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

Issue 2 - Evidence

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 3:45 p.m. to examine the state of the health care system in Canada.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, I see a quorum. Since we have several witnesses and are a few minutes late, we should get started. Before we do, may I say a welcome to the students from the Forum for Young Canadians, who are observing the work of the committee. They are here on a week-long study of Parliament and government. I do not know why, but when I hear of people studying Parliament and government, I am reminded of a line from when I was appearing often on television with Hugh Segal, who was a Conservative member of a political panel. His wonderful line was that the Canadian Constitution promises the people peace, order and good government, and when the Liberals are in government you at least get two out of three. That was his opening line whenever we got into a debate.

Senators, we are here today to continue our study of the health care system, with a particular focus for the next couple of months on the factors that are increasing health care costs.

We have two sets of witnesses this afternoon. The first witnesses are from Statistics Canada and the Canadian Institute of Actuaries. The actuaries' organization has the acronym CIA, which will be interesting when it appears in our transcript. They will talk about the changing demography of the country. One hears frequently that the aging population is driving up health care costs. We want to understand today how serious that is and what the implications are for health care financing.

Our second set of witnesses is from the National Advisory Council on Aging and the Conference Board of Canada. The conference board is in the process of doing a lengthy study on the economics of the health care sector, and I think you will find their presentations interesting.

Let us begin then with the people from StatsCan. Thank you for taking the time to come.

Mr. Rejean Lachapelle, Director, Demography Division, Statistics Canada: Honourable senators, thank you for inviting us to appear before you.

At this time, we will only address some of the issues that you will be considering in your study of the health care system. We thought it was important to focus our attention on population changes, specifically, on the aging of the population. We will also look briefly at two other subjects -- the health of seniors, and the ability of Canadian society to meet the needs of an aging population.

Population aging corresponds to a faster rate of growth in the number of seniors, or, stated otherwise, an increase in the proportion of seniors. This is not a new phenomenon in developed countries. In Canada, the proportion of individuals aged 65 and over grew from 5 per cent in 1921 to 8 per cent in 1951.

At the time, this increase was incorrectly attributed to a decrease in mortality. In fact, the aging of the population was due, rather, to a reduction in fertility. The number of young people was growing more slowly than the population of seniors. During this period from 1921 to 1951, the decrease in mortality contributed to a reduction in population aging, since it applied mostly to children.

Last week, we released a population projection report of which you have received a copy. That presents a range of scenarios concerning future changes in the country's population. All of them entail significant population aging.

According to the medium growth scenario, the proportion of the population aged 65 years and over should continue to grow steadily until 2010, when it will reach 14 per cent. Thereafter, the change should accelerate as the baby boomers cross the 65-year mark between 2011 and 2031.

At the end of this period, the proportion of individuals aged 65 years and over should reach 24 per cent. Over the next 20 years, that is from 2031 to 2051, this quantity should grow by only 2 percentage points, reaching about 25 per cent in 2051, which is very close to the asymptotic proportion of 25.6 per cent. This ceiling is strictly a result of the scenario's assumptions and is independent of initial conditions.

[Translation]

At the 2025 or 2030 horizon, the findings in terms of the age composition from the medium-growth scenario are quite robust, on condition, of course, that they are taken as orders of magnitude. This is attributable to the primary role played by the age distribution of the population at the outset, especially the relative weight of the baby boom generation. The assumptions about future changes in demographic components of growth can only lead to slight variations, for instance in terms of the proportion of the population aged 65 and over. In 2031, this varies between 22.7 per cent in the high-growth scenario and 24.2 per cent in the low-growth scenario.

Population aging affects not only the population as a whole but also the population of seniors. We observed an increase in the population of people aged 85 and over in the senior population. It showed an increase from 8 per cent in 1971 to 11 per cent in 2000 and 14 per cent in 2011. Over the course of the following 15 years, population aging will fall somewhat with the arrival of the baby boomers into the 65-84 age group; as a result, the proportion of very old people will fall to 12 per cent by 2026. It will then increase reaching 21 per cent in 2051, at which time the remaining baby boomers will all have reached at least 85 years of age.

Our analysis of the past and future changes in population aging depend on an implicit assumption, which is that of the invariance of the age defining the lower limit of the population of seniors. We adopted 65 years of age, which is the age after which Canadians are entitled, under certain conditions, to old age security. Until a few decades ago, this was also the mean retirement age. Since then this age has tended to decline. Consequently, the figures presented probably underestimate the proportion of the population that has passed the mean retirement age. Conversely, life expectancy at 65 years of age has increased during the past 100 years: from 11 years in 1901 to 16 years in 1996 for men and from 12 to 20 years over this same period for women. This raises the possibility that the old age threshold, which is the age associated with the onset of dependency as a result of a weakening in physiological functions, has probably increased over the years. This would mean a slowdown in the growth of the population aging if we were to take it into account. For a better understanding of the situation, it will be necessary to describe the health status of the elderly population.

Mr. Jean-Marie Berthelot, Manager, Health Analysis and Modeling Group, Social and Economic Studies Division, Statistics Canada: If the trends over the past twenty years persist, there should be no deterioration in the health of Canadian seniors. However, given the aging of the population, there will likely be an increase in needs. Nonetheless, given the probable improvement in health, this increase may not be as large as estimated solely on the basis of demographic projections.

In 1996, approximately 95 per cent of seniors aged 65 and over lived at home and 5 per cent lived in long-term care facilities. Seniors living at home were, on average, 10 years younger than those living in long-term care facilities.

In 1996-1997, almost 80 per cent of all seniors aged 65 and over indicated that their health was excellent, very good or good, and approximately 70 per cent indicated they had no prolonged activity limitation.

Between 1986 and 1996, years of dependence-free life expectancy at age 65 increased significantly, from 12.0 to 12.7 and from 12.7 to 13.5 for men and women respectively. By contrast, there was little change in life expectancy with dependence. Thus, the proportion of dependence-free lives increased.

Since the study of factors associated with aging is quite broad, we will concentrate on the determinants of the loss of autonomy for seniors. It has been determined that the key factors associated with the loss of autonomy are; age, being female, low income, low level of education, tobacco consumption, physical inactivity and suffering from certain chronic illnesses.

Disability-free life expectancy for Canadians currently aged 45 years varies considerably depending upon their lifestyle. For instance, for male smokers, years of life expectancy and disability-free life expectancy at age 45 are 28.1 and 17.8 respectively , compared with 35.5 and 24.8 for non-smokers.

Regarding the determinants of health, it has been noted that the current generation of 45 to 64 year olds has a higher level of education, has smoked less and is comprised of more individuals with employment income (mainly because of higher labour market participation by women) than the previous generations.

In addition, the health of the current generation of 45 to 64 year olds is better than that of the same category twenty years ago. Since then, there has been a decrease in the prevalence of arthritis and rheumatism, high blood pressure, heart disease, bronchitis and emphysema, as well as activity limitation. However, there has been an increase in asthma and diabetes. Over the past twenty years, with a few exceptions, the direction in the trends observed in terms of chronic health problems and activity limitations has been the same among men and women.

[English]

The future ability of Canadian society to meet the needs of an aging population depends on the needs of seniors, on service delivery methods, and on the financial capacity of society as a whole. It is impossible to predict future changes in all of these factors. However, projections and simulations can be done on the basis of a different set of assumptions. In addition, it is possible to compare our current situation with that in other countries with older populations.

When comparing the proportion of persons aged 65 years and over and health care expenditures as a proportion of gross domestic product for industrialized countries, no association between the two variables is found. There is a graph illustrating this in the appendix to our presentation. For instance, the United States spends close to 14 per cent of its GDP on health care, but the proportion of seniors in its population is less than 13 per cent. Sweden spends less than 9 per cent of its GDP on health care, even though its proportion of seniors is 17 per cent.

In addition, the life expectancy of Swedes at 65 years of age is higher than that of Americans, for both men and women. According to some studies, cost increases in the Canadian health care system over the last 30 years have been mainly due to unit cost increases, and not to aging.

Upon retirement, the baby boom generation will likely have access to a variety of income sources and greater financial capacity. Participation by women in the labour market, by generation, has been increasing steadily since the 1920s and appears to have stabilized for women born in the 1960s.

There will, therefore, be a greater proportion of seniors in the future who will be able to draw on the Canada Pension Plan or the Quebec Pension Plan. However, participation in private registered pension plans by employed individuals has fallen since 1983 among men, decreasing from 52 per cent to 42 per cent. It has increased among women, rising from 36 per cent to 39 per cent.

Retirees are increasingly relying on their pension income and on their personal savings. In 1971, income from the Canada Pension Plan and the Quebec Pension Plan, as well as private pension plans, accounted for only 14 per cent of the total income of women aged 65 to 69 and 19 per cent for men in the same age category. In 1997, the corresponding figures were 36 per cent and 46 per cent respectively.

The aging of the population will certainly lead to an increase in the proportion of seniors and a reduction in the proportion of children in society, but also to a change in income sources for governments. A 1997 study by Wolfson and Murphy dealt with aging in a comprehensive manner, simultaneously taking into account changing needs in terms of services and cash transfers and changes in tax revenues based on different projection scenarios. This study concluded that population aging was but one of the significant determinants. For instance, by 2036, the effect of an assumed increase in unit costs for health care and educational services that is 1 per cent higher than the increase in salaries will be as significant as the aging of the population in terms of the tax burden. A 1 per cent average increase in productivity would significantly increase tax revenues and provide an opportunity to cover the costs of aging, the increase in unit costs, and even generate a tax surplus. This study also suggested that the tax contribution of seniors will increase, and that they will assume a significant portion of public expenditures associated with aging.

We thank you and will be pleased to answer your questions.

The Chairman: Since we prefer to ask questions of the panel as a whole, I ask Mr. Oakden, who is the President of the Canadian Institute of Actuaries, to proceed.

