Proceedings of the Special Senate Committee on Aging
Issue 6 - Evidence, May 5, 2008
OTTAWA, Monday, May 5, 2008
The Special Senate Committee on Aging met this day at 12:32 p.m. to examine and report upon the implications of an aging society in Canada.
Senator Sharon Carstairs (Chair) in the chair.
[English]
The Chair: Honourable senators, welcome to the meeting of Special Senate Committee on Aging. As you know, this committee is examining the implications of an aging society in Canada.
Today's meeting will focus on options raised in Chapter 6 of our interim report, Issues and Options for an Aging Population, which was tabled in the Senate on March 11. This chapter listed options regarding regional distribution of health costs associated with seniors.
To help us understand this complex topic, we have before us, once again, Mr. Marc Lee from the Canadian Centre for Policy Alternatives, Professor Joe Ruggeri from the University of New Brunswick and Professor Byron Spencer from McMaster University. Welcome to the Senate of Canada
I never trust technology and therefore, we will begin with Mr. Lee by videoconference, because we know we have him now. However, sometimes we lose our witnesses.
Marc Lee, Senior Economist, Canadian Centre for Policy Alternatives: Thank you for the opportunity to appear before the committee again to make remarks on the draft interim report.
My overall comment based on reading the report is that the principle of adjusting health care transfers for differences in age structure is sensible. The provincial data shows that Alberta is the outlier with a much lower population share of seniors. Providing transfers on an equal per capita basis currently provides more than a fair share to Alberta. We can get into the details in the discussion period, however I believe there are a few complications that should be noted and contemplated for the final report.
First, the basket of health care services provided by the provinces is broader than physicians and hospitals, which are covered by and funded through the Canada Health Act. For seniors, the most important areas outside the act are long-term care, home care, home support, palliative care and pharmaceutical drugs. These are currently a patchwork across the country, largely depending on decisions made by provincial governments about the scope of coverage, copayments, et cetera.
In my research, I derive age-adjustment factors by looking at per capita spending by age group and then adjusting the age structure for historical data or future projections. I ask what the cost of health care would be if we had the age structure we had in 1975, 1990 or 2030.
One can also look at these by use of funds. I did not publish these data, but what you will find is that "hospitals" generally track the overall public aging index, but "physicians" is less. There is almost no aging impact at all from "other professionals," which includes a range of other health care services. The biggest driver, from an aging perspective is "other institutions," such as residential care.
What is important for this committee is that the largest driver from an aging perspective is the category of "other institutions" such as residential care and the others I mentioned. Looking at a population aging perspective over the recent past and into the near future, there is about a 1 per cent per year increase in the cost of providing the same level of health care services because of an aging population. For other institutions, it is almost 3 per cent per year.
It makes sense to consider the need for a more comprehensive, standardized set of health care services so that service levels are more consistent across the country. Such an approach would also take pressure off emergency wards by ensuring more and better care in the community. Only at that point would we want to adjust for age structure.
Second, the committee is missing an opportunity to press for cost containment in the expansion of health care services related to new technological development. These include health technology assessments, as pointed out by the Romanow report. At a time when innovations such as genetic screening and nanotechnology applications are anticipated, we need to know what works before rolling out and funding them.
The rapidly growing use of diagnostic technologies such as MRIs and PET scanners are a case in point. While there are benefits from advances in these technologies for certain patients with certain conditions, caution is required before widespread adoption. One example is the use of such technologies to screen healthy people when subsequent interventions may be costly but not necessary. Former Prime Minister Brian Mulroney is reported to have nearly died from complications arising from surgery the origin of which was a private scan that uncovered what ended up being benign nodules in his lungs.
Third, the committee should consider making recommendations around public sector cost controls for pharmaceutical drugs. Indeed, one way of fairly addressing the aging population with respect to drugs would be to upload the responsibility for drug coverage to the federal government, an ideal floated by B.C. Premier Campbell in 2004. This would have the added benefit of availing of federal control over patent legislation and drug approval, plus the gains to be had from bulk purchasing, generic substitution, compulsory licensing and reference-based pricing.
A fourth and final consideration for an age-adjusted transfer is the evidence around the cost of dying as opposed to the cost of aging. While seniors have higher per capita costs, the actual population impact is often overstated because the older you get, the more likely you are to be in the final year of life. That final year of life is the most costly in terms of public health care dollars spent. I cite a couple of papers in my study that find evidence that the cost of dying is unrelated to age.
I will leave it there. I look forward to hearing the other comments and engaging in discussion.
The Chair: Thank you for addressing the high cost of dying. As you may or may not know, palliative care is one of my focuses.
Joe Ruggeri, Professor, Department of Economics, University of New Brunswick, as an individual: Honourable senators, I am very honoured to be called back to discuss the options for this important policy issue. I looked strictly at the options in Chapter 6, having assumed from the report that there was already some support for the notion that something should be done for the differential costs of health care given to the aging factor, which is different in different regions.
The options presented in the second interim report may be separated into two major categories. The one category includes options for reforming a program of fiscal federalism that is independent of the issue of population aging. The second category includes reforms that are specifically directed at the issue of population aging and health care spending.
Let me start with the first category, which includes the suggested reform of the equalization program. I will start on a very practical note. It would be useful to remember that this program has remained a revenue-based program since its inception. Second, the latest major reform of equalization was just implemented this year and it also follows the 50- year-old tradition. Therefore, it seems that the likelihood of another major reform, in particular one that would depart drastically from a 50-year-old tradition, would be next to zero.
On a more technical note, the equalization program has come periodically under attack on two counts. First, it is alleged that the program is too complex. Second, it is alleged that equalization distorts the tax policy options of receiving provinces.
It seems to me that adding a spending side to the program would then double up the distortion — if any — because there would then be distortions on the revenue side as well as on the spending side. Moreover, I believe that adding a spending side would more than double the complexity of the system, because the technical issues related to these equalizations on the spending side are much more serious and numerous than the revenue side.
