older population means slower economic growth because of slower growth in the labour force. The Department of Finance and the Parliamentary Budget Officer recently issued a longer term economic forecast that said the average future growth rate for Canada would be 1.7 per cent. Keep in mind that historically, if we go back to the 1960s and 1970s, the growth rate was between 3 and 4 per cent. Most people now tend to think it's 2 to 2.5 per cent; we need to get our minds around that in the future it's much lower than that. From work I did in 2015 for the Council of the Federation, my estimate was 1.55 per cent — I don't want to quibble between 1.55 or 1.7, although that's a big difference over time. Communicated in the realm of what you want to study in your committee, you're looking at some of the regional effects as well, so I just want to point out that the 1.55 is the national average. New Brunswick, for example, would be 0.5, a consistent number with the average of 1.55 simply because their demographics are different. We tend to grow older as we go from the West to the East, so the stronger growth rates tend to be in the West and the weaker ones in the East.
What to do about that? There are only two things: Increase the labour force or increase productivity. We can increase the labour force where it's under-represented, which would be in women, immigrants, people with disabilities and indigenous people. I want to spend one second on indigenous, because I think that's important. Indigenous people are about 4.5 per cent of Canada's population, but over the next 10 to 20 years, they account for 8 to 12 per cent of the growth in the Canadian labour force. That's because roughly half of the First Nations population is under the age of 25, so they loom very large in the increase in the labour force.
The Chair: Excuse me, sir, for one moment. Can you slow it down a bit because we are trying to translate your English into French for some of our francophone colleagues. If you could do that, it would be helpful. You don't have to start over. Just continue on from where you are. We are good.
Mr. Drummond: I will go back to where I was. I said that for the Canadian average, indigenous Canadians will account for between 8 and 12 per cent of the labour force over the next couple of decades. However, because of the regional interests, in Saskatchewan and Manitoba that contribution will be between 30 and 50 per cent. When you are looking at it regionally, it is a fair statement to make. Where the economies in Saskatchewan and Manitoba in particular go will depend on what happens to those indigenous youth. You will know as well and probably better than me that it hasn't been good in the past. That is definitely one thing we need to look at more closely. The Prime Minister's commitment to close the socio-economic gap does offer some promise on that front.
Raising productivity is something Canada has worked at for decades now with limited success. We could try some of the same things. One of the things we haven't tried hard in Canada is better matching between labour demand and labour supply — identifying the labour needs that business needs — and trying to feed that through the courses offered in universities and colleges and what the students choose to take.
Briefly on the fiscal side, the federal government, despite that slower growth, is in a reasonable position to be sustainable in the sense that their debt-to-GDP ratio should not rise — in fact, it may even fall. Two key elements to that are it capping this growth to the transfers to the provinces at either GDP or 3.5 per cent growth and capping the growth under the equalization program at 3.5 per cent. The national economics are not really flowing through to the federal level because it has given some insurance on that side. Of course, there could have had additional insurance on that side. We did have a policy in place for a few years to increase the age of entitlement for Old Age Security and the Guaranteed Income Supplement from 65 to 67. The government has reversed that, so that will obviously increase the pressures there more.
I worry more about the provinces because the health care bill resides largely in the provinces. If we take something like a real economic growth rate of 1.5 per cent and add in the inflation target we have in Canada of 2 per cent that means that nominal income growth across Canada will be about 3.5 per cent. Provincial and federal revenues tend to grow at the same pace as the nominal GDP, which is 3.5 per cent revenue growth.
Left to its own devices, I believe that health care will probably return to a growth rate of about 6 per cent and probably stronger than that. I think that will be difficult for the provinces to absorb, given that federal transfers are at 3.5 per cent and given their existing tax systems. They will undoubtedly, as they have been doing, squeeze other things, but that is difficult.
On the regional element of that — sorry to pick on New Brunswick, but it is kind of extreme in almost all of these examples — there is weak economic growth. However, the flip side of that is by having an older population, they, and others — Newfoundland and Labrador, Nova Scotia, Prince Edward Island and Quebec is not too far behind — will have greater pressures on their health bill.
I haven't mentioned anything about the municipalities but I do think they will be under some fiscal duress over that period in part because of slower growth. However, with the increasing tendency of the population to take a long break and the small number of municipal areas, they will be increasingly straddled with their inability to raise a broad base tax base. If anyone wanted an illustration of how that works, look at what happened in Toronto recently, where they were set to put on road tolls as a source of funds and the province told them they couldn't do that. We definitely have economic issues that need to be addressed and some fiscal ones largely at the provincial and municipal level. Thank you.
Senator Woo: Thank you all for your testimony.
Let me start with Professor Foot and his suggested remedy of taxing financial transactions, in particular stock market transactions, also known as the Tobin tax, I believe, but for a different purpose. Your body language suggested a variation of the Tobin tax. Would you say a bit more about it and whether you are intending some multiple policy objectives, including the objectives of the Tobin tax, or whether this is solely designed to deal with raising revenue for health care costs?
Mr. Foot: It is solely designed for raising revenue for health care. That is why I didn't agree with you when you said it was a Tobin tax because that had a specific objective. People have suggested this to raise money for foreign aid, for example. I am not talking about any of those things.
Huge amounts of money are going throughout financial sector. The financial sector is very profitable and we can point our finger at them for the 2008-09 near collapse of the economy. Nobody got their hands rapped for that particularly. The population at large is pretty angry and I think the financial sector can well afford to start paying for some of our health care costs.
I don't want to tie it up with anything pre-Tobin and I won't go through a whole list of others. It is purely to raise money. It is for a health care fund. It is very clear that the revenues are going to improve Canadians' health.
Senator Woo: The banks have just reported record profits the past week, as we all know —
Senator Moncion: Just the first quarter.
Senator Woo: Exactly, just the first quarter, so there is more to come. However, not all of them have to do with proprietary trading or stock market activities. Perhaps this is not the right forum to discuss the details of how this tax would be designed, but have you thought about the intended and unintended consequences for the financial sector?
Mr. Foot: Clearly, you want to think about both the intended and unintended consequences.