Mr. David Oakden, President, Canadian Institute of Actuaries: I will begin, and then Mr. Brown will deliver the bulk of the presentation. Professor Brown is past president of the Canadian Institute of Actuaries and has written many papers on the significance of an aging population and its impact on health care and pension funds. Also joining me are two members of our committee on health care practice: Mr. Leach, who is the chairman, and Mr. Ferguson, who is a member of the committee.

Also, we have a presentation of slides that you can follow. We have provided you with a hard copy, if you would like to take some notes.

As this quote here shows, medicare funding is indeed a complex subject. I hope our presentation here today does not do what the quotation says. Our intention is to shed some light on areas where further research is required. I would now like to comment briefly on the main findings in our report.

The first is that aging is but one factor driving the increase in health care costs, and in fact is not the most important. Other factors include the development of new drugs, technologies and procedures, along with the rising expectations of Canadians.

The interrelationships between these cost factors need to be clearly understood in order to properly evaluate the various solutions for saving medicare.

The second finding is that the absence of appropriate cost data makes it very difficult to do meaningful, long-term projections of medicare costs. We have to do a better job of generating more meaningful data, as you cannot manage what you cannot measure.

Third, we believe that the problems with medicare lie more with the design of the program than with the lack of funding. There will be no solution to the cost problem until there is a fundamental change in the attitudes and behaviours of Canadians. This change in attitude can be achieved using mechanisms that exist in most of the other industrialized countries. These include user fees, copayments, and deductibles.

Fourth, about one-third of all current health care costs in Canada are funded by private sources. Unless government spending increases significantly, which we think is unlikely, the private sector will continue to play an important role. I think the work of this committee is an excellent opportunity to determine the optimal mix of services and funding between the public and private sectors.

In addition, the public sector can also learn from the techniques used to control costs in the private sector. One recent example is "telephone triage," which was introduced by the private sector and is now used by several provinces in controlling costs.

Fifth, as the system is currently structured, the workforce pays for the health benefits of the elderly. In general, those under 65 pay for the health costs of those over 65. Before members of the baby boomer generation retire, it may be appropriate for them to pre-fund some of their benefits, both to maintain intergenerational equity and to stabilize the potential increase in the burden of health care costs on the working population.

Our final point is, given that the size of the liability for publicly funded health care is comparable to that for the CPP and QPP, we think it is important to perform annual or periodic reviews of the costs of medicare.

I now ask Mr. Brown to expand on some of our comments on population aging.

Mr. Rob Brown, Professor, University of Waterloo, and Canadian Institute of Actuaries: My purpose today is to focus on aging population. You will find that many of our comments are completely in agreement with those of Statistics Canada, and that should not be a surprise. I will begin by showing you that Canada, while it has an aging population, is still one of the younger countries in the world. Many of the industrialized nations of Europe are far ahead of us in terms of the percentage of the population aged 65 and over. If we use that definition of population aging, the true impact of the demographic shift as the baby boom generation heads into years of heavier use would still be 15 to 20 years out. Thus, we can learn much by looking at these other industrialized nations.

Now, as Statistics Canada pointed out, there is absolutely no correlation between the age of a population and the percentage of its GNP spent on health care. We can see, as was pointed out, that the United States is a young population, but spends a disproportionate amount of its gross national product on health care. Sweden is much older, but is able to run a system that is more economical in terms of requiring shifts from gross national product to health care financing.

This slide begins to indicate that population aging is not the causal force and not the driving force.

In this slide you can see the increase in health care expenditures versus the increase in the aged population. Again, you can see that there is not necessarily any correlation between the increase in the age of the population and increases in health care expenditures. These other countries have other mechanisms for controlling the cost. The literature tells us that high-tech equipment, drug utilization, and the level of service that we provide to the population are more important cost factors. We have a problem in that respect because we are situated next to the United States, and their system is by far the most costly in the world. However, they provide any level of new, high-tech care that a person is willing to pay for, even if it has not really been proven effective.

We will then get pressure from our citizens to live up to the expectations created in the United States without expending 14 per cent and 15 per cent of GNP.

Why is it then that population aging shows up so often as driving health care costs? We think that much of the explanation is expressed in this next slide that shows the distribution of expenditures during the last year of life. This is not a comfortable slide to look at, but after you begin to analyse the statistics, you begin to wonder whether our health care system is really being used as a death care insurance system.

We expend something in the order of 50 per cent to 70 per cent of the final year health care costs just prior to death. In fact, there are estimates that up to 50 per cent of our total lifetime health care expenditures may be made just prior to death.

Is this the way that we want to continue to run our system? If we plug these numbers in, held constant, then it is true that an aging population will drive costs up, although not as rapidly as the percentage of the aged, as Statistics Canada pointed out, because you only die once. Thus, the percentage of people in the age groups that use health care more will grow more rapidly than the percentage of people who are being treated just prior to death.

Health costs for seniors who survive any given year are not disproportionately high. Those people who die in a given year cost the health system the most. You can see ratios anywhere from 4.4 times as much to 10 times as much for those who die in a year versus those who survive.

Here is an even more powerful presentation. It shows the effects if we provide legal entities called "living wills" or "advance directives," where the patient instructs the doctor not to take extraordinary efforts to sustain a meaningless life. We have evidence that in jurisdictions with advance directives that have legal precedent and standing, costs are cut by three and four times.

This is not an easy debate, but we think that it is essential it take place. We believe the Canadian public is ready to have this debate. Should we have living wills and advance directives with legal standing?

At the Canadian Institute of Actuaries, we do not believe it is right and proper to put the onus on the professionals, the doctors, to make these decisions on a one-by-one basis, especially if they must be concerned about legal liability. These decisions must be taken by Parliamentarians after an open, public debate, and legal protection must be provided to the medical practitioner.

To summarize our findings then, and focusing on the aspect of the aging population, we believe that the fixation on the aging population as the problem, which will be presented here, is actually a necessary illusion. That is, people will say that they do not have the solution, that it is the aging population that is driving the cost, and the aging population is inevitable. Therefore, more funding must be found.

We disagree. We believe that there are methods to control health care costs. We believe that incentives can be provided to patients, doctors and hospitals, through government fiat, that can control costs, and that there is evidence from around the world to show that that is true.

Exclusive evidence on population aging as the cause of the growth in health care expenditures runs the risk of creating a red herring by distracting us from choices that ought to be made. However, those choices may harm the interests of professional and political groups that will appear before you.

There will be groups who will come before you and say that the rising costs are inevitable and that you need to provide more funding. The Canadian Institute of Actuaries is not here to ask for more funding. In fact, we hope we are here to provide you with assistance by shining more light on the issues.

What could we do for you? What would we like to do for you?

We would like to assist in deciding what data should be collected and in what format. We would then like to assist in the initial analysis.

By the way, we do this for the 30 per cent of health care that is paid for by the private sector. We are the ones who study and analyse the data, do the pricing, and create policy designs.

Second, we would like to provide you with basic insurance principles that could be applied to the publicly funded system to help in saving costs and making it more efficient and effective.

Third, where data do exist, we would like to help shed light on matters where longstanding myths may be driving public perceptions -- for example, the one that we are discussing today, that population aging inevitably will drive health care costs upwards.

Fourth, we would like to work toward creating actuarial cost/benefit ratios to help Parliament decide what procedures the publicly funded system should cover and what should be left to private coverage. We feel this would be far more logical and efficient than rationing of beds and medical practitioners.

Fifth, we would like to discuss an optimal division between pre-funding and pay-as-you-go financing by the baby boomers to provide for their needs as they age, and to create intergenerational equity.

Sixth, we would like to create and present the first annual actuarial evaluation of Canada's public health care system. By so doing, we could show you the size of the system and the future expected cost as the population ages. We could then do sensitivity analysis. That is, we could run what-if scenarios to show you how you could control the costs under different potential legislative scenarios.

Finally, we could tell you the total actuarial liability of the existing health care system and what promises have been made to Canadians of all ages. When we did a preliminary study in 1996 based on very raw data, we estimated the actual liability of the Canadian health care system as $1 trillion dollars. We are talking about a large system here.

I would conclude with that. Thank you for your time. We are available to answer any questions that you may have.

The Chairman: I thank all of you for a very interesting presentation. With some of the graphs we just saw a minute ago, your presentation certainly falls into the area of more than provocative. That is exactly what you were asked to do, and I appreciate that.

Senator LeBreton: I found the presentations from both StatsCan and the actuaries to be worthwhileI think people tend to blame the aging population. It is just an easy way out for a lot of people in trying to deal with this situation.

Mr. Oakden mentioned pre-funding some of the benefits. I wrote that down and was wondering how we would sell that to the Canadian public. That is going to be the basis of my question.

When you talk about pre-funding, are you then suggesting that certain health care benefits be sort of "put in the bank," funded privately, and not fall under the public system? Do you see a system whereby public health care could participate in that kind of activity as well?

Mr. Brown: This is not privatization in any way. In the debate that took place in 1996-97, the same issue arose with respect to social security and the Canada Pension Plan and Quebec Pension Plan. We were shown that there was an optimal level of previous funding, with approximately one-sixth funded by pay as you go.

Health care is also a social security system. The issue is that blip called the baby boom, followed by the baby bust. We are talking about allowing the baby boomers to pay for their extra, marginal costs to see us through the years of their generation. We do not assume that we can promise ourselves benefits and pass the costs along to these marvellous young people who are here today.

I have certainly done a head count and know that I need to be cognizant of their needs as well.

We would thereby level out the costs amongst all of the population, and the baby boomers would prepay their own health care costs while they are still working. That is the intent. There is no intent to move to what you would refer to as "privatization." There would only be the intent to arrange pre-funding for the extra marginal cost of the baby boom generation.

Senator LeBreton: Do you not then create two levels, including one level of those who are not able to participate in a pre-funded type of plan, people who are low income or not in the workforce? How do you deal with those people?

Mr. Brown: This would be a macro economic system controlled by the government. It would be earmarked "taxation" that would then be available to fund that system. There would be no "Robert Brown" account or "David Oakden" account.

I would put some extra tax revenues into an earmarked fund, and as former vice-president Gore suggested, I would put that in a "lock box" to be used to pay for the health care of the baby boomers. There would be no account with my name on it.