My general concern with the broad options of reforming programs that are not directly related to aging and health care spending will be that, while we discuss these broad schemes forever, nothing will be done to address a problem that is real and, in my view, requires immediate policy response because it will have a very strong impact. It already has some impact on the smaller provinces, which are experiencing greater population ages in excess of the national average. To me, pursuing the avenue of equalization would be the equivalent to saying "let us do nothing."
Now I will turn to the two options directly linked to population aging and health care spending because the issues they raise are quite different. Here, we have a general option and a more specific option. The more general option would restructure a permanent program to accommodate a temporary phenomenon. In this respect, it is important to remember that the Canada Health Transfer is a very simple program. Every so often, depending on the fiscal situation of the federal government and on the stage of the political cycle, the federal government makes a proposal for funding. Then there is a discussion with the provincial governments, followed by an agreement on a total amount of money that will be provided over a specified period of time — for example, a five- or ten-year agreement, which may then be changed.
Once the lump of money — which is, to a certain degree, politically determined — is there, then there is no big formula. It is allocated on an equal per capita basis, currently adjusted for the equalized value of the tax points transferred in 1977 and starting in 2013 or 2014 on a strictly per capita basis. It is as simple as that.
Whatever supplement that would be considered for taking care of the relationship between the differential rates of population aging in different provinces and health care spending, this supplement, by necessity, would be complex. It would have to be formula-based; otherwise it would not be sensitive to the issue that we want to address.
What would we have? We take a simple program, which is a kind of permanent structure of fiscal federalism, and complicate it. We would reduce the amount of visibility and even a certain degree of accountability. In the end, we would take something that can really be measured and should be looked at in detail and lump it together into something that is often, partly or totally decided on a political basis.
It is no surprise that having a separate supplement is the best option. I believe that having a separate supplement specifically directed at the issue has great advantages in terms of transparency, accountability and targeting. It also would be a transitory transfer introduced to address a transitory issue. It can be designed to be very sensitive to the changes in the magnitude of the aging issue. Finally — and this is quite important — it would help keep provincial governments accountable for where they spend this money. Although the money would not be earmarked strictly for health care for seniors, there would be a clear amount that is related to a specific problem. If it were just lumped together, it would be just one number and then there would be questions. Did they buy lawnmowers to mow the lawns around senior homes and hospitals? Is this a component of the health care system because seniors are taking a walk outside when it is a nice day? From every aspect that I can think about, just having a separate transfer would be the best option out of the ones that I saw in the report.
Byron Spencer, Professor of Economics, McMaster University, as an individual: Thank you for inviting me back to present further on this topic. Has the handout been distributed?
The Chair: Apparently it is on its way.
Mr. Spencer: I prepared a PowerPoint presentation and that was not feasible to use, so I have printed copies of the document that my presentation relies upon. I would like you all have a copy of that as soon as possible.
The Chair: So I can explain, Mr. Spencer, the PowerPoint was only available in English so we have had it translated. The translation is completed and it is now being printed and run off. You will have it in front of you in a short while.
Mr. Spencer: I will proceed as best I can without it.
I have entitled my comments, "Population Aging and the Allocation of Health Care Resources." This committee certainly needs no reminder that the population is aging and that it is aging in different ways across the country — rapidly in the Eastern provinces and generally less so as we move west.
I have been asked to comment specifically on the Aging Committee's second interim report at Chapter 6 entitled, "Regional Distribution of Health Costs Associated with Seniors." I am happy to do that, but I will direct comments to a closely related issue on problems associated with the allocation of health care resources that go beyond specifically aging.
I will begin with a few comments on Chapter 6. This captures much of the evidence very well and lays out the options very clearly, in particular those associated with the existing equalization formulas.
The equalization formulas are complex in detail. Undoubtedly, there are significant ways in which they affect the way in which health care services are delivered. At the same time, my reading of the situation is that it would be best not to move further in the direction of age-based transfers in a formula way, as proposed in this chapter. As the interim report documents, that would be a major step on a slippery slope. As the previous witness just indicated in some detail, it would also be a complex and difficult thing to do.
There are many possible reasons for adjusting the equalization formulas that could be identified, many more important than age distribution. For example, climate is one of those and there are many others as well. A satisfactory resolution to that, in agreeing with the previous witness, would be both difficult to find and expensive to implement.
I will take the time available to me to draw the attention of this committee to related matters that are important for the deliberation of how health care resources are identified.
Slide 5, called, "The Context" indicates the fundamental assumption that the purpose of the health care system is to meet the health care needs of the population, and we all would agree with that. One would expect that there would be some relationship between the rate at which the population is growing on the one hand and the rate at which expenditures on health care are increasing on the other hand.
The next slide is entitled, "Annual Percent Rates of Change in the Population." We see that the overall rate of population growth in the last three decades has averaged about 1 per cent per year. The next slide is labelled, "Annual Percent Change in Population." I have added population aged 65 and older. You can see that it is growing faster than the overall population, which is consistent with the aging of the population.
In the next slide, we add the rate of growth of health care expenditures and you can see there is no relationship between the rate at which health care expenditures have been growing and the rate at which the population has been growing. That suggests a particular problem, namely that at the aggregate level there is far too little coherent and consistent planning of the health care system. If the rate of growth of expenditures is completely unrelated to the rate at which the needs of the population for health care services is increasing, then there is a problem at the aggregate level in terms of insufficient spending.
The next slide shows the rate of growth of expenditures in real terms rather than in nominal terms. Nominal terms is the basis on which the budgets are set and real terms is the basis on which they are spent. There is no relationship between the rate at which the health care needs of the population are growing and the rate at which expenditures are growing. We see big positive changes followed by big negative changes, and so on; it is incoherent.
In the next three pages of my presentation, I break the figures down by province. In the slide entitled "All Canada Level," all of the provinces are shown on the same scale. The Canada level chart shows much less volatility than any one of the provinces. The provinces have increases and decreases at differing times. They average out in some way so the Canada sequence is much smoother. At the province level, we have huge volatility in the rate at which expenditures are increasing and subsequently decreasing. They appear to bounce around from year to year in a most unsatisfactory way.