One of the reasons is to start with a small tax, one tenth of 1 per cent, is that it's minor. We know that a lot of taxes don't impact behaviour unless they are rather large. Flip it around. If you want to get people to change their environmental decisions, you have to have large taxes. Small taxes do not tend to change behaviour.
Now, there can be small changes in the fact that do we include shares, are we including just stocks? There are lots of details as we drive down. However, as I said to you, if I sell a U.S. stock, there's an automatic tax. They don't call it tax; the SEC calls it a fee, a stamp duty. It is automatically taken off. It is collected electronically. You don't need a huge bureaucracy and it disappears into their budget for them to monitor the financial sector. Why can't we do something similar in Canada but start very small, get it right and then we can broaden it if that is what we decide to do as a policy decision?
Senator Woo: Without straying too far into the mechanics of the tax, could we get a former bank economist and finance official to weigh in on this idea of a tax on financial transactions essentially to fund escalating health care costs? I am referring to Mr. Drummond, of course.
Mr. Drummond: I hate to fall and jump in with both feet to the standard joke that economists never agree with each other but I do disagree with that position.
I think we have lots of revenue in Canada. We have enough to handle the aging population. That doesn't mean we shouldn't do something. We should never take lying down a natural growth rate of 1.55 — that is my calculation; finance's is 1.7. There are lots of things that we can do to increase that growth rate. Even an increase of the growth rate from 1.5 to 2 per cent would relieve a lot of this pressure.
I think the federal government needs to increase the transfers to the provinces for health care. I don't think it is fair or right and health care will increase faster than GDP. That is inevitable. That is what Canadians want. That is what Canadians deserve. It is their number one priority. There is nothing wrong with it increasing faster than GDP. The federal government is deliberately saying that it will be a shrinking share of that. I think increasing that to 4 per cent would take a lot of pressure off the provinces. At this point, I'm reluctant to put additional funding into health care.
We did that in the 2000s through the health care accord, and frankly I think it was a disaster. There was no accountability and it just went in higher compensation. We did not get the health care reforms that we need, and I'm sorry — my history as you know is as a bean counter — we don't seem to be able to get health care reform for any of the right reasons, such as we run an extremely inefficient system and we don't have very good quality of care.
Maybe we will only get it for the fiscal need, so I don't think it's a terribly bad thing that we do keep some fiscal pressure on health care. Provinces have to get that 6 per cent national growth rate track down to something like 4.5 or 5 per cent and I think that they can manage once they have done that.
[Translation]
Senator Forest: We can call it transaction fees. It is an interesting idea, especially when you look at what happened when the GST fell from 7 per cent to 5 per cent. If we expect banks to play a role in transactions, do you not think they would pass on the cost directly to consumers who make transactions on the bond market or the stock market? The taxpayer will ultimately have to pay.
[English]
Mr. Foot: Not necessarily. First, you can impose a tax on the stock market on both seller and buyer. You can have 10 basis points on the seller and the buyer.
I think you will find that big corporations will be paying a lot of the foreign exchange tax. A lot of the money running into Canada right now from overseas is just coming in and buying up our housing, and it's not generating anything for the Canadian government.
It's not necessarily just Canadian domestic people. It could be foreigners bringing their money into Canada; it can be corporations. You can share it between buyer and seller. It doesn't have to be all on one consumer. The bank fees that we have now, yes, are imposed on the consumer. A lot of people object, but no one can do much about it.
The banks in foreign exchange have stretched the margin from 5 per cent to 7 per cent now on the difference between the buying and selling rate, and the economy hasn't ground to a halt. So the banks have actually increased their profits by driving that gap. It doesn't seem to me that it necessarily has to fall particularly on just the individual consumer.
[Translation]
Senator Forest: My question pertains to increasing life expectancy, which will have an impact on GDP growth. Returns will be lower, especially for all pension plans. In Quebec, it was easy to calculate. People were taking their retirement earlier and earlier and living longer. In the public and semi-public sectors with defined benefit plans, this clearly has a major impact on health costs. Have you assessed the impact on the capitalization of our plans? This could have a very significant impact on the capitalization balance of our major pension plans.
[English]
Mr. Foot: There are a number of questions buried in there.
First, thinking of Canadians taking their money outside of their pensions, out of their RRSPs and so on, they are all taxable revenues, so in fact that helps the government. Just because people get older and start taking pensions doesn't mean the revenues aren't flowing to government. Plus those baby boomers, particularly the front half of the baby boomers, are fairly rich. They will be paying significant taxes in the higher tax brackets.
Second, I rely on the Canadian actuary who tells me that the Canada Pension Plan is sound. I don't have the resources to dig any deeper than he has. I have screamed at the private sector for forecasting too high a growth in revenues because they think the economy will continue to grow faster, and Dr. Drummond and I have both brought the message that this will not happen. I don't think they have built in the growing life expectancy assumptions to a significant amount.
Do you realize life expectancy is going up two years every decade? If you are 50 today, life expectancy has gone up 10 years in your lifetime. That is huge — massive. In the private sector, many of the pension plans have not built in the rising life expectancy significantly. I am much more worried about the private pension plans than I am the public pension plans.
To give you one parenthetic comment, I think the most ridiculous thing we have done is to keep interest rates so low that it is very difficult for the boomers and pension funds in general to get the revenues they need to pay down the road. The idea of low interest rates to stimulate investment, which hasn't happened, is ridiculous. It is adding to the problem that you raised. I think the problem is more low interest rates.
Senator Forest: Thank you.
Senator Pratte: My question is really for Dr. Avery and Mr. Drummond about the inevitable increase in health care expenses coming from pressures of population aging.
As a journalist, I have been following the problems of the health care system for the last 30 years. I am somewhat desperate because health care expenses have been increasing fast. The federal government has tried to give the provinces lots of money. It hasn't really worked. They have tried to cut back on the monies given to the provinces. That hasn't really worked either. I think the provinces have tried a lot of strategies, a lot of changes, reforms of different types. The system hasn't really become more efficient.