Mr. Darryl Leach, Consultant Actuary, Towers Perrin, and Canadian Institute of Actuaries: The C.D. Howe Institute's February, 2001 issue of "Commentary" comments on this issue. In it they talked about setting up what they call a "seniors' health account." They suggest that Canadians could allocate part of current federal budget surpluses to a seniors' health account, and that would help to contain the burden of the cost of the baby boomers' health care on their children. This is a quote from the document:

Establishing a seniors' health grant and partially pre-funding it through a seniors' health account would put Canadians in better shape to deal with the challenge of publicly funded health care.

It would not be like individuals putting money into RRSPs; it would provide funds from the surplus.

The Chairman: I should tell my colleagues that witnesses from the C.D. Howe Institute will be here tomorrow morning.

If I could use a layman's description, you are essentially suggesting that there would be a group policy -- every Canadian is in the group, and each would pay a premium, provided it was affordable. There are some criteria by which some individuals pay to be in the group, and other people who cannot afford it are in the group in any event. That is the essence of your proposal.

Mr. Brown: It could be the same criteria that we use for taxation.

Senator LeBreton: I have one question on the Statistics Canada presentation. This is the second time that this issue has arisen. Generally, people are healthier than they used to be, except for increases in asthma and diabetes. I am curious about whether Statistics Canada has probed into why that increase has occurred. This is the second time that we have heard this. Is it environmental, or what is it?

Mr. Berthelot: I do not believe we know the answer to the question about asthma. We know that there has been an increase in terms of the body mass index, which is a risk factor for diabetes, but we clearly cannot say that that is the cause. We know that there is more reporting of the condition. It could also be that more people are diagnosed now. Thus, people know they have diabetes, but the real answer is that we do not know the cause of the increase.

Senator LeBreton: When you get a statistic like that, is there some trigger mechanism at Statistics Canada that will send you off to probe why that occurs? Is it simply put on the table as a statistic and just left to sit there?

Mr. Berthelot: I do not think we have such a mechanism, but putting that effectively before the public may convince some researchers to look into it.

Senator Cohen: Thank you for your presentation today. The facts and figures are overwhelming. I had no idea of the high cost of dying, and that it had reached the proportions that it has. It makes you want to live and concentrate on wellness.

Has the Canadian Institute of Actuaries worked in tandem with the government and the Health Department up to now?

Mr. Brown: We have responded every time that we have been asked.

Senator Cohen: From what I am hearing, could you be a major asset?

Mr. Brown: We would like to be a larger asset than we have been in the past. I do not think we are well known. We are only 3,000 strong, but we believe that we are a resource that you can access.

Senator Cohen: I am not a health professional, but every point you made had a resonance with me. Thus, obviously, to an average Canadian who cares about what is happening, it makes a lot of sense. We must marry your organization more with the Health Department.

My question is about demographics. You referred to the life expectancy of Swedes at 65 years of age as being higher than that of Americans, and that it costs much less. What is their secret? How does our aging population compare with that of other industrialized countries?

Mr. Berthelot: I do not know the secret of Sweden. We only report on the data that we collect in Canada, and we use the OECD data to provide you with the numbers from other countries.

Senator Cohen: Has there been a comparison study?

Mr. Berthelot: Statistics Canada has not compared the Swedish health care system with the Canadian health care system. I do not think it would be within our mandate.

Senator Cohen: Do you have any reporting from any other industrialized country? I think that information would be very helpful as we progress in our work.

Do you have a comparison of what is happening in one industrialized country with what is happening in another? What has been successful elsewhere that has not been successful here, and vice versa?

Mr. Berthelot: It is not part of the mandate of Statistics Canada to review or survey programs and political systems. Rather, we measure Canadian society. It would be for someone else to take that role.

Senator Cohen: Has Statistics Canada done a study of why women live longer than men in Canada?

Mr. Berthelot: Nobody knows why women live longer. We know that in terms of risk factors, there are lower levels of smoking, for example. However, we have not done a specific study. What do you mean by a "study?" Do you mean trying to find the causes?

Senator Cohen: I refer to any research into that whole area.

Mr. Berthelot: There is some research information at Statistics Canada comparing men's and women's health profile and life expectancy, but in terms of understanding why they live longer, I do not think so.

Mr. Lachapelle: I have one comment on the last question. The phenomenon of women living longer than men is observed in many other societies. In a way, with the kind of research that has been done, researchers are trying to understand those kinds of things. The only possibility on which they have a guess is cultural -- the habit of smoking and things like that. It is a phenomenon that people find important to know about and would like to understand better. What provides a clue and is an important factor is a cultural one <#0107>in fact the gap between men and women in terms of life expectancy has decreased in the last 20 or 25 years. That is connected to changes in the habits and behaviour of women, because some have adopted men's behaviour patterns.

Mr. Brown: We have a recent paper we could get to you on that topic. It is a very in-depth literature review.

Senator Keon: I believe you said that an aging population is not the main reason for increasing health care costs. The reasons are multifactorial. Were you able to pull the significant factors out of the multifactorial pool?

Mr. Brown: No, we were not. I would say that we are a young committee. I am sure you are aware that health care data are very difficult to obtain, especially data that would allow for multifactorial analysis. A significant amount of data would tell you how much Ontario spent in total last year, for example. It is difficult to get breakdowns from which you can do a multifactorial analysis. We have not been able to achieve that, but it is a goal.

Senator Keon: Have you any perceptions?

Mr. Brown: I will now remove my Canadian Institute of Actuaries hat, if I may, and become a university professor. I have been surprised and somewhat disappointed by the lack of correlation between spending on health care and measurable impacts. The concept of life expectancy and how much a country spends on health care are not correlated. As someone in the education sector, I could make a case that you should be spending money on education if you are concerned about population life expectancy, as opposed to MRIs. It is very interesting where the multifactorial analysis can lead you. It leads you into very unexpected paths and fields.

[Translation]

Senator Morin: My first questions are to Mr. Lachapelle and Mr. Berthelot. Unfortunately I did not hear your presentation but I have received a copy of the brief. What really interests us in the area of health is not the person sixty-five years of age, since it has been shown that a person's health is quite stable up until the age of 70 or 75. It is after the age of 85 that there are real changes in one's health.

If I understand correctly, the state of health of seniors is getting better. What is important is not that there are more seniors, but rather that the number of people aged 85 and over is increasing significantly. At their meeting in Quebec City in 2000, the health ministers said that they had not taken health costs into account. That is one of the reasons why health care costs are increasing: the proportion of Canadians aged 85 and over is increasing.

Your figures on sickness begin at 45 years of age. They do not really apply to seniors. For example, Alzheimer's disease does not hit people 45 years of age, but people suffering from it require a lot of care, which is much costlier than for other diseases.

Over the next ten years, the number of deaths in Canada will increase significantly. You state that Canadians 65 years of age now enjoy better health. We know that. What is important as regards the health care system is those people over 85 who are losing their independence and the number of deaths. That is what is going to push up health care costs.

Mr. Lachapelle: You are referring to the aging of seniors. That is correct, and we highlighted the point in our presentation. However, as we stated in our brief, it must be remembered that over the past thirty years there has been a significant increase in the population of Canadians aged 85 and over. The situation of Canadians very much older than 65 will stabilize between 2011 and 2031, which is precisely when the baby boomers will become seniors. They will be the youngest of the seniors. Later of course, as from 2030, there will be a large increase of the population of very old seniors as the generation born between 1946 and 1966 will reach 85 years of age.

I will ask Mr. Berthelot to answer the other questions on the health of senior Canadians and developments in that area.

Mr. Berthelot: The reason why we presented life expectancy at 45 years of age is because that is the mid-point for baby boomers. What are the projections for their life expectancy? What are the reasons why some people in the group are going to have longer or shorter lives than others? That is why we looked at those who smoke for example. We are not considering only life expectancy but also life expectancy with a loss of independence.

The purpose was to show important determinants such as smoking, body mass index and physical inactivity, and to relate these points in the next paragraph to the fact that generations of baby boomers have lower prevalence risk factors than today's seniors. As we know that people 65 and older today are in better health than seniors 25 or 30 years ago, the profiles would indicate that we can expect an improvement for the baby boom generation.

Senator Morin: Unfortunately the standard risk factors no longer apply after 85 years of age.

Mr. Berthelot: They apply beforehand, and the number of years living with disability or in a health care institution also depends on activity limitations and home care services. Everything depends on activity limitation. As we now know, risk factors do not apply at 85 years of age. We were trying to develop an idea of future directions. Analysis of a number of factors seems to indicate that the seniors of tomorrow will be in better health than today's, who themselves are in better health than yesterday's.

Senator Morin: You are right as regards people under the age of 85.

[English]

I have two questions for Mr. Brown. I direct his attention to tables 2 and 3, on the last two or three years of life. This issue arises regularly. It is more expensive to be sick than to be healthy. We all have a number of illnesses, but the most major illness we have will be the last one, generally speaking. If you compare someone who dies in one column to someone who survives in another, it is obvious that the person who died would be sicker than the person who survived; it is not surprising that it is more expensive to pay for that.

I should like to turn to table 4, which surprised me no end. This table would indicate that most of what Dr. Keon and myself have been doing in the health care field is unnecessary.

There would be a $70,000 difference between the hospital charge for a patient who gave an advance directive and one who did not. Generally, physicians prefer to have patients who have an advance directive. We know exactly what they want.

That is a significant amount of money. Unfortunately, there is no reference in the paper that I have before me. I would like to know the number of patients studied, where the study was done, on what kind of cases, and whether that was total population or selected cases.

I cannot let this go by without having some knowledge of the number of patients and the cases. If these are terminal cancer cases, it is a select population.

Mr. Brown: I can refer you to the paper. I cannot go back at the moment and reproduce the breakdown, because we were given it in the macro-economic form that you have.

This is U.S.-based data. It is based on Medicare data. The paper is entitled: "Development of the Last Year of Life Valuation Model." It is from the North American Actuarial Journal.

We were struck by the figures as well.