I see this as indicative of an overall failure to plan in a coherent and systematic way for the delivery of health care services. The page entitled, "Implications" indicates that such budget fluctuations make it difficult for hospital administrators, program managers and others to plan for the delivery of care both in institutions and in the community. Those same fluctuations make it difficult for universities and other post-secondary institutions responsible for the training of health care professionals to anticipate how many to train. Why would we increase enrolment in nursing schools at the same time that nurses are being laid off for budgetary reasons? There are two sides to planning and inconsistencies are occurring.
I will expand on the idea of insufficient planning while trying to persuade the committee that it is extremely important. The next slide shows average health care expenditure by age. It is well-known that on average, people use more health care services when they are old than when they are young. Of course, much of that is associated with the fact that death occurs typically at older ages rather than at young ages.
The shape of that cost profile gives me the opportunity to comment specifically on something that is stated in the second interim report related to recent cost increases. If you look at the page that says "From Issues and Options . . . ," I will highlight two passages from the report. I quote from page 48, "Hospital utilization rates and other instances of health care service use by the elderly have risen dramatically in recent years." The report continues on page 49, ". . . the cost of health services demanded by seniors is increasing considerably."
I emphasize that while the costs associated with seniors have increased, they have been similar for all other age groups. It is not specifically an "old" thing.
The next slide is entitled, "Health Care Costs, 1998-2005, Percent Change." The solid line at about the 50 per cent mark shows the increase by various ages. Age is along the horizontal axis from youngest to oldest and it is virtually a flat line, which is to say that the cost increases have been 50 per cent over that period at all ages. They have been a bit lower at the older end than at the younger end. Basically, it is a story of being flat. There are differences across different categories but none of them is strongly age-related, the exception being the "other professional" category, which is a small component of the health care budget.
I will return now to cost profile at the next slide. Let us suppose we combine that cost profile information that says that older people are higher cost than younger people with the age distribution of the population as it was in 2006 — the solid line at the bottom of that figure — and as it is projected to be at 2036 — the dotted line. You will see there is a substantial shift away from the younger population towards the older population in that three-decade period.
With the cost profile and the population age distribution, we can calculate the fraction of all government health care expenditures distributed to each age group in the population. Such a calculation tells us that in 2006, about 45 per cent of all government health budgets were used to provide health services to those aged 65 years and older. That probably is not a big surprise to anyone. It is also no particular surprise to learn that about 70 per cent of that age group reports having two or more chronic conditions. Further, it is no surprise to hear that the concentration of expenditures on the older population will become greater as the population ages.
Given the current age pattern of health care expenditures, by 2036, those aged 65 and older will account for a quarter of the population but 63 per cent of all public expenditures on health care, if present distributions continue.
Those things you will not find surprising. What you may find surprising starts with the next slide entitled "Mismatch between. . ." This is the mismatch between the health care needs of the population being served and what health care professionals are trained to do. More specifically, the evidence suggests that training programs for physicians and other health care professionals give little attention to the specific treatment of older patients.
I have not been able to document the situation for Canada, except anecdotally, and that evidence confirms what I have to say. However, there is reason to think that our situation here is not unlike the U.S. in this particular regard. The particular issue is quoted on the slide entitled "In the U.S. . ."
Only 2 per cent of all medical schools have a full-scale department of geriatrics that requires a mandatory rotation of geriatrics for students and residents, and less that 3 per cent of all medical students take even one course in geriatrics.
I suspect the situation in Canada is very similar.
Put differently, the training of health care professionals gives very little time to the treatment of complicated chronic conditions that are common among older patients. Almost all physicians training takes place in a hospital setting and, when older patients present themselves in that setting, the focus is typically on an acute condition. Indeed, it may even be the case that the failure to appropriately treat those who have multiple chronic conditions while they are still functioning in the community can lead to acute symptoms that cause them to present themselves in hospitals.
Put differently again, health care professionals are taught to treat one condition or one ailment at a time, with the most attention given to acute conditions. However, often — and perhaps most often — those same health care professionals find that older patients represent the great bulk of patient visits. The conditions of those patients involve the treatment of multiple chronic conditions rather than a single acute condition. That situation will become even more accentuated in the future.
I will conclude. The equalization formula is important. I do not have a lot to offer about it specifically, aside from supporting what I understand to be the committee's reluctance to recommend age-based transfers. I support that reluctance.
The committee asked for options for addressing the regional distribution of health costs associated with seniors and that such options be identified. I have been trying to do that. Most importantly, I wish to draw the committee's attention to the fact that very little systematic planning of the overall health care system takes place. I find that an amazing fact since provincial governments spend about 40 per cent of their program budgets on health care.
Since we do have a publicly-financed health care system, the only planning that can possibly be done in a centralized way must be done by the funder and that is the provincial government. If the funder does not do it, nobody will. If the provinces do not become actively engaged in planning, the health care system will continue to grow like Topsy; in other words, it will continue to grow without anyone's intention and will continue to grow from one crisis to the next as the quality continues to raise concerns.
The Chair: Thank you, all three of you, for your presentations.
There are certainly areas of disagreement, but I think we are also seeing very significant areas of agreement among the three witnesses. Certainly, I heard that nobody particularly wanted to see a change on the equalization formula. They felt "enough of that;" it should be ignored as a particular concept.
Mr. Spencer, you made particular reference to the lack of training in medical schools for geriatricians. We know from our evidence that, this year, we are training only 10 from coast to coast in Canada in terms of geriatrics. Your figures for the United States are comparable in Canada.
It reminds me of our 1995 study in which we learned in a study from a Dr. MacDonald — from Edmonton then and now at McGill University — who indicated that the average training of a physician in any form of palliation, including simple pain treatment, was one hour in four years of medical school. Fortunately, that has now changed. The federal government made a contribution to changing the curriculum. In one of our previous chapters, we made a similar recommendation to the federal government in terms of putting money and resources into training of physicians at the undergraduate level in the field of geriatrics.