There doesn't seem to be really a solution or even solutions to the problem that the system requires lots of money — more money, probably, than what we can afford. I see the Canadian Medical Association's four-point strategy requires a lot of money. It is probably necessary but it is a lot of money, right?
What are we going to do? We can give that money out, but will the system work better at the end of it? I'm not sure. I'm not convinced.
Dr. Avery: Thank you, senator. That is, of course, a very important question. There are two ways at least — probably more — to think about this. One is the discussion you just had about raising money to increase the amount of flow in. The other is to adapt the system so that we have a more efficient and responsive system.
When you look at all of the programs that the Canadian Medical Association has recommended, they are all designed to increase the efficiency of the system. That is a fundamental point.
Let us take an example. At the moment, for every six days of a hospital bed in this country, one of those is taken up by someone who shouldn't be there, and almost always an older person. That means that one sixth of our hospital expenditures, which constitute the majority of health care spending in this country, are being spent inappropriately to the detriment, frequently, of the patient. That money could be much better spent elsewhere. The care of that person could be done much better in another situation, either at home or in a long-term care facility.
I submit to you if we were able to affect that, it would put the recommendations that we've heard already to shame. We need to redo our system. By dealing with what is rather rudely referred to as "bed blocking" in our hospitals, we could save billions of dollars. It would improve health because health is in danger frankly in an acute care hospital bed. There are noxious bugs that will attack in a hospital bed when you're not looking. There is the more subtle, but equally problematic, facility acquired dementia.
Senator Pratte: I'm sorry to interrupt you but I've been hearing that problem described exactly as you did for the last 20 years at least and governments promising to solve that problem for the last 20 years and here we are and the problem still exists. The problem is there and obviously there is incapacity to solve the problem.
Dr. Avery: I think the way that the government tried to approach this through the health accord was exactly the right way to approach it, to create some national standards across this country that could impose some conditions on how we deal with that problem. For example, a wait-time guarantee would put pressure upon the provincial and territorial systems to deal with bed usage by seniors which is inappropriate. You could get at it in several different ways. We believe national standards are a very important piece to this. We understand that the accommodations that were achieved with some of the provinces and territories were to be expected in the political scene, but that doesn't mean to say we shouldn't be pursuing national standards as well. I do believe that's part of the solution.
Senator Pratte: Could we hear Mr. Drummond on this?
Mr. Drummond: I was taken by your comment that no one seems to know what to do about health care because I see it quite differently. I think a lot of people know exactly what to do about it and I would bet if we put 20 of them together right here our lists would be virtually the same.
The paradox and the puzzle is if we know what to do then why doesn't it get done? If we started from scratch, suppose we didn't have a health care system and we designed one from now, everyone would have one that looks pretty different and it would look a lot different from the one we have. It would be based on information and you would use that information to allocate the care where the patients are going and based on measuring outcomes. We don't even measure outcomes. We measure how much we pay. We pay physicians fee-for-service, which encourages more service and doesn't include the quality. They're not paid to take the best care of their patient. They actually might lose money if they refer somebody to the appropriate place.
We don't use diagnostic tests. We test more than necessary on things that are proven not to be valuable. We don't do the standard blood tests for adults with type 2 diabetes. Surprise, surprise, we've got the highest incidence of type 2 diabetes and in the developed world there are all kinds of things wrong in the health care system but you always have to come back to "why don't we do it?"
Part of the reason is because I think most of the time politicians don't feel they need to. Why did health care record a very high rate of growth between 1998 and 2008? It's because the revenues came in the front door at a rapid pace. Why did they cut back on health spending in the mid-1990s? You mentioned in health care we don't seem to be able to get the growth rate down, but this is now the fifth year we've had very low increases in health care spending right across Canada because the provinces were stretched fiscally. They do it when they're stretched fiscally but unfortunately they tend to clamp everything down rather than doing those main reforms, but the biggest obstacle is Canadians think we have a great health care system. Woe betide the politician who says "I'm here to fix your health care system" because everyone says it's so great. Why do they think it's so great? Well, it's cheaper than the Americans and we've got broader coverage in most respects than the Americans, but if we compare ourselves to health care systems in other developed countries we're at best middle of the road. We're in a group as the second most expensive and we have average outcomes, which speaks to bad efficiency.
If we look at the 11 countries examined by the Commonwealth Fund, we're the second least efficient only done worse by the United States. But we do know what to do. The Senate told us what to do in the Kirby report, which is quite a while ago but it's still relevant and a lot of the right answers are in there and many people, including myself, have repeated those since but we don't get it.
Senator Ataullahjan: My question is for you, Professor Drummond. A recent article in the CBC noted that Prime Minister Trudeau's economic advisory committee recommended increasing the age of retirement in Canada. The report calls for the age of eligibility for the Old Age Security and Canada Pension Plan to be reviewed and increased. It also suggested that the government explore different incentive structures, including OAS and CPP deferrals beyond age 70, to encourage workers to stay in the workforce longer.
I want to know what impact this will have on young Canadians who are unable to enter the workforce because more and more Canadians are continuing to work longer. How strong are our current measures with respect to young people's employment?
Mr. Drummond: First, there is absolutely no doubt that the labour market is a tough one for young people right now but that will ease. We're talking about the slowdown in the labour force and we have companies referring to shortages of labour. Where are they going to turn? They will turn to young people. They will turn hopefully increasingly to indigenous people. Some of the groups of women have lower participation and some of the groups of people with disabilities. There is labour there but they will have to turn to that as the economy has been towards the baby boomers in the past. It will at some point turn to the younger. Will that happen right away? Well, it will depend to some degree on the extent to which people work longer.
Professor Foot gave you some history on the demographics but when the Canada Pension Plan and other plans were put into place it was fairly typical that someone would only live 10 or at most 15 years after they retired and that was the life cycle at that point. As was pointed out in the case of the public sector people, although it has gotten tougher to retire early, in the last five years you could retire at the age 55 with almost a full benefit and yet you could live into your late 80s and 90s. It totally turned around on them. In that context, it's quite reasonable to say when you're starting off at 22 you should plan to work until 67 because that's a much more realistic balance between the number of years you're working and creating savings relative to the period that you're in retirement.
