Budget 2012: McGuinty government brings even greater restraint to health care

Ontario’s 2012 budget will leave health care facing even greater restraint than recommended by the Drummond Commission on Public Service Reform.

Drummond’s recommendation to restrain health care funding to increases of 2.5 per cent per year was previously considered unworkable. Tuesday’s provincial budget limits increases in health care spending even further — to an average of 2.1 per cent over the next three years. This year it will be 2.45 per cent.

In dollars, that amounts to $1.1 billion more this year, $1 billion more in 2013-14, and $900 million more in 2014-15.

Gone will be increases in excess of $2 billion per year that were experienced in recent years.

Hospitals will be the hardest hit – their core budgets set at zero. The government has set aside 2 per cent in envelope funding for specific hospital programs, such as wait times initiatives.

Home care and community care will get the biggest increase at 4 per cent per year, bringing funding to $526 million more annually by 2014-15. Already stretched thin, home care will face a greater transfer of hospital patients under the government’s present scenario.

Long term care will receive a 2.8 per cent increase, although only 1 per cent will be dedicated to front line care to residents. Surprisingly, after complaints about nursing homes shifting funding envelopes to enhance their profits, the province says that it will provide operators with “greater flexibility to pay for services from their current funding structure.”

There is no mention at all of mental health services in the budget. Once considered to be a major priority for government, it appears to be content to play out its modest plan of addressing child and youth mental health for at least the next two years.

The Ontario Hospital Association offered a voluntary freeze for executives, but the budget changes that to mandatory for at least the next two years. That brings the wage freeze for hospital executives to four years. Bonuses are still exempt.

For the rank and file workers, the government says it respects the collective bargaining process but says restraining public-sector compensation costs for the full five years of their fiscal plan is critical to balancing the budget.

Shying away from a legislated wage freeze, the budget script says their position is consistent with the Supreme Court’s view of collective bargaining as a charter right. Acknowledging that Ontario’s public sector settlements are below those of the private sector, municipal sector and the federal sector, Finance Minister Dwight Duncan states there will be no funding for incremental compensation increases for new collective agreements.

“Wages, benefits, pensions, premium pay, overtime and grid movement provisions are all important elements of compensation that must be considered,” the document states.

For doctors, the government is not only looking at zeros, but suggests overall compensation for doctor’s services will be frozen at $11 billion. This is despite the budget’s promise to increase access to doctors and nurse practitioners by expanding same day and next day appointments as well as after-hours care. We’re not sure how these contradictory goals will be achieved.

Many of the recommendations appear straight out of the Drummond report, including more flexibility (read power) for the Local Health Integration Networks to allocate resources. They also like the idea of shifting more “routine” procedures from hospitals to not-for-profit clinics.

The other surprise is the extension of the so-called HBAM (Health-based activity model) funding to Community Care Access Centres and Long Term Care homes. Originally it had only been discussed in the context of hospitals.

The budget states that these health providers “will be funded based on the types and volume of services and treatments they deliver, at a price that reflects the best practice and complexity of patients and procedures.” While best practices are usually discussed in clinical terms, it is interesting that the government inserted “price” into the equation.

The government also adopted Drummond’s recommendation to make wealthier seniors pay for more of their drugs. Instead of simply taxing the rich, the government prefers a complex process of assessing senior’s income and adjusting deductibility on the Ontario Drug Benefit plan. The net result is about five per cent of seniors will be paying more. Seniors with incomes in excess of $100,000, or couples in excess of $160,000, will pay an average of $665 more per year on the cost of their prescription drugs. It is interesting to note that they say these income thresholds will not be adjusted for inflation, meaning more seniors will be eventually required to pay a greater share of their drugs costs over time. The government did not adopt Drummond’s plan to use the savings from doing this to increase access to drugs for working age low-income Ontarians.

While Don Drummond found a zeal for public health, it was not reflected in the budget. There is no plan to upload the remaining 25 per cent share of public health costs from the municipalities. Not surprisingly, neither does the McGuinty government plan to increase public health funding to BC levels, which are about three times the per capita investment of Ontario.

Don Drummond’s recommendation to widen coverage of Medicare in Ontario was likely intended to blunt criticism from progressive quarters. Needless to say, it didn’t make the budget. In fact, there is a suggestion that there could be reduced coverage for certain kinds of testing.

The government says that for every dollar of new revenue generation, it is saving $4 in program spending. However, most of the revenue side of that equation is calculated from the suspension of the last phase of corporate tax cuts, intended to take the corporate tax rate down to 10 per cent from 11.5 per cent. We’re unsure how not cutting taxes amounts to new revenue generation in the government’s estimates.

As predicted, the final deficit picture for 2011-12 came $1 billion below last year’s forecast.

The government notes that tax revenues are now 11.6 per cent of gross domestic product (the measure of the size of Ontario’s economy) – 15 per cent less than what it was in 1994. That means had 1994 taxes remained in place, Ontario would likely be in a surplus situation today.

The budget also notes that Ontario spends less per capita on programs (like health and education) than any other province in Canada. We finally beat out Nova Scotia for that honour.