We have a situation in which Professor Ruggeri is suggesting we make a very simple and short-term, proportional- based transfer of money to those provinces that have a faster growing aging population than those provinces that do not. He suggested it would be transitory, as I understand, because we will not have this same problem forever as the population shifts in a number of demographics.
I would like to hear from Mr. Lee and from Mr. Spencer as to what they would think about that kind of plan. In other words, stay away from the idea of a social transfer tax and the idea of equalization formula changing. Simply comment on a transitory type of funding.
Mr. Lee: In principle, I agree with what Professor Ruggeri has suggested in terms of the complications of amending the federal funding formulas for the broad transfers and that a separate and transitory supplement is, in fact, the best option.
Transitory, in this case, is quite a long period of time. We know that population pressures are anticipated to continue to grow over the next quarter century. By the early 2030s, we will be at the peak in terms of seniors as a share of the total population. After that point, then the pressures begin to abate, albeit somewhat slowly. It is difficult to project that far into the future, however.
We are looking over a 50-year or so time horizon, which is about the current age of the existing equalization program. While I would agree with the general sentiment, we are talking about major demographic pressures that will be with us for some time to come.
Mr. Spencer: I certainly agree that the transitory aspect of it is a very long transition. We are moving towards a much larger share of the population in old age as a result of low fertility. That is ongoing. Of course, there will be a bit of a temporary increase in a sense that the baby boom will be in old age and it is a particularly large group. However, we are moving generally from a relatively young population to a much older population. There will be sustained differences across the country. One must think that will continue in unpredictable ways perhaps, but it will continue into the future.
I guess I am concerned and quite persuaded by some things that I see in Chapter 6 saying that this is not the only base on which special arrangements might be made. There are many other claims for making a special adjustment to the equalization formulas. I think it would become very complicated and difficult to justify doing all of that.
Mr. Ruggeri: I would like to comment on a number of issues that were raised previously, especially the one about fluctuations in provincial spending related to this funding.
From my perspective, the real issue is an issue of fiscal federalism. All the papers I have seen and all the calculations I have looked at, some I have done and are similar to the others, with respect to the impact of population aging on the health care costs and the growth over time indicate that, really, there is no problem at the national level. Even in the future, it will be even less because, as we found out a couple of days ago from a Statistics Canada report on the census, the average income of people over the age of 65 is becoming closer to the national average. There may be a point in time where the average income of a senior couple is the same as that of a younger couple, which means the relative contribution to the fiscal system will increase and, therefore, the financial contribution to the health care they receive.
This is one of the general factors I see established. The national level is really not an issue. For a while, the issue with this vertical fiscal imbalance was that the federal government reduced its original commitment from 1977 progressively to 1995. When we think in terms of the stability of those who fund, the lack of stability has been at the federal level starting if we look from 1977, especially with a big drop in 1995. Now we are somewhat back on track. The stability of federal funding caused the instability at the provincial level.
I was in Alberta during that time. People could not imagine today what happened: the number of nurses and doctors that went to the United States and the number of hospitals that shuffled. All of those things happened in 1995 because of the $6-billion reduction in transfers to the province. What we need, if we want stability, is to ensure there is stability on the federal side so provinces can plan when we think in terms of this planning.
This brings me to the specific issue, what I call the transitory period. The real issue may be in 20 or 25 years. Again, this is an issue that we know will be there. We do not know the exact magnitude of the spending, but we know it will be large. The calculation I made for New Brunswick over the next 25 years is $6 billion in today's dollars. I can tell you that the province of New Brunswick cannot afford that kind of loss of money. We must realize that the 25 cents, roughly, to the dollar that every province gets now is to finance this cost at the national average cost. Anything above that is 100 per cent provincial. The Province of New Brunswick would be fully responsible for paying any expenses above this 25 per cent roughly, if we maintain equality among the provinces.
That is why I say it is an issue of fiscal federalism. First of all, whether the federal government provides enough funding to all the provinces on the basis of commitments established long ago, roughly the time that equalization was introduced was the time that all these programs were introduced. They were introduced on a 50/50 sharing base.
Second, we have to recognize that for equality among provinces there will be pressures. No matter how we measure it, no matter how we measure the other effects, this is financially the biggest impact there will be on any of the smaller provinces. We can look at any other factor relating to age, younger people, or the environment, anything we want. By far, this will be the biggest hit for them.
My concern is that these provinces will go into deficits again to finance health care. They will make whatever adjustments they can in order to cut the costs that will increase, and that will be the quality of our care, especially for seniors. Quality will differ tremendously among the provinces. To me, that is not the Canadian way.
With respect to having a specific transfer separate from everything else, first, it allows us to perform detailed calculations, to set up a formula for stability in funding from the federal government. Related to what Mr. Lee was saying, and I agree with him, is that if we identify this particular program, the issue of cost containment can be addressed in a rational manner because there are a certain amount of dollars attached to it from the federal government. There is an interest on everyone's part to reduce costs, specifically as they affect these particular programs.
Having listened to my colleagues, I feel my recommendation, if you want to call it that, for having this separate program is that strengthened. The issue is there and it is large in terms of dollars. It is very serious for the smaller provinces.
Senator Mercer: I thank all three of you for your interesting presentations. I want to go back to this issue of having special transfers based on the aging population. While it all sounds good, the problem with the federal government giving transfers to the provinces is that the provinces tend to become dependent on those transfers. How do we ensure that as demand of the provinces decline, if the population shifts, that the Government of Canada can pull back its funding?
You may think it is logic, but when politics interfere, sometimes logic goes out the window. A dollar given to a province is very difficult to take away, as we witnessed in the mid-1990s when the federal government pulled back some money to get the national fiscal house in order.
How do we do this so we will not get locked into a single province saying that even though the aging population has changed it still needs the money?
How does the Government of Canada get out of this problem?
Mr. Ruggeri: The solution is when you have a formula-based program. If the problem is that the rate of population aging in New Brunswick is higher than the national average, when the difference shrinks, the amount of money shrinks automatically. This is why I prefer the separate program because you can set it off to be sensitive to the cost associated with that particular factor.