Senator Morin: I must say that I cannot agree. Dr. Keon will speak for himself, but it is impossible that there could be such a major difference between those who gave an advance directive and those who did not.

Generally, we tend not to give unnecessary treatment. The difference is too great. The $70,000 difference per patient per hospital charge is really unbelievable. I cannot accept that.

Mr. Brown: We will share all the data with you. I can only stand by the studies that we have analyzed to this point.

Senator Morin: I realize that you are quoting someone whom we do not have before us. It is good to give us the reference.

Mr. Brown: It is in our longer paper. I think you are looking at the slide presentation for today.

Senator Morin: I did not get anything else.

I am surprised that Germany was not included in your various slides because Germany has done a lot on long-term pain. They have insurance. What you are recommending is the German model, where they have long-term, universal social insurance, which is 1 per cent of salary.

Some people agree with it and others do not, but Germany has been doing that for some time. This is really what you are recommending. Germany has a universal social insurance program for long-term care. It has been in existence now for 10 years. The employers collect 1.7 per cent of the employee's salary to go into this fund. It is spent on long-term care after an assessment.

Generally, it is well accepted. Some of the insurance is for home care, some of it is for hospital care, but it is for that purpose. Before we go into that, I think it would be beneficial to review the German model.

The Germans use a significant amount of resources on their older population, and they have an aging population. By far the oldest population in Western Europe is in Germany. I was surprised to see that Germany was not referenced.

Mr. Brown: One of those triangles was Germany. We could not identify all of them or you would not be able to read the graph. I must say, with respect, that we have not decided whether the German model is right for Canada or not. I cannot say that we are recommending a German model.

Senator Morin: That is what it is.

The Chairman: I have two comments. First, as I listened to your presentation and read your paper, I did not detect that you are recommending a specific solution. You are saying that this is one way to go at it.

Second, we are working on a piece of research at the moment that will be available around the middle of May 2001 that will compare the universal models in several countries, including Germany.

Senator Roche: Following up on Senator Morin's questions, I have two questions for Professor Brown in the context of our subcommittee's report on palliative care. I would hope that the committee, during its deliberations, would have that report in mind. Professor Brown has dealt extensively here with the last year of life.

I too am greatly struck by the high figures for costs for the last year of life. Perhaps my question will take you beyond your discipline and your specific competence, but it should be raised.

What is the reason for these high costs? Is it because the patient -- who obviously has a serious illness, as he will be dead within the year -- is being treated actively and requires a significant degree of expensive treatment? Or is it because the patient is occupying very expensive space in an active treatment hospital? Are you able to shed some light on the reason for the cost?

Mr. Brown: I cannot tell you the answer to that question, not with the degree of research that we have been able to do to date.

Senator Roche: I suspected that you might not be able to answer. Mr. Chairman, I would be interested in getting at that information.

The Chairman: Let me ask the StatsCan people. Do you have any data on that?

Mr. Berthelot: We have done some research in the area of cancer. We have found that in the last six months of life, which is mainly palliative and terminal care, the patient is hospitalized for about 20 days or 25 days, depending on the type of hospital. It costs at least $20,000, I would say.

The Chairman: I think that that is a key point but would pursue it differently. Do the data indicate that if someone is left in a hospital because there is no palliative care unit, that it is more expensive?.

Senator Roche: They are.

The Chairman: I presume it is much cheaper to have someone who is clearly terminally ill in a palliative care unit than in an acute hospital bed, which I think is part of where Senator Roche was going.

I am trying to find out if we have data that look at those trade-offs.

Mr. Berthelot: I do not think that we have data that allow us to trace effectively where people go in the health care system. We will be able to see where they died and look at their hospital utilization.

Senator Roche: In this context, I would suggest that we review the report and the testimony which produced the report on palliative care. As I recollect the evidence, there are some data that show quite clearly that palliative care is less expensive. There are many reasons for palliative care; including that it is less expensive.

Professor Brown, you drew our attention to living wills in such a way that I inferred that you are in favour of them and would require them to be mandatory. Did you mean to go that far?

Are you saying that living wills are of such assistance to doctors and the entire medical team that you would want to require living wills on cost factors alone? In that way, active treatment would not be given to people who have said that if they were in a terminal condition, they would want to die?

Mr. Brown: That is a political question. We would like to provide the political forum with the data analysis that could lead to the correct answer. The question itself is a political one.

The Chairman: That is a wonderful, political answer.

Senator Rompkey: I do not know where you got the witnesses, but they are God's gift to politicians, because they have come before us today and said that not only do we not need to spend more money, they can show us how to do that. I think that we need a long-term relationship with them.

Some of the questions that I wanted to ask have been asked already. I think that it was the StatsCan people who talked about the change in the percentage of income that is derived from pension. As I understood what you said, the reliance on pension has increased. Why is that? What are the factors that have contributed to that?

Mr. Berthelot: It is clear that people contribute to pensions. It is clear that women have been working more, so they contribute to the Canada Pension Plan or the Quebec Pension Plan.

Senator Rompkey: It has nothing to do with other factors? That is the main reason?

Mr. Berthelot: There could be other factors. I have not studied that, but there could be other factors in terms of the eligibility for Old Age Security or the GIS. Perhaps Mr. Murphy could add some comments.

Mr. Brian Murphy, Manager, Statistics Canada: I am Brian Murphy with Statistics Canada. The numbers in the report had figures from 1971, when the CPP had been in place for six years or seven years, something like that. The main reason for the increase in that would be the maturation of the CPP. People would be starting to receive the pay-as-you-go benefits from that.

We now find that there are high fixed proportions. Seventy-five per cent of seniors' incomes comes from transfers. It is a huge block. It is high, and fixed at that point now.

Senator Graham: I would like to thank the witnesses for their presentation. It is all very interesting.

I happened to be Allan McEachen's executive assistant when medicare came into force. I have something of a history with, and more than a passing interest, particularly at my age, in the statistics that you have revealed. I am always more comfortable when I am in the same room with Senators Keon and Morin.

When you mentioned pre-funding as opposed to pay as you go, I got nervous because I could see Don Harron's TV commercial on prepaid funerals passing before my mind. I was more comfortable after Senator Morin made his comments. I did wonder why you said that the person who dies is sicker than the one who survives. Even I understand that.

I was interested in Mr. Brown's statement that "we believe that there are methods to control health care costs." This is a follow-up to what Senator Rompkey said about being happy that people here say that we should not have to pay more for the health care system in Canada. What are those methods that you can suggest, and have you offered them to Health Canada?

Mr. Brown: We offered them today in our report. In particular, as actuaries, we would bring you some of the cost control methods that are used in an insurance system. I will preface that immediately by saying that many of these systems mean that 99.9 per cent of the population gets almost everything that they want at a price that is affordable. Those private insurance principles that could be applied and would lead to cost savings, and in fact are applied in most industrialized nations in the world, would be items like deductibles, copayments, and co-insurance.

The patient is a participant in the system and has an incentive to use it appropriately and efficiently. Thus we have built into the system reasons for the patient to choose palliative care over a more expensive alternative; to choose a clinic over an emergency room; or to choose a telephone triage over a clinic. Those are the types of principles that could be applied.

It may then be necessary to overcome the issues that will arise and are immediately obvious to everyone. There could be one-tenth of the population that will not find those systems to their advantage.

Senator Graham: What is the effect of income inequality on life expectancy?

Mr. Brown: It is extremely important. It is also highly correlated with education. Thus it is sometimes difficult to separate the two, but it is extremely important. It can be shown, for example, that in a country like Costa Rica, with relatively low per capita income but equitable distribution, life expectancy is far greater than one might expect. One of the reasons is the equity of the distribution of income, as well as their emphasis on public education and public health initiatives.

Senator Graham: Does it have the same effect on both men and women?

Mr. Brown: I do not know that I have seen the report broken down that way.

Senator Morin: Yes, it does.

Senator Graham: What differences in demographic trends exist for various ethnic groups in Canada? Does it matter whether one lives in rural or urban Canada?

Mr. Brown: My first response will be similar to several I have given this afternoon: I wish that I could get data that I could analyse to answer those questions. I cannot. That is one of the big problems.

Outside of not getting health care delivery data, there are some answers to your questions. Most immigrants to Canada take on the demographics of Canadians relatively rapidly. However, the aboriginal population is demographically remarkably different from the Canadian population without native ancestry. In some provinces, aboriginal people are becoming a sufficiently large percentage of the population to have a measurable impact on health care costs.

Senator Graham: What about the urban/rural question?

Mr. Brown: I would be taking a stab there, and I would rather not.

The Chairman: Does StatsCan have any comments to make on Senator Graham's questions?

Mr. Lachapelle: We have a significant amount of data on the demographic itself. It can be shown that there is a significant difference in the percentage of seniors between the regions and there will be more and more.

It can be shown that in rural areas in which we observe a large net migration, where many young people left, there will be a higher proportion of seniors and low fertility. That is why it begins to appear that the aging population is rural.

It is easy to find out those kinds of things. We can study it, and there have been some data collected.

It is more difficult with ethnic groups, except in aboriginal populations, where the proportion of seniors is much lower because the fertility rate is higher.

For other groups in the country, it is more complex. We know that 30 years ago, Newfoundland had the lowest proportion of seniors. In 20 or 25 years, Newfoundland will probably have the highest proportion, because their fertility rate is the lowest in the country and there is a lot of migration.

If your question were more in relation to the differential in the health condition, I would ask Mr. Berthelot to answer.

Mr. Berthelot: We have done some work on looking at how income is distributed in Canada at the provincial level and in the major metropolitan areas of 50,000 people or more. We have compared that with state information and metropolitan area data from the United States.

We find that there is a strong association in the U.S. between where the income is distributed and the mortality rate for the working age. There is no association in Canada, either at the provincial level or at the city level.

Why is that? There is a significant difference between the U.S. and Canada, between our education and health care systems. We have been working with Australia and we are initiating some work with Sweden to find out what their situation is. With Australia, we find similar results to Canada. There is something in their system, as in ours, that reduces the effect of income inequality.

