Will auditor’s report prompt Libs and PCs to reconsider health funding?

The Liberals and Tories may want to reconsider their health care funding election pledges following last month’s auditor’s report.

Trying to neutralize the health care issue in the upcoming fall election, PC leader Tim Hudak committed to an increase of $6 billion in new health care spending over the next four years. That works out to be about $1 billion less than the Liberal plan to reduce health care spending increases to 3.6 per cent per year.

At the end of June Ontario Auditor General James McCarter questioned the McGuinty government’s projections of health care costs over the next three years.

“Our view is that, given the health demands of a growing and aging population and an average growth rate in health expenses of 7.1 per cent per year over the past eight years, assuming that health-care costs will rise much more slowly in the next three years cannot be considered cautious.”

Looking at cost assumptions by sector, only the scenario for drugs looked reasonable due to “more definitive plans to contain drug program costs,” including expanded use of generic drugs and a cap on generic drug pricing.

Much of the government’s assumptions rely on zero increases in compensation costs to both unionized workers and doctors.

The OMA agreement is presently in its last year. The auditor writes: “That there will be no increase for health care professionals when the current OMA agreement comes up for renewal in April 2012 is clearly an aggressive rather than a cautious assumption.”

Expense estimates for hospitals assume savings of $1 billion between 2011/12 and 2013/14.

The auditor writes: “The government has indicated that it will be up to hospitals to operate within their funding allocation regardless of how they manage the savings and compensation pressures they face. Therefore, if hospitals do not find $1 billion in savings and do not succeed in freezing compensation, they will likely run deficits or may have little alternative but to cut services.”

While the auditor acknowledges that funding of services provided Community Care Access Centers are far more at the discretion of government, the three year forecast calls for increases of only 2.3 per cent – about a third of the present growth rate of 7.2 per cent per year.

Similarly, it plans to reduce funding increases to long term care from 8.6 per cent per year to 4.2 per cent per year.

The auditor noted the obvious: given home care and long term care are integral to moving alternate level of care patients out of the hospitals, it is hard to see how the hospitals can save money through these transfers if the recipient sectors are being starved of cash.

As damning as the auditor’s pre-election review is towards the Liberal cost projections, consider the fact that the Tories plan to spend even less. To date, the NDP has not released any specific financial commitment towards health care increases.

Inheriting a surprise deficit from the Tories in 2004, the McGuinty government introduced the Fiscal Transparency and Accountability Act requiring the auditor to review and report on the reasonableness of the government’s pre-election report on the province’s finances.

While the past increases may appear daunting, keep in mind that these increases are not inflation adjusted and do not take into consideration levels of economic growth. While these increases in health care spending were taking place, the government managed to reduce its inherited $5.6 billion deficit and balance its budget by 2005-06. It was the global recession of 2008-09 that plunged the government back into deficit, not excessive health care costs.