It is similar to the equalization formula. If New Brunswick had per capita fiscal capacity equal to the national average, there would be zero equalization. Equalization would disappear.
The same thing would happen here. If the program is directly related to this single factor, when that age factor disappears the amount of money disappears. There should be no negotiation. The negotiation between the federal and provincial government would be strictly at the time the formula is set up. After that, it would be on automatic pilot.
Senator Mercer: Mr. Spencer and Mr. Lee, do you have comments?
Mr. Spencer: I agree that if it were set up as a formula that is how it would work. There would be an automatic adjustment as the population distribution changed.
I would add that it has been demonstrated repeatedly, as is reported in Chapter 6, that the drivers for the cost increase have not been predominantly population aging. Health care costs have gone up for reasons largely unrelated to population aging but for reasons of more intensive provision of services. I would also add, very importantly, the failure to plan reasonably effectively for the services that are delivered.
Mr. Lee: In terms of estimating future aging and its implications, aging is perhaps one of the easiest projections to make, at least in the short term, over the horizon of a fiscal framework. It is much less complicated than dealing with something like natural resource royalties in the equalization program.
Senator Mercer: I am from one of those provinces like New Brunswick; I am from Nova Scotia, where the population would get money out of this. I know the provinces would say, as the population shifted, "That it is true, but we still need the money."
I want to switch to another topic that several of you touched on, and that was medical and nursing schools. Do we need more medical and nursing schools? Should the Government of Canada be involved in directing the curriculum more strictly so we do not have this gap in doctors coming out of medical schools in Canada, not having spent enough time on aging and geriatrics? Is there a role for the government, as a major funder, to direct the curriculum more strictly than it has in the past?
Mr. Spencer: I certainly think there is a role for the funders to pay attention to the product coming out and to be concerned with what services are delivered and whether those services are appropriate services for the population. If the funder does not do this, then it is not done. Obviously it must be done in combination with the people who provide those services and the people who train health care workers and the rest of it. I do not mean it is simple, but if it does not happen and it is not a priority on the part of the funder — as I would claim it has not been — then the system grows without direction.
Senator Mercer: Are there no long-range thinkers or planners in the medical-education community?
Mr. Spencer: People who are doing planning will do their own planning. For example, a dean of a faculty of medicine will certainly plan for his faculty, but it must be planned on a bigger scale than that. We have an interest, certainly at a province level and I would argue also at a Canada level, as to how many physicians are trained and in what specialties. We must anticipate people who will be retiring in different specialties and replacing them. There should be some information available to upcoming residents in medical schools about where the demands are likely to be. We want to be sure that the incentives for them to go in that direction are appropriately aligned. I think there is a lot there. It is complex, but important.
Senator Mercer: One of the most important things that schools do is train doctors and nurses. We have an ad hoc method of how we plan that. That is a concern that may be beyond the scope of the committee, but it is a big problem. Thank you.
Senator Stratton: This is a fascinating discussion. With this per capita transfer for age, I go through the charts by Professor Spencer. Interestingly, you see the variation from province to province in the age group of 65 years plus. When you get to Manitoba and Saskatchewan — Manitoba is my home province — you see the differential at 65 plus years with the average population, there is virtually no gap. That is because there is a high birthrate in a certain sector of our population.
When you go to Alberta, you see a coming together of the same thing with the age over 65 years in the population. In my view, that may be wrong; it is an influx of younger people looking for work out there. That is background information and comments.
My concern is, once that door is opened and you say we will fund on a per capita, age-related basis to look after this issue, it will vary according to the percentage of people you have at the age of 65 years and over. However, the door having been opened, you then find sectors of the population with health concerns. For example, Aboriginal people could have large health concerns that they would feel — and I would agree with them — need to be addressed.
Having opened that door, on a per capita basis, do you do the same thing for, for example, Aboriginal people? Does that, then, lead to other areas? I cannot think of any offhand, but you have to look at that potential.
Do you agree with that analysis or can you deal with it in another way where you can limit or not have that door opened? My fear is that once you have done that, you have opened that door.
Mr. Spencer: I endorse what you are saying. If you open the door, you get all sorts of special interests. The First Nations population is one, but there are any numbers of special interests that would come out and make claims that are generally along the lines of special arrangements for aging populations.
The other thing I think worth emphasizing is that the equalization formulas, as we now have them, already reflect differences in age distribution without making special allowance for health care costs and a special transfer for aging. A lot of age is built into the existing arrangements.
Mr. Ruggeri: It seems to me that there is nothing wrong with opening the door to doing the right things. Therefore, if inequality is created along the way, existing inequalities may increase. If they are large enough to affect a large share of the population and the fiscal capacity of a province to deal with those issues, they should be considered in the package.
We have been discussing the issue of age, and that is why I am confining my comments on this particular special transfer to that subject. I cannot see any area other than Aboriginals, because of the cost of birth and because that is where the two major costs are on a per capita basis. I see no reason that they cannot be looked at.
From a national perspective, the programs in which we have fiscal federalism rest on the foundation of right to citizenship. We have publicly funded education in this country because we believe that everyone should have the same opportunity to achieve his or her potential no matter where he or she lives and no matter how much money his or her parents have.
I interpret health care in the same manner. It was a decision made by Canadians who were here before I came, and I am thankful for that decision. In my interpretation, Canadian citizens of all ages, no matter where they live and no matter how much or how little money they have, they are entitled to the same quality of health care. In that way, I would not have to move from New Brunswick to Alberta, although Alberta is now spending all kinds of money to on its health care system as a major driver of economic activity. Alberta opened a big centre only last week.
If there are major components of the population that are impacted by these rights that can only be supported through proper federal funding, that should be taken into consideration.
Mr. Lee: Perhaps First Nations require some more study. We are getting into issues around jurisdiction. There is a much larger segment of the population on First Nations reserves that are already covered through federal programs such as Health Canada. The key issue we are trying to deal with here is differences among the provinces themselves due to different age structures and how those will change over time.
