Friday, April 22, 2016

A Primer on Medicine, Money, and Misery, Part II

Not even Denzel had a smooth ride as a doctor in the 80s.

(A quick note before carrying on: another doctor on Twitter argued that the Grant & Hurley paper I referenced in the last post has an anti-doctor bias. And indeed, the paper is titled Unhealthy Squeeze: How Physician Pay Demands Put the Squeeze on Provincial Health Care Budgets. Although I'm really only interested in the historical facts, research methods, and data, rather than the authors' slant, the point is taken.)

The Changing Fiscal Setup

Though power at the federal level has historically swayed back and forth between the Liberals and the Tories, political conflicts in Canada aren't usually about "left vs. right" the way they are in the U.S. Rather, Canadian political fights are more often federal vs. provincial, centered on jurisdiction and money. In truth, even that's a bit of an overstatement. Since the perennial election issues are under provincial responsibility (i.e. health and education), Canadian politics is often just a matter of how much of the bill the feds are willing to pay.

Faced with the high inflation and lousy economy of the late 70s, the federal government changed the way it paid for health care. Rather than commit to paying 50 cents of every dollar, the new model consisted of a per-capita cash grant indexed to inflation, and a transfer in "tax points". In other words, the feds reduced their personal and corporate tax rates so the provinces could raise theirs by the corresponding amount.

This made for an uneasy peace. The provinces had more freedom to use health care dollars, and the feds had a measure of predictability in their health spending.

But the elephant in the room was the exploding use of the system. Despite a growing number of doctors, per-person use of doctor's services more than doubled in the 1970s, and tripled over the entire period from 1970-1990.

Those are pretty astounding statistics, as this is well before the "grey tsunami" we're being conditioned to dread these days. There's also no single explanation for why it happened. There was universality of coverage as compared with the pre-Medicare days. It's likely that people simply grew more accustomed to seeing a doctor in an era of universal insurance as well. And, I've argued previously, doctors can increase use of health care resources, directly and indirectly. I would again stress that this doesn't necessarily lead to inappropriate care. Much of that demand is created by new technologies and treatments, rather than any bad behavior on the part of the doctor (though there are always bad apples out there).

The Godfather Returns

Independent of the money issues, the federal government asked Justice Emmett Hall to revisit Canada's progress on universal health care. Justice Hall's first report in 1964 was a major driver of what became the Medical Care Act. His 1979 report highlighted shortcomings of the system, in particular the persistence of extra-billing and user fees as barriers to access.

(In a somewhat ironic footnote, the 1979 report recommended binding arbitration for resolving disputes in doctor-government negotiations. The medical associations strongly opposed it at the time, whereas these days OMA is pressing a Charter challenge to achieve arbitration rights).

The end result was a landmark piece of legislation, namely the Canada Health Act. It reinforced the conditions that provincial health care systems had to meet to receive federal funds, and provisions for penalizing provinces that allowed extra-billing and user fees. In a remarkable show of unity, the Canada Health Act passed by unanimous consent of the House of Commons.

The corollary to the Canada Health Act was a law passed by the Mulroney government, laying down dollar-for-dollar penalties for user fees and extra-billing. Most provinces moved swiftly to pass complying legislation, even giving doctors a raise to offset the loss of extra-billing income. Things weren't quite so smooth in Ontario.

I Fought the Law...

Ontario's Health Care Accessibility Act, also known as Bill 94, faced extreme opposition from the medical profession. Though only a small proportion of doctors extra-billed, the OMA (Ontario Medical Association) voted in favor of strike action. Roughly 40% of Ontario's doctors and 75% of OMA members undertook some form of job action or another in the strike that lasted 25 days. Apart from those who opposed extra billing, almost every category of doctor took part in the strike, though participation was more pronounced among surgical specialists.

...and the Law Won

It's hard to view the strike as anything other than a disaster. The law was enacted regardless, negative stories spread throughout the syndicated press, and it left a lasting stain on the reputation of the profession that has persisted in the decades since.

And really, doctors' incomes weren't particularly suffering at the time. Doctors' real incomes, it turns out, climbed by roughly 15% in the 1980s, during a period of sky-high interest rates. Most of the gains came in after passage of the Canada Health Act, suggesting that the Act and its consequences didn't merit such intense opposition by doctors after all.

Altering the Deal

While the Canadian economy as a whole went through a boom in the 1980s, so did the national debt. With interest rates as high as they were, debt servicing was joining health care costs as a major budgetary problems for federal and provincial governments. Accordingly, the Mulroney government began scaling back the cash component of federal transfers earmarked for health care.

The strain on fiscal cooperation between the feds and the provinces would only grow through the 1990s, as the Chretien Liberal government set out on an aggressive program to balance the federal budget. Much of this was done at the expense of health care transfers, beginning with the radical measures of the 1995 budget.

To gain control over health care costs from their end, however, the provinces would undertake dramatic reforms of their own. Doctors would be a central target of the cost-control efforts.

Next time: Cuts, caps, and the infamous Barer-Stoddart report

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