Senator Marshall: I want to go back to the health care funding and Senator Pratte's question. I was very interested because Mr. Drummond commented on the health care funding very early in the proceedings this evening. And I would appreciate Dr. Avery's opinion on this. Do you think if the government really didn't provide so much funding to health care — they just provided 3.5 per cent — if it wasn't such a big increase, do you think that would force the health care sector to change? We've been hearing for decades now that there need to be changes made in health care, but it seems that the system is so big it can't seem to turn itself around or do anything major that will have a positive impact on the cost.
Do you think if the federal government really played hard ball and didn't give, for example, 3.5 per cent but only 1 per cent and that's it, do you think that would force the provinces to do something with the health care system? Would that be a solution?
Mr. Drummond: My response is I believe the federal government is playing hard ball at 3.5 per cent because I think future health care costs that are going to be faced on average across the provinces will grow in the 6 per cent and perhaps higher range. They will have to do a tremendous amount of reform just to get that growth rate down to 5 per cent. So the government's 3.5 per cent will put substantial pressure already on the provinces.
I hate that it comes to that, even at that 3.5 per cent, I think it will be even harsher. We should be able to do the reform just because it's the right thing to do. We should be able to get greater value for service and greater outcomes, and that should be enough of a catalyst, but it doesn't seem to be enough. It seems to have fiscal pressure, but I fully believe that will come.
The other aspect — we've been talking about this 1 percentage point increase in health care for aging, we have to keep an open mind that may rise. We're getting all kinds of different possibilities of interventions, including personal medicine. There's a possibility in 10 or 20 years, with additional interventions — and I'm not trying to be the bean- counter; these will be good in that they'll improve the quality of people's lives and their longevity — but that 1 percentage point may go up. If the federal government stays at the 3.5 per cent, that will have to be dealt with by the provinces.
Sorry to pick on New Brunswick once again — I could throw in Newfoundland and Labrador, Nova Scotia and Quebec not too far behind — the average I referred to as the national number will be higher growth in health care in those provinces, and their revenue growth will be weaker. So it doesn't matter whether the federal government squeezes more than 3.5 per cent. It's not a crisis; it's not like 1992 when Saskatchewan didn't know whether they could fund its debt. It's not come to an apocalyptic point like that, but it's a very tight squeeze that's going on for a while. Eventually, they'll have to respond to it, and we know how to respond to it to make the system more efficient.
Senator Marshall: The government right now has embarked on a big infrastructure program — multi-year. Do you see that as having any significant impact on health care? For example, Dr. Avery mentioned long-term care patients occupying a hospital bed. So if there's infrastructure funding available to build more long-term beds, that should ease the pressure on the health care system. That's as opposed to stimulating economic growth, so that would be another positive for health care.
Do you see any other benefits with regard to the infrastructure funding and how that would have a positive impact on health care?
Mr. Drummond: Not for health care. Now I'm going to be really bad, because I disagreed at one point with Dr. Foot and now I will disagree with Dr. Avery. It's about building more beds for long-term care. I'll throw out two statistics, and you can tell me whether you think they are represented. In 1987, Denmark passed a law prohibiting the country from building any more long-term care beds. Surveys of the elderly population of countries records the highest rates of satisfaction for care in the world is Denmark.
I think they are related. By not building those long-term care beds, it forced them to run a good home care system. In a situation like in Canada where an elderly person can't get out of their bathtubs, they dial the community centre and within 24 hours, someone is in there and there's a bar in the bathtub. Can't make your meals? Somebody is providing the meals.
That's what people want: They want to stay in their home as long as they can. It's a lot cheaper to make somebody's meal or cut their lawn than put them in a long-term care facility that's $200-plus per year. I don't think that helps.
One component of infrastructure I'd have liked to see is to fix up the information management system in Canada. We are behind virtually every other developed country in the generation of information that's useful for health care, but even what we've generated, you can't transfer. You can't take your X-ray information from one place to another place. You can't even take it from one hospital to another, or to another caregiver. You don't have your own personal health record; your health record is probably scattered in 30 different places.
Somebody should be visited by a community care nurse when they come out of a hospital with congestive heart failure, but most hospitals don't even have electronic health discharge records. The physician and the community nurse don't know they are discharged.
These are some of the glaring aspects of what I talked about as inefficiency.
Senator Marshall: After hearing you speak of the Danish example and not building any more hospital beds, Denmark played hardball with that. Maybe if we stopped funding increases in health care that the health care system would be as responsive as what happened in Denmark.
The Chair: Any other comments from our other guests?
Dr. Avery: I have to agree with Professor Drummond around the changes that are necessary, specifically about home care. Home care is way cheaper and way better as long as we have the backup to it. I think that's almost a sine qua non.
I will observe that, as far as I know, health care facilities are not actually eligible for infrastructure funding under this current program, so that is an issue. Nevertheless, there are people occupying acute-care hospital beds who should not be there, and the only appropriate place is in long-term care, and we don't have those beds. So I think there is a strong argument there. Notwithstanding the fact that we should be downloading a lot more to home care, there is still a significant argument about creating more long-term care beds.
So I think there are two answers to your question. You're proposing blowing it up or a slow blow-up, I think, and that's dangerous. We've seen what's happened in this province, for example, when you get too much contraction. You get chaos. I could talk to you for a long time about the bad effects of what's happened in Ontario. When it comes to pressuring, sure it will create change, but I think that's highly dangerous.
We need two things. First, we need those provincial, territorial and federal standards. We need agreement on standard settings. That will force change. If we tie money to those standards — and I come back to a simple one, which is wait times for surgery, which is easy to count, but there are many others — that will force some change.
The second piece is about what we do when we have created this situation for change, and how we actually get meaningful work to make that change. I believe it's around collaboration, and collaboration between all of the partners that represent the health care system — or part of the health care system — which is the professions, the governments, the universities, the health care managers and, very importantly, the people. Without having that sort of collaboration, we will end up with what's happened so far for the last 50-odd years, where somebody makes a recommendation without taking into account the effects on some of the other partners. It gets subverted in some way. As a fundamental principle, that collaboration for health improvement is essential.