In my presentation I was trying to explain that there are a number of key public health care services consumed by seniors that are essentially outside of the Canada Health Act, which is essentially about doctors and hospitals. The key issues around aging come down to things like the provision of long-term care and home care services and grappling with the challenges of cost containment due to technology.
There are alternative means of getting there. One that I suggested in the case of pharmaceutical drugs is to upload that responsibility to the federal government. There may be some political challenges in getting there but, in principle, that addresses the core problem, which is the level of jurisdiction and the differences among provincial jurisdictions and what services they provide and the type and scope of coverage that exists.
If there is not a willingness to go in that direction, an alternative means of doing that, particularly when copayments and premiums paid by seniors in prescription drug programs across the country can vary dramatically, would be to increase base income support through the OAS or the GIS program. That is another way to get at it.
The senator was getting at the relative impact of population aging in health care as opposed to other areas that the federal government supports. In transfers for post-secondary education there may be grounds for an adjustment in terms of differences in the size of the population that is consuming those services. However, my sense is that the magnitude of that relative to the magnitude of health care funding is of a completely different order.
Finally, getting back to Senator Mercer's comment around accountability of the provinces for receipt of federal dollars, we have seen a major erosion of that going back to 1977 and then again with the introduction of the CHST. I do not think that the federal government is doing a particularly good job of enforcing provisions of the Canada Health Act with relation to funding. I am more in favour of the federal government using its fiscal powers to set priorities for things like medical and nursing spaces and for certain directions in terms of how that money is spent based on national priorities.
Senator Stratton: I would be interested in a study of what impact the First Nations people have on the health care system in Manitoba and Saskatchewan in particular. I think it is significant and before we make a decision to go to age-based funding, we need to look at that other aspect of it.
The Chair: Senator Stratton, I could not give you the exact figure, but I believe that in any given day 50 per cent of the children at the Children's Hospital of Winnipeg are Aboriginal children.
Senator Stratton: I did not want to say 50 per cent, because I was not entirely certain of that, but that is my recollection as well.
The Chair: I would like to address a question to Mr. Lee and then get input from Mr. Spencer and Mr. Ruggeri.
All the provinces agreed to a national pharmaceutical program before the health accord of 2003. It was the federal government that backed off. If we had a national pharmaceutical program, the drugs would be provided on a per- patient basis and that would be fair to every part of the country. However, if long-term care dollars, home care dollars and palliative care dollars were based on the usual per capita formula, would that not continue to disadvantage provinces like Nova Scotia and New Brunswick because they have a need for a higher percentage of long-term care beds, home care services and palliative care services than the average across the country?
Mr. Lee: I agree, senator. It certainly is much easier to contemplate a national program in the case of drugs than with those other types of services. My point was simply to put it on the table that these other areas are very important in terms of the care that is received by seniors. We could have a federal community health care act that would specifically recognize those services and introduce funding mechanisms that would equalize the level of care received in those various types of services even before we think about an age-related transfer. The question is what the starting base will be. The provinces are at different levels in terms of the types of programs they have, the scope and the copayments that are required of seniors. If we were to introduce the age-related transfer without thinking about that, we may get some uneven results because of the different starting points.
Mr. Spencer: I believe it is true that in the Atlantic provinces there is no drug coverage for people at age 65 and older, whereas there is such coverage elsewhere in the country. Introducing federal government support for a national pharmaceutical plan of some sort, would address a significant part of the concern that is being identified by the committee. It would be an alternative way of dealing with a good chunk of that problem. Average drug expenditures are about $240. That figure is just behind the other institutions in terms of dollar value.
Mr. Ruggeri: As far as the drug side, I have not looked at the latest data for this year; however, when I looked at it a couple of years ago — I may be corrected — the average cost of drug consumption is not related to age. Therefore, it will not address the particular issue. Having the federal government take over the whole thing will relieve the provinces from the overall pressures of health care spending. The provinces will then have more money that they may spend on seniors, if they wish to do so. Basically, that is what would happen. However, it does not deal directly with the question of aging.
If it were simply a matter of the cost coming from the drugs, then I would say, "Yes, that is the solution. Let the federal government take over. We do not have the transfers and we do not have to worry it about. It is all done." As far as this particular issue, however, it would directly do absolutely nothing. It does it indirectly, however, because the provinces would have the extra funds. That is my view.
Mr. Spencer: It would have the benefit of treating seniors across the country much more equally in terms of access to drugs and payment for their drugs, whereas that is not the case at this time. That is what I meant.
Mr. Ruggeri: That is right.
The Chair: I am sure you are both aware that there is a great differential. In Ontario, for example, everyone over the age of 65 years has his or her drugs paid for after the first $100. In my province of Manitoba, it is different. It is essentially a pharmaceutical program for everyone, based on needs. If you have a certain income level, unless you are an extraordinarily high user of prescription drugs, you would not ever get a payment from the provincial government.
Senator Keon: Mr. Spencer, I would like clarification on a couple of these charts.
First, in "Health Care Costs, 1998-2005, Percent Change," has a straight line for the total of the institutional costs and the doctor costs. With the exception of this peak, they are pretty much a straight line. This is costs. When we look at the expenditures related to age, we have an exponential curve that starts at about age 55, which is not reflected on the other slide.
Mr. Spencer: Yes, I can explain the difference. The first chart that you held up is the per cent change in cost over a seven-year period. That says that the total costs — and these are publicly financed total costs — looked at by age of beneficiary here — went up by 50 per cent for all ages. That is, whatever the base, they went up by about 50 per cent. The base cost was much higher at the older end, but they increased 50 per cent at the same time that the costs of 30- year-olds increased 50 per cent, but from a smaller base. That first figure is just the percentage increase or typical increase, but some are decreasing, so percentage changed, whereas the age profile is the levels and not the changes.
Senator Keon: I still have a little difficulty understanding it. You put the older people in here, even though you are showing the different age groups all along.
Mr. Spencer: Yes, but that solid heavy line in the middle says there is about a 50 per cent increase in costs at all ages. That is, each and every age has a 50 per cent increase in costs.
