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Fraser Institute

Enough talk, we need to actually do something about Canadian health care

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From the Macdonald Laurier Institute

By J. Edward Les for Inside Policy

Canada spends more on health care as a percentage of GDP than almost all other OECD countries, yet we rank behind most of them when it comes to outcomes that matter.

I drove a stretch of road near Calgary’s South Health Campus the other day, a section with a series of three intersections in a span of less than a few hundred metres. That is, I tried to drive it – but spent far more time idling than moving.

At each intersection, after an interminable wait, the light turned green just as the next one flipped to red, grinding traffic to a halt just after it got rolling. It was excruciating; I’m quite sure I spied a snail on crutches racing by – no doubt making a beeline (snail-line?) for the ER a stone’s throw away.

The street’s sluggishness is perhaps reflective of the hospital next to it, given that our once-cherished universal health care system has crumbled into a universal waiting system – a system seemingly crafted (like that road) to obstruct flow rather than enable it. In fact, the pace of medical care delivery in this country has become so glacial that even a parking lot by comparison feels like the Indianapolis Speedway.

The health care crisis grows more dire by the day. Reforms are long overdue. Canada spends more on health care as a percentage of GDP than almost all other OECD countries, yet we rank behind most of them when it comes to outcomes that matter.

And we’re paying with our lives: according to the Canadian Institute for Health Information, thousands of Canadians die each and every year because of the inefficiencies of our system.

Yet for all that we are paralyzed by the enormity and complexity of the mushrooming disaster. We talk about solutions – and then we talk and talk some more. But for all the talking, precious little action is taken.

I’m reminded of an Anne Lamotte vignette, related in her bestselling book Bird By Bird:

Thirty years ago my older brother, who was ten years old at the time, was trying to get a report written on birds that he’d had three months to write, which was due the next day. We were out at our family cabin in Bolinas, and he was at the kitchen table close to tears, surrounded by binder paper and pencils and unopened books about birds, immobilized by the hugeness of the task ahead. Then my father sat down beside him, put his arm around my brother’s shoulder, and said, “Bird by bird, buddy. Just take it bird by bird.”

So it is with Canadian health care: we’ve wasted years wringing our hands about the woeful state of affairs, while doing precious little about it.

Enough procrastinating. It’s time to tackle the crisis, bird by bird.

One thing we can do is to let doctors be doctors.  A few weeks ago, in a piece titled “Should Doctors Mind Their Own Business?”, I questioned the customary habit of doctors hanging out their shingles in small independent community practices. Physicians spend long years of training to master their craft, years during which they receive no training in business methods whatsoever, and then we expect them to master those skills off to the side of their exam rooms. Some do it well, but many do not – and it detracts from their attention to patients.

We don’t install newly minted teachers in classrooms and at the same time task them with the keeping the lights on, managing the supply chain, overseeing staffing and payroll, and all the other mechanics of running schools. Why do we expect that of doctors?

Keeping doctors embedded within large, expensive, inefficient, bureaucracy-choked hospitals isn’t the solution, either.

There’s a better way, I argued in my essay: regional medical centres – centres built and administered in partnership with the private sector.

Such centres would allow practitioners currently practicing in the community to ply their trade unencumbered by the nuts and bolts of running a business; and they would allow us to decant a host of services from hospitals, which should be reserved for what only hospitals can do: emergency services, inpatient care, surgeries, and the like.

In short, we should let doctors be doctors, and hospitals be hospitals.

To garner feedback, I dumped my musings into a couple of online physician forums to which I belong, tagged with the query: “Food for thought, or fodder for the compost bin?”

The verdict? Hands down, the compost bin.

I was a bit taken aback, initially. Offended, even – because who among us isn’t in love with their own ideas?

But it quickly became evident from my peers’ comments that I’d been misunderstood. Not because my doctor friends are dim, but because I hadn’t been clear.

When I proposed in my essay that we “leave the administration and day-to-day tasks of running those centres to business folks who know what they’re doing,” my colleagues took that to mean that doctors would be serving at the beck and call of a tranche of ill-informed government-enabled administrators – and they reacted to the notion with anaphylactic derision. And understandably so: too many of us have long and painful experience with thick layers of health care bureaucracy seemingly organized according to the Peter Principle, with people promoted to – and permanently stuck at – the level of their incompetence.