Mr. Foot: It's very important when you talk about home care — and Dr. Drummond referred to it — did all of you hear that he mentioned in health care spending that somebody mow the person's front lawn? It's absolutely essential, if you're going to keep people at home, which is where they want to be — Don was dead-right on that — that you have a complete set of services: People coming to do laundry and mow the lawn. That's what's necessary for people to be back in their home, and that's what Denmark put in place. They put the alternatives in place when they blew up the system. That's what made it work.
The Chair: I can talk about my own mother. At 89, she fell and broke her hip. She lived in a two-storey house. We got home care to come in to take care of her, but the problem is that the home care industry 10 years ago was in its infancy stages, and there was a quality issue of the people giving the home care. It was expensive; it was running me and my brother around $4,000 a month. We had to take her into autonomous living that then goes to assisted living. That was $5,800 a month. These places are booming in terms of private business.
But the point brought up by both of you gentlemen in terms of home care is that home care must be every element of home care to be successful. Part of it may be that when you get people in larger houses than they need to be in, you need to get people living on one floor. Living in houses is another element of the importance if you're going to give a total home care solution. It's just a thought, but when you started talking about it I thought about my mom and what she went through.
Senator Moncion: There is a trend developing where you have luxury apartments that are available. They're not nursing homes, old age homes and they're not long-term care facilities. You're seeing more and more people selling their houses so there is no more lawn to cut, and they're in these apartments. They live there for as long as they can until they lose some of their mental capacity. We're seeing this more and more.
I think it's an education that we have to work on with people who are growing older. The example I'll give is my father, who is now 96 years old. He's in a long-term care facility but has only been there less than a year and he was in an assisted home for four years before he got there, and before that he was in his house. That is just to give you progression, but he never wanted to leave his house and the mental issues came into play. That's where we had to work with him to get him somewhere else. But it's a matter of educating people that there are other ways and it doesn't have to be in a facility that is completely fixed up for you. I will not have my kids to go through what I have been through with an aging parent.
Dr. Avery: Senators, your experiences are repeated a million times in this country and you're absolutely right. There is a relatively easy answer to this and it involves some initial money. It is the continuum of care that is exemplified in this city by Bruyère, for example, and they go from home support — although not sufficiently so because of the funding issues currently — through all the stages to extended care.
That continuity of care enables people to live to the maximum when they are able to do so. We have the template. We haven't got ourselves together to use it and part of that is funding.
Senator Neufeld: I'm going to be a bit like some of the other people. I have heard for more than 20 years about there not being enough long-term care beds and that there are bed blockers. That has been going on forever. Part of that is true, and part of it is because doctors have actually asked for some of those people to be in those beds. But generally the population says they're just bed blockers. Some of them are there for a specific reason and that's because they've been prescribed to be there. At least that's my experience in the province I come from, British Columbia.
We heard from people the other day that there is enough money in the system now to actually run the system if we just changed it. And today, we're sitting at the federal level, saying it's the provinces' problem and if we were sitting with some provincial health ministers, it would be the federal problem. Been there, and I've heard all those things.
Generally speaking, the general public thinks that we have a good system. In fact, they're told that. The people who know that the system is broken are people that are trying to utilize the system. And if there's one quick way to die as a politician provincially, it is to stand up and say the whole system is broken and we have to rebuild it. Or say it as a federal politician, because the next election around you're gone; it's that quick. I don't know what the answer is to get people to understand that there are some problems.
I challenged a doctor here the other day that maybe it's time, because the people won't believe the politicians. And the opposition will kill any government that says the system is broken. That's a good way to get unelected. But I think that doctors have to start standing up. Doctors are trusted by their patients. That's historic. It's there. I think doctors have a responsibility to start standing up, and the Canadian Medical Association — I'm not just pointing to you — and all the associations have to start talking about fixing this thing. It's going to take some pretty big changes.
To me, that's one place we have to start and as long as we're just going to blame one another, and throw more money at it, that's exactly what will happen. You're going to throw more money at it. The provinces are going to keep after the feds for more of the money.
If we want to modernize the health care system, we also have to let the provinces start doing some of that modernization because if you try to do something different in the health care system, the federal government will say that doesn't fit within the five parameters that we've set for health care, and we're going to cancel or stop some of your funding. I've experienced that in British Columbia.
We have had some funding held because we wanted to get innovative, so provinces can't get innovative by themselves. It has to be the system, and I'm not trying to say it's just the doctors that have to do it, but I think they have to lead the charge because that's who the public trusts. They don't trust politicians to change it whether they are federal or provincial; I don't care who they are. That's not going to work. It just gets you unelected, so I think there has to be a different way.
This isn't a question but there has to be a different way to start talking to people about the system and that if we don't fix it, we're not going to have it if we're not careful.
The Chair: Who would like to start on that one?
Mr. Drummond: To point out one picky thing, most of what's being talked about is in the provincial domain. It's not in the federal domain. The management of health care is a provincial responsibility so if physicians would be more actively and productively engaged in reforms, it would be through the provinces. But look at what's happening. What is the engagement between our largest provinces and its physicians? It's a fight over an across the board pay cut, which makes no sense. There are elements of the conversation but it's not across the board.
What should be happening is a discussion with the physicians of what could change but when you look at it, what can a physician do at the moment? They're incented to do certain things and penalized to do other things. They are not given any incentive to divest some of what they're doing to nurse-practitioners, for example, or to refer people to the appropriate type of clinics. Some of it comes down to the foundation of how things work but all the incentive systems are out of alignment so physicians can't do it on their own. They can play a role, but they're in a meaningless context right now of having to scrap over across the board fee increases and that's not a very different situation across the country.
Dr. Avery: Yes, thank you. The challenge is a good one. I would like to say that in almost every province — unfortunately some of the bigger provinces are not in this situation — we have quite good collaboration between governments and the health professions and particularly with physicians.