Senator Keon: That is the interesting point that I am coming to, namely, depending on how it is displayed, it would appear that seniors are not skewing the costs that much. Is that right?
Mr. Spencer: They have higher average costs, but they have had the same increase. It is not as though the increase in costs for seniors went up 100 per cent and the others went down by 20 per cent. They have all increased the same amount.
Senator Keon: Is that by about 50 per cent?
Mr. Spencer: Yes.
Senator Keon: I will need some education on that.
I now want to come to the major point, which I want all three of you to address. I will start with you, Mr. Ruggeri, because you have advocated for a special transfer to solve the problem.
I think we are into something much more complex than that. I want to know how this special transfer will fit into the overall problem that we have, namely, that health care expenditures are growing at a rate of about 5 per cent higher than GDP. That is not sustainable. Is that correct?
Mr. Ruggeri: No, they are growing at the same rate of GDP. They are growing at 5 per cent to 6 per cent.
Senator Keon: They have grown in the last eight years, I understand, at an average of 8 per cent, and GDP has grown in the last five years at an average of 3 per cent.
Mr. Ruggeri: It is a matter of the period at which you are looking. If you look over a shorter period where provinces must make up for it, when you look at those big fluctuations and take a period where you started from the bottom, when the province had to make adjustment for the federal cuts, and then look at the years where there was additional federal funding where the province had to catch up, you will then have a bigger difference between the growth of GDP and the growth of expenditures.
If you look at the projection that I have seen, and some of the ones that I have done that show the next 25 years, we have a growth of GDP roughly in the nominal terms of 4.6 per cent and a growth of health care spending anywhere between 5 per cent and 6 per cent. The difference is about 1 percentage point, which, strangely enough, is the 1 per cent point that the population aging adds on the national average side.
Senator Keon: That is very interesting. Those numbers that you are coming up with, then, are a combination of federal spending and provincial spending; is that correct?
Mr. Ruggeri: Most of the public spending is at the provincial level, so it would not matter whether we do it federal- provincial or the spending by all the provinces combined. The growth rate is very much the same.
Senator Keon: If you look at the expenditures of the province — and it does not seem to matter at which curve you look — you have this rate of growth of about 8 per cent over the last five years in all the provinces. The GDP is 3 per cent. There is a difference there of 5 per cent.
Does the fact that the federal government spent for a period of time neutralize that? Is that because the federal government is not giving in enough? Certainly, the figures that the provinces are showing reveal a tremendous discrepancy between GDP and health care expenditures.
Mr. Spencer: We certainly observe that health care expenditures over a long period of time have been growing more rapidly than GDP and the population. Health care as a fraction of GDP has accounted for an increasing component. That is certainly true over the last two decades. Your comment is right; it is unsustainable. We cannot have health care costs grow at noticeably higher rates than GDP forever without absorbing all of GDP, which will not happen. There will be some corrective mechanism come into play, obviously.
Mr. Lee: The numbers you are putting out do not seem right to me. Perhaps you are looking at real GDP numbers and comparing those to growth in nominal health care spending. That would certainly account for some of the difference. Eight per cent per year seems to be on the high side.
Senator Keon: The average over the past five years is 8 per cent in the provinces, at least according to the one set of figures I have. The average for province GDP growth has been 3 per cent.
Mr. Lee: There has certainly been a period of catch-up after there were cuts in federal funding in the mid-1990s. We have seen a recovery period coming out of that. Certainly, it is true that if those rates were to continue indefinitely into the future, we would have a sustainability problem.
It is interesting to see what is going on. Health care spending as a percentage of GDP is also not necessarily, over time, providing the same level or amount — the same basket, if you will — of health care services. Much of the growth relative to GDP in the 1970s and 1980s had to do with real expansion of health care services, particularly around such things as pharmaceutical drugs, residential care and home care.
My sense is that in recent years, that differential — and forget about what the actual differential is for a moment — is very much related to some of the challenges we are facing with technology and the fact that we are actually providing more health care services per capita than we did in the recent past. An example of that would be in orthopedics. For knee and hip replacements, the number of surgeries has grown substantially more than population growth or population aging would justify. We have new surgical techniques, less invasive techniques that allow today's 80-year- old to have a surgery that his or her predecessor two decades ago simply would not be able to have. Similarly, pharmaceutical drugs are the fastest growing component of the health care system. Part of this is in the provision of new and better drugs. When we are thinking about the important issue around how we can contain costs as the population ages while still providing a decent and ideally growing level of services, we need to think about health technology assessments and some of the policies we put in place with regard to drugs, and the interactions within the health care system itself. I mentioned community care, things like residential care and home care and their interactions with the acute care system and trying to break out of the present federal and provincial silo-type approach with regard to spending.
Senator Keon: My real question is the following. I wanted to discuss this from the platform that I suggested. If we talk about a separate transfer, are we not adding to the ever-widening gap between health care expenditures and growth of GDP?
Mr. Ruggeri: I have to change the platform, with your permission, because I disagree. I have worked with those numbers and I have done the projections for Canada over the past three years. I believe the last time I was here I left a number of copies of a book that I wrote with all the details and the different benefits and costs related to overall government spending by different ages. If we look at the longer term and at the drivers of cost over the next 25 to 30 years that are available there in the literature, and also look at projections of nominal GDP over the next 25 years done by the Conference Board of Canada and so on, what we really have is a projected growth of nominal GDP of about 4.6 per cent. In real terms, it would be about 2.6 per cent on average. We have a projected growth of health care spending of about 5.6 per cent. The difference is 1 percentage point.
Some people might come up with higher estimates but we should remember that health care spending in this country at the provincial level is really managed spending. There are caps. The doctors can go on strike but they must settle their rates with the provincial government. The pharmaceutical companies can come up with all kinds of new pharmaceuticals that they want, but the provinces must decide which ones will be covered and which ones will not be covered. Some of these negotiations will go on depending on the money that is available.