But I didn’t mean to suggest – not for a minute – that doctors shouldn’t be engaged in running these centres. I also wrote: “None of which is to suggest that doctors shouldn’t be involved, by aptitude and inclination, in influencing the set-up and management of regional centres – of course, they should.”

Of course they should. There are plenty of physicians equipped with both the skills and interest needed to administer these centres; and they should absolutely be front and centre in leading them.

But more than that: everyone should have skin in the game. All workers have the right to share in the success of an enterprise; and when they do, everybody wins.  When everyone is pulling in the same direction because everyone shares in the wins, waste and inefficiencies are rooted out like magic.

Contrast that to how hospitals are run, with scarcely anyone aware of the actual cost of the blood tests or CT scans they order or the packets of suture and gauze they rip open, and with the motivations of administrative staff, nurses, doctors, and other personnel running off in more directions than a flock of headless chickens. The capacity for waste and inefficiencies is almost limitless.

I don’t mean to suggest that the goal of regional medical centres should be to turn a profit; but fiscal prudence and economic accountability are to be celebrated, because money not wasted is money that can be allocated to enhancing patient care.

Nor do I mean to intimate that sensible resource management should be the only parameter tracked; patient outcomes and patient satisfaction are paramount.

What should government’s role be in all this? Initially, to incentivize the creation of these centres via public-private partnerships; and then, crucially, to encourage competition among them and to reward innovation and performance, with optimization of the three key metrics – patient outcomes, patient satisfaction, and economic accountability – always in focus.

No one should be mandated to work in non-hospital regional medical centres. It’s a free country (or it should be): doctors should be free to hang out their own community shingles if they wish. But if we build the model correctly, my contention is that most medical professionals will prefer to work collaboratively under one roof with a diverse group of colleagues, unencumbered by the mundanities of running a business, but also free of choking hospital bureaucracy.

I connected a couple weeks ago with the always insightful economist Jack Mintz (who is also a distinguished fellow at the Macdonald-Laurier Institute). Mintz sits on the board of a Toronto-area hospital and sees first-hand “the problems with the lack of supply, population growth, long wait times between admission and getting a bed, emergency room overuse,” and so on.

“Something has to give,” he said. “Probably more resources but better managed. We really need major reform.”

On that we can all agree. We can’t carry on this way.

So, let’s stop idling; and let’s green-light some fixes.

As Samwise Gamgee said in The Lord of the Rings, “It’s the job that’s never started as takes longest to finish.”


Dr. J. Edward Les is a pediatrician in Calgary who writes on politics, social issues, and other matters.

Business

Here’s what pundits and analysts get wrong about the Carney government’s first budget

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From the Fraser Institute

By Jason Clemens and Jake Fuss

Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending.

The Carney government’s much-anticipated first budget landed on Nov. 4. There’s been much discussion by pundits and analysts on the increase in the deficit and borrowing, the emphasis on infrastructure spending (broadly defined), and the continued activist approach of Ottawa. There are, however, several critically important aspects of the budget that are consistently being misstated or misinterpreted, which makes it harder for average Canadians to fully appreciate the consequences and costs of the budget.

One issue in need of greater clarity is the cost of Canada’s indebtedness. Like regular Canadians and businesses, the government must pay interest on federal debt. According to the budget plan, total federal debt will reach an expected $2.9 trillion in 2029/30. For reference, total federal debt stood at $1.0 trillion when the Trudeau government took office in 2015. The interest costs on that debt will rise from $53.4 billion last year to an expected $76.1 billion by 2029/30. Several analyses have noted this means federal interest costs will rise from 1.7 per cent of GDP to 2.1 per cent.

These are all worrying statistics about the indebtedness of the federal government. However, they ignore a key statistic—interest costs as a share of revenues. When the Trudeau government took office, interest costs consumed 7.5 per cent of revenues. This means taxpayers were foregoing 7.5 per cent of the resources they sent to Ottawa (in terms of spending on actual programs) because these monies were used to pay interest on debt accumulated from previous spending.

Under the new budget plan, this wedge between what the government collects in revenues versus what is actually spent on programs will rise to 13.0 per cent by 2029/30. Put differently, slightly more than one in every eight dollars sent to Ottawa will be used to pay interest on debt for past spending. This is one way governments get into financial problems, even crises, by continually increasing the share of revenues consumed by interest payments.

