October 27, 2011, Ottawa, ON - With the expiry of the Canada Health Accord approaching in 2014, the federal government has an opportunity to begin meaningful reform of Canada's healthcare system by learning the lessons of welfare reform from the 1990s. According to Jason Clemens, director of research of the Macdonald-Laurier Institute (MLI), Canada faces a twin crisis in the form of both short and longer-term deficits coupled with a faltering healthcare system that continues to consume increasing government resources while failing to provide commensurate services.

In this context, MLI released two studies today. In Turning Point: Balancing the Budget While Confronting Rising Healthcare Costs, Clemens discusses how rising health care spending is contributing to the current deficit and rising debt problems in Canada. In Reforming the Canada Health Transfer, he uses the experiences of welfare reform in the 1990s to provide a template for reforming Canada's healthcare system.

Currently, Canada spends a relatively high amount on healthcare. Canada's spending on healthcare, as a share of the economy, ranks 5th amongst industrialized countries with universal healthcare. Federal transfers to the provinces for healthcare are expected to grow at almost twice the pace of other spending. From 2006-07 to 2014-15, federal transfers for healthcare will increase from a little over $20 billion to slightly more than $32 billion, an increase of nearly 60 percent in less than a decade.

According to Clemens, even with this level of spending, Canada does not enjoy corresponding healthcare performance. In Reforming the Canada Health Transfer, he presents a long list of international measures of Canada's performance, which simply put, do not match up with the amount of resources allocated to support healthcare. For example, of the 34 OECD countries, Canada ranks 26th in access to physicians, 16th in nurses, 24th in hospitals beds, and 16th in access in to MRIs and CT scanners (27 reporting countries).

Clemens recommends the experience of welfare reform at the federal and provincial levels as a framework for healthcare reform. He outlines three necessary reforms that mirror the reforms to federal transfers to the provinces in the 1990s, reforms that unleashed a highly successful wave of experimentation and reform in welfare provision at the provincial level.

1. The Canada Health Transfer should be stabilized or even reduced, and certainly not increased, in order to bring more direct accountability to the provincial level for the raising of resources used in healthcare while containing cost increases to the federal government.

2. The federal government should allow the provinces the maximum amount of flexibility to design, regulate, and provide healthcare to citizens within a universal and portable framework.

3. The Canada Health Act will have to be amended with respect to cost-sharing and extra billing in order to provide the provinces the requisite amount of flexibility while maintaining and safeguarding the principles of universality, portability, and accessibility. Indeed, the federal government could facilitate provincial innovation and experimentation by clarifying the meaning and intent of the five principles of the Canada Health Act.

Clemens concludes, "Canada's national finances are in a precarious state. We face immediate challenges in the form of deficits and rising debt, as well as longer-term problems emanating from ever-increasing healthcare spending. We need to confront these problems with specific solutions. Using the lessons of welfare reform from the 1990s is the key."

Jason Clemens is the director of research and managing editor of the Macdonald-Laurier Institute.

The Commentary Turning Point: Balancing the Budget While Confronting Rising Healthcare Costs and the paper Reforming the Canada Health Transfer are the latest publications in MLI's Turning Point 2014 Series.


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