When we look at the future, the difference between the growth of nominal spending on health care that is publicly funded and nominal GDP is about 1 per cent. That means that if we use 10 cents out of each dollar of GDP now for health care, 25 years from now we will use about 15 cents. All this so-called big pressure that we cannot afford amounts to 5 cents to the dollar. That is really all there is to it.
My calculations indicate that a real growth rate of 2.4 per cent a year on average over the next 25 years is enough to take care of these expenditures, these health care pressures, because there will be lower pressures in other areas. Unless we have an economic disaster that will last for years and years and our growth rate is reduced to 1.5 per cent, there is absolutely no problem with health care affordability of the system that we have today over the next 25 years.
Mr. Lee: There are three key things in terms of sustainability: population aging, population growth and health care- specific inflation. If you look at the population projections from Statistics Canada around population growth and population aging and you then project forward the average over the past 10 years of health care-specific inflation, the health care budget publicly needs to grow by about 4.4 per cent per year in order to provide the same level of services for a growing and aging population. Anything above that is essentially enrichment; that is, growing the basket or suite of health care services. The sustainability question hinges on whether or not economic growth will be above, at or below 4.4 per cent. Mr. Ruggeri just suggested it might be 4.6 per cent, which would leave some room for enrichment of health care services above and beyond providing the same level of health care services to the population.
That is not to understate the challenges we face in terms of managing costs associated with drugs and technology, but we can provide the same level of services that we have today into the future with an aging population. I believe that is a very high level of health care services. To the extent that we want more, if we want more and better health care services, then we do indeed have to pay for that and pay a larger share of our collective income in doing so. However, we have to ensure we are not confusing expansion of the health care system with what is required minimally to maintain it.
Senator Keon: Do you agree with Mr. Ruggeri that the best option is a separate transfer and that this does not in any way threaten a widening gap between GDP and health care expenditure?
Mr. Lee: Essentially, we are moving the discussion from whether health care is sustainable on a national basis to dealing with some of the regional inequities in terms of differences in age structure and how those differences will change over time. Professor Ruggeri's recommendation of a separate and temporary, if you will, transfer is simply trying to even out the situation across the provinces in terms of how we deal with an aging population.
In fact, it could be done without necessarily being an increase in overall spending. You could have it so that it is revenue neutral so that funds that go to provinces with larger than average senior populations would be offset by decreases to provinces with lower than average senior populations. There is a political calculus, obviously, that comes out of that. That is one way of doing it. I do not believe that the regional issue is the same issue as the overall sustainability issue.
Senator Keon: Mr. Spencer, are you in total agreement with what has been said?
Mr. Spencer: There are wide areas of agreement. I would certainly agree and emphasize that I am not concerned about the general sustainability of the health care system. I am not concerned with population pressures making the health care system unsustainable because it has been demonstrated that population pressures do not endanger the health care system; it is not the major driver of the increases in costs that we have observed. It is quite sustainable from that point of view.
At the same time, health costs have been going up more rapidly than GDP and certainly much more rapidly than they would be going up if the population were the major driver of the increases in cost.
In my remarks, I tried to draw the attention of the committee to the scope for better planning within the health care system. If people were prescribed fewer inappropriate drug combinations so we did not have a noticeable large fraction of all hospitalizations as a result of overmedication for example, that would be a huge impact.
I have to think we could get a long way towards that if we had not necessarily a national pharmaceutical plan but at least an electronic record of what drugs people are taking and an automatic check that they are not taking inappropriate combinations of drugs. Such things exist in other countries. There is no reason why they could not exist here. I could see that reducing health care costs substantially in the future.
[Translation]
Senator Chaput: My question is for Professor Spencer and it concerns planning. Earlier on in your presentation, you said there was:
. . .far too little coherent and consistent planning of the health care system.
In your conclusion, you said that:
. . .very little systematic planning of the overall health care system takes place.
And you went on to say this:
The planning . . . must be done . . . by the government, or it will not happen.
Professor, what kind of planning do you see happening and what steps do you see the government taking?
[English]
Mr. Spencer: If this will happen at all, I guess the way I see it is the public service, people like assistant deputy ministers and deputy ministers and ministries of health across the country and people perhaps within Health Canada at the director general or assistant deputy minister level, would be charged with responsibility for overall direction of the health care system.
It is not that they are not charged with that responsibility at the moment, but I believe it to be a true statement that right across the country they have not taken as a primary charge of their responsibility to worry about the overall coherent planning of the system. They do not worry about how many nurses might be displaced by doctors or more likely the reverse, of what nurse practitioners could do and effectively substitute for doctors in health care delivery services, for example. The whole range of the provision of health care services, the integration of services across different types of health care professionals, the treatment of people with chronic conditions, all those sorts of things that I have tried to identify are matters that do not get attention. There is a gross mismatch between what health professionals are trained to do and the population health care needs. If the health care system, led by the funders, does not make plans consistent with that, then no one else will take the lead and do it. It must be the funder.
The Chair: Thank you very much. Are there any other questions?
I want to put before you what I heard today. I saw little or no support for changing the equalization formula. I saw little or no support for changing the Canada Social Transfer tax. I heard some support for Professor Ruggeri's suggestion with respect to a transitory funding on a per capita basis of the differential between some provinces having more aging people than others.
I heard very clearly the need for planning, coherence and integration of all those things that I think Professor Spencer said in detail. That includes such things as the need to properly direct the human resources, the nurses, the doctors, the specialists, that type of thing.
I heard about the need for more federal engagement in the payment of drugs but also the federal focus of broadening the present funding of health care into such areas as long-term care, home care, palliative care and that basket of services which right now is outside of the Canada Health Act.
Have I essentially touched on most of what I have heard, Professor Lee, from your perspective?
Mr. Lee: Excellent summary, Madam Chair.
The Chair: Professor Spencer?
Mr. Spencer: Yes, although I would add it is not just human resources but also physical resources.
The Chair: I want to thank all three of you for your presentations. I know it is always awkward, Professor Lee, to do this by video conferencing, but it was important we had you today and we appreciate it very much.
We will go into camera. Do I have a motion for staff to remain in the room? It was so moved by Senator Chaput.
The committee continued in camera.