Income inequality is greater for males than females and it is higher in the working age population. Among seniors, it is believed that there are what is called "healthy migrant effects." The elderly who are healthy move to places where the weather is better, such as Florida and Texas, and these places in the United States have a higher inequality measure. When one looks at seniors, the association is not really there, either in Canada or the U.S. It is a shallow association.

Senator Callbeck: I know we are running out of time, so I will ask one brief question of Mr. Brown.

In point three in your summary, the last sentence says: "The population needs to be better informed about the costs of medical care."

I should like to hear your ideas as to how that should be done. Are you thinking of sending out a statement at the end of the year, telling each person how much he or she cost the health system? What are your ideas? You seem to be saying that if the public is better informed, health costs would decrease. Do you have any facts to back that up?

Mr. Brown: At the moment, most provinces in Canada would not be able to send a statement at the end of each year showing what had been billed because the data do not exist in a format that would make that economically feasible. Therefore, the education may have to be at more of a macro level. I am hoping, and I believe, that much of the work that this committee will do will provide education to Canadians about health care.

It is my perception that Canadians perceive health care as being a free commodity. Canadians need reminding once in a while that health care is not a free commodity. It does come at a cost. Some activities and processes are higher cost than others.

I would say that honourable senators have the opportunity to start the education process. Would that have an impact on saving money? Yes, I think it would. Other countries have done this in aiming to decrease costs, and I think public education should assist us in creating a more efficient and effective system.

The Chairman: I am fascinated by your comments to Senator Morin on the high cost of the last year or two of life. Let us suppose that the average life expectancy is 10 years less than it is. Let us suppose we have the same number of people that we have today. Then in fact we would not save much on the health care system because the same number of people would be dying in any given year and we would still be incurring that cost. Is that basically right?

In other words, the real problem is not that the population is getting older, it is that more people are dying in any one year. We happen to say that they are all old. Have we in a sense been defining the problem incorrectly?

Mr. Brown: I would agree with that. I would also say that the projections that many people do, assuming that these costs are a function of an age group, will then overstate the impact of population aging and the effect that will have on health care. In fact the period prior to death is the driving force.

The Chairman: For the record, you showed in one table roughly a $60,000 or $70,000 difference between people who had living wills and those who did not. For anyone familiar with U.S. health care costs, that is probably only five or six days. That is not a huge amount of time.

Mr. Brown: Those are U.S. data.

The Chairman: Unfortunately, my family had some experience with the U.S. health system last year.

Senator Morin: The absolute numbers are surprising.

The Chairman: I thank all of you for coming. I know we went on longer than we expected, but that seems to be what happens when we hear interesting witnesses.

Our last panel of witnesses today includes, from the Conference Board of Canada, Mr. Frank and Mr. Brimacombe; and also, from the National Advisory Council on Aging, we have Dr. Gordon.

I will ask Mr. Frank to begin because I know he has a presentation. We will then turn to Mr. Gordon, who will be making some comments on the basis of Mr. Frank's presentation.

Thank you for coming and for being so patient.

Dr. James G. Frank, Chief Economist and Vice-President, Conference Board of Canada: Honourable senators, Mr. Brimacombe and I are very pleased to be here this afternoon to speak to you about some of the work we have been doing. We want to compliment the committee for undertaking this initiative.

I want to tell you briefly about the conference board because we are a somewhat different organization. We are a not-for-profit research outfit. Our mission is to assist members in anticipating and responding to changes in the global economy. That is quite a large mission. The more important part is that we are non-policy prescriptive. Thus, we tend not to advocate one perspective over another and we try to present research to inform our listeners, our members, or the general public on issues that we are studying.

Five years ago, we initiated a project called "Performance and Potential." At that time, we took the position that a high and sustainable quality of life was what society was really about and that we would look in a disciplined way at the drivers of that high and sustainable quality of life. Our fifth report was released last fall and we have provided copies of the executive summary for you, if you are interested, in both official languages. By the way, it covers many other issues not related to health care, although there is a section in there on that.

Our reports focus on what we call the "underpinnings" of a high and sustainable quality of life -- things like our productivity and fiscal balances, debt levels, industrial competitiveness and social policy.

In 1996, we called attention to those things that we thought would help us to develop a sustainable social policy that was affordable, effective and accountable, and that the taxpayers would also support.

We believe that the health care system is an important determinant of Canadians' quality of life. That contributes also to our industrial competitiveness, which is important as well.

Since the early part of the 1990s, the number one policy issue has been health care and its future. The current debate seems to have focused on two separate but related issues: first, timely access to quality health care; and second, the overall financial sustainability of the system. Framed in another way, the issues boil down to money and structure.

While there are many published figures on population projections, and you have discussed them today, there are two things that I wish to put on the table. Right now, the proportion of the population aged 55 and over is about 22 per cent. In our economic analyses, we do a significant amount of work on population and we figure that will jump to 32 per cent by 2020.

As our society ages, we look at the relationship between our aging population and health care expenditures. This is the topic that you are discussing now.

There is a table in the handout I have given you and I want you to notice what happens at about the 45-to-54 age group. At that point, current expenditures would be about $1,140 a head for males and about $1,345 for females. These expenditures essentially double every 10 years after that.

This is interesting information because it is one of the few cases where you find exponential increases in a data set like that.

When we know, or understand, that the proportion of our population heading into that 55-plus age group will increase, we can understand that our health care expenditures will rise fairly sharply as a result of aging alone over the next 20 years.

It is true that the impact of a growing and aging population will not happen overnight. We think there will be time to find some approaches that may be helpful in meeting these twin objectives of timely access and affordable financial structures.

In many respects, the debate is about how the options we will identify in meetings like this, and in the near term, will alter the choices that we have to make in the future. From our perspective, there are numerous policy roads that Canada could take, the most fundamental of which is the respective role of the public and private sectors, both from a financing and a delivery point of view. At the same time, there is a larger strategic policy issue that Canadians must consider and we wish to bring this to your attention today. Every additional dollar we spend from the public purse on health care is one less dollar that we can spend on education, social services, and perhaps even debt reduction, if that is a priority for you, or other important policy issues in the public sector.

While health care is clearly a fundamental service, we must remember that there are other important sectors in society that have a legitimate claim on the public purse. Given the challenges that face the health care system, the conference board released two studies, one on British Columbia and one on Ontario, for the last year that isolated the impact of aging, total public health care spending, and its relationship to provincial government revenues, which, of course, must pay for this.

We looked at this over the next 20 years. We had two research questions. First, what was the impact of aging on total public spending and the changing volumes of per capita utilization rates over that period? Second, what proportion of public revenues would be consumed in an unconstrained growth of health care spending?

The Chairman: Can you speak more slowly? That was a problem with the previous witness too. The translators are out of breath.

Mr. Frank: I apologize. I was mindful of the time. I will slow down.

How would Canada's aging population affect total public spending over the next two decades? That was one element of it, of course. What proportion of public revenues would be allocated to health care if we did not put a lid on those expenditure changes over time?

I want to underscore this approach, because while others have undertaken analyses as well, we have taken it a step further, with our provincial forecasting and modelling capabilities, to estimate provincial revenues and the share of those revenues allocated to health care.

In doing these two studies, I emphasize that our forecasting models, and this analysis of the future, are always built on a number of assumptions and economic relationships. I will speak to a few of them in a minute. However, I raise the point now because when one undertakes projections about future public spending on health and its relationship to government revenues, the question is not necessarily whether we are right with the specifics of the analysis, but more importantly, whether the information will serve to mobilize public opinion toward change and examination of the issues embedded in the subject being studied.

In our research, we take the historical record of changes in health care services, in real or volume terms, for each of 18 age and sex groups as our starting point. We then project forward from the most recent year, based on these real expenditures per person and the population distribution. In our analysis, we assume no new programs. This is the base case outlook with what we have in place now.

We assume that governments will achieve balanced budgets and hold them there for the next two decades. We also hold tax rates constant. Based on our projections of future economic growth, in each of the provinces or in the country as a whole, for example, we can calculate total government revenues.

What did we find? As a share of government revenues, expenditures in British Columbia would rise from about 38 per cent to 53 per cent in 20 years. In Ontario, it would rise from about 36 per cent now to 47 per cent in 20 years.

In each case, our projections show that the costs of the aging population and the current practices in health care will absorb roughly one half of government revenues in 20 years.

We understand the limitations of undertaking analyses like this. We do long-term forecasting all the time. In particular, we understand that health care systems are dynamic and that they change over time. As a consequence, some will argue that we have overestimated future health care expenditures, and some will argue that we have underestimated them. However, let me make a few comments about what was not included in this analysis. This is more interesting in some respects.

My point is to suggest that the projected cost of health care could well be an underestimate of what will occur. Here are the reasons. First, we made no adjustments in the cost of salaries to health care staff, including physicians or nurses or physiotherapists or any others, beyond 2.2 per cent per year, which is the base case inflation outlook over the next 20 years.

If we are wrong on that, obviously we have underestimated the cost today, but not the volumes of services.

Second, we made no assumptions about the expansion of public funding for home care or pharmacare. In other words, the boundaries of medicare, as we know them, are held constant in this work.

Third, we made no adjustments to the range of services that were either no longer covered or could be added under medicare. This would take us into the discussion about medically necessary services and comprehensiveness -- a discussion that is important because pressures to expand coverage will likely flow from increased technological breakthroughs related especially to the human genome project over the next decade, or possibilities around reproductive technologies.

Fourth, in the next decade, we can expect that it will become practical to design drugs for individuals. What we do not know is how expensive this will be. We can expect, though, that there will be public pressure to have these modalities covered under the current approach to health care. As we look at these costs of drugs, which of course are growing rapidly, we are reminded of the impact of technology and what can be done on the frontiers of science. Whether state-of-the-art diagnoses and treatments should immediately be included under medicare will be hotly debated. We made no assumptions about quantum changes along these lines.

Fifth, there are possibilities for achieving further efficiencies in the system. While there are a number of experiments going on, such as with new models for delivering primary care treatment, we incorporated no assumptions into this work about the financial impact of that kind of structural change.

