In the past 15 years, no group of health care professionals has had more success increasing its share of government expenditures than Ontario’s doctors. They wrung juicy salary increases out of former premier Dalton McGuinty, often at the expense of other of critical elements of the system, particularly hospitals. Even after unilateral fee cuts in 2015, Ontario spent more of its health budget on doctors – 16.4 per cent – than any other province.
To the average taxpayer, this makes the doctors who rejected the Ontario government’s enhanced offer – of a 2.5-per-cent annual increase in the budget for physicians over four years – look greedy. The deal negotiated by the Ontario Medical Association, but rejected by 63 per cent of the doctors who voted on it, would still have seen physician compensation outpace overall health spending.
The dissident doctors complained that the proposed increases, after accounting for inflation and rising administrative costs, would not have been enough to make up for fee cuts imposed last year by Premier Kathleen Wynne’s government. But given that their compensation grew so much during the McGuinty era, it’s difficult to sympathize with such gripes.
Astonishingly, the very commentators who have complained the most about the Liberals’ horrendous fiscal management are siding with the doctors. You can argue that squeezing doctors while continuing to buy off teachers and other constituencies more loyal to the Liberals at election time smacks of cynicism and cronyism. But at least it’s a start.
Most doctors in private practice like to think of themselves as small-business operators rather than as gatekeepers to a vast network of publicly funded health services. That they are both creates all sorts of conflicts that, in a centrally planned system, can often only be resolved by government fiat. As long as we pay doctors principally on a fee-for-service basis, rather than turning them into salaried professionals, hard caps on overall compensation may be the only tool governments have to prevent patient churn and skyrocketing costs in coming years.
Much has been made about the unexpected slowdown in health spending since the last recession. Rather than demonstrating the success of administrators in “bending the cost curve,” however, the deceleration in spending appears to have been a function of the economic cycle. In the United States, millions of people lost their health insurance when they were laid off during the recession, cutting demand for health care.
Rising premiums, deductibles and co-payments, meanwhile, have led those with insurance to use it more selectively.
It’s much harder to curb demand in a publicly funded health system in which patients pay nothing directly to access services. The sharp run-up in budget deficits during the recession, therefore, forced provincial governments to act on the supply side to rein in health costs.
In the five years to 2015, real per capita health spending declined by 4.7 per cent in Canada. As Livio Di Matteo and Colin Busby outline in a new C.D. Howe Institute study, however, almost 80 per cent of recent cutbacks in provincial health-care spending were borne by hospitals and capital spending. In the three years to 2013, Ontario cut health care expenditures by 1.7 per cent in real terms, but slashed capital spending by 12.9 per cent and hospital budgets by 1.5 per cent. Overall spending on physician services, meanwhile, declined by only 0.4 per cent in real terms.
The authors doubt, however, that the recent slowdown in health spending is sustainable. Capital spending can only be deferred for so long. And the proliferation of “niche buster” drugs – highly specialized treatments for cancer and other diseases that come with six-figure price tags – will drive spending higher. But likely not as much as an increase in medical school graduates and specialists (a supply-side factor) and the number of Canadians over 75 (a demand-side driver).
Governments may increasingly need to resort to hard budget caps to control health spending. This need not have a negative impact on patient care if it forces all players to seek out efficiency gains, of which there are many to be had, given the vast duplication and redundancy built into the system. But it will require the co-operation of doctors, who, contrary to their self-image, are not free agents, but providers of a government-funded essential service.
Younger doctors, motivated by more noble goals than money, seem to get this. They favoured the Ontario government’s offer, acknowledging that there are bigger health-care priorities than doctor compensation. They put their elders to shame.