A second and fairly consistently misrepresented aspect of the budget pertains to large spending initiatives such as Build Canada Homes and Build Communities Strong Fund. The former is meant to increase the number of new homes, particularly affordable homes, being built annually and the latter is intended to provide funding to provincial governments (and through them, municipalities) for infrastructure spending. But few analysts question whether or not these programs will produce actual new spending for homebuilding or simply replace or “crowd-out” existing spending by the private sector.

Let’s first explore the homebuilding initiative. At any point in time, there are a limited number of skilled workers, raw materials, land, etc. available for homebuilding. When the federal government, or any government, initiates its own homebuilding program, it directly competes with private companies for that skilled labour (carpenters, electricians, etc.), raw materials (timber, concrete, etc.) and the land needed for development. Put simply, government homebuilding crowds out private-sector activity.

Moreover, there’s a strong argument that the crowding out by government results in less homebuilding than would otherwise be the case, because the incentives for private-sector homebuilding are dramatically different than government incentives. For example, private firms risk their own wealth and wellbeing (and the wellbeing of their employees) so they have very strong incentives to deliver homes demanded by people on time and at a reasonable price. Government bureaucrats and politicians, on the other hand, face no such incentives. They pay no price, in terms of personal wealth or wellbeing if homes, are late, not what consumers demand, or even produce less than expected. Put simply, homebuilding by Ottawa could easily result in less homes being built than if government had stayed out of the way of entrepreneurs, businessowners and developers.

Similarly, it’s debatable that infrastructure spending by Ottawa—specifically, providing funds to the provinces and municipalities—results in an actual increase in total infrastructure spending. There are numerous historical examples, including reports by the auditor general, detailing how similar infrastructure spending initiatives by the federal government were plagued by mismanagement. And in many circumstances, the provinces simply reduced their own infrastructure spending to save money, such that the actual incremental increase in overall infrastructure spending was negligible.

In reality, some of the major and large spending initiatives announced or expanded in the Carney government’s first budget, which will accelerate the deterioration of federal finances, may not deliver anything close to what the government suggests. Canadians should understand the real risks and challenges in these federal spending initiatives, along with the debt being accumulated, and the limited potential benefits.

Jason Clemens

Executive Vice President, Fraser Institute

Jake Fuss

Director, Fiscal Studies, Fraser Institute
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Business

Carney budget continues misguided ‘Build Canada Homes’ approach

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From the Fraser Institute

By Jake Fuss and Austin Thompson

The Carney government’s first budget tabled on Tuesday promises to “supercharge” homebuilding across the country. But Ottawa’s flagship housing initiative—a new federal agency, Build Canada Homes (BCH)—risks “supercharging” federal debt instead while doing little to boost construction.

The budget accurately diagnoses the root cause of Canada’s housing shortage—costly red tape on housing projects, sky-high taxes on homebuilders, and weak productivity growth in the construction sector. But the proposed cure, BCH, does nothing to fix these problems despite receiving a five-year budget of $13 billion.

BCH’s core mandate is to build and finance affordable housing projects. But this mission is muddled by competing political priorities to preference Canadian building materials and prioritize “sustainable” construction materials. Any product that needs a government preference to be used is clearly not the most cost-effective option. The result—BCH’s “affordable” homes will cost more than they needed to, meaning more tax dollars wasted.

Ottawa claims BCH will improve construction productivity by “generating demand” (read: splashing out tax dollars) for factory-built housing. This logic is faulty—where factory-built housing is a cost-effective and desirable option, private developers are already building it. “Prioritizing” factory-built homes amounts to Ottawa trying to pick winners and losers—a strategy that reliably wastes taxpayer dollars. The civil servants running BCH lack the market knowledge and cost-cutting incentives of private homebuilders, who are far better positioned to identify which technologies will deliver the affordable homes Canadians need.

The government also insists BCH projects will attract more private investment for housing. The opposite is more likely—BCH projects will compete with private developers for limited investment dollars and construction labour. Ottawa’s intrusion into housing development could ultimately mean fewer private-sector housing projects—those driven by the real needs of homebuyers and renters, not the Carney government’s political priorities.

Despite its huge budget and broad mandate, BCH still lacks clear goals. Its only commitment so far is to “build affordable housing at scale,” with no concrete targets for how many new homes or how affordable they’ll be. Without measurable outcomes, neither Ottawa nor taxpayers will know whether BCH delivers value for money.

You can’t solve Canada’s housing crisis with yet another federal program. Ottawa should resist the temptation to act as a housing developer and instead create fiscal and economic conditions that allow the private sector to build more homes.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute
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