Finally, in our model we assumed that net international migration will stand at 225,000 in the year 2020. That is equivalent to 285,000 gross international migration into Canada.

This is important because if there is a net reduction in the level of migration into Canada, there will be fewer people working, less income taxes collected; however, of course expenditures on health care will be relatively little affected. Hence, the cost to provincial governments will in fact be higher than we have estimated.

I mention these six items to emphasize we took a cautious approach to the question of forecasting costs and government revenues. Note that there is no recession in the forecast over the next 20 years. Yet we have, I would say, quite large increases in costs as a share of revenues, based on essentially leaving the structure as we know it today in place.

It yields, as I said, approximately one half -- 45 to 50 per cent -- of provincial revenues devoted to health care.

Suffice it to say that this is a critical area of research inquiry that is worthy of additional investigation. Recognizing that health care systems are dynamic and that they adapt, we need to do more to understand how they could evolve over time to address the pressures associated with a growing and aging population, notwithstanding new technologies and advances in science.

To partly address these issues, the conference board, as part of its leaders' round table on health, health care and wellness, is in the process of developing a number of projected scenarios that will focus on the impact of different structural changes. We hope to have that work done later this year.

While one can debate our ability to look into the future, one cannot dispute the fact that, given limited public resources for a number of competing programs, governments will continue to face a daunting task in making serious political and policy decisions. This means that while some programs receive additional funding, others will receive less. Looking at the last four years of provincial budgets, we can show that 62 per cent of the increase in provincial spending over that period went to health care alone. That does not include the results of the September 1, 2000 ministers' accord.

Over the short term, governments have the chance to make these choices. Over the medium to long term, though, one cannot ignore the claims from other programs such as education, social services, or even debt reduction. Clearly, the debate to date has not been able to step back from the health care vortex and see that there is a much larger picture, bringing with it a broader array of competing public policy objectives.

In sum, while the future of our health care system is worthy of a significant amount of attention, we must also be sensitive to the other important investments, and their rates of return, that governments make on behalf of Canadians. As we think about the future, though, we must be mindful that our values as Canadians will be at the centre of the debate. We have published a major piece on both Canadian values and on values around health care, and they are available on our Web site.

Some difficult decisions will have to be made when it comes to the future of the health care system. We have some value tensions that I wish to summarize as I conclude.

First, how do we reconcile the issues of quality and affordability? Canadians want timely access to the best care possible, but how can our publicly funded system keep up? It would be safe to say that Canadians implicitly recognize that there will be trade-offs under our system. However, if the discrepancy between what Canadians feel is reasonable and necessary and what the system can provide grows, something will have to give. The research indicates that reasonably clearly.

A second values tension is how we reconcile providing everyone with relatively equal access to the same level of services and the desire of some people to pay out of pocket for faster or enhanced medically necessary services. Do we stop them from accessing services and recognize this as an inherent trade-off within our system, or do we allow people to spend their money, even if such services may not be medically necessary -- this is the peace-of-mind argument -- and what would be the repercussions of each approach?

The third and final tension arises around where the role of government begins and ends in maintaining people's health and where our individual responsibilities lie. Should government ensure the system adequately covers all costs for catastrophic illness and injury and leave the rest to the individual; or should the publicly funded system achieve a balance between covering treatment and prevention services; or should consideration be given to cost-sharing arrangements for some of these services -- the so-called co-insurance approach?

Regardless of the policy road we choose, there is no escaping the issue of values when confronting health care. Values are present even when we talk about the status quo.

In closing, I commend the committee for inviting us here today and for taking a leadership role in examining the health care system and the federal role in any reforms that may be required. We hope that our discussion today will contribute to phase two of the committee's work, and Mr. Brimacombe and I would be happy to try to answer any questions that you may have.

Dr. Michael Gordon, Member, National Advisory Council on Aging: Honourable senators, I will make some preliminary comments. First, I am honoured to be here and honoured to represent NACA. You can probably tell from my accent that I am an American. I came to Canada 25 years ago. Part of the reason I live in Canada is because of the health care system. As someone who goes back and forth between Canada and the U.S. a lot, and who has family in the United States, I would say there is no contest in terms of health care systems.

I wish to frame something that may be different from the way some of the discussions have gone so far. I look at the aging of the population as one of the great successes of the health and social service systems. I am not sure how you run your lives, but I am willing to bet that you make decisions hoping that you will live a little longer. At the end of that little longer, you hope to be 80, 85 or 90, because you ate the right things and exercised. The triumph of social services and health care over the last number of decades has been the aging population. This is an enormous achievement. We must be very careful not to undermine that, because it is a non-renewable resource. My concerns relate in part to the threats to the integrity of what I believe is an outstanding health care system.

The National Advisory Council on Aging is pleased to present its views to the Standing Senate Committee on Social Affairs, Science and Technology. On behalf of the council, I wish to thank you for your interest in this important issue of population aging.

Our mandate, as you know, is to provide advice to the Minister of Health on issues related to aging. A number of publications have been issued over the past few years, summarizing, explaining and documenting the position papers. The positions that we have taken include the recent, "1999 and Beyond: Challenges to an Aging Society," and another more recent one on health care reform.

Speaking of the aging population, it is very diverse. I am a geriatrician, and we often say in geriatrics that, as you get older, you get more different from each other than when you were younger. That is contrary to the way we speak about the aging population. There is enormous diversity and capability in our elderly population.

The health status in the last 20 years has improved remarkably in most western countries, and certainly in Canada. Looking at the mortality and morbidity statistics, perhaps you believe the concepts of the "rectangularization" of the curve are true, that as you do the right things earlier, you will decrease the years of morbidity so that they are closer and closer to the end. Some people have challenged that, but there are many bases for understanding that we have remarkable improvements in many areas of aging.

A very large proportion of the aged have chronic health conditions. Some of these conditions are amenable to preventive, primary or secondary measures that are very important to take heed of and to implement where possible. We believe there has been an under-investment in prevention and health promotion in Canada. However, there are certain areas in which we do not know what we could do to prevent illness or promote health, and of course the outcomes of these decisions have a major impact on morbidity, mortality, quality of life, and cost. Alzheimer's disease is a prime example. We have no idea currently what to tell people to do to prevent it, yet if we could do that tomorrow, a huge cost of the health care system would disappear.

There are many opportunities in promotion and delivery of services. At NACA, we believe that the publicly funded system is key to a comprehensive, humane and appropriate health care system for our country.

I mentioned the health promotion component. There are many examples to focus on. A simple one that is high on the agenda for those of us who practice geriatrics is fall prevention and mobility. We know that relatively small investments, especially directed at the frail elderly population, can result in major benefits in terms of prevention of falls and the subsequent impact on morbidity and mortality costs and decreased quality of life. One of the major risk factors for entering a nursing home, for example, is a fall or a fracture and the consequences of that.

We believe that primary care is an important component of a comprehensive health care system and that a greater focus should go into ensuring it exists throughout Canada. We know that there is an enormous disparity among different areas in Canada and also between urban and rural in terms of primary care access.

Our position, which we have taken strongly, is that home care should now be part of the health care system.The Canada Health Act, when constructed, had a rather limited view of health care, which at the time was perhaps appropriate. However, much of health care can now be delivered in the home. Many of the problems related to aging and function, rather than requiring high-tech treatments, require relatively low cost, but very important assistance in home care. We believe that this should become part of the health care system.

We would say the same thing about pharmacare. Many of the treatments and the improvements in care are related to the remarkable drugs that have now become available. We know that there are issues with drugs -- and that is another agenda -- on how to ensure that the price of drugs and their use is appropriate. I have sat on the Ontario provincial committee for drugs, so I am aware that there are many options available to ensure that proper pharmacare therapy is available.

We believe that the current access to drugs for seniors across the country is not acceptable. The funding systems in some provinces require that, for a very modest increase in your income, your cost of pharmacare escalate rapidly. That has an impact, therefore, on total income and quality of life.

Long-term care must be an important focus of the total health care system. At this time, we can project a greater need. Even with all the right things that we do in the area of necessary long-term care, many provinces are decreasing their funding and support for it. Thus, we are concerned about that.

The last component is palliative care, which I know was mentioned in the previous presentation. We believe, and I do not think this is news to anyone, that it is important to have a comprehensive palliative care system that is institutional or home-based -- whatever is appropriate for the individual -- and that the time has come to ensure that all Canadians who require palliative care have access to it. This is somewhat different from terminal care, because one deals with a time line and one deals with a process.

I want to make a statement based on some other discussions. My understanding of living wills -- and there is a large supporting study in the United States -- is that they did not lead to any significant changes in the actual resources used or the costs incurred. Not that I do not believe that living wills are useful, but they are mainly helpful to families making difficult decisions because they are not addressed to doctors or nurses; they are addressed to family members.

We must put into perspective the importance of living wills as a method of communication, not of saving money. My understanding of the literature does not support that in the elderly population.

I would like to note that if we could only get rid of the last year of life, we would save a lot of money. The problem is that the last year is only known afterwards. If any of you here has dealt with older parents or family members, as I have done now twice, you realize that it is not known until the end that it is the last illness. One does not decide to forego surgery, as I went through with my father last week, and who is 89, because one may die from it. It is done because the person is vibrant and needs the surgery. Should he die in three weeks, one might say that that was a waste of money, but that is not the way we provide health care. We do not look from the back; we always look forward, fortunately.

We believe that there is more room for integration of structures within the system to make it work better and to improve access. We must remember that those who are lucky in their later years can be robust, active, and contribute enormously to the fabric of life. There are those who are unlucky, who are frail and needy, and we must not abandon them.

I do not believe that we are at a stage of catastrophic scenarios. It is tempting to make projections. I understand you take your figures and you move forward. However, some of the figures that were used in the 1970s are now out by 50 per cent or 60 per cent over the actual costs.

In conclusion, the council believes that a publicly funded system which can deliver quality of care to Canadians in an effective, efficient and humane manner, is the direction in which we must continue. We believe that demographic aging offers an important opportunity to modernize the health care system. We believe that the quality of care for seniors is one of the important issues in the health care system. We must be prepared to meet those challenges in a humane and respectful manner.