I can tell you in my own province — yours too, sir — of British Columbia, we have tight discussions about it. It's not tight enough yet because it doesn't involve all the partners I spoke of. It's a broad discussion. It's not something we can solve with one solution. Everyone recognizes that. It starts here, with the federal-provincial discussion. And I can't tell you how frustrated I have felt at times having been confronted with "it's not a federal problem. I can't do anything about it."
And then "if we just had more money from the feds we'd be okay." That's not where it's at. We need to think about the whole spectrum of what we want to do here, which is system reform writ large.
We need to think about pharmacare, about the practice organization. Senator Neufeld, that is what you were referring to, I think, when you spoke about the fee incentives, and Professor Drummond referenced that.
We have to reorganize how practices work. It's not rocket science; it is pretty straight forward, but to get there we need to have the willingness to change. It comes back to the collaboration and the engagement of the people, your fear that politicians will get unelected; you can bypass all of that by having that engagement and collaboration.
Senator Neufeld: I agree. British Columbia is good, but you need that discussion with the people. The public has to understand, because if you go to fix something like health care, you will fix it until the general public that aren't doctors, politicians or funders understand that there is a problem.
If you go to fix it before the public understands you are fixing something for a good reason, it will not happen. The public has to know what is going on. You can't walk in and say, "Well, we are all going to get together in a room and fix this." The public has to understand because it is a big issue when you start messing with health care.
Senator Mockler: Dr. Drummond, I am from New Brunswick. I completed reading A Tale of Two Countries that we were basically faced with, as we look at what is happening east and west of the Ottawa River. At the end of the day, it's who is going to pay and how are we going to pay?
As an economist, what would you recommend to Atlantic Canada to create wealth in view of facing an aging population, and that if we don't address it, it will address us and who will pay for it? When I travel to Western Canada, I have been told a few times, as a senator from Atlantic Canada, that there is a time those transfers will not happen. How do we fix it?
Mr. Drummond: I will take advantage of a seed I planted about how we need to do a better job of matching the labour demand and supply. This applies particularly to the Atlantic provinces because at least 60 to 70 per cent of the jobs in the future in Canada will require some form of post-secondary education. Almost none of them will be open to anyone who doesn't have a university degree.
One thing Atlantic Canada has is a lot of really good universities and colleges, I would say almost disproportionate to the population. It has produced a lot of good graduates, but as you know, coming from New Brunswick, a lot of them leave. How do you get them to stay? How do you attract some of the existing companies right now? How do you meet their demands to allow them to expand, but with the wealth of these universities and the research capacity, how can you attract businesses to that?
We talk about the mobility of corporations, but why are they mobile? They are looking for the right people at the right cost, but increasingly looking for high-skilled people. That is the ace in the hand I think the Atlantic provinces have, from maybe even a quirk of history, why they ended up with a disproportionate number of higher education institutions relative to their population, but it is an asset they can build on.
You didn't ask on the health care side, but I will comment on it because my thesis will be the revolution in health care is going to come from a province that may be one of the smaller ones. My candidates will be one of the eastern ones.
Again, that revolution will come because of a perception of a fiscal crisis; they will have to do it. That seems to be the Canadian way. It is also one of the disadvantages that health care is so fragmented, but one of the advantages is people can go their own way. Most of it started in the province of Saskatchewan and it spread afterwards. I think that is what will happen. New Brunswick or one of these other provinces will run out of the fiscal room to deal with this, and they will institute the really marked changes and they will be copied across the rest of the country.
Dr. Avery: New Brunswick is a lovely province and it is populated with lovely people. The system there is really in trouble. We have a report from the New Brunswick Medical Society which indicates that 90 per cent of doctors in New Brunswick are burned out, depressed, leaving practice, moving away, and all of those other things that happen when doctors become burned out and depressed. They will retire early, move, focus on doing as little as possible and reducing their scope of practice. Those are all bad things. Generalism is what we should be aiming at in Canada for most of the medical care, 80 per cent by some estimates.
When you have a population of doctors that are so depressed and, consequently, not as productive as they should be, you have to ask why. Fundamentally, it is about a loss of autonomy and control of their lives. We have seen the same thing worked out in pretty much every province in this country to a greater or lesser extent. I can give you the detail on that if you wish.
New Brunswick is a leader in this respect — not a very good place to be. I come back to it; the answer is about collaboration and equal partnership. Doctors, as much or more than anyone else in Canadian society, want to solve this. They don't want to be depressed and hating going to work and just pulling their horns in. They want to get out there and solve the problem. People come out of medical school and they want to save lives and fix the system and make it work. It is getting beaten out of them because of that control. The only way out is collaboration.
Senator Andreychuk: We keep referring to New Brunswick, and I appreciate that because they have done a study, but aren't we also talking about rural and urban? I will disagree with my colleague here, but we built all these so-called small hospitals in Saskatchewan where we staffed, and we said we would increase the services where they should have said GP services, general practitioner, with other things. The doctors there are depleted.
In one case this week, two doctors have said no new patients. What happens to the rest? Get yourself to an emergency ward. That's the answer for everything now. It's a problem not only of New Brunswick, but it's a rural problem and the equalization of services.
When it started in Saskatchewan, we weren't talking about the medical practice we have today. It was a simplistic practice; none of these high-tech machines. This is where I disagree with my colleague. There is an expectation that they should have every one of those machines in every place, in every corner when that is not practical. We have to rethink urban and rural as well as the disparity from province to province.
Mr. Drummond: I agree with that absolutely. That is part of an education of the citizenry. That arose in the case of Saskatchewan, and it got hot in the southern area of Ontario where they closed the emergency wards in some hospitals and had all the services consolidated, and people were upset that the emergency ward wasn't next to it. The reality is the emergency ward was so small and they did some interventions so infrequently that you were probably putting your health at risk by going there. You can't always do this depending on how much of an emergency it is, but you are better off going to a consolidated centre, as the honourable senator has said, that has all the equipment and the physicians and other caretakers who have done these interventions on a much more frequent basis.
Saskatchewan, going right back to Roy Romanow's era, did close a lot of those smaller hospitals and did some consolidation, and I am sure we will see more of that in the future in Canada.
