Monday, April 25, 2016

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

The rules of engagement changed in response to 1990s austerity.


The recession of the early 1990s worsened the pressure on government budgets at all levels. As the feds continued to slash transfers for health care, despite ever-increasing system use, the provinces scrambled to find ways to bring their budgets under control. Much of the provincial cost-cutting targeted unionized workers--recall Ontario's unpaid days off for public sector employees ("Rae days")--but physicians' earnings faced curtailment as well.


Put a Lid on It

There were two ways by which the provinces limited spending on doctors. The first was to set a global physician services budget, and institute some sort of holdback/clawback if total physician billings exceeded the global cap.

Most provinces also instituted some form of individual billing cap on doctors. In some instances, this was a hard cap--submit and bill over amount X for the year, and it's rejected. In other cases, billings over a certain threshold (such as $400,000) were paid at a discount from of the regular fee.

Beggar thy Neighbor: the dangers of global budget caps

While an individual billing cap will only affect the services of one doctor and his or her patients, a global limit on physician spending (such as the one put in place by the Wynne Liberals in 2015) creates internal strife among doctors. Some doctors are wrongly penalized simply for seeing more patients. Moreover, those that do bill inappropriately can continue to do so with impunity, because the costs of the clawback are spread out across the entire profession.


From an academic standpoint, this creates some real-life applications of game theory. That's all well and good, but it highlights the glaring problem facing doctors in Canada: their associations aren't unions, but rather a disparate collection of self-interested groups. Under a global cap, one dollar allocated to family docs is one dollar not available to urologists.

Historically, procedure-intensive specialists have tended to win the day in fee deals, but that's by no means been a guarantee. Doctor-doctor squabbles are a fixture in health care politics, with threats to dissolve or even sue provincial associations from subgroups of doctors not unheard of. Even a five-year, physician-driven, physician developed overhaul of the fee schedule, intended to resolve chronic inequities between different fields of practice (also known as relativity), went nowhere politically.


Anger leads to hate, hate leads to suffering

Without question, the dramatic measures of global and individual caps did control costs. Doctors' real net income fell by an average of 5% from 1991 through 1996. But there were long term consequences in the heavy-handed way the provinces instituted these measures.

To begin with, the cost-control measures of the early-to-mid 1990s didn't stick around long. By 2002, doctor's incomes had climbed back to the level where the long-term trend dating back to the 1970s would have predicted. 


Nevertheless, doctors were now quicker to pull the trigger on job action, and in a much more selective way. There would be no repeat of the 1986 strike debacle, but doctors across the country didn't hesitate to engage in targeted, rotating work stoppages. As these actions came and went without the lingering taste of 1986, these confrontations with government can presumably be considered effective, or at the very least innocuous to the reputation of the profession. If anything, the doctors emerged from the 90s in greater standing with the public, after macro-level efforts at reform went awry.

The Best Laid Plans...

At some point, you've probably heard that the (apparent) doctor shortage of the 2000s was the result of "two economists" recommending a 10% cut in medical school admissions...and we all know how often economists get it wrong. 

It's time to do away with that theory once and for all.


The "economists" in question were actually Drs. Morris Barer and Greg Stoddart, two of the most esteemed health policy researchers in Canada. The recommendation was part of the somewhat clunky-named Toward Integrated Medical Resource Policies for Canada, more commonly known as the Barer-Stoddart report.

Barer-Stoddart was prepared for Canada's Deputy Ministers of Health--the chief administrators of provincial health care--and explored possible directions for modernizing the financing of medical services, possibly help control costs in the long run.

The report, which was summarized in an insightful series of articles for the Canadian Medical Association Journal, contained a set of strategic directions for medical service reform, including:
  • reduction in the number of international medical graduates (IMG)
  • reduction in medical school and corresponding residency spots
  • overhaul of funding for academic hospitals
  • replacing fee-for-service medicine in settings where it was a poor fit, such as primary care or mental health
  • investing in guideline dissemination and health outcomes research
Drs. Barer and Stoddart were more than aware of the interdependence of the recommendations in their report, and even acknowledged that implementing some policies in the absence of other reforms could make things worse rather than better. Naturally, that's exactly how things turned out.


The medical school, residency, and IMG cuts were implemented almost immediately, but funding reforms were still years away from the negotiations meat-grinder. The net result was a (perceived) swing in Canada from a surplus of doctors to a shortage of doctors, ascribed erroneously to the now-infamous "two economists".

In hindsight, the 1990s represents one lost opportunity after another for meaningful reforms in the funding of Canadian doctors. Relativity, geographic distribution, and the proper role of fee-for-service pay could have been dealt with during a period of relative upheaval in the financing of health care. Instead, those problems linger to this day, looking ever more intractable as the years go by.

Next time: the feds loosen the purse strings, and the changing face of general practice

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