The Chairman: Having read the details of your recommendations, are you basically suggesting that the current program be not only maintained, but expanded? Second, you are suggesting that there be a publicly funded home care program. Third, you believe that there should be public funding of some kind of a drug program.

Dr. Gordon: Pharmacare, yes.

The Chairman: In terms of the value issue that Mr. Frank raised, it is clear what end of the spectrum you are on. This is not to say whether I agree with you or disagree with you, I am just trying to understand.

When you say things like "a publicly funded program," do you mean that the program should cover all Canadians or only some Canadians, and that it should be paid for out of the general tax revenues or that people ought to pay some money for services?

Dr. Gordon: I was not trying to define the system of payment. I talk about a publicly funded system, meaning that everyone is covered. It is universal. I believe that the five principles are as applicable today as they were when they were developed.

I believe all Canadians should be covered -- young, middle aged and old should be covered. I believe that the challenge of coming up with such a system must be undertaken, whether it is through general taxation, a combination of taxation and copayments, or whatever other terms.

I authored an article some time ago on a tax-based but publicly funded universal system with different ways of bringing money in based on utilization. I think that there are many different models you can look at.

The principle is that it should be the same for everyone. I am concerned about the idea, having experienced it in different jurisdictions, of being able to access services because you have the money as opposed to because you have the need. The major resource limitation is the professionals. As I experienced in Great Britain, if some can buy their way to the head of the queue, the queues become longer.

It is the same person delivering the services. We do not have excess capacity. I do not know of any western country, including the United States, that has excess capacity of the key people such as doctors and nurses. I am very concerned about those models because I do not believe that they deal with the issue.

I would be willing to look at any structure for the financing, as long as universality and equity are maintained within it. We would need to be careful about copayments because they can come back and plague you. The issue in Quebec over seniors and drugs turned out to be more costly than what they had before.

One must be careful about where the money is being saved and where it is being spent. However, I am not an economist; I am only a doctor.

Senator LeBreton: When we talk about the aging population, and when we look at your graph in table 1 on page 3 of your submission, Mr. Frank, we are really talking about the upper end of the aging population putting more strain on the health care system, are we not?

We are all dealing with aging parents. My mother was perfectly healthy until she hit the age of 90. She was absolutely no burden at all, and then all of a sudden, in two years, she was in a care centre. When we talk about the aging population, what are we really talking about? Your table is interesting, but what does that really mean in terms of dollars in the health care system? Do we know how many people there are now over the age of 85 and will it be a problem that there will be more in that age group?

Dr. Frank: The simple answer is "yes." Mr. Brimacombe, I would like you to respond as well. We tend to focus on aging somewhat inappropriately. We are dealing with a population that has an age distribution. Everyone who studies this knows that was a baby boom generation and that it is just now starting to hit that early 50s period.

The distinction about aging per se not causing increased costs may be useful, but I am not persuaded of it. We incur many costs when we die; that is obvious. It is vital to understand that the population distribution is changing in a way that we have not experienced in Canada before. The mathematics of it, if you continue to use the same systems that you have now, and the same cost per person, will inevitably raise the total cost as you progress through time. That is what we have pointed out in this work.

Thus, I at least try to stay away from dealing solely with the aging point of the story. I think it is a much bigger story than that. However, the statistics on what happens when we get older are compelling. We tend to need to use the system more frequently. There is no debate about that.

The other point I wanted to make is about projections; my colleague made a comment about projections that proved to be inadequate. I live with this issue every day in my professional life. If one is doing a good job of this kind of work, the goal is to precipitate action to change the future. Obviously, if we are successful in finding ways to manage health care more effectively, then the risk that we will see it eat into all other areas of government spending, in a way that is probably not politically acceptable to most Canadians, will be reduced.

As we see it now, unconstrained growth in health care will consume ever-larger proportions of provincial budgets. That is the basic finding of this work.

Whether we can change that or not, whether we want to choose that outcome or not, is what this debate is about.

Mr. Glenn Brimacombe, Director of Health Programs, Conference Board of Canada: It boils down to the changing distribution of the population over time against the changing consumption patterns of Canadians as they grow old. That is what you see. Aging is related to the notion of morbidity, or the sheer fact that as human beings we have limits and our bodies break down and demand care. When you look at the consumption profiles -- issues of severity of illness and the intensity of servicing Canadians -- you can see that it differs along the age cohort pattern. The numbers in table one are straight out of the Canadian Institute for Health Information. We have not developed them. They are publicly available numbers and were taken from the health databases across the country. When you look at the profile in terms of doubling, you see the same sorts of results in the other countries.

The OACD released a study on aging in 1996. It shows the different relationships among the factors, or multiples, that you spend on individuals who are over the age of 65 versus those who are under that age. There is a factor of roughly three and one-half. For those over the age of 75, the factor goes up to over four. There is a relationship, and there are other factors at play, clearly.

Senator Graham: I welcome Dr. Gordon's comment that there is no contest between the health care delivery systems in the United States and in Canada. I presume that you favour Canada, since you spent the last 25 years making a valuable contribution to this country.

Dr. Gordon: That is correct.

Senator Graham: Would you make a comparison between Canada and some of the other countries in the world?

Dr. Gordon: I trained in Great Britain a while ago when the NHS was more comprehensive, before this more recent, market-based addition to the system.

I lived in Israel for four years, which had a quasi-public health system that has changed significantly. I travelled in other places as well. I would say that the Canadian health care system, of the places I have seen and read about, is the one that I favour most. The Australians have a similar system.

Many of the similar systems have looked at, or have added, private tiers or components. I am concerned about the implications of that, structurally, ethically and politically. It ultimately undermines the public system. Depending on how you look at the literature, you can believe that or not. There are other ways of looking at it, whether ethically or morally, and saying, "Why should someone be able to buy something as essential as health care just because they want to, as opposed to whether they need it more than someone else?"

I happen to favour the system here. I have worked very hard in my writings and my lobbying to ensure that we do not lose it. I have concerns about it, because I think it is under attack for various reasons.

Senator Graham: How many tiers do we have in Canada today?

Dr. Gordon: We have multiple tiers at the margins. In other words, there are many things you can buy. If you want to make a comparison, most communities have a fire department, but you can have a fire detector, a fire extinguisher, and a sprinkler system. If you are really wealthy, you can have 12 sprinklers in your house, but you cannot buy your own fire truck. At least, I do not know of any community that allows it. We have decided that there will be a publicly funded fire protection system because that is what serves the community best, even though we know that some people have more fires than others. I look at it as an essential part of the social fabric.

Senator Graham: Mr. Frank, you mentioned that there are possibilities for further efficiencies to be achieved in the system. Do you have any suggestions?

Dr. Frank: Mr. Brimacombe will answer that.

Mr. Brimacombe: This is one of the issues that Dr. Frank referred to in terms of the sensitivity analysis, because what we talked about was kind of the base case. Issues around the de-institutionalization and development of a more mature home care structure, or long-term care facility structure; the issue of appropriate utilization of resources between acute care institutions and long-term care institutions. Another related efficiency is the degree to which populations become healthier, so that their dependency on the health care system is not as strong over a period of time.

Another issue could be the whole range of technologies, and to what degree they are seen as a cost saver and not only as a cost driver in the system. Those are just a few examples that we are thinking about, and also to what degree we can model these kinds of relationships over the 20-year time horizon.

Senator Keon: This has been an interesting discussion. Dr. Gordon, I wish to commend you for making a number of very accurate statements. I will not comment on them specifically; however, you made a number of very accurate statements in your presentation.

Mr. Frank, it would appear that you have presented data that conflict with those of our last set of witnesses. Returning to table one, just below it, you state that health care costs will continue to increase over the next 20 years solely due to the aging of the population. The previous witnesses said that was not so, that aging did not have any real impact on health care costs; that what mattered was the last year of life and the costs of that last year.

I am glad that you point out that your data came from CIHI, because CIHI is not capable of capturing the number of hits on the system from the patient. It can only capture the hospital stay of the patient, as it is hospital data. It would be interesting, if it were possible, to take your table, re-analyse the various age groups, and cut out the last year of life for each -- in other words, cut out the deaths -- and then analyse the third group and throw the deaths in. I think you would come up with a very different set of figures. Perhaps you would be closer to agreeing with our previous witnesses.

Dr. Frank: I think we would be closer to agreeing with them. If you cut the dying process out of this, obviously that will happen. The other reality, too, is that, as we get older, we tend to use the system more because we tend to have more health problems. Perhaps we do not, although that would be news to me. What you would capture, though, is obviously a lower cost if you eliminate the process of dying; that is quite clear. I do not know how useful that would be, frankly.

Senator Keon: I think it would be very useful. It brings me to another contradiction that Dr. Gordon raised. The previous witnesses said that living wills are tremendously cost-effective. From a pragmatic point of view, I can tell you that as the CEO of an institution, I find them very cost-effective, but the reality is that they are probably not really, since all they do is eliminate many useless tests. If the medical team is astute, the useless tests will not be done anyway.

Between these two sets of data, this could be ferreted out. If your data were expanded in table one, you would have to look at three sets -- these data are too raw -- you would have to look at the end of life and the "non-end of life" in the various age groups. Of course, CIHI cannot capture all the hits on the system, only the hospital hits, but it would be useful.

Senator Morin: Mr. Frank, starting with the percentage of expenditures, it would be interesting if you did this with other provinces. The figures for Newfoundland would be more than 100 per cent, as you know, and Nova Scotia would be close to 95 per cent. The poorer the province, the higher the figure. In the case of Newfoundland, it goes over 100 per cent. That is interesting.

I agree with you entirely. Whatever way you look at it, either it is the last year of life, or, in the case of the frail elderly, obviously greater use of resources than a 20-year-old patient. I think that is a fact.

I have two points. As far as efficiency goes, you are probably familiar with the study by the provincial health ministers a year ago on health care costs. They say those data suggest there are fewer opportunities for productivity improvements in health services. They think that even with all the reforms in all provinces, there really is not much that can be achieved. I am referring to their June 2000 report.