Senator Mockler: I want to come to some of the questions that were asked before.
We are being told that we will need to revisit the Canada Health Act and modernize it. A book was written, What Is Government Good At, by Donald J. Savoie. We are being told that in the health care system presently across Canada, even in my own province, there is about 20 per cent of uselessness. If that is the case, with the experience that you have of governing and providing the services and the demographics that we have in aging, how do we address that?
Dr. Avery: You are right, and it is easy. First, it is around practice reorganization and, second, collaboration.
I have been practising for the last 40-odd years in a rural community with outreach into remote communities where there were no facilities. It was completely possible to practice well in those situations. I am not particularly smart, but it is just about how you organize yourself in thinking about what is necessary for that particular individual.
The practice reorganization piece is essential. There are two bits that we need to think about. There is the bit on the top, which is the collaboration that I spoke to first. Without that, we will get people going out sideways, unelecting politicians, subverting it because it is interfering with somebody's ego or job or whatever. Put them around the table and get them to talk about it; you can deal with that.
The piece at the bottom is what you are talking about, sir, which is the work that needs to happen at the practice level. We should be enhancing and pushing for a generalist approach to medicine, and we should be pushing for a team-based approach to medicine, and we should be pushing for a straddling of the community work and the hospital work.
That is the rural model. That is what we have to do of necessity in a rural situation, because there isn't any other way to do it.
We have refined that over the years. In fact, Canada leads the world in the understanding a generalist model of practice. What we have not yet done is gone to that generalist team-based model completely, nor have we imported that model to the city. We could solve all kinds of problems by importing that model into this city and every city in this country.
The Chair: A comment from you, Mr. Foot or Mr. Drummond?
Mr. Drummond: Yes. I will come back to the reference to the Canada Health Act. Time has passed the Canada Health Act by so badly that it is largely irrelevant.
We keep hearing that it is an obstacle to very different things, but is it really? For example, one of the conditions is portability. We don't even remotely have portability, and nothing has ever been done about that.
Another one of the five conditions is public administration. Well, excuse me, but 30 per cent of health care spending in Canada is in the private sector. How is that public administration? Next to the United States, that is the highest ratio of any of the developed countries.
There have been all kinds of violations. There have been a few silly things done under it that hopefully have not been repeated since. For example, when Quebec first proposed a $7 fee for someone who went to an emergency when a nearby clinic was open, that was a perfectly sensible move. The federal government got huffy about that but relented. Other than that, it is largely irrelevant.
It could be replaced by something more meaningful, such as what Dr. Avery was talking about. Now it would be national standards of care, but not under the current context. I think almost any conversation we have in Canada about meaningful reform in health care probably doesn't even need to mention the Canada Health Act; it really has become that irrelevant.
Senator Cools: I would like to welcome you four gentlemen to our committee tonight. I want you to know that I grew up in a time when doctors were viewed as gods and central to the community and important. Every person wanted their son or daughter to be a doctor. I know because I went through that myself.
I do a lot of thinking about these issues, and I talk to people who I think know about it when I meet them or have the opportunity to have an exchange with them. Quite often you are sitting on a plane, and I may be sitting next to Dr. Avery, and we have a wonderful one- or two-hour conversation about all the woes of the system. Indeed, they are many.
I have talked to a lot of people, and the overall concern that they always mention and uphold is that doctors are not involved sufficiently. The profession of medicine is not involved sufficiently enough in the overall planning and administration and all those decisions about health care.
The first time I was told that was by a very learned gentleman, a doctor. He seemed to think, at the time, that that was one of the major problems.
When I as a very young woman, which is now many years ago — actually, I was a university student still — I worked as a lab technician, and I was good. I worked at the hospital. I would be called in at all hours of the night on emergencies to do a test. You discover that at those times when you come in there will be a resident working on dialysis in the kidney room. When you have the results, you phone up and tell him you have the results, and you will send them up by pneumatic tube. He would say, "No, I will come down and pick them up myself."
I remember those young residents. They were bright, young and going places. Many of them got very famous. I learned to understand over the years that when they were coming down to pick up the results — you write out a requisition and all the results of the test — that they were very aware. They were 23 or 24 years old, these residents, and they were very aware that their patient was slipping away. They were coming down to talk to me in the middle of the night for a few minutes to build up some more strength to go back to deal with the fact that they were losing a patient.
When you encounter that kind of experience often, as I did, you begin to understand something about the pressures on the profession, and their ability to respond well in most circumstances is one of the reasons that they have been so uplifted in the community with respect.
The Chair: Question, senator? We need to move on.
Senator Cools: No. We can have some nice commentary. This is a very important issue here.
The Chair: I understand, but if you could frame your question.
Senator Cools: Doctors are suffering from what they call compassion burnout today. I have been deeply disturbed by this.
Some years back, around 2007-08, an economist in the Department of Health provincially — they have the power to do all these things — did a study which showed him that the population of doctors was too large. In those years there was a great physician shortage, which was the result of a very bad decision on behalf of the provincial government, the health department. They reduced registration of medical students, but this shortage was harassing the hospitals and harassing the practice.
I wonder if you have any thoughts as to how such an erroneous and scandalous decision could be reached by professionals in the business of administering the health care system.
Dr. Avery: Thank you, and thank you for your story as well. I think the answer is very straight forward, and it is what we do way too much, which is respond to a segment only, only one small part of the whole continuum of what we are trying to do in a very complex system. So the Barry Stoddart report, the one you're referring to, did indeed set Canada back for probably 15 years. We are just recovering from that. We still don't have as many doctors in our nation as some of our reference countries, the OECD countries. Nevertheless, I don't think that is actually the point anymore. The point now is about embracing generalism and about practice reform, about team-based care and about straddling that community and hospital practice. We have so much disease, disability and death, frankly, that happens between those two interfaces, between the community and the hospital. It just must stop.
The Chair: Thank you. We need to move on because we are running out of time, and we are running out of gas, too, if we're honest with ourselves. It has been a long day, and I thank all of you for your outstanding work in the various committees that you do. Two people left, Senator Woo and Senator Marshall, and then we'll end. We thank you very much.
Senator Woo: I am desperately trying to find a silver lining in this silver economy discussion. I wanted to ask the two economists particularly if they can help me with any silver lining they can see. Two things come to mind. They may be fallacious, and I am kind of setting up a straw man for you but keen to hear your thoughts.
First, the baby boomers, of course, are the holders of huge amounts of wealth, partly because of the cycle of our economy in the post-war period. They benefited the most from the boom years. We all know about the disparity of income between different age groups, particularly young people and old people. Is there anything to think about in terms of the distribution of the wealth effect, if you will, on the passing of the baby-boomer generation, as an upside, if I can put it that way? That's question number one.
The second question is something that my Japanese friends always tell me. I don't really believe them. As you know, they have the most rapidly aging population. Some of them are worried about it. Others are not so worried about it. The ones who are not worried about it give this argument. They say, "It is true that our potential growth rate has dropped, but there still will be positive growth or, at least, a steady state with a shrinking population. In effect, that means higher per capita incomes. Please, could one or both of you respond to that?
Mr. Foot: Japan is the most rapidly aging, and, therefore, their growth rate fell much faster than anywhere else. But Japan makes it very clear that they have a shrinking population now. They don't have growth, and there is more wealth for the people that are left behind. In fact, they are better off. But, wait a minute, they live four or five years longer than Canadians, on average, a huge discrepancy.
The second oldest region in the world is Europe. That is why their growth has slowed down dramatically.
I am really concerned about the push for growth. Growth is bad for the environment. We know that. We should be pushing for sustainability. I don't think that growth is going to bail us out of this. I'm sorry, Don, but pushing for growth all the time just benefits the private sector. The private sector has to start thinking about sustainability. As for those boomers, let me tell you, most of those boomers you're talking about now are looking after their 85-year-old mothers and 90-year-old fathers. Really. I have been through it, and that is when they find out that the health care system doesn't deliver what it promises. There are a whole bunch of people now in their 60s realizing that we don't have a health care system. By the way, remember that their parents had, on average, four children. There were four children born around 1960. So all that wealth that the boomers expect to get is going to be divided four ways, and, if it is a dysfunctional family, the lawyers get it all.
Be real careful with your silver lining. You can save money on child benefits because there are fewer children. So you save money on the young end of the scale. I think the boomers are going to work out their own living arrangements. I think the families are going to get together, to go back to a comment that was made earlier, and rent four apartments on one floor and all look after one another. Or a women's book club — because women live longer than men, so there tend to be a lot of older women in book clubs — will all rent apartments close to one another, on the same floor of an apartment building, and they'll look after one another because they realize the system's not going to help them. So we're going to see some very creative solutions coming out. That is another silver lining, I think, that's coming down the road.
You save money on child payments, and don't expect the boomers to have all of the wealth. Yes, they are near the end of their lives, but they will pay for a lot of their health care themselves. Most pharmaceutical spending is in the private sector, not in the public sector.
Mr. Drummond: I'll try to address the other half of the question. Why is Japan pretty complacent despite their demographics, which, coming back to our friends in New Brunswick, kind of look like New Brunswick's demographics?
There is a failure in Japan, and, in fact, it is common across the Eastern Asian countries. I would throw South Korea, Singapore and China into that same mix. They have failed to understand what the growth implications of their demographics are. In Japan, the potential growth rate, I would calculate, is exactly the same as New Brunswick's, 0.5 per cent. Yet, they are serially disappointed, every single quarter, when their growth falls below 2 per cent. Don't the calculators work in your country? You can't get the 2 per cent growth from your productivity history and your population growth.
South Korea just put out a growth target, a year and a half ago, of 4.5 per cent. You said Japan is aging the fastest; I think South Korea might have slightly edged them out in that category. How are they going to get 4.5 per cent growth? The growth target in Singapore is 3.5 per cent. China is really decimated if they don't get 6 per cent growth. None of these countries is going to achieve these growth rates.
Coming back to Canada, because that is what we are talking about, that is why I want us to understand that our underlying growth rate is probably about 1.5 per cent. Don't accept it. Try to change it; try to raise it. But understand what we do, and make our plans about that. Don't keep planning that our growth is going to be 2 to 2.5 per cent and just be serially disappointed and have the wrong policies. Count on the 1.5 per cent. Try to improve it, but have policy to embrace and recognize that.
The Chair: Doctor, do you have any comments to make on that?
Dr. Avery: Quickly, I understand this is a committee on National Finance, but, really, the money is in practice reorganization and in collaboration.
The Chair: Thank you. Can we go to the last question with Senator Marshall?
Senator Marshall: I didn't really have a question; I wanted to make a point. We are talking about health care, and we are talking about it as a national program. But I am from Newfoundland and Labrador, and the province is now in a fiscal crisis. As the federal government's share of the health care expenditures decreases, the provinces end up picking up more. The ability of some of the provinces to absorb more expenditure is shrinking, so the window of opportunity for reform is getting smaller. I think that, for some of the provinces, like Newfoundland and Labrador and New Brunswick, their opportunity for reform is sort of getting narrower and narrower. Some provinces are in better shape, maybe British Columbia, than others. We are not all talking about the same situation. It depends on each individual province.
Senator Mockler: What, then, is the role of the private sector, to take more space or to be part of stakeholders at the table to try to find a solution?
The Chair: Build more private aged homes, and charge us $8,000 a month.
Dr. Avery: Thank you for the question, senator. I actually think it is a distraction. I know it's an emotional thing, and we've got this big case with my friend Brian Day going on, et cetera. I have known the man for 40 years. He is not my friend in his overall objectives, I must say that. That isn't where we're going to make a big difference. It must be clear that the country as a whole can only afford a certain amount of money to put towards health care.
To a large extent, whether it's public or private actually doesn't matter so much. We have a wonderful idea with our monopsony and we just need to make sure that we have that proper connection, that collaboration, and that we have the proper practice set ups to make it work.
The Chair: We thank our witnesses very much for their presentations this evening and for the answers to our questions. Thank you.
(The committee adjourned.)