I do not think you save money with new technology, unfortunately. I think more elderly patients are on dialysis. Your father is having bypass surgery at the age of 90.

Dr. Gordon: I am hoping he gets to 90; he is only 89.

Senator Morin: As a cardiologist, I would never have imagined that before. Now the majority, I am sure, of Senator Keon's bypass surgeries are done at that stage. There is a significant amount of orthopaedic surgery performed on older patients.

A second point is expectations. The Canadian elderly public, especially, has greater expectations of the health care system. They are better informed. They know what they want, and that is another cost increase.

I enjoyed these presentations very much, Mr. Chairman.

Dr. Frank: I would like to return to Dr. Keon's comments on the CIHI. The data reported come from Health Canada. My understanding is that they incorporate all the factors that are associated with expenditure by age and sex.

Senator Keon: You are absolutely correct. I thought you said they came from CIHI, and I was wrong.

Dr. Frank: I have worked in this area for quite some time. I was on the board of the Civic Hospital a decade ago. The health care system as we know it today is very powerful in commanding resources. When we did this work for Ontario and B.C., we essentially reflected that power in the finding that almost half of revenue goes to health care.

Quite clearly, we could put the lid on that and say, "No, we as a society will not allow that to happen." The share of provincial spending or revenue -- because remember, we balanced the budget, so revenue equals expenditures going into the future -- going to education, other government services, social welfare services and so on, grows much less quickly, because we allowed health care to continue the same kind of growth and spending patterns as we have observed historically. That is not tenable or operational; at least, that is the position we have taken.

As far as structural changes and efficiencies are concerned, it is a tricky business to sort out the words that we use. Sometimes we use "structural change," meaning a different way of doing something. Sometimes we say "efficiencies," because it is less expensive for the same result. These things are sometimes used interchangeably.

Let me give you an example. I refer often to structural change occurring in the early 1990s, when we were closing beds at the Civic Hospital, and people who were in a tertiary-care hospital were essentially moved into longer-term nursing care institutions that were less expensive. If I showed you the data over time, you would see a sharp drop in expenditures for these older categories of people during the early 1990s. That was related to the structural change of de-institutionalization.

I will take the position that the quality of care in the long-term nursing institution is equivalent to the quality of care that we offered at the Civic.

We see that as a possibility, at least. However, if the cost is a third or a half, then as a society we must find ways of making that happen, and it is not easy. That was an example of both an efficiency change and a structural change. We have seen the incredible explosion in the number of day surgeries. We have seen regionalization and hospital amalgamation. All of these are aimed at trying to maintain the quality and reduce the costs. I think that how we discuss that as we go through this debate about what to do is very important. Sometimes the words have not the best connotations.

Dr. Gordon: I think that in some ways you are right about technology. However, I remember vividly the first time I told a surgeon he should not operate on someone who not been exposed to Tagamet, and he was livid because I had just cancelled surgery. Of course, that is an example of technology. It is hard to anticipate what will happen, especially when the population is large.

I have mentioned Alzheimer's disease. Right now we are really using a poor drug for a terrible condition, but it could be that in five years that condition will be a non-issue, like polio, and the whole system will change. There may be things that we cannot anticipate. You may use the word "technology" for such advances in health care. Some of these things are expensive; others, like bypass surgery, are an everyday event. It is like an office procedure.

Senator Cordy: Dr. Frank, you commented earlier that the number one policy issue is health care. I do not think anyone in the room would disagree.

My question is connected to the comments made by Senator Morin. I think Canadians have come to expect timely access to the health care system and are becoming much better informed than they were many years ago, through the Internet, better education, and so on. We were told earlier today that there is no correlation between money spent and longevity. In fact, Sweden is spending less money than Canada, proportionately, and seeing longer lifetimes for their people.

When I looked at your projections for British Columbia and Ontario, I was not surprised, but it is still shocking to see it in black and white. I concur with Senator Morin that those percentages will likely be much higher in 2020 in smaller provinces.

Nevertheless, the public expectations for health care are there. I am not sure if it is the majority, but certainly a vocal part of society expects us to continue to pour huge amounts of money into health care.

In order to slow down the increase in health care expenditures, you mentioned things like home care, de-institionalization, and technology. Did you consider things such as coping?

Dr. Frank: Our organization has not taken positions on what ought to be done. We frankly found it challenging enough to present this kind of work and not have people instantly reject it as crazy. Thus, if I now presented the nine things that in Jim Frank's value system we ought to do, quite possibly you would turn around and say that I have introduced bias into the research used to project those outlooks.

I can tell you that the outlook for the provinces for the next 20 years is the base case Conference Board of Canada outlook. Nothing was tinkered with to do this work. We do have a higher immigration inflow than StatsCan uses in their different scenarios because in the long run, we find in our economic analysis that the unemployment rate turns negative if you let the models run. That is insane. That will never happen. Why does it turn negative? It is because the reproduction that we are doing now is not enough to keep the labour force growth positive over 20 years. Thus, we increased immigration into Canada in our model.

I ask the question: Will we actually get those 285,000 people? Second, will they be people with skills that command an average income that is higher than the Canadian average? If we continue to import people whose average income is lower, our average income will fall. Ipso facto, our tax collection fall. That will have no impact on health care because the people who are coming to the country are largely in the younger age groups.

When we do this work, we try to pull all of these things together. It is very complicated. As I say, we do not take the recommendation route. We find it a challenging enough job to do that basic analysis.

Mr. Brimacombe: If I may add to that, on the health expenditure side, the most recent OECD expenditure information shows that public per capita spending in Sweden is behind Canada by about $50. That is a very small difference, incrementally speaking. When it comes to copayments or user fees, and aside from what we know the evidence to be, user fees work to a certain degree, but they do penalize the poor and the elderly. There are causes and effects here to which we must be sensitive.

We are currently in the process of looking at different scenarios that we want to incorporate and model. That is one area that we may want to include. I cannot commit to that yet because we will be consulting with the round table that we are convening. At the end of the day, we will be presenting information rather than specific recommendations on a course of action.

Senator Morin: Do we have any evidence that user fees reduce costs, or do they increase government revenue? Those are two different things.

Senator Cordy: By the way, I am not suggesting we introduce user fees.

Senator Morin: Mr. Chairman, if there is evidence that user fees reduce total costs, I would appreciate seeing that. I did not think it existed. If it increases government revenue, that is a different thing.

Dr. Gordon referred to the Quebec situation, which is a beautiful example of increased government revenues and no change in cost, except for the poorer population.

Dr. Gordon: There are old Medicaid data from years ago on covering a limited number of drugs for a certain condition and showing a decrease in certain kinds of costs, but the hospitalization rate for that condition -- schizophrenia -- exploded. It depends on where you decide your end point will be.

I would make one statement about the concept that increased funding does not produce any real benefit in terms of life expectancy. That is a crude measure of "benefit" because we have sort of reached the maximum, or close to it. There was a good article recently in Science, by Olshansky, about how close we are to probably maximizing life expectancy at birth. We will not see that, however, in terms of quality of life and function, where you probably can show major benefits. There is no question that people with limiting angina who have bypass surgery and can then walk may not increase their life expectancy in many cases, depending on the surgery, but will increase their quality of life.

We must be careful what measurements we use when we say we should not just throw money at it. We often use that as an excuse not to make the investment. If you do not believe quality of life matters, then you should say it does not matter.

Mr. Brimacombe: If I may, the other part of the question was about the literature. There is a significant amount of literature in the Canadian context on user fees. It goes back to a seminal study by Beck and Horne in the early 1970s on the impact of user fees.

The key question is, what is the policy objective; is it revenue raising, or is it what kind of distributive impact a user fee will have on your population?

If you are impacting, perhaps in a disproportionate way, the elderly or the poor, the question is, are you delaying care when the condition might have been treated, and creating greater costs down the road?

The Chairman: One of the wonderful things about economics is that it does not know how to deal with distributive effects, which is one of the few things in which politicians are really interested.

Senator Keon: Mr. Chairman, witnesses from the C.D. Howe Institute will be here tomorrow morning and they have done a significant amount of work on this subject.

Senator Callbeck: Thank you for your presentations; they were well done.

Mr. Gordon, I have a question about the section on home care. I certainly agree that we need improved and expanded home care. However, there was one sentence that surprised me: "Council is dismayed by the fact that efforts are being made to limit access to home care rather than to invest more resources in this sector." I thought that the opposite was true; I thought more emphasis was being put on home care.

Dr. Gordon: What province do you live in?

Senator Callbeck: I live in Prince Edward Island.

Dr. Gordon: You could say that home care is relatively more costly in Ontario, but harder to get in terms of the population need. I see this as a result of the past -- privatization. I have sometimes practised geriatrics, and most of my patients get very little help from the formal home care system. Thus, the families and private insurance pay. The structured, publicly funded home care system in Ontario is nowhere near what it should be. The CCACs, which are now the structures through which it is organized, are constantly being squeezed. I cannot speak for all the other provinces; however, my understanding is that it is not unusual for home care to have not been expanded appropriately, and in some provinces it has even been decreased.

Senator Callbeck: Are efforts being made to limit access to home care in Ontario?

Dr. Gordon: The funding for home care is very limited and the needs are high. Therefore, you could suggest that not increasing it, even though the needs are higher, is the equivalent of limiting it, depending on how you do the equation. The number of people who require a substantial degree of home care and can receive it through the public system is small. They are not receiving it adequately through the public system.

Senator Rompkey: Of course, they claim that the same is true of education.

Mr. Brimacombe: To corroborate what Dr. Gordon said, when health expenditures are reviewed, and we look at other institutions as a category, including all the non-acute facilities, 75 per cent of spending in Canada is private and 25 per cent is public. Broken down as a share of total public and private, it is falling in that category across all three areas, although you would not think that this would be so, given the emphasis that we should be placing on it. However, that is what we see when we look at the most recent data.

The Chairman: Thank you.